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Commitments and Contingencies
 6 Months Ended
Jun. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Leases
The Company has a lease for its headquarters location in Redwood City, California, which consists of approximately 24,591 square feet of office space (the “existing premises”) and was scheduled to expire on July 31, 2025 (the “Office Lease”). The Company leases additional facilities in Redwood City, California, under a sublease agreement, which consist of approximately 25,254 square feet of office space (the “expansion premises”) and was scheduled to expire on September 30, 2024 (the “Sublease”).
In May 2024, the Company entered into a third amendment to Sublease (the “Third Amendment to Sublease”) to extend the lease term of the expansion premises through May 31, 2028. The Third Amendment to Sublease contains a rent-free period between November 1, 2024 and February 28, 2025, after which rent is approximately $0.1 million per month and is subject to an annual increase of approximately 3%.
The Company also entered into a third amendment to Office Lease (the “Third Amendment to Office Lease”) to extend the lease term of the existing premises through July 31, 2035. The Third Amendment to Office Lease contains a rent-free period between August 1, 2025 and November 30, 2025, after which rent is approximately $0.1 million per month and is subject to an annual increase of approximately 3.5%. Additionally, under the Third Amendment to Office Lease, the Company and the landlord have agreed to expand the existing premises to include the expansion premises, effective as of June 1, 2028, through July 31, 2035 (conterminous with the existing
premises as referenced above). Commencing on June 1, 2028, the monthly base rent for the expansion premises will be $0.1 million per month and is subject to an annual increase of approximately 3.5%.
Under the Third Amendment to Office Lease, the Company has two options to extend the lease term on the leased premises for a period of five years, respectively. The Company did not include the renewal options in the lease terms for calculating lease liability, as it was not reasonably certain that the Company will exercise these renewal options. The amendments were accounted for as modifications that resulted in additional right of use assets in exchange for lease liabilities of $16.3 million.
In 2013, the Company entered into a five-year lease for office facilities in Switzerland. The Company had an option to extend the lease through January 2022, which was not exercised by the Company. Per the lease terms, in the event the option to extend is not exercised, the lease remains in force and can be terminated with 12-months’ notice. In June 2024, with the intention of seeking other premises, the Company provided notice to the landlord to terminate the lease, effective June 30, 2025.
As of June 30, 2024, the Company has leases on fourteen vehicles with an average lease term of 3.0 years.
Operating lease cost consists of the following (in thousands):
Six Months Ended June 30,
20242023
Operating lease cost
$1,538 $1,442 
Short-term lease cost
20 18 
Variable lease cost
387 320 
Total lease cost
$1,945 $1,780 
The following table summarizes a maturity analysis of the Company’s lease liabilities showing the aggregate lease payments as of June 30, 2024 (in thousands):
Fiscal Year Ending December 31,Amount
2024 (remaining six months)$1,573 
20252,176 
20262,569 
20272,611 
20282,729 
Thereafter20,624 
Total minimum lease payments32,282 
Less: Amount of lease payments representing interest13,297 
Present value of future minimum lease payments$18,985 
Less: Current lease liabilities
1,071 
Long-term lease liabilities$17,914 
The following table summarizes additional information related to the Company’s operating leases (in thousands, except weighted average data):
June 30, December 31,
20242023
Right of use asset
$18,490 $3,406 
Weighted average remaining lease term (years)10.991.35
Weighted average discount rate10.5 %6.7 %
The following table summarizes other supplemental information related to the Company’s operating leases (in thousands):
Six Months Ended June 30,
20242023
Cash paid for amounts included in the measurement of lease liabilities included in cash flows used in operating activities
$1,821 $1,748 
Right-of-use assets obtained in exchange for lease liabilities$16,360 $224 
Service Agreement
In April 2022, the Company entered into an agreement with a service provider which requires total minimum purchases of $0.6 million, $0.4 million, and $0.4 million over a three-year period. From inception of the agreement through June 30, 2024, the Company recorded $1.2 million of expense for services related to this agreement in cost of goods sold. In June 2024, the Company amended the agreement with the service provider, which eliminated the minimum purchase obligations.
Contingencies
From time to time, the Company may be a party to various litigation claims in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with legal counsel, the need to record a liability for litigation and contingencies. Accrual estimates are recorded when and if it is determinable that such a liability for litigation and contingencies are both probable and reasonably estimable.
In December 2022, the Company received a civil investigative demand (“CID”) from the U.S. Department of Justice, Civil Division in connection with an investigation under the Anti-Kickback Statute and False Claims Act (the “Investigation”). The CID requests information and documents regarding the Company’s relationships with certain health care providers, medical practices, and hospitals in connection with the sales and marketing of the Zephyr Valves and related products and services. The Company is fully cooperating with the Investigation. The Company is unable to express a view at this time regarding the ultimate outcome of the Investigation or estimate an amount or range of reasonably possible loss. Depending on the outcome of the Investigation, there could be a material impact on the Company’s business, results of operations and financial condition.