Annual report pursuant to Section 13 and 15(d)

Leases

v3.22.4
Leases
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases Leases
The Company leases administrative, manufacturing, research and distribution facilities through operating leases. Several leases include fixed payments including rent and non-lease components such as common-area or other maintenance costs.
The components of total lease expense for the years ended were as follows:
Years Ended December 31,
(in thousands) 2022 2021 2020
Finance lease costs
Amortization of right-of-use assets $ 20  $ 22  $ 22 
Interest on lease obligations 2  2  3 
Operating lease costs
Operating lease costs 4,077  4,326  2,777 
Short-term lease costs 72  10  116 
Variable lease costs 1,241  744  18 
Total lease expense $ 5,412  $ 5,104  $ 2,936 
Supplemental balance sheet information related to the operating and financing leases is as follows:
(In thousands, except lease term and discount rate) December 31, 2022 December 31, 2021
Operating Leases
Right-of-use operating assets $ 14,369  $ 15,193 
Current maturities of long-term lease obligations $ 1,303  $ 1,825 
Long-term lease obligations $ 20,387  $ 20,794 
Financing Leases
Right-of-use financing leases (1)
$ 41  $ 42 
Current maturities of long-term lease obligations $ 7  $ 9 
Long-term lease obligations $ 18  $ 4 
Weighted average operating lease term (in years): 11 12
Weighted average financing term (in years): 4 2
Weighted average discount rate operating leases 10.58  % 10.32  %
Weighted average discount rate financing leases 11.91  % 7.23  %
(1) Financing leases are included in property and equipment, net on the consolidated balance sheets.
Future minimum lease payments under operating and financing leases as of December 31, 2022, were as follows:
(In thousands)
Year ending December 31,
2023 $ 3,519 
2024 3,297 
2025 3,336 
2026 3,348 
2027 2,921 
Thereafter 20,931 
Total $ 37,352 
Less: Imputed interest (15,637)
Total lease liability 21,715 
Less: Current lease liability (1,310)
Long-term lease liability $ 20,405 
Lease modifications
The Company accounts for lease revisions as a lease modification in accordance with ASC 842, Leases, when the modification effectively terminates the existing lease and creates a new lease.
On February 22, 2021, the Company entered into the Seventh Amendment to a License and Services Agreement ("Seventh Amendment") with Community Blood Center (doing business as Community Tissue Services) ("CTS"), with an effective date of February 22, 2021, pursuant to the original agreement dated August 6, 2015, as amended ("CTS Agreement"). The CTS Agreement is for processing of the Avance Nerve Graft in Dayton, Ohio. The Seventh Amendment extended the term of the agreement to December 31, 2023. Under the CTS Agreement, the Company pays CTS a facility fee for use of clean room/manufacturing, storage, and office space, which the Company accounts for as an embedded lease. The Company valued the CTS Agreement using a 6.3% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $272 as a result of this amendment.
On July 12, 2021, the Company entered into the First Amendment to Office Lease ("Heights Union First Amendment") with Cousins Heights Union, LLC (as successor in interest to Heights Union I, LLC), with an effective date of July 12, 2021, pursuant to the original lease dated September 20, 2018, as amended ("Heights Union Lease"). The Heights Union Lease is for the general office, medical laboratory, training, and meeting purposes located in Tampa, Florida. The Heights Union First Amendment revises the commencement date of the Heights Union Lease to mean October 30, 2020 and revises the termination date of the Heights Union Lease to be October 31, 2034. Pursuant to the Heights Union First Amendment, the Company was entitled to an additional 1.5 months of free rent. The Company valued the Height Union Lease using a 10.6% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $299 as a result of this amendment.
On July 13, 2021, the Company entered into a Sixth Amendment to Lease ("Sixth Amendment") with Alachua Copeland Park Investments, LLC (as successor in interest to Ology Bioservices Holdings, LLC, who was successor in interest to SNH Medical Office Properties Trust), with an effective date of July 13, 2021, pursuant to the original lease agreement dated February 6, 2007, as amended ("Alachua Lease"). The Alachua Lease is for the Company's corporate headquarters in Alachua, Florida. The Sixth Amendment extended the term of the Alachua Lease to October 31, 2026. The Company valued the Alachua Lease using a 10.6% incremental borrowing rate and recorded a right-of-use asset of $1,335 and a lease liability of $1,370 as a result of this amendment.
On January 27, 2022, the Company entered into a Commercial Lease Amendment ("Amendment") with JA-Cole L.P., with an effective date of February 1, 2022, pursuant to the original Commercial Lease dated April 21, 2015, as amended (the "2015 JA-Cole Lease"). The 2015 JA-Cole Lease is for the office and warehouse facility located in Burleson, Texas. The Amendment revised the commencement date to May 1, 2022, and the expiration date to April 30, 2027. The Company valued the 2015 JA-Cole Lease using a 11.3% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $641 as a result of this amendment.
On August 22, 2022, the Company entered into the First Amendment to Lease Agreement (the “First Amendment”) with JA-Cole, L.P. with an effective date of October 1, 2022, pursuant to the original Commercial Lease dated October 1, 2020, as amended (the "2020 JA-Cole Lease"). The 2020 JA-Cole Lease is for the office and warehouse facility located in Burleson,
Texas. The First Amendment adds an additional 2,500 square feet to the Leased Premises, for a total of 5,000 square feet and revises the expiration date of the 2020 JA-Cole Lease to mean September 30, 2027. The Company valued the 2020 JA Cole Lease using a 12.8% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $221 as a result of this amendment.
On December 31, 2022, the Company entered into the Second Amendment to Lease Agreement (the "Second Amendment") with SNH Medical Office Properties Trust n/k/a Nucleic Acids Licensing, LLC with an effective date of January 1, 2023, pursuant to the original lease agreement on November 19, 2018, as amended (the "2018 Nucleic Lease"). The 2018 Nucleic Lease is for medical laboratory space in Alachua, Florida. The Second Amendment extends the term of the 2018 Nucleic Lease one year; to December 31, 2023, with the option to extend the term for one additional year. The Company valued the 2018 Nucleic Lease using a 14.0% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $75 as a result of this amendment.
Leases Leases
The Company leases administrative, manufacturing, research and distribution facilities through operating leases. Several leases include fixed payments including rent and non-lease components such as common-area or other maintenance costs.
The components of total lease expense for the years ended were as follows:
Years Ended December 31,
(in thousands) 2022 2021 2020
Finance lease costs
Amortization of right-of-use assets $ 20  $ 22  $ 22 
Interest on lease obligations 2  2  3 
Operating lease costs
Operating lease costs 4,077  4,326  2,777 
Short-term lease costs 72  10  116 
Variable lease costs 1,241  744  18 
Total lease expense $ 5,412  $ 5,104  $ 2,936 
Supplemental balance sheet information related to the operating and financing leases is as follows:
(In thousands, except lease term and discount rate) December 31, 2022 December 31, 2021
Operating Leases
Right-of-use operating assets $ 14,369  $ 15,193 
Current maturities of long-term lease obligations $ 1,303  $ 1,825 
Long-term lease obligations $ 20,387  $ 20,794 
Financing Leases
Right-of-use financing leases (1)
$ 41  $ 42 
Current maturities of long-term lease obligations $ 7  $ 9 
Long-term lease obligations $ 18  $ 4 
Weighted average operating lease term (in years): 11 12
Weighted average financing term (in years): 4 2
Weighted average discount rate operating leases 10.58  % 10.32  %
Weighted average discount rate financing leases 11.91  % 7.23  %
(1) Financing leases are included in property and equipment, net on the consolidated balance sheets.
Future minimum lease payments under operating and financing leases as of December 31, 2022, were as follows:
(In thousands)
Year ending December 31,
2023 $ 3,519 
2024 3,297 
2025 3,336 
2026 3,348 
2027 2,921 
Thereafter 20,931 
Total $ 37,352 
Less: Imputed interest (15,637)
Total lease liability 21,715 
Less: Current lease liability (1,310)
Long-term lease liability $ 20,405 
Lease modifications
The Company accounts for lease revisions as a lease modification in accordance with ASC 842, Leases, when the modification effectively terminates the existing lease and creates a new lease.
On February 22, 2021, the Company entered into the Seventh Amendment to a License and Services Agreement ("Seventh Amendment") with Community Blood Center (doing business as Community Tissue Services) ("CTS"), with an effective date of February 22, 2021, pursuant to the original agreement dated August 6, 2015, as amended ("CTS Agreement"). The CTS Agreement is for processing of the Avance Nerve Graft in Dayton, Ohio. The Seventh Amendment extended the term of the agreement to December 31, 2023. Under the CTS Agreement, the Company pays CTS a facility fee for use of clean room/manufacturing, storage, and office space, which the Company accounts for as an embedded lease. The Company valued the CTS Agreement using a 6.3% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $272 as a result of this amendment.
On July 12, 2021, the Company entered into the First Amendment to Office Lease ("Heights Union First Amendment") with Cousins Heights Union, LLC (as successor in interest to Heights Union I, LLC), with an effective date of July 12, 2021, pursuant to the original lease dated September 20, 2018, as amended ("Heights Union Lease"). The Heights Union Lease is for the general office, medical laboratory, training, and meeting purposes located in Tampa, Florida. The Heights Union First Amendment revises the commencement date of the Heights Union Lease to mean October 30, 2020 and revises the termination date of the Heights Union Lease to be October 31, 2034. Pursuant to the Heights Union First Amendment, the Company was entitled to an additional 1.5 months of free rent. The Company valued the Height Union Lease using a 10.6% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $299 as a result of this amendment.
On July 13, 2021, the Company entered into a Sixth Amendment to Lease ("Sixth Amendment") with Alachua Copeland Park Investments, LLC (as successor in interest to Ology Bioservices Holdings, LLC, who was successor in interest to SNH Medical Office Properties Trust), with an effective date of July 13, 2021, pursuant to the original lease agreement dated February 6, 2007, as amended ("Alachua Lease"). The Alachua Lease is for the Company's corporate headquarters in Alachua, Florida. The Sixth Amendment extended the term of the Alachua Lease to October 31, 2026. The Company valued the Alachua Lease using a 10.6% incremental borrowing rate and recorded a right-of-use asset of $1,335 and a lease liability of $1,370 as a result of this amendment.
On January 27, 2022, the Company entered into a Commercial Lease Amendment ("Amendment") with JA-Cole L.P., with an effective date of February 1, 2022, pursuant to the original Commercial Lease dated April 21, 2015, as amended (the "2015 JA-Cole Lease"). The 2015 JA-Cole Lease is for the office and warehouse facility located in Burleson, Texas. The Amendment revised the commencement date to May 1, 2022, and the expiration date to April 30, 2027. The Company valued the 2015 JA-Cole Lease using a 11.3% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $641 as a result of this amendment.
On August 22, 2022, the Company entered into the First Amendment to Lease Agreement (the “First Amendment”) with JA-Cole, L.P. with an effective date of October 1, 2022, pursuant to the original Commercial Lease dated October 1, 2020, as amended (the "2020 JA-Cole Lease"). The 2020 JA-Cole Lease is for the office and warehouse facility located in Burleson,
Texas. The First Amendment adds an additional 2,500 square feet to the Leased Premises, for a total of 5,000 square feet and revises the expiration date of the 2020 JA-Cole Lease to mean September 30, 2027. The Company valued the 2020 JA Cole Lease using a 12.8% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $221 as a result of this amendment.
On December 31, 2022, the Company entered into the Second Amendment to Lease Agreement (the "Second Amendment") with SNH Medical Office Properties Trust n/k/a Nucleic Acids Licensing, LLC with an effective date of January 1, 2023, pursuant to the original lease agreement on November 19, 2018, as amended (the "2018 Nucleic Lease"). The 2018 Nucleic Lease is for medical laboratory space in Alachua, Florida. The Second Amendment extends the term of the 2018 Nucleic Lease one year; to December 31, 2023, with the option to extend the term for one additional year. The Company valued the 2018 Nucleic Lease using a 14.0% incremental borrowing rate and recorded a right-of-use asset and a lease liability of $75 as a result of this amendment.