Leases

12 Months Ended

Dec. 31, 2019

Operating Leases

The Company has a non-cancelable operating lease for office, research and development, and manufacturing facilities in Fremont, California through August 31, 2024, with an option to further extend the lease for an additional 60 months subject to certain terms and conditions. The operating lease right-of-use asset and associated lease liability do not consider the option to extend the term after August 31, 2024, as the Company is not reasonably certain of exercising the extension option.

The lease agreement calls for monthly base rent of approximately $136,000 for the period commencing September 1, 2017, with annual increases on September 1 of each subsequent year until the lease year beginning September 1, 2023. The agreement also provided for rent abatements, subject to certain conditions, totaling $0.3 million and certain tenant improvements to be completed at the landlord’s expense of approximately $1.0 million.

In September 2019, the Company agreed to pay incremental costs of $251,000 in the form of additional rent in equal monthly installments over the remaining term of the lease, for specific work defined in the lease agreement. The Company accounted for the incremental rent as a lease modification by increasing the right-of-use asset and associated liability by $189,000. The modification was reflected as a non-cash operating activity in the statement of cash flows for the year ended December 31, 2019. There were no changes to the lease terms.

The Company entered into a three year, non-cancelable lease for telephone equipment in January 2018.

Per the terms of the agreements, the Company does not have any residual value guarantees, restrictions or covenants. In calculating the present value of the lease payments, the Company utilized its incremental borrowing rate, as the rates implicit in the leases were not readily determinable. The Company accounts for lease and non-lease components separately. The building lease includes non-lease components (i.e. common area maintenance) which are charged and paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and lease liability but reflected in operating expense in the period incurred.

Finance Leases

The Company leases certain equipment under non-cancelable agreements which expire between 2021 and 2022 that were accounted for as capital leases under ASC 840. The leases were not reassessed at the adoption of ASC 842 as the Company elected the practical expedient to not reassess existing leases.

The components of lease cost were as follows:



Description of lease costs	Year ended December 31, 2019
	(in thousands)
Operating lease costs	$	1,671
Finance lease costs:
Amortization of finance lease right-of-use assets	27
Interest on finance lease obligations	17
Total	$	1,715

Cash payments for leases were as follows:



Description of cash payment	Year ended December 31, 2019
	(in thousands)
Operating cash flows from operating leases - cash paid for operating leases	$	1,793
Operating cash flows from finance leases - cash paid for interest	$	11
Financing cash flows from finance leases - cash paid for principal	$	14

Lease term and discount rate were as follows:



	December 31, 2019
Description of other lease information	Operating leases		Finance leases

Weighted-average remaining lease term (in years)	4.66		1.83
Weighted average discount rate	11	%	27	%

As of December 31, 2019, annual scheduled lease payments were as follows:



Year	Operating leases			Finance leases
	(in thousands)
2020	$	1,861		$	24
2021	1,909			14
2022	1,961			3
2023	2,017			—
2024	1,372			—
Total undiscounted cash flows	9,120			41
Less: amount representing interest	(2,049		)	(8		)
Present value of lease liabilities	$	7,071		$	33

Leases