Lightning eMotors, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

3 Months Ended

Mar. 31, 2023

A contract is or contains a lease when, (1) the contract contains an explicitly or implicitly identified asset and (2) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration. The Company assesses whether an arrangement is or contains a lease at inception of the contract. For all leases, other than those that qualify for the short-term recognition exemption, the Company recognizes as of the lease commencement date on the balance sheet a liability for its obligation related to the lease and a corresponding asset representing the Company’s right to use the underlying asset over the period of use.

The Company leases its manufacturing center, distribution center, and office space (collectively “Operating Facility”) and certain information technology (“IT”) equipment under non-cancelable operating leases. The Company also leases equipment utilized in the manufacturing process under non-cancelable financing leases. These financing leases include either a bargain purchase option or the equipment reverts ownership to the Company at the end of the lease term.

The Company assesses the expected lease term at lease inception and discounts the lease using a fully-secured, annual incremental borrowing rate (or rate implicit in the lease, if readily determinable), adjusted for time value corresponding with the expected lease term. The Company elected, for all classes of underlying assets, to not apply the balance sheet recognition requirements of ASC 842, Leases, to leases with a term of one year or less, and instead, recognize the lease payments in the income statement on a straight-line basis over the lease term. The Company also elected, for certain classes of underlying assets, to combine lease and non-lease components. The Company elected to combine lease and non-lease components for its Operating Facility, IT equipment and manufacturing equipment leases.

Right-of-use assets and lease liabilities as of March 31, 2023 and December 31, 2022 consist of the following:


	March 31, 2023				December 31, 2022
	Operating		Finance		Operating		Finance
Assets
Right-of-use assets, net (1)	$	7,411	$	855	$	7,735	$	893
Liabilities
Lease obligation - current portion (2)	$	1,734	$	181	$	1,649	$	179
Lease obligation - long-term portion (3)	7,262		573		7,735		619
Total lease obligations	$	8,996	$	754	$	9,384	$	798

Weighted average remaining lease terms (in years)	3.9		4.6		4.2		4.8
Weighted average discount rate	15%		4%		15%		4%

(1)Finance right-of-use assets, net are included in “Other assets” on the consolidated balance sheets.

(2)Finance lease obligation – current portion is included in “Accrued expenses and other current liabilities” on the consolidated balance sheets.

(3)Finance lease obligation – long-term portion is included in “Other long-term liabilities” on the consolidated balance sheets.

The Company’s lease cost is presented below. The Company does not have any short-term leases or leases with variable lease payments. The financing lease cost for the three months ended March 31, 2023 and 2022 was immaterial.


	Three Months Ended March 31,
	2023		2022
Operating Lease Cost
Cost of revenues	$	404	$	261
Research and development	76		308
Selling, general and administrative	183		78
Total operating lease cost	$	663	$	647

The maturities of the Company’s lease liabilities are as follows:


	March 31, 2023
	Operating		Finance
2023 (remainder of year)	$	2,186	$	154
2024	2,997		205
2025	3,043		160
2026	3,105		128
2027	517		82
Thereafter	—		84
Total future minimum lease payments	11,848		813
Less: imputed interest	(2,852)		(59)
Total maturities	$	8,996	$	754