Quarterly report pursuant to Section 13 or 15(d)

COMMITMENTS AND CONTINGENCIES

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COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
 
Commitments—In October 2013, we signed a lease for office space for our corporate headquarters and moved in during the first quarter of 2014. The lease, as amended, had an expiration of July 31, 2018. In May 2018, we entered into an agreement with the landlord to extend the lease for one month, through August 2018 with no change to the amount of rent or other payments due under the lease. Subsequently, we negotiated with the landlord for an extension through September 2018 when we moved to our new location. In May 2018, we signed a lease for our current corporate headquarters. The lease provides for an initial space of 16,682 square feet (the "initial" premises) beginning in September 2018 and an additional 10,355 square feet (the "expansion" premises) beginning January 2019. The lease term is 72 months and expires on August 31, 2024. The agreement allows for one option to renew for an additional five years. Base rent on the initial premises is abated for September and October of 2018 and is $19,500 per month from November 1, 2018 to July 31, 2019. Base rent on the initial premises increases to $25,774 per month as of August 1, 2019 and then escalates by 3% on each anniversary date thereafter. Base rent on the expansion premises is $7,767 per month from January 1, 2019 through June 30, 2019 with an increase to $15,533 for the month of July 2019 and an increase to $15,998 per month effective August 1, 2019 with 3% escalations on each anniversary date thereafter. We are also required to pay our proportionate share of operating expenses and utilities which are estimated to initially be $11,177 per month for the 2018 period utilizing only the initial premises. Our share of operating expenses and utilities will increase once we occupy the expansion premises and will likely fluctuate in the future. Per the terms of the lease we are also required to maintain as a security deposit $50,000 in cash and a letter of credit in favor of the lessor. The initial amount of the letter of credit is $200,000 with a step-down of $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 $211,000 mutual fund account which is classified as restricted cash on our balance sheet as of September 30, 2018.

In November 2013, we signed a lease for our satellite development office in Burlingame, CA. The lease had a two-year term, and rental costs of approximately $4,000 per month. In May 2015, we renewed the lease for a one year period expiring November 30, 2016 with rental costs of $5,000 per month. Effective December 16, 2016, we signed a new lease of 5,248 square feet of office space within the same building in Burlingame, California commencing February 2017. The lease has a five year term, and rental costs of approximately $17,000 per month.
 
Rent expense related to our facilities and equipment for the three months ended September 30, 2017 and 2018 was $127,000 and $200,000, respectively, and for the nine months ended September 30, 2017 and 2018 was $339,000 and $484,000, respectively.

Legal ProceedingsWe are occasionally involved in legal proceedings and other matters arising from the normal course of business.
On September 24, 2015, a purported shareholder derivative action was filed in the United States District Court for the Central District of California. The plaintiff alleged that certain of our officers and directors breached their fiduciary duties to us, violated federal securities laws and exposed us to possible financial liability.
On August 15, 2018, the court granted final approval of a settlement which fully resolved plaintiffs' claims and provided for a release of all claims asserted in the derivative action, bringing the litigation to a close.
We are not party to any other legal proceedings. We may, from time to time, be party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of any future matters could materially affect our future financial position, results of operations or cash flows.
Legal fees and other costs associated with legal proceedings are expensed as incurred. We assess, in conjunction with our legal counsel, the need to record a liability for litigation and contingencies. Litigation accruals are recorded when and if it is determined that a loss related matter is both probable and reasonably estimable. Material loss contingencies that are reasonably possible of occurrence, if any, are subject to disclosure. We evaluate developments in legal proceedings and other matters on a quarterly basis. As of September 30, 2017 and 2018, there was no litigation or contingency with at least a reasonable possibility of a material loss. No losses have been recorded during the three and nine months ended September 30, 2017 and 2018, respectively, with respect to litigation or loss contingencies.