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Leases

9 Months Ended

Sep. 30, 2021

7. Leases

We have operating leases for our corporate offices and our manufacturing facility, and finance leases for equipment. Our leases have remaining lease terms of three to eighteen months. One of our primary operating leases includes options to extend the lease for one to three years and the other primary lease includes an option to annually extend; those operating leases also include options to terminate the leases within one year. Future renewal options that are not likely to be executed as of the balance sheet date are excluded from right-of-use assets and related lease liabilities.

Our operating leases represent building leases for our Stockholm corporate offices and our Kungsbacka manufacturing facility. Our Stockholm corporate office lease has a remaining lease term of 17 months and both of our leases are automatically renewed at a cost increase of 2% on an annual basis, unless we provide written notice nine months prior to the respective expiration dates.

We report operating lease right-of-use assets, as well as current and noncurrent operating lease obligations on our consolidated balance sheets for the right to use those buildings in our business. Our finance leases represent manufacturing equipment; we report the manufacturing equipment, as well as current and noncurrent finance lease obligations on our condensed consolidated balance sheets for our manufacturing equipment.

Generally, interest rates are stated in our leases for equipment. When no interest rate is stated in a lease, however, we review the interest rates implicit in our recent finance leases to estimate our incremental borrowing rate. We determine the rate implicit in a lease by using the most recent finance lease rate, or other method we think most closely represents our incremental borrowing rate.

The components of lease expense were as follows (in thousands):

	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Operating lease cost ⁽¹⁾	$	174	$	529

Finance lease cost:
Amortization of leased assets	$	130	$	446
Interest on lease liabilities		3		11
Total finance lease cost	$	133	$	457

⁽¹⁾	Includes short-term lease costs of $41,000 and $117,000 for the three and nine months ended September 30, 2021, respectively.

	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Operating lease cost ⁽¹⁾	$	139	$	381

Finance lease cost:
Amortization of leased assets	$	164	$	467
Interest on lease liabilities		3		15
Total finance lease cost	$	167	$	482

⁽¹⁾	Includes short-term lease costs of $30,000 and $81,000 for the three and nine months ended September 30, 2020, respectively.

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021
Cash paid for amounts included in leases:
Operating cash flows from operating leases	$	(150	)	$	(492	)
Operating cash flows from finance leases		(3	)		(11	)
Financing cash flows from finance leases		(131	)		(426	)

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		-			-

	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
Cash paid for amounts included in leases:
Operating cash flows from operating leases	$	(115	)	$	(298	)
Operating cash flows from finance leases		(3	)		(15	)
Financing cash flows from finance leases		(21	)		(185	)

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		-			-

Supplemental balance sheet information related to leases was as follows (in thousands):

	September 30, 2021			December 31, 2020
Operating leases
Operating lease right-of-use assets	$	488		$	919

Current portion of operating lease obligations	$	314		$	504
Operating lease liabilities, net of current portion		36			377
Total operating lease liabilities	$	350		$	881

Finance leases
Property and equipment, at cost	$	3,569		$	3,806
Accumulated depreciation		(3,193	)		(2,941	)
Property and equipment, net	$	376		$	865

Current portion of finance lease obligations	$	369		$	769
Finance lease liabilities, net of current portion		28			95
Total finance lease liabilities	$	397		$	864

	September 30, 2021			December 31, 2020
Weighted Average Remaining Lease Term
Operating leases		1.2 years			1.6 years
Finance leases		0.4 years			0.8 years

Weighted Average Discount Rate:
Operating leases ⁽²⁾		5	%		5	%
Finance leases		2	%		2	%

⁽²⁾	Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019

A summary of future minimum payments under non-cancellable operating lease commitments as of September 30, 2021 is as follows (in thousands):

Years ending December 31,	Total
2021 (remaining months)	$	66
2022		297
		363
Less imputed interest		(13	)
Total lease liabilities	$	350
Less current portion		(314	)
	$	36

The following is a schedule of minimum future rentals on the non-cancellable finance leases as of September 30, 2021 (in thousands):

Year ending December 31,	Total
2021 (remaining months)	$	210
2022		169
2023		22
Total minimum payments required:		401
Less amount representing interest:		(4	)
Present value of net minimum lease payments:		397
Less current portion		(369	)
	$	28