Commitments and Contingencies

12 Months Ended

Dec. 31, 2023

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 4. Commitments and Contingencies

Leases

The Company has facility leases that it accounts for under ASC 842, including the operating leases for its corporate headquarters facility in San Jose, California, and facilities in Toronto and Markham Ontario, Canada. In November 2023, the Company renewed the San Jose facility lease for a one-year term commencing January 15, 2024 (the Renewal Term), and effective with the commencement of the Renewal term the Company ceased accounting for the lease under ASC 842. In December 2023, the Company renewed the Toronto office lease for a one-year term commencing January 1, 2024. In May 2022, the Company entered into a lease for the facility in Markham with a 60-month term, which commenced June 21, 2022. The Markham landlord also provided a lease incentive of approximately $286,200 (the Incentive). In 2023, the Company received payment of $143,100 from the Markham landlord of the first installment of the Incentive. The remaining balance of the Incentive is paid to the Company in the form of an adjustment to rent during the last three months of each year during the remaining lease term. During 2023, a credit of $35,775 was made against the rent during the three months ended December 31, 2023. As of December 31, 2023, the pending Lease Incentive to be received was $107,325.

Upon the renewal of the Toronto lease in 2023, the Company recognized a right-of-use asset of approximately $137,700. The discount rate used to measure the lease assets and liabilities for the renewal was 8%.

The initial right-of-use asset and corresponding liability of approximately $1.0 million for the Markham facility lease was measured at the present value of the future minimum lease payments. The discount rate used to measure the lease assets and liabilities was 8%. Lease expense is recognized on a straight-line basis over the lease term.

On March 1, 2022, the Company entered into a 36-month finance lease agreement for the lease of equipment resulting in the recognition of a right-of-use asset and lease liability of approximately $274,000.

On November 1, 2022, the Company entered into a 36-month finance lease agreement for the lease of equipment resulting in the recognition of a right-of-use asset of approximately $124,000 and lease liability of approximately $117,000.

The following table provides the details of right-of-use assets and lease liabilities as of December 31, 2023 (in thousands):

	Year Ended
	December 31, 2023
Right-of-use assets:
Operating leases	$	422
Finance lease		193
Total right-of-use assets	$	615
Lease liabilities:
Operating leases	$	525
Finance lease		194
Total lease liabilities	$	719

Future minimum payments under the leases at December 31, 2023 are listed in the table below (in thousands):

Year ending December 31,
2024	$	413
2025		166
2026		110
2027		108
Total future lease payments		797
Less: imputed interest		(78	)
Present value of lease liabilities	$	719

The following table provides the details of supplemental cash flow information (in thousands):

	Year Ended December 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for leases	$	674	$	704

Rent expense was approximately $0.6 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively. In addition to the minimum lease payments, the Company is responsible for property taxes, insurance and certain other operating costs related to the leased facilities and equipment.

Indemnification

In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. The Company has also entered into indemnification agreements with its officers and directors. No material amounts were reflected in the Company’s consolidated financial statements for the years ended December 31, 2023 and 2022 related to these indemnifications.

The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances applicable to each particular agreement. To date, the Company has not made any payments related to these indemnification agreements. 

Product Warranties

The Company warrants certain of its products to be free of defects generally for a period of three years. The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of net revenues. Warranty costs were not material for the years ended December 31, 2023 and 2022.

Legal Matters

The Company is not a party to any legal proceeding that the Company believes is likely to have a material adverse effect on its consolidated financial position or results of operations. From time to time the Company may be subject to legal proceedings and claims in the ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial resources and diversion of management efforts.

Purchase Obligations

The Company’s primary purchase obligations include non-cancelable purchase orders for inventory and computer-aided-design (CAD) software. At December 31, 2023, the Company had outstanding non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $2.3 million and non-cancelable purchase orders for CAD software of $3.1 million over 24 months.