LEASES

9 Months Ended

Sep. 30, 2020

We lease all of our office space pursuant to operating lease and sublease arrangements, which expire at various dates through February 29, 2024. We recognize lease expense on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets. We combine lease and non-lease components for new and reassessed leases. We apply discount rates to operating leases using a portfolio approach.

On January 31, 2020, we entered into an agreement to lease approximately 5,000 square feet of office space in San Francisco, California. This facility is used for administrative functions. The lease commenced in the first quarter of 2020 and expires in 2022. During the three months ended March 31, 2020, we recorded a lease liability of $0.6 million, which represents the present value of the lease payments using an estimated incremental borrowing rate of 3.50%. We also recognized lease right-of-use assets ("ROU") of $0.6 million which represents our right to use an underlying asset for the lease term. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Below is a summary of our ROU assets and lease liabilities as of September 30, 2020 and December 31, 2019, respectively (in thousands):


	Balance Sheets Classification	September 30, 2020		December 31, 2019
Assets
Right-of-use assets	Other assets	$	2,105	$	2,202
Liabilities
Operating lease liabilities - current	Other current liabilities	1,389		1,150
Operating lease liabilities - long-term	Other long-term liabilities	2,014		2,664
Total lease liabilities		$	3,403	$	3,814

During 2019, we began to shift general and administrative, research and development and executive functions and employees from our San Jose, California facility (“SJ Facility”) to our San Francisco, California and Montreal, Canada offices. In the fourth quarter of 2019, we announced our decision to exit the SJ Facility by March 31, 2020. We accelerated the amortization of our SJ Facility leasehold improvements over their remaining estimated life. The SJ Facility leasehold improvements were fully amortized by March 31, 2020.

On March 12, 2020, we entered into a sublease agreement with Neato Robotics, Inc. ("Neato") for the SJ Facility. This sublease commenced in June 2020 and ends on April 30, 2023 which is the lease termination date of the original SJ Facility lease.

In accordance with provisions of ASC 842 Leases ("ASC 842"), we treated the sublease as a separate lease as we were not relieved of the primary obligation under the original lease. We continue to account for the original SJ Facility, as a lessee, in the same manner as prior to the commencement date of the sublease. We accounted for the sublease as a lessor of the lease. We classified the sublease as an operating lease as it did not meet the criteria of a Sale-Type or Direct Financing lease.

At the commencement date of the sublease, we recognized initial direct costs of $0.3 million. These deferred costs will be amortized over the terms of the sublease payments. As of September 30, 2020, $0.1 million was reported in Prepaid expenses and other current assets and $0.2 million was reported in Other assets on our Condensed Consolidated Balance Sheets.

We recognize operating lease expense and lease payments from the sublease, on a straight-line basis, in our Condensed Consolidated Statements of Operations and Comprehensive Loss over the lease terms. During the three and nine months ended September 30, 2020, and 2019, our net operating lease expenses are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating lease cost	$	278	$	301	$	851	$	855
Sublease income	(257)		—		(327)		—
Total lease cost	$	21	$	301	$	524	$	855

The table below provides supplemental information related to operating leases for the nine months ended September 30, 2020 (in thousands except for lease term):


Cash paid within operating cash flow	$	1,061
Weighted average lease terms	2.3 years
Weighted average discount rate	3.50		%

Minimum future lease payment obligations for our operating leases as of September 30, 2020 are as follows (in thousands):


For the Years Ending December 31,
Remainder of 2020	$	373
2021	1,499
2022	1,222
2023	453
2024	24
Total	$	3,571

Future lease payments as of September 30, 2020 from our sublease agreement are as follows (in thousands):


For the Years Ending December 31,
Remainder of 2020	$	257
2021	1,046
2022	1,077
2023	351
Total	$	2,731