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Leases

3 Months Ended

Mar. 31, 2023

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 two months to two years. 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. These 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 under one year 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 March 31, 2023		Three Months Ended March 31, 2022
Operating lease cost ⁽¹⁾	$	127	$	166

Finance lease cost:
Amortization of leased assets	$	3	$	30
Interest on lease liabilities		2		2
Total finance lease cost	$	5	$	32

⁽¹⁾	Includes short-term lease costs of $108,000 and $44,000 for the three months ended March 31, 2023 and 2022, respectively.

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

	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
Cash paid for amounts included in leases:
Operating cash flows from operating leases	$	(16	)		(184	)
Operating cash flows from finance leases		(2	)		(2	)
Financing cash flows from finance leases		(28	)		(61	)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		-			-

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

	March 31, 2023			December 31, 2022
Operating leases
Operating lease right-of-use assets	$	103		$	118
Current portion of operating lease obligations	$	85		$	83
Operating lease liabilities, net of current portion		18			35
Total operating lease liabilities	$	103		$	118
Finance leases
Property and equipment, at cost	$	2,640		$	2,622
Accumulated depreciation		(2,421	)		(2,418	)
Property and equipment, net	$	219		$	204

Current portion of finance lease obligations	$	73		$	95
Finance lease liabilities, net of current portion		41			46
Total finance lease liabilities	$	114		$	141

	March 31, 2023			March 31, 2022
Weighted Average Remaining Lease Term
Operating leases		1.5 years			1.5 years
Finance leases		1.4 years			2.0 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 March 31, 2023 is as follows (in thousands):

Year ending December 31,	Total
2023 (remaining months)		54
2024		53
		107
Less imputed interest		(4	)
Total lease liabilities	$	103
Less current portion		(85	)
	$	18

The following is a schedule of minimum future rentals on the non-cancellable finance leases as of March 31, 2023 (in thousands):

Year ending December 31,	Total
2023 (remaining months)		66
2024		33
2025		19
Total minimum payments required:		118
Less amount representing interest:		(4	)
Present value of net minimum lease payments:		114
Less current portion		(73	)
	$	41