Leases

12 Months Ended

Dec. 31, 2024

Note 3 – Leases

The Company determines if an arrangement is a lease at inception of a contract. The Company’s lease portfolio includes a manufacturing site, component warehouse and corporate offices. The remaining lease terms on the Company’s leases recorded on the consolidated balance sheet are between 4.0 and 15.8 years, most of which include options to extend the lease terms. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet.

The Company took possession of additional square footage at the Manufacturing Facility in 2023 and 2024. The Manufacturing Facility lease is classified as finance lease, while substantially all other leases are classified as operating leases.

Operating and finance lease right of use assets are presented separately in long-term assets, the current portion of finance lease liabilities is presented separately in current liabilities, the current portion of operating lease liabilities is 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.

Right of use 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. Right of use 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 rates used in determining the present value of lease payment for the Manufacturing Facility lease as a result of the lease modifications in 2024. Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease right of use 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, 2024		Year Ended December 31, 2023
Operating lease costs:
Fixed	$	634	$	737
Short-term		2,157		2,202
Total operating lease costs	$	2,791	$	2,939
Finance lease costs:
Amortization of leased assets	$	2,610	$	2,168
Interest on lease liabilities		3,061		2,759
Total finance lease costs	$	5,671	$	4,927
Total lease cost	$	8,462	$	7,866


Supplemental balance sheet information related to leases were as follows:
	December 31, 2024		December 31, 2023
Right of use assets:
Right of use asset operating lease	$	2,423	$	2,826
Right of use asset finance lease		45,081		40,277
Total	$	47,504	$	43,103

Lease liabilities:
Operating lease liabilities:
Current	$	519	$	470
Long-term		2,645		3,164
Total operating lease liabilities	$	3,164	$	3,634

Finance lease liabilities:
Current		1,256	$	1,378
Long-term		46,678		41,273
Total finance lease liabilities	$	47,934	$	42,651
Total	$	51,098	$	46,285


Supplemental cash flow information is as follows:
	Year Ended December 31, 2024		Year Ended December 31, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	685	$	992
Operating cash flows for finance leases		3,061		2,759
Financing cash flows for finance leases		2,145		1,007
Total	$	5,891	$	4,758

Right of use assets obtained in exchange for new lease obligations:
Operating leases	$	-	$	1,805
Finance leases		7,414		9,352
Total	$	7,414	$	11,157

The aggregate future lease payments for leases as of December 31, 2024 are as follows:


	Operating leases			Finance leases
2025	$	700		$	4,706
2026		716			4,935
2027		732			4,935
2028		749			4,935
2029		286			4,935
Thereafter		520			57,569
Total lease payments		3,703			82,015
Less: interest		(539	)		(34,081	)
Total	$	3,164		$	47,934


Weighted average remaining lease term (years)
Operating leases	6.3
Finance leases	15.8
Weighted average discount rate
Operating leases	6.24	%
Finance leases	7.28	%