XML 44 R16.htm IDEA: XBRL DOCUMENT

Leases

12 Months Ended

Dec. 31, 2023

The Company determines if an arrangement is a lease at its commencement if the Company is both able to identify an asset and conclude the Company has the right to control the identified asset. Leases are classified as finance or operating based on the principle of whether or not the lease is effectively a financed purchase by the lessee. An ROU asset represents the Company’s right to use an underlying asset for the lease term and a lease liability represents the Company’s obligation to make lease payments related to the lease. The Company recognizes operating and finance lease ROU assets and liabilities at the commencement date based on the present value of lease payments over the lease term. The lease term includes renewal options when it is reasonably certain that the option will be exercised, and excludes termination options. The Company’s leases do not provide an implicit rate therefore, the Company uses its incremental borrowing rate based on information available at the commencement date to determine the present value of lease payments. The incremental borrowing rate used is estimated based on what the Company would be required to pay for a collateralized loan for a similar asset over a similar term. The Company’s leases do not include any material residual value guarantees, or bargain purchase options.

To the extent that the Company’s agreements have variable lease payments, the Company includes variable lease payments that depend on an index or a rate in the measurement and classification of a lease and excludes those that depend on facts or circumstances occurring after the commencement date, other than the passage of time. Lease expense for operating leases is recognized on a straight-line basis over the lease term and is recorded in operating expenses on the Consolidated Statements of Operations and Comprehensive Loss. Amortization of ROU assets on finance leases is recorded on a straight-line basis within operating expenses in the Consolidated Statements of Operations. Interest expense incurred on finance lease liabilities is recorded in Interest expense on the Consolidated Statements of Operations and Comprehensive Loss. The Company has elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset. Additionally, the Company does not separate lease and non-lease components. Operating leases are included in ROU assets, Operating leases liabilities, current portion and Operating lease liabilities, less current portion in the Company's Consolidated Balance Sheets. Finance leases are included in Property and equipment, net, Finance lease liabilities, current portion, and Finance lease liabilities, less current portion in the Company's Consolidated Balance Sheets.

The Company’s lease arrangements consist primarily of its ieFactory California production facility, corporate office, store and equipment (which was terminated during December 2022, see Note 5, Property and Equipment, Net lease agreements. The leases expire at various dates through 2032, some of which include options to extend the lease term for additional 5-year periods.

ASC 842 Disclosures

On January 1, 2022, the Company adopted ASC 842. For more information on the adoption, see the “Recently Adopted Accounting Pronouncements” section in Note 1, Nature of Business and Organization, and Summary of Significant Accounting Policies.

Lease cost includes both the fixed and variable expenses recorded for leases. The components of lease cost for the year ended December 31 were as follows (dollars in thousands):



	2023		2022
Finance lease cost
Amortization of ROU assets	$	273	$	1,990
Interest on lease liabilities	275		664
Total finance lease cost	548		2,654

Operating lease cost	5,915		4,657
Variable lease cost	257		159
Total lease cost	$	6,720	$	7,470

The following table summarizes future lease payments as of December 31, 2023 (dollars in thousands):


Fiscal year	Operating Leases
2024	$	5,617
2025	4,997
2026	5,019
2027	2,814
2028	1,813
Thereafter	7,602
Total	27,862
Less: Imputed Interest	9,935
Present value of net lease payments	$	17,927

Lease liability, current portion	$	3,621
Lease liability, net of current portion	14,306
Total lease liability	$	17,927

Supplemental information and non-cash activities related to operating and finance leases are as follows (dollars in thousands):


	2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,709	$	4,143
Operating cash flows from finance leases	275		686
Financing cash flows from finance leases	1,016		1,888
	$	7,000	$	6,717

Lease assets obtained in exchange for financing lease liabilities	$	—	$	21,865
Lease assets obtained in exchange for operating lease liabilities	$	—	$	—


	December 31, 2023		December 31, 2022
Weighted average remaining lease term (in years)
Operating leases	5.70		6.4
Finance leases	5.00		5

Weighted average discount rate
Operating leases	15.6	%	15.6	%
Finance leases	9.2	%	5.0	%

Sale and Lease Back transaction of the FF isFactory California

On October 19, 2023, the Company entered into a sale leaseback transaction whereby it has exercised its option to purchase its Hanford manufacturing facility (the “Property”) and simultaneously completed a sale leaseback to Ocean West Capital Partners (“Landlord”) pursuant to that certain Lease Agreement, dated as of October 19, 2023, by and between the Tenant and 10701 Idaho Owner, LLC (the “Lease Agreement”). This Lease Agreement also allows the Tenant to access to up to $12.0 million of tenant improvement allowance for the Property. The new lease will be for a term of five years, with a monthly lease rate of $355,197, with a five-year extension option, and the Tenant has an option to purchase the fee interest in the Property at any time after the second year of the lease term. Furthermore, the Tenant has a right of first offer to purchase the Property in the event Landlord desires to sell the Property. The obligations of the Tenant under the lease are guaranteed by the Company pursuant to that certain Guaranty of Lease made by the Company to 10701 Idaho Owner, LLC

Due to the inclusion of the purchase option in the lease agreement, the Company was considered to have continuing involvement and, thus, accounted for the transaction as a failed sale lease back, with the HQ assets subject to the sale leaseback remaining on the balance sheet and the sale proceeds recorded as a liability in accordance with the financing method. The Company recognized a $24.9 million financing obligation at the completion of the transaction, which was recorded to the Financial obligations on a sale and lease back transaction on our Consolidated Balance Sheet. No gain or loss was record on the failed sale and lease back.

The future scheduled payments of the financing obligations on our Hanford manufacturing facility sale and lease back transaction as of December 31, 2023 are as follows (dollars in thousands):


Twelve months ended December 31,
2024	$	4,284
2025	4,035
2026	4,156
2027	4,681
2028	62,180
Total	79,336
Less implied interest	(41,853)
Less expected tenant improvement allowance	(12,000)
Present value of payments	$	25,483

Under the terms of the sale and leaseback transaction, we expect to receive $12.0 million in tenant improvement allowance, the repayment of which is included into the financing obligation payments above.

Leases