Annual report pursuant to Section 13 and 15(d)

LEASES

v3.20.4
LEASES
12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
LEASES LEASES
We lease facilities under two non-cancelable operating leases. The leases expire between January 2022 and November 2024 and include renewal provisions for two to five years, provisions which require us to pay taxes, insurance, maintenance costs or provisions for minimum rent increases. We also lease facilities and equipment under short-term agreements for a period of 12 months or less and recognize the payments straight-line over the lease term. All of the information presented below, with the exception of total lease costs, relates to our two non-cancelable operating leases and a finance lease.
On May 1, 2020 we entered into an amendment for one of our non-cancelable facilities operating leases, under which certain rent payments were deferred and the term of the lease was extended by three months to November 30, 2024. The base rent was deferred for three months and the deferred amount will be repaid over the remaining balance of the modified lease term. In addition, operating expenses were deferred for three months and the deferred amount will be paid upon true-up of operating expenses, which is estimated to occur in early 2021. We evaluated the amendment under the provisions of ASU No. 2016-02, Leases (Topic 842), as well as subsequently issued interpretive guidance, and have elected to account for the concessions as if no changes to the lease contract were made. In our evaluation we considered the total amount of lease payments both before and after the amendment and determined they are substantially the same. As of December 31, 2020, the deferred base rent is included in operating lease liabilities and the deferred operating expenses are included in accrued expenses.
    One facility operating lease requires us to maintain a cash security deposit of $50,000 and also a $105,000 letter of credit in favor of the lessor. The letter of credit was originally for $200,000 at lease inception and steps down $50,000 at each anniversary date if there have been no monetary defaults. The letter of credit is secured by a pledge in favor of the issuing bank of a $105,000 mutual fund account which is classified as restricted cash in our balance sheet.
Lease renewal options are at our discretion. No renewal options have been recognized in our right-of-use assets and lease liabilities as of December 31, 2020. Our lease agreements do not require material variable minimum lease payments, residual value guarantees or restrictive covenants.
The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term.
    Our facility operating leases generally do not provide an implicit rate, and therefore we use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. We used a weighted average incremental borrowing rate of 4.75% as of January 1, 2019 for operating leases that commenced prior to that date. The discount rates applied to each lease reflect our estimated incremental borrowing rate. This includes an assessment of our credit rating to determine the rate that we would have to pay to borrow, on a collateralized basis for a similar term, an amount equal to our lease payments in a similar economic environment.
    In December 2020, we entered into a lease for lab equipment. The lease is for 60 months and bears an interest rate of 5.99%. After evaluation of the lease under ASU No. 2016-02, Leases (Topic 842), we determined the lease to be a finance lease. We recorded a right-of-use asset and lease liability of $204,436 upon inception of the lease.

The Company's weighted average remaining lease term and weighted average discount rate as of December 31, 2020 is shown below:
Weighted average remaining lease term (years)
      Operating leases 3.62
      Finance lease 4.92
Weighted average discount rate (%)
      Operating leases 4.75  %
      Finance lease 5.99  %
    Minimum future maturities of lease liabilities recognized on the consolidated balance sheets as of December 31, 2020 (in thousands):
Operating Leases Finance Lease
2021 $ 777  $ 42 
2022 586  50 
2023 583  50 
2024 544  50 
2025 —  46 
Total minimum lease payments $ 2,490  $ 238 
Less: interest (202) (33)
Present value of minimum lease payments $ 2,288  $ 205 
    
Operating lease and nonlease costs were $1,132,000 for the year ended December 31, 2020, of which $812,000 and $320,000 are included in research and development expenses and sales, marketing and administration expenses, respectively. Operating lease and nonlease costs were $1,066,000 for the year ended December 31, 2019, of which $803,000 and $263,000 are included in research and development expenses and sales, marketing and administration expenses, respectively. Operating lease costs include short-term rents and other operating expenses.
    Cash paid for amounts included in the measurement of operating lease liabilities were $613,000 and $492,000 for the years ended December 31, 2020 and 2019, respectively, which is included in operating activities in the consolidated statement of cash flows.
Finance lease amortization for the years ended December 31, 2020 and 2019 was $3,000 and zero, respectively, and is included in research and development expenses.
LEASES LEASES
We lease facilities under two non-cancelable operating leases. The leases expire between January 2022 and November 2024 and include renewal provisions for two to five years, provisions which require us to pay taxes, insurance, maintenance costs or provisions for minimum rent increases. We also lease facilities and equipment under short-term agreements for a period of 12 months or less and recognize the payments straight-line over the lease term. All of the information presented below, with the exception of total lease costs, relates to our two non-cancelable operating leases and a finance lease.
On May 1, 2020 we entered into an amendment for one of our non-cancelable facilities operating leases, under which certain rent payments were deferred and the term of the lease was extended by three months to November 30, 2024. The base rent was deferred for three months and the deferred amount will be repaid over the remaining balance of the modified lease term. In addition, operating expenses were deferred for three months and the deferred amount will be paid upon true-up of operating expenses, which is estimated to occur in early 2021. We evaluated the amendment under the provisions of ASU No. 2016-02, Leases (Topic 842), as well as subsequently issued interpretive guidance, and have elected to account for the concessions as if no changes to the lease contract were made. In our evaluation we considered the total amount of lease payments both before and after the amendment and determined they are substantially the same. As of December 31, 2020, the deferred base rent is included in operating lease liabilities and the deferred operating expenses are included in accrued expenses.
    One facility operating lease requires us to maintain a cash security deposit of $50,000 and also a $105,000 letter of credit in favor of the lessor. The letter of credit was originally for $200,000 at lease inception and steps down $50,000 at each anniversary date if there have been no monetary defaults. The letter of credit is secured by a pledge in favor of the issuing bank of a $105,000 mutual fund account which is classified as restricted cash in our balance sheet.
Lease renewal options are at our discretion. No renewal options have been recognized in our right-of-use assets and lease liabilities as of December 31, 2020. Our lease agreements do not require material variable minimum lease payments, residual value guarantees or restrictive covenants.
The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term.
    Our facility operating leases generally do not provide an implicit rate, and therefore we use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. We used a weighted average incremental borrowing rate of 4.75% as of January 1, 2019 for operating leases that commenced prior to that date. The discount rates applied to each lease reflect our estimated incremental borrowing rate. This includes an assessment of our credit rating to determine the rate that we would have to pay to borrow, on a collateralized basis for a similar term, an amount equal to our lease payments in a similar economic environment.
    In December 2020, we entered into a lease for lab equipment. The lease is for 60 months and bears an interest rate of 5.99%. After evaluation of the lease under ASU No. 2016-02, Leases (Topic 842), we determined the lease to be a finance lease. We recorded a right-of-use asset and lease liability of $204,436 upon inception of the lease.

The Company's weighted average remaining lease term and weighted average discount rate as of December 31, 2020 is shown below:
Weighted average remaining lease term (years)
      Operating leases 3.62
      Finance lease 4.92
Weighted average discount rate (%)
      Operating leases 4.75  %
      Finance lease 5.99  %
    Minimum future maturities of lease liabilities recognized on the consolidated balance sheets as of December 31, 2020 (in thousands):
Operating Leases Finance Lease
2021 $ 777  $ 42 
2022 586  50 
2023 583  50 
2024 544  50 
2025 —  46 
Total minimum lease payments $ 2,490  $ 238 
Less: interest (202) (33)
Present value of minimum lease payments $ 2,288  $ 205 
    
Operating lease and nonlease costs were $1,132,000 for the year ended December 31, 2020, of which $812,000 and $320,000 are included in research and development expenses and sales, marketing and administration expenses, respectively. Operating lease and nonlease costs were $1,066,000 for the year ended December 31, 2019, of which $803,000 and $263,000 are included in research and development expenses and sales, marketing and administration expenses, respectively. Operating lease costs include short-term rents and other operating expenses.
    Cash paid for amounts included in the measurement of operating lease liabilities were $613,000 and $492,000 for the years ended December 31, 2020 and 2019, respectively, which is included in operating activities in the consolidated statement of cash flows.
Finance lease amortization for the years ended December 31, 2020 and 2019 was $3,000 and zero, respectively, and is included in research and development expenses.