v3.21.2
LEASES
 6 Months Ended
Jun. 30, 2021
Leases  
LEASES

 

6. LEASES

 

The Company leases corporate office space in Los Gatos, California. In August 2020, the Company and its landlord amended the lease for this office. This amendment extends the expiration date of the operating lease from January 2021 to January 2026 and increases the space from 3,396 square feet to 4,101 square feet. Under ASC 842, the lease amendment was treated as a separate lease for the new space and a modification of the lease for the original space. An additional right-of-use (“ROU”) asset and lease liability of approximately $681,000 were recorded during at the time of the amendment. In January 2021 the additional space became available for use, and the Company recorded an additional ROU asset and corresponding liability of approximately $144,000. The lease liability is based on the present value of the minimum lease payments, discounted using the Company’s estimated incremental borrowing rate of 5.5%. The lease contains escalating payments on the anniversary of the original commencement which 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 property taxes and insurance, are recorded as a period expense when incurred.

 

In March 2021, the Company began leasing 474 square feet of office space in Tempe, Arizona. The new lease is classified as an operating lease with an initial term of two years and an option to extend for an additional three years through February 2026. The lease also contains a performance standard for research collaboration with Arizona State University. The agreement requires a minimum value of collaborative research in each year of the lease. The lease is accounted for under ASC 842 and accordingly, the research payments are included in the ROU and lease liability at the commencement. In March 2021, the Company recorded an ROU and associated lease liability of approximately $238,000. The lease liability is based on the present value of the minimum lease payments, discounted using the Company’s estimated incremental borrowing rate of 5.5% over five years, as the Company expects to lease the through the three-year extension. The lease also contains escalating payments on the anniversary of the original commencement which are included in the measurement of the initial lease liability.

  

Lease expense for operating leases consists of the lease payments recognized on a straight-line basis over the lease term. The components of operating lease costs were as follows (in thousands): 

                    
  

Three Months Ended June 30,

   Six Months Ended June 30, 
   2021   2020   2021   2020 
Fixed lease costs  $62   $26   $114   $53 
Variable lease costs   –    14    –    27 
Short-term lease costs   11    7    22    17 
Total operating lease costs  $73   $47   $136   $97 

  

Future minimum payments under non-cancellable leases as of June 30, 2021 were as follows (in thousands): 

    
For the Year Ended December 31,  Amount 
Remaining 2021  $112 
2022   239 
2023   271 
2024   278 
2025 & thereafter   305 
Total future minimum lease payments   1,205 
Less imputed interest   (143)
Total lease liability  $1,062 

 

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

                    
   Three Months Ended June 30,   Six Months Ended June 30, 
   2021   2020   2021   2020 
Operating cash flow information:                    
Cash paid for amounts included in the measurement of lease liabilities  $36   $41   $38   $82 
Non-cash activity:                    
Right-of-use assets obtained in exchange for the lease obligations  $–   $–   $382   $– 

 

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 5 years at $150,000 per month. The lease commencement date is anticipated to be in August 2021, at which time the Company will account for the lease under ASC 842. A prepayment of $450,000 was made in the six months ended June 30, 2020, this payment represents the final three payments under the lease and is recorded as a long-term prepaid until the lease commencement, at which time it will be record in accordance with ASC 842.