LEASES

12 Months Ended

Dec. 31, 2023

8.	LEASES

The Company leases corporate office space in Los Gatos, California. In August 2020, the Company and its landlord amended the lease for this office. The amendment extended the expiration date of the operating lease to January 2026 and increased the space from 3,396 square feet to 4,101 square feet. Under ASC 842, the lease amendment was treated as a separate lease for the new space and a modification of the lease for the original space. In January 2021 the additional space became available for use, and the Company recorded an additional ROU asset and corresponding liability of approximately $144,000. The lease liability is based on the present value of the minimum lease payments, discounted using the Company’s estimated incremental borrowing rate at lease inception of 5.25%. The lease contains escalating payments on the anniversary of the original commencement which are included in the measurement of the initial lease liability. Additional payments based on a change in the Company’s share of the operating expenses, including property taxes and insurance, are recorded as a period expense when incurred.

In March 2021, the Company began leasing 474 square feet of office space in Tempe, Arizona. The new lease is classified as an operating lease with an initial term of two years and an option to extend for an additional three years through February 2026. The renewal option was exercised in January 2023. The lease also contains a performance standard for research collaboration with Arizona State University. The agreement requires a minimum value of collaborative research in each year of the lease. The lease is accounted for under ASC 842 and accordingly, the research payments are included in the ROU and lease liability at commencement. Effective May 1, 2023, the Company leased an additional 404 square feet at its Tempe office location under an amendment to its current lease. The monthly rent payment increased from $1,277 per month to $2,365 per month and the increased rent under the amended lease is accounted for as a modification to the lease under ASC 842 at the time of commencement. At the effective date of the lease amendment, a right-of-use asset of approximately $33,000 was recorded along with a short-term operating lease liability of approximately $12,000 and long-term operating lease liability of approximately $21,000. The amended lease ends in February 2026.

In October 2019, the Company entered into an agreement to lease a tool for use in the development of the Company’s technology. The lease agreement established a monthly lease payment of $150,000 per month. The lease contains a provision for an annual adjustment of lease payments based on tool availability and usage during the preceding 12 months and the adjusted payment is calculated on August 1 of each year of the lease. 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 lease payments resulted in a reduction in the ROU and corresponding lease liability. Effective August 1, 2023, the lease payments for this tool were adjusted to $137,650 per month for the period August 1, 2023 through July 31, 2024. This adjustment to the lease payments also resulted in a reduction in the ROU and corresponding lease liability.

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 and in consideration for this extension the remaining lease payments were reduced to $84,000. 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.

The Company terminated its office lease in Cambridge, Massachusetts as of March 31, 2023. The cost of the lease was $2,942 per month.

Lease expense for operating leases consists of the lease payments recognized on a straight-line basis over the lease term. Expenses for financing leases consists of the amortization expenses recognized on a straight-line basis over the lease term and interest expense. The components of lease costs were as follows (in thousands):

Schedule of components of lease costs
	Year Ended December 31,
	2023		2022
Financing lease costs:
Amortization of ROU assets	$	1,146	$	1,229
Interest on lease liabilities		194		255
Total financing lease costs	$	1,340	$	1,484

Operating lease costs
Fixed lease costs	$	257	$	248
Variable lease costs		2		–
Short-term lease costs		1,045		35
Total operating lease costs	$	1,304	$	283

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

Schedule of future minimum payments
For the Year Ended December 31,	Financing leases			Operating leases
2024	$	1,367		$	271
2025		1,436			298
2026		478			24
Total future minimum lease payments		3,281			593
Less imputed interest		(203	)		(34	)
Total lease liability	$	3,078		$	559

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


	Year Ended December 31,
	2023			2022
Operating cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	272		$	265
Cash paid for amounts included in the measurement of financing lease liabilities	$	1,112		$	1,239
Non-cash activity:
Right-of-use assets obtained in exchange for operating lease obligations	$	33		$	–
Remeasurement of right-of use asset and liability in financing lease obligations	$	(115	)	$	(458	)

The table above does not include short-term leases that are one-year or less. The weighted average remaining discount rate is 5.25% for the Company’s financing leases and 5.48% for the Company’s operating leases. The weighted average remaining lease term is 2.6 years for the financing lease and 2.1 years for operating leases.