|9 Months Ended|
Sep. 30, 2020
We lease facilities under two non-cancelable operating leases. The leases expire between January 2022 and November 2024 and include renewal provisions for 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. All of the information presented below, with the exception of total lease costs, relates to our two non-cancelable operating leases.
On May 1, 2020 we entered into an amendment for one of our non-cancelable 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 amortized 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 at the time of the lease's 2020 annual 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. The deferred base rent and operating expenses are included in accounts payable on our condensed consolidated balance sheet as of September 30, 2020, and until such repayment is made.
One 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 September 30, 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 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.
The Company's weighted average remaining lease term and weighted average discount rate for operating leases as of September 30, 2020 is shown below:
The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the total operating lease liabilities recognized on the condensed consolidated balance sheets as of September 30, 2020:
Operating lease costs were $278,000 for the three months ended September 30, 2020, of which $196,000 and $82,000 are included in research and development expenses and sales, marketing and administration expenses, respectively. Operating lease costs were $268,000 for the three months ended September 30, 2019, of which $204,000 and $64,000 are included in research and development expenses and sales, marketing and administration expenses, respectively.
Operating lease costs were $840,000 for the nine months ended September 30, 2020, of which $608,000 and $232,000 are included in research and development expenses and sales, marketing and administration expenses, respectively. Operating lease costs were $795,000 for the nine months ended September 30, 2019, of which $597,000 and $198,000 are included in research and development expenses and sales, marketing and administration expenses, respectively.
Cash paid for amounts included in the measurement of operating lease liabilities were $422,000 and $441,000 for the nine months ended September 30, 2020 and 2019, respectively, which is included in operating activities in the condensed consolidated statements of cash flows.
No definition available.
The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef