Leases

12 Months Ended

Dec. 31, 2019

As a lessee, the Company’s current leases include its master facility lease and immaterial equipment leases, all of which are considered operating leases.

The Company (as a sublessor) also subleases portions of its facility to third parties under two separate subleases. All of these subleases have been determined to be operating leases and are accounted for separately from the head lease.

Master Facility Lease

The Company leases a building in San Diego under an operating lease that expires on December 31, 2021. The lease currently requires fixed monthly rent payments of approximately $76,000, with 3% annual escalation. The lease also contains one five-year renewal option with minimum monthly rent equal to the then-current fair market value, subject to a 3% annual increase. As the Company is not reasonably certain to exercise this option, it has not been included in the calculation of the lease liability or right-of-use asset related to this lease.

Facility Subleases

As a result of corporate restructurings in previous years, the Company vacated a portion of its facility and has subleased space to third parties under two separate sublease agreements, which both expire December 31, 2021. An additional sublease expired on October 31, 2019 and was not renewed. The Company recorded a cease-use loss liability and expense in 2018 pursuant to ASC 420, Exit or Disposal Cost Obligations, representing the total expected shortfall in sublease income for two of the subleases as compared to its required payments for those spaces under the remainder of the master lease term. This liability was being amortized over the remaining lease term until the adoption of ASC 842, whereupon the remaining cease-use loss liability of approximately $487,000 was eliminated and treated as a reduction to the beginning ROU asset value for the master lease as of January 1, 2019. Income will continue to be recognized on a straight-line basis over the term of the sublease.

The components of lease expense were as follows:



	Twelve Months Ended December 31, 2019
Operating lease cost	$	444,878
Operating sublease income	(381,653		)
Net operating lease cost	$	63,225

Supplemental balance sheet information related to leases was as follows:



	December 31, 2019
Operating lease ROU assets	$	697,418

Current operating lease liabilities	$	865,379
Non-current operating lease liabilities	860,963
Total operating lease liabilities	$	1,726,342

Weighted-average remaining lease term–operating leases	2.0 years
Weighted-average discount rate–operating leases	6.5		%

Supplemental cash flow and other information related to leases was as follows:



	Twelve Months Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	916,762

Total remaining annual commitments under non-cancelable lease agreements for each of the years ended December 31 are as follows:



Year Ending December 31,	Operating Leases			Sublease Income			Net Operating Leases
2020	$	865,379		$	(291,173	)	$	574,206
2021	968,165			(291,173		)	676,992
2022	5,868			—			5,868
2023	3,423			—			3,423
Total future minimum lease payments	1,842,835			$	(582,346	)	$	1,260,489
Less imputed interest	(116,493		)
Total	$	1,726,342

Total annual commitments under non-cancelable lease agreements as of December 31, 2018 under the previous lease accounting guidance are as follows:



Year Ending December 31,	Operating Leases		Sublease Income			Net Operating Leases
2019	$	914,540	$	(333,124	)	$	581,416
2020	941,670		—			941,670
2021	968,165		—			968,165
2022	5,868		—			5,868
2023	3,423		—			3,423
Total	$	2,833,666	$	(333,124	)	$	2,500,542

Leases