Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases Leases
The Company has the following lease obligations:
Victoria, British Columbia
During August 2020, the Company signed a lease for commercial office space in Victoria, British Columbia for a new corporate headquarters that was expected to commence in April 2022.
During the fourth quarter of 2020, the Company entered into 18-month facility and furniture leases for its existing corporate head office located in Victoria, British Columbia. The lease terms commenced on January 1, 2021 with an end date of August 31, 2022.
On August 3, 2022, we provided notice of termination for the lease of the intended new corporate headquarters space in Victoria on the basis that the landlord's work was not completed by the time required under the lease. As a result of the termination, the Company expensed $0.3 million of Construction in Progress (CIP) cost that was related to the new corporate headquarters.
On September 1, 2022, the fixed lease term ended for Aurinia's existing corporate headquarters and the Company exercised its
right to enter into a month to month lease, of which expenses are incurred in SG&A.
Rockville, Maryland
During March 2020, the Company entered into a lease for its U.S. commercial office in Rockville, Maryland for a total of 30,531 square feet of office space. The lease has a remaining term of approximately 9 years and has an option to extend for two five-year periods after the 11 years has elapsed and has an option to terminate after seven years. As of December 31, 2022, the Company had a right-of-use asset of $4.9 million and lease liability of $8.0 million included in the consolidated balance sheets. As of December 31, 2021, the Company had a right of use asset of $5.2 million and lease liability of $8.6 million included in the consolidated balance sheets. During 2020, the Company received reimbursements for tenant leasehold improvements by the landlord in the amount of $2.3 million for the Maryland lease. The Company recorded leasehold improvement incentives as additions to the lease liability. The lease term commenced on March 12, 2020. When measuring the lease liability, the Company discounted lease payments using its incremental borrowing rate at March 12, 2020. The incremental borrowing rate applied to the lease liability on March 12, 2020 was 5.2% based on the financial position of the Company, geographical region and terms of lease.
Edmonton, Alberta
During October 2022, the Company entered into a long term lease in Edmonton for a total of 4,375 square feet of office space. The lease is a 6 year lease and has an option to renew of five years at prevailing market rates. The lease commenced on November 1, 2022 and the Company recorded the lease as an operating lease. The lease is not material to the Company's financial position.
The Company incurs variable lease costs under the existing Victoria and Rockville leases. These costs include operation and maintenance costs included in SG&A and are expensed as incurred. The variable lease costs are not material to the Company's financial position.
The operating lease costs for the years ended December 31, 2022 and December 31, 2021 are $1.0 million for both periods respectively.
The weighted-average remaining lease term and discount rate for the years ended December 31, 2022 and December 31, 2021 are as follows:
2022 2021
Weighted average remaining lease term (in years) 8.7 9.5
Weighted average discount rate 5.3% 5.2%
Supplemental cash flow information related to operating leases for the years ended December 31, 2022, December 31, 2021 and December 31, 2020 are as follows:
(in thousands) 2022 2021 2020
Cash paid for amounts included in the measurement of lease liabilities $ (1,160) $ (646) $ (267)
Initial recognition of operating lease right-of-use asset $ 57  $ 419  $ 5,804 
Future maturities of operating lease liabilities as of December 31, 2022 are as follows:
(in thousands) Operating Lease Payments
2023 $ 982 
2024 1,113 
2025 1,141 
2026 1,169 
2027 1,198 
Thereafter 4,533 
Total lease payments 10,136 
Less: imputed interest (2,048)
Total $ 8,088 

On December 15, 2020, the Company entered into a collaborative agreement with Lonza to build a dedicated manufacturing capacity within Lonza’s existing small molecule facility in Visp, Switzerland. The dedicated facility (also referred to as "monoplant") will be equipped with state-of-the-art manufacturing equipment to provide cost and production efficiency for the manufacture of voclosporin, while expanding existing capacity and providing supply security to meet future commercial demand.

Following U.S. regulatory approval of voclosporin in January 2021, the Company has commenced a capital expenditure payment program totaling approximately CHF 21.0 million. The first capital expenditure payment was made in February 2021 of $11.8 million (CHF 10.5 million) and was treated as an upfront lease payment and recorded under other non-current assets on the consolidated balance sheets. The second payment is not due until the facility fulfills the required operational qualifications which is estimated to be during the first half of 2023. Upon completion of the monoplant, the Company will maintain sole dedicated use of the monoplant by paying a required quarterly fixed facility fee. The Company expects to account for the arrangement as a finance lease under ASC 842. The present value of the minimum lease payments total approximately $85.0 million, beginning April 2023 and expiring in 2030, and are not included in the above table.

The Company has entered into an equipment and facility finance lease for a backup manufacturing encapsulation site in Beinheim, France that has not yet commenced and is therefore, not included in the above table. As part of the agreement, the Company expects to make payments of approximately $0.9 million prior to lease commencement and the future value of minimum lease payments will total approximately $0.1 million.