7. LEASES
 12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases
7. LEASES

 

The Company leases corporate office space in Los Gatos, California. This lease has a remaining term of 13 months as of December 31, 2019. This lease is accounted for under ASC Topic 842 and, as a result, the most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Upon adoption the Company recorded an operating lease right-of-use asset and the related lease liability. The lease liability is based on the present value of the remaining minimum lease payments, discounted using the Company’s estimated incremental borrowing rate of 10% at the effective date of January 1, 2019. As permitted under ASC Topic 842, the Company elected several practical expedients that permit it to not reassess (1) whether a contract is or contains a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs.

  

The impact of the adoption of ASC Topic 842 on the balance sheet at January 1, 2019 was (in thousands):

 

   As reported December 31, 2018   Adoption of ASC Topic 842   Balance January 1, 2019 
Prepaid expenses and other current assets  $170   $(13)  $157 
Operating lease of right-of-use assets  $–   $295   $295 
Total assets  $19,357   $282   $19,639 
Other current liabilities  $1,611   $129   $1,740 
Long-term liabilities operating leases  $–   $153   $153 
Total liabilities  $1,611   $282   $1,893 

 

The current lease accounted for under ASC Topic 842 contains escalating payments on the anniversary of the commencement. These additional lease components are included in the measurement of the initial lease liability. Additional payments based on a change in the Company’s share of the operating expenses, including real estate taxes and insurance, are recorded as a period expense when incurred. Lease modifications result in remeasurement of the lease liability. Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term.

 

The components of operating lease costs were as follows (in thousands):

 

    Year Ended December 31, 2019  
Fixed lease costs   $ 108  
Variable lease costs     53  
Short term lease costs     31  
Total operating lease costs   $ 192  

 

Future minimum payments under non-cancellable leases as of December 31, 2019 were as follows (in thousands):

 

For the Year Ended December 31,  Amount 
2020  $149 
2021   13 
Total future minimum lease payments   162 
Less imputed interest   (10)
Total lease liability  $152 

 

The below table provides supplemental information and non-cash activity related to the Company’s operating leases are as follows (in thousands):

 

  

Year Ended

December 31, 2019

 
Operating cash flow information:     
Cash paid for amounts included in the measurement of lease liabilities  $161 
Non-cash activity:     
Right-of-use assets obtained in exchange for the lease obligations (1)  $295 

_________________________

  (1) Represents the initial right-of-use asset valuation of the Los Gatos lease on January 1, 2019

 

In October 2016, the Company entered into lease agreement for approximately 200 square feet of office space in Cambridge, Massachusetts. The lease, with current monthly payments of $2,619 per month, commenced on October 24, 2016. The lease rate will increase to $2,942 on January 1, 2020. Because the lease is month to month and can be cancelled with a 30-day notice, the future lease payments are not included in the Company’s lease accounting under ASC Topic 842.

 

In October 2019, the Company entered into an agreement to lease a tool for use in the development of the Company’s technology. The lease is for five years at $150,000 per month. The lease commencement date is anticipated to be in April 2020, at which time the Company will account for the lease under ASC 842.