LEASES

3 Months Ended

Mar. 31, 2024

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 and interest expense. The Company’s lease agreement for a tool used in the development and marketing of the Company’s technology 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, 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.

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 December 2023, the Company entered into a lease agreement for a tool in Tempe, Arizona. The term of this lease is for 12 months beginning on January 1, 2024 for $87,000 per month. Since the lease term is not for more than one year and there are no extension provisions in the lease, 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.

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

Schedule of lease costs
	Three Months March 31,
	2024		2023
Financing lease costs:
Amortization of ROU assets	$	281	$	291
Interest on lease liabilities		39		53
Total financing lease costs	$	320	$	344

Operating lease costs:
Fixed lease costs	$	66	$	62
Short-term lease costs		261		297
Total operating lease costs	$	327	$	359

Future minimum payments under non-cancellable leases as of March 31, 2024 were as follows (in thousands):

Schedule of future minimum payments
For the Year Ended December 31,	Financing leases			Operating leases
Remaining 2024	$	1,037		$	181
2025		1,436			298
2026		478			24
Total future minimum lease payments		2,951			503
Less imputed interest		(163	)		(46	)
Total lease liability	$	2,788		$	457

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

Schedule of supplemental information
	Three Months Ended March 31,
	2024		2023
Operating cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	110	$	56
Cash paid for amounts included in the measurement of financing liabilities	$	219	$	241

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

The weighted average remaining discount rate is 5.50% for the Company’s operating leases and 5.25% for the financing lease. The weighted average remaining lease term is 2.3 years for the Company’s operating leases and 1.9 years for the financing lease.