Leases

6 Months Ended

Jun. 30, 2019

Leases

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.

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 ASC840. The leases were not reassessed at adoption of ASC842 as the Company elected the practical expedient to not reassess existing leases.

The finance lease obligations were as follows:



	June 30, 2019		December 31, 2018
	(unaudited; in thousands)		(in thousands)
Finance lease obligations, current portion	$	15	$	5
Finance lease obligations, long-term portion	$	25	$	18

The components of lease cost were as follows:




Description of lease costs	Three months ended June 30, 2019		Six months ended June 30, 2019
	(unaudited; in thousands)
Finance Lease Cost
Amortization of finance lease right-of-use assets	$	4	$	19
Interest on finance lease obligations	3		12
Operating lease costs	410		820
Total	$	417	$	851

Cash payments for leases were as follows:



Description of cash payment	Six months ended June 30, 2019
	(unaudited; in thousands)
Operating cash flows from operating leases	$	872
Operating cash flows from finance leases	$	6
Financing cash flows from finance leases	$	6

Lease term and discount rate were as follows:



	June 30, 2019
Description of other lease information	Operating leases		Finance leases
	(unaudited)
Weighted-average remaining lease term (in years)	5.25		2.28
Weighted average discount rate	11	%	27	%

As of June 30, 2019, annual scheduled lease payments were as follows:



Year	Operating leases			Finance leases
	(unaudited; in thousands)
Remainder of 2019	$	889		$	12
2020	1,815			24
2021	1,863			14
2022	1,914			3
2023	1,970			—
2024	1,340			—
Total undiscounted cash flows	9,791			53
Less: amount representing interest	(2,396		)	(13		)
Present value of lease liabilities	$	7,395		$	40

Leases, Operating