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Leases | 12 Months Ended
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Dec. 31, 2023
Leases [Abstract] |
Leases | NOTE 6 - LEASES The Company leases real estate for office space and for administrative, research, marketing and light manufacturing operations of the lessee’s aerospace related research and development business under operating leases. There are four finance leases. The Company has eight real estate leases with lease terms ranging from 6 months to 250 months and four equipment leases with lease terms ranging from 36 months to 60 months, some of which contain options to extend and some of which contain options to terminate the lease without cause at the option of lessee. The Company’s real estate leasing agreements include terms requiring the Company to reimburse the lessor for its share of real estate taxes, insurance, operating costs and utilities which the Company accounts for as variable lease costs when incurred since the Company has elected to not separate lease and non-lease components, and hence are not included in the measurement of lease liability. For the years ended December 31, 2023 and 2022, there were no significant variable lease costs. There are no restrictions or covenants imposed by any of the leases, and none of the Company’s leases contain material residual value guarantees. In September 2021, we signed a ground lease agreement for the development of our LPOC that will serve as a production and testing facility of lunar lander components and other aerospace related operations. The lessor will reimburse up to $40.0 million for certain costs incurred by us for design, construction, and development. Management concluded that it was deemed the owner, for accounting purposes only, of the facility under build-to-suit lease accounting due to its involvement in the construction activities of the facility. Accordingly, we are accounting for the construction of the facility as a financing arrangement. As of December 31, 2022, we had capitalized $10.3 million of construction in progress and a corresponding financing obligation of $9.1 million. Upon completion of the construction, the lease agreement will have an initial term of 20 years with four optional renewal periods of 5 years each. During the fourth quarter of 2022, construction was completed for the Small Engine Verification facility (the “SEV” facility) portion of the LPOC, and we took possession of the SEV facility. Upon commencement of the SEV facility portion of the lease, management determined that it qualified for sale and leaseback accounting, with the leaseback being classified as an operating lease. No gain or loss was recognized or deferred on the sale of the SEV facility, as the fair value upon completion was determined to be equal to the carrying value. As of December 31, 2023, the Company recorded right-of-use assets of $2.9 million and corresponding lease liabilities of approximately $3.2 million. As of December 31, 2022, the Company recorded right-of-use assets and corresponding lease liabilities of approximately $3.1 million. During the third quarter of 2023, the remaining construction for the LPOC was near completion and we took possession of the entire facility. Upon commencement of the lease, we determined that the LPOC qualified for sale and leaseback accounting, with the leaseback being classified as an operating lease. No gain or loss was recognized or deferred on the sale of the lunar operations center, as the fair value upon commencement was determined to be equal to the carrying value. As of the lease commencement date, we derecognized approximately $30.4 million of construction in progress and the corresponding financing obligation of $30.4 million associated with capitalized construction costs of the lunar operations center and related reimbursements received from the lessor. We recognized operating lease right-of-use assets of $32.3 million and operating lease liabilities of $26.7 million as of the lease commencement date, which included $5.6 million of reimbursable costs to be received from the lessor. As of December 31, 2023, we have approximately $3.8 million of contractual obligations to complete construction of the LPOC, of which $0.7 million is expected to be reimbursed by the lessor recorded as other current liabilities and $3.1 million to be funded from available cash recorded as current operating lease liabilities. The components of total lease expense are as follows (in thousands):
|  |  | Year Ended December 31,
|  |  |  |  | 2023 |  | 2022
Operating lease cost |  |  |  |  | $ | 1,536 |  |  | $ | 714 |
Finance lease cost |  |  |  |  | 3 |  |  | — |
Short-term lease cost |  |  |  |  | 333 |  |  | 117 |
Total lease cost |  |  |  |  | $ | 1,872 |  |  | $ | 831 |
The components of supplemental cash flow information related to operating leases are as follows (in thousands):
| Year Ended December 31,
| 2023 |  | 2022
| Operating Leases |  | Finance Leases |  | Operating Leases |  | Finance Leases
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |
Cash flows from operating activities | $ | 1,034 |  |  | $ | 3 |  |  | $ | 832 |  |  | $ | — |
Cash flows from investing activities | $ | 1,344 |  |  | $ | 5 |  |  | $ | — |  |  | $ | — |
Cash flows from financing activities | $ | — |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 32,393 |  |  | $ | 93 |  |  | $ | 3,480 |  |  | $ | — |
Weighted average remaining lease term - operating leases (months) | 226 |  | 35 |  | 155 |  | 0
Weighted average discount rate - operating leases | 6.1 | % |  | 7.8 | % |  | 5.7 | % |  | — | %
The operating and finance lease ROU assets, current operating lease liabilities, current finance lease liabilities, non-current operating lease liabilities, and non-current finance lease liabilities are disclosed in our consolidated balance sheets. The table below includes the estimated future undiscounted cash flows for operating and finance leases as of December 31, 2023 (in thousands):
Year Ending December 31, |  | Operating Leases |  | Finance Leases
2024 |  | $ | 1,822 |  |  | $ | 33 |
2025 |  | 1,836 |  |  | 33 |
2026 |  | 1,831 |  |  | 28 |
2027 |  | 1,364 |  |  | 5 |
2028 |  | 1,451 |  |  | 4 |
Thereafter |  | 56,783 |  |  | — |
Total undiscounted lease payments |  | $ | 65,087 |  |  | $ | 103 |
Less: imputed interest |  | 32,177 |  |  | 11 |
Present value of lease liabilities |  | $ | 32,910 |  |  | $ | 92 |
Plus: construction costs to be funded by the Company |  | 3,150 |  |  | — |
Less: reimbursable construction costs from the lessor |  | (677) |  |  | — |
Total lease liabilities |  | $ | 35,383 |  |  | $ | 92 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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