Lease Commitments

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Note 5 – Lease Commitments

Under ASC 842, the Company determines if an arrangement contains a lease at inception. A lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment (i.e., an identified asset) for a period of time in exchange for consideration. Leases are classified as either operating or financing. At lease inception, the Company recognizes a lease liability equal to the present value of the remaining lease payments, and a right of use asset equal to the lease liability, subject to certain adjustments, such as for lease incentives. The Company used its incremental borrowing rate to determine the present value of the lease payments. The Company determined the incremental borrowing rates for its leases by applying its applicable, fully collateralized borrowing rate, with adjustment as appropriate for lease term. The lease term at the lease commencement date is determined based on the

non-cancellable

period for which the Company has the right to use the underlying asset, together with any periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option. The Company considered a number of factors when evaluating whether the options in its lease contracts were reasonably certain of exercise, such as length of time before option exercise, expected value of the leased asset at the end of the initial lease term, importance of the lease to overall operations, costs to negotiate a new lease, and any contractual or economic penalties.

Right-of-use

assets and obligations for short-term leases (leases with an initial term of 12 months or less) are not recognized in the consolidated balance sheet. Lease expense for short-term leases is recognized on a straight-line basis over the lease term. The Company does not sublease any of its leased assets to third parties. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. The Company has lessor agreements that contain lease and

non-lease

components. As the Company has determined that the

non-lease

component of these agreements is the predominant component, the Company accounted for the complete agreement under ASC 606 upon adoption of ASC 842.

ASC 842 includes a number of reassessment and

re-measurement

requirements for lessees based on certain triggering events or conditions, including whether a contract is or contains a lease, assessment of lease term and purchase options, measurement of lease payments, assessment of lease classification and assessment of the discount rate. The Company reviewed the reassessment and

re-measurement

requirements and identified two lease modifications which are reflected in the table below showing the maturity of the Company’s lease liabilities as of June 30, 2020. This includes an extension of an operating lease for the facility leased by the Company in San Jose, California as well as some equipment. In addition, there were no impairment indicators identified during the quarter ended June 30, 2020 that required an impairment test for the Company’s

right-of-use

assets or other long-lived assets in accordance with ASC

360-10

Property Plant and Equipment (“ASC 360”).

Certain of the Company’s leases include variable lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain

non-lease

components that transfer a distinct service to the Company, such as common area maintenance services. The Company has elected to not separate the accounting for lease components and

non-lease

components for real estate and equipment leases.

Components of Leases:

The Company has leases for office space and office equipment. The leases have remaining lease terms ranging from less than one year to three years and six months as of June 30, 2020.

The components of lease expense for the period are as follows (in thousands):


Lease Cost	Classification	Three Months Ended June 30, 2020
Operating lease cost	Operating expenses	$	224
Capital lease costs
Amortization of leased assets	Amortization and depreciation		4
Interest on lease liabilities	Interest expense		—

Total		$	228

Other information related to leases was as follows (in thousands)


	Three Months Ended June 30, 2020
Cash paid for operating cash flows from operating leases	$	236
Cash paid for operating cash flows from capital leases		—
Cash paid for financing cash flows from capital leases		4


	As of June 30, 2020
Weighted-average remaining lease term of operating leases (in years)		2.70
Weighted-average remaining lease term of capital leases (in years)		1.00
Weighted-average discount rate for operating leases		5.6	%
Weighted-average discount rate for capital leases		11.0	%

Maturity of the Company’s lease liabilities as of June 30, 2020 was as follows (in thousands):


As of June 30, 2020:	Operating Leases			Finance Leases			Total
2020	$	457			4			461
2021		920			—			920
2022		899			—			899
2023		211			—			211
2024		5			—			5

Total lease payments		2,492			4			2,496
Less: imputed interest		(186	)		—			(186	)

Total lease liabilities		2,306			4			2,310
Less: current portion of lease liabilities		(809	)		(4	)		(813	)

Long-term lease liabilities	$	1,497		$	—		$	1,497