Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.21.2
Leases
9 Months Ended
Sep. 30, 2021
Leases  
Leases

Note 9 – Leases

The Company adopted authoritative guidance related to leases effective January 1, 2020 using the modified retrospective method. 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”) under noncancelable operating leases that expire in February 2027. The lease payments include taxes, insurance, utilities, and maintenance costs.

The Company had leases for vehicles under finance leases that expired at various dates, with the longest lease ending in April 2021. None of these leases included a renewal option. For financial reporting purposes, minimum lease payments related to these vehicle leases were recorded as inventory raw materials, principally electric battery systems, and expensed through “cost of revenues sold” and, as a result, the Company included the purchase option payments due at the end of the lease term in the finance lease obligation.

The Company assesses the expected lease term at lease inception and discounts the lease using a fully secured annual incremental borrowing rate, 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 leases. The Company did not have any short-term leases during the three or nine months ended September 30, 2021 or 2020.

Right-of-use assets and lease liabilities as of September 30, 2021 and December 31, 2020 consist of the following:

September 30, 2021

December 31, 2020

    

Operating

    

        Operating        

    

        Finance        

Assets

 

  

  

 

  

Right-of-use assets, net

$

8,840

$

7,881

$

Liabilities

 

  

 

  

 

  

Operating lease obligation - current portion

$

1,035

$

1,769

$

Operating lease obligation - long-term portion

 

9,431

 

7,265

 

Finance lease obligation - current portion

 

 

 

54

Total operating and finance lease obligations

$

10,466

$

9,034

$

54

Weighted average remaining lease terms (in years)

5.4

5.2

0.3

Weighted average discount rate

15%

12%

12%

The Company's lease cost is presented below. The Company does not have any variable lease payments.

Three Months Ended September 30, 

Nine Months Ended September 30, 

2021

    

2020

    

2021

    

2020

Operating Lease Cost

 

  

 

  

  

 

  

Cost of revenues

$

121

$

133

$

410

$

220

Selling, general and administrative

 

475

 

113

 

1,401

 

546

Research and development

 

40

 

25

 

110

 

47

Total operating lease cost

$

636

$

271

$

1,921

$

813

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

September 30, 2021

    

Operating

2021 (remainder of year)

$

582

2022

2,588

2023

 

2,802

2024

 

2,887

2025

 

2,974

2026 and thereafter

 

3,564

Total future minimum lease payments

 

15,397

Less: imputed interest

 

(4,931)

Total maturities

$

10,466