LEASES

3 Months Ended

Mar. 31, 2023

7.	LEASES

The Company accounts for leases over one year under ASC 842. Lease expense for the Company’s operating leases consists of the lease payments recognized on a straight-line basis over the lease term. Expenses for the Company’s financing leases consists of the amortization expenses recognized on a straight-line basis over the lease term, variable lease costs and interest expense. The Company’s lease agreement for a tool used in the development and marketing of the Company’s technology contains a provision for an annual adjustment of lease payments based on tool availability and usage. The potential lease payment adjustment is determined on August 1 of each year of the lease and is calculated based on the tool availability and usage for the preceding 12 months. Effective August 1, 2022, the lease payments for this tool were reduced to $100,824 per month for the period August 1, 2022 through July 31, 2023. This adjustment to the variable lease payments resulted in a reduction in ROU and corresponding lease liability. The components of lease costs were as follows (in thousands):

Components of lease costs
	Three Months Ended March 31,
	2023		2022
Financing lease costs:
Amortization of ROU assets	$	291	$	319
Interest on lease liabilities		53		71
Total financing lease costs	$	344	$	390

Operating lease costs:
Fixed lease costs	$	62	$	62
Short-term lease costs		297		11
Total operating lease costs	$	359	$	73

Future minimum payments under non-cancellable leases as of March 31, 2023 were as follows (in thousands):


For the Year Ended December 31,	Financing leases			Operating leases
Remaining 2023	$	839		$	198
2024		1,436			278
2025		1,436			284
2026		478			21
2027 & thereafter		–			–
Total future minimum lease payments	$	4,189		$	781
Less imputed interest		(266	)		(59	)
Total lease liability	$	3,923		$	722

The table above does not include our short-term leases that are one-year or less.

The below table provides supplemental information and non-cash activity related to the Company’s operating and financing leases are as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Operating cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	56	$	54
Cash paid for amounts included in the measurement of financing liabilities	$	241	$	359
Non-cash activity:
Right-of-use assets obtained in exchange for operating lease obligations	$	–	$	–
Right-of-use assets obtained in exchange for financing lease obligations	$	–	$	–

The weighted average remaining discount rate is 5.25% for the Company’s operating and financing leases. The weighted average remaining lease term is 2.9 years for operating leases and 3.3 years for the financing lease.

Effective May 1, 2023, the Company will lease an additional 404 square feet at its Tempe office location under an amendment to its current lease. The monthly rent payment will increase from $1,277 per month to $2,365 per month and will be accounted for as a modification to the lease under ASC 842 at the time of commencement.

The Company recently terminated its office lease in Cambridge, Massachusetts as of March 31, 2023. The cost of the lease was $2,942 per month. In December 2022, the Company entered into a lease agreement for a tool in Tempe, Arizona. The term of this lease is for six months beginning on January 1, 2023 with an option to extend the lease for an additional six months. The initial lease terms were $96,000 per month. In March 2023, the Company elected to extend the lease through December 31, 2023, the remaining lease payments will be reduced to $84,000 over the remainder of the lease. Since the lease and extension are not for more than one year, the future lease payments are not included in the lease obligations on the Company’s condensed balance sheets.