11. LEASES

12 Months Ended

Dec. 31, 2022

11. LEASES

We lease our office space and certain equipment under finance and operating leases. Our leases have remaining lease terms of one month to ten years. Our office lease agreement includes both lease and

non-lease

components, which are accounted for separately. Our finance leases contain options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless we are reasonably certain to exercise the purchase option.

In September 2021, we entered into an office lease with Redmond East Office Park LLC, a Washington limited liability company, pursuant to which we will lease approximately 16,681 square feet of space located in Redmond, Washington that we will use primarily for general office space and product testing. The lease provides for an initial term of 128 months that commenced November 1, 2021. Pursuant to the lease, annual base rent will be approximately $

500,000

for the first year and is subject to annual increases of

3.0

%. In addition to base rent, we will pay additional rent comprised of our proportionate share of any operating expenses, real estate taxes, and management fees. We have the option to extend the term for one

ten-year

renewal period, provided that the rent would be subject to market adjustment at the beginning of the renewal term. The total minimum lease payments related to this lease is $

6.4

million.

In September 2021, we entered into a second office lease with Redmond East Office Park LLC, pursuant to which we will lease approximately 36,062 square feet of space located in Redmond, Washington that we will use primarily for general office and lab space. The lease provides for an initial term of 120 months and commenced on December 1, 2022. Pursuant to the lease, annual base rent will be approximately $

1.1

million for the first year and is subject to annual increases of 3.0%. In addition to base rent, we will pay additional rent comprised of our proportionate share of any operating expenses, real estate taxes, and management fees. We have the option to extend the term for one

ten-year

renewal period, provided that the rent would be subject to market adjustment at the beginning of the renewal term. The total minimum lease payments related to this lease is $

13.0

million. The delivery date of the new space was September 1, 2022 to allow for the build out of tenant improvements before the commencement date. During the quarter ended September 30, 2022, we recorded a

right-of-use

asset in the amount of $9.3 million on our balance sheet.

In connection with the effectiveness of the second lease with Redmond East Office Park, we amended our current office lease and will have access until January 31, 2023 to coincide with our move into the new 36,062 square feet of space.

In April 2022, we entered into an office lease with Universal-Investment-Gesellschaft mbH, a German investment company, pursuant to which we lease approximately 3,533 square feet of space located in Nuremberg, Germany that we use primarily for general office space for business development activities. The lease provides for a term of 60 months that commenced May 1, 2022. Pursuant to the lease, annual base rent is approximately $

76,000

per year. The total minimum lease payments related to this lease is approximately $

380,000

In September 2022, we entered into an office lease with Universal-Investment-Gesellschaft mbH, a German investment company, pursuant to which we lease approximately 3,810 square feet of space located in Nuremberg, Germany that we use primarily for general office space for business development activities. The lease provides for a term of 60 months that commenced November 15, 2022. Pursuant to the lease, annual base rent is approximately $92,000 per year. The total minimum lease payments related to this lease is approximately $461,000.

The components of lease expense were as follows:


	Year Ended December 31,
(in thousands)	2022		2021		2020
Operating lease expense	$	1,501	$	513	$	464

Finance lease expense:
Amortization of leased assets		26		30		26
Interest on lease liabilities		2		3		3

Total finance lease expense		28		33		29

Total lease expense	$	1,529	$	546	$	493

Supplemental cash flow information related to leases was as follows:


	Year Ended December 31,
(in thousands)	2022		2021		2020
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	1,280	$	762	$	656
Operating cash flows from finance leases		2		3		3
Financing cash flows from finance leases		26		28		29
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	10,184	$	5,322	$	—

Supplemental balance sheet information related to leases was as follows:


	December 31,
(in thousands)	2022			2021
Operating leases
Operating lease right-of-use assets	$	14,579		$	5,577

Current portion of operating lease liability		1,846			849
Operating lease liability, net of current portion		13,829			4,983

Total operating lease liabilities	$	15,675		$	5,832

Finance leases
Property and equipment, at cost	$	112		$	112
Accumulated depreciation		(80	)		(56	)

Property and equipment, net	$	32		$	56

Current portion of finance lease obligations	$	21		$	21
Finance lease obligations, net of current portion		—			26

Total finance lease liabilities	$	21		$	47

Weighted Average Remaining Lease Term
Operating leases		13.1 years			9.5 years
Finance leases		0.5 years			1.2 years
Weighted Average Discount Rate
Operating leases		9.0	%		2.5	%
Finance leases		6.3	%		6.3	%

As of December 31, 2022, maturities of lease liabilities were as follows:


(in thousands)	Operating			Finance
Years Ended December 31,	leases			leases
2023		1,904			22
2024		1,896			—
2025		1,947			—
2026		2,000			—
Thereafter		11,642			—

Total minimum lease payments		19,389			22
Less: amount representing interest		(3,714	)		(1	)

Present value of lease liabilities	$	15,675		$	21