Envoy Medical, Inc. Leases Disclosure
7. Operating Leases
The Company leases its headquarters office space in Minnesota and leases office space in Germany. The headquarters office space lease is with a stockholder, which is considered a related party. During the year ended December 31, 2024, the Company and the landlord agreed to modify the lease to extend the lease term for three (3) additional years through December 31, 2030. Additionally, the Company requested and the landlord provided an additional 1,664 square feet of usable office space, for a total of 11,540 square feet of rentable space. Accordingly, base rent was increased to $6 thousand per month and increases each year by approximately four percent. Also, tenant improvements completed by the landlord totaling $0.15 million will be repaid in three $50 thousand annual payments beginning July 1, 2027. As a result of the modification, the Company recognized an increase to the ROU asset and operating lease liability of $0.5 million which is reflected in the consolidated balance sheets.
The lease of the office space in Germany is not with a related party and is immaterial.
The components of leases and lease costs were as follows (in thousands):
| December 31, 2024 | December 31, 2023 | |||||||
| Operating lease right-of-use asset (related party) | $ | 879 | $ | 464 | ||||
| Operating lease liability, current portion (related party) | $ | 143 | $ | 158 | ||||
| Operating lease liability, net of current portion (related party) | 802 | 404 | ||||||
| $ | 945 | $ | 562 | |||||
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating lease cost | $ | 180 | $ | 127 | ||||
| $ | 180 | $ | 127 | |||||
Other supplemental information of lease amounts recognized in the consolidated financial statements is summarized as follows:
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid for amounts included in the measurement of lease liability | $ | 201 | $ | 142 | ||||
| December 31, 2024 | December 31, 2023 | |||||||
| Weighted-average remaining lease term - in years | 6.0 | 3.9 | ||||||
| Weighted-average discount rate | 9.9 | % | 5.0 | % | ||||
Future minimum lease payments associated with these leases were as follows as of December 31, 2024 (in thousands):
| 2025 | $ | 229 | ||
| 2026 | 223 | |||
| 2027 | 230 | |||
| 2028 | 195 | |||
| 2029 | 198 | |||
| Thereafter | 151 | |||
| 1,226 | ||||
| Less: Imputed interest | (281 | ) | ||
| $ | 945 |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.