Leases

12 Months Ended

Dec. 31, 2022

Note 3 – Leases

The Company determines if an arrangement is a lease at inception of a contract. The Company’s lease portfolio includes manufacturing sites, component warehouses and corporate offices. The remaining lease terms on the majority of the Company’s leases are between 0.3 and 17.8 years, some of which include options to extend the lease terms. Leases with initial term of 12 months or less are not recorded on the consolidated balance sheet.

In 2021, substantially all of the Company’s leases were operating leases. In April 2022, the Company and the lessors of the Company’s leased facility in Castaños (the “Castaños Facility”) amended the original lease to incorporate additional square footage into the lease. The modification resulted in a lease classification modification from operating to finance.

Operating and finance lease ROU assets are presented separately in long term assets, the current portion of operating and finance lease liabilities are presented within other current liabilities, and the non-current portion of operating and finance lease liabilities are presented separately within long term liabilities on the consolidated balance sheet.

ROU assets represent the Company’s right to use an underlying asset during the lease term and the lease liabilities represent the Company’s obligation to make the lease payments arising during the lease. ROU assets and liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company revalued the incremental borrowing rate used in determining the present value of lease payment for the Castaños Facility lease as a result of the lease modification in April 2022. Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease ROU asset amortization expense is recognized on a straight-line basis over the lease term, while interest expense on finance lease liabilities is recognized using the interest method.

The components of the lease costs were as follows:


	Year Ended December 31, 2022		Year Ended December 31, 2021
Operating lease costs:
Fixed	$	1,735	$	3,710
Short-term		505		761
Total operating lease costs	$	2,240	$	4,471
Finance lease costs:
Amortization of leased assets	$	1,182	$	-
Interest on lease liabilities		1,355		-
Total finance lease costs	$	2,537	$	-
Total lease cost	$	4,777	$	4,471


Supplemental balance sheet information related to leases were as follows:
	December 31, 2022		December 31, 2021
Right of use assets:
Right of use operating lease assets	$	1,596	$	16,669
Right of use finance lease assets		33,093		-
Total	$	34,689	$	16,669

Lease liabilities:
Operating lease liabilities:
Current	$	897	$	1,955
Long-term		1,780		16,617
Total operating lease liabilities	$	2,677	$	18,572

Finance lease liabilities:
Current		605	$	-
Long-term		33,245		-
Total finance lease liabilities	$	33,850	$	-
Total	$	36,527	$	18,572


Supplemental cash flow information is as follows:
	Year Ended December 31, 2022		Year Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,630	$	4,315
Operating cash flows from finance leases		1,355		-
Financing cash flows from finance leases		738		-
Total	$	4,723	$	4,315

Right of use assets obtained in exchange for new lease obligations:
Operating leases	$	-	$	-
Finance leases		20,344		-
Total	$	20,344	$	-

The aggregate future lease payments for leases as of December 31, 2022 are as follows:


	Operating leases			Finance leases
2023	$	992		$	3,298
2024		250			3,298
2025		256			3,354
2026		263			3,523
2027		271			3,523
Thereafter		1,085			48,139
Total lease payments		3,117			65,135
Less: interest		(440	)		(31,285	)
Total	$	2,677		$	33,850


Weighted-average remaining lease term (years)
Operating leases	7.9
Finance leases	17.8
Weighted-average discount rate
Operating leases	4.5	%
Finance leases	8.0	%