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8. LEASES | 9 Months Ended
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Sep. 30, 2021
Leases [Abstract] |
8. LEASES | 8. LEASES Lessee Lease Policy We lease our office space and certain equipment under finance and operating leases. Our leases have remaining lease terms of one to two years. Our office lease agreement includes both lease and non-lease components, which are accounted for separately. Our finance leases contain options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless we are reasonably certain to exercise the purchase option. In September 2021, we entered into an office lease with Redmond East Office Park LLC, a Washington limited liability company, pursuant to which we will lease approximately 16,681 square feet of space located in Redmond, Washington that we will use primarily for general office space and product testing. The lease provides for an initial term of 128 months commencing November 1, 2021. Pursuant to the lease, annual base rent will be approximately $500,000 for the first year and is subject to annual increases of 3.0%. In addition to base rent, we will pay additional rent comprised of our proportionate share of any operating expenses, real estate taxes, and management fees. We have the option to extend the term for one ten-year renewal period, provided that the rent would be subject to market adjustment at the beginning of the renewal term. The total minimum lease payments related to this forward-starting lease are $6.4 million. In September 2021, we entered into a second office lease with Redmond East Office Park LLC, pursuant to which we will lease approximately 36,062 square feet of space located in Redmond, Washington that we will use primarily for general office and lab space. The lease provides for an initial term of 120 months with a target commencement date of July 1, 2022. Pursuant to the lease, annual base rent will be approximately $1.1 million for the first year and is subject to annual increases of 3.0%. In addition to base rent, we will pay additional rent comprised of our proportionate share of any operating expenses, real estate taxes, and management fees. We have the option to extend the term for one ten-year renewal period, provided that the rent would be subject to market adjustment at the beginning of the renewal term. The total minimum lease payments related to this forward-starting lease are $13.0 million. In connection with the effectiveness of the second lease with Redmond East Office Park, we amended our current office lease to provide for early termination intended to coincide with our move into the new 36,062 square feet of space but, in any event, no later than October 31, 2022. The components of lease expense were as follows: Components of Lease Expense
|  |  | Three Months Ended |  |  | Nine Months Ended
|  |  | September 30, |  |  | September 30,
(in thousands) |  |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020
Operating lease expense |  | $ | 116 |  | $ | 116 |  | $ | 348 |  | $ | 348
Finance lease expense: |  |  |  |  |  |  |  |  |  |  |  |
Amortization of leased assets |  |  | 7 |  |  | 6 |  |  | 24 |  |  | 18
Interest on lease liabilities |  |  | - |  |  | - |  |  | 2 |  |  | 2
Total finance lease expense |  |  | 7 |  |  | 6 |  |  | 26 |  |  | 20
Total lease expense |  | $ | 123 |  | $ | 122 |  | $ | 374 |  | $ | 368
Supplemental cash flow information related to leases was as follows: Cash Flow Information Related to Leases
|  |  | Nine Months Ended
|  |  | September 30,
(in thousands) |  |  | 2021 |  |  | 2020
Cash paid for amounts included in measurement of lease liabilities: |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 506 |  | $ | 491
Operating cash flows from finance leases |  |  | 2 |  |  | 2
Financing cash flows from finance leases |  |  | 25 |  |  | 19
Supplemental balance sheet information related to leases was as follows: Supplemental Balance Sheet Information Related to Leases
|  |  | September 30, |  |  | December 31,
(in thousands) |  |  | 2021 |  |  | 2020
Operating leases |  |  |  |  |  |
Operating lease right-of-use assets |  | $ | 652 |  | $ | 946
Current portion of operating lease liability |  |  | 691 |  |  | 676
Operating lease liability, net of current portion |  |  | 307 |  |  | 774
Total operating lease liabilities |  | $ | 998 |  | $ | 1,450
Finance leases |  |  |  |  |  |
Property and equipment, at cost |  | $ | 112 |  | $ | 112
Accumulated depreciation |  |  | (49) |  |  | (28)
Property and equipment, net |  | $ | 63 |  | $ | 84
Current portion of finance lease obligations |  | $ | 23 |  | $ | 31
Finance lease obligations, net of current portion |  |  | 27 |  |  | 44
Total finance lease liabilities |  | $ | 50 |  | $ | 75
Weighted Average Remaining Lease Term |  |  |  |  |  |
Operating leases |  |  | 1.5 years |  |  | 2.3 years
Finance leases |  |  | 1.3 years |  |  | 2.0 years
Weighted Average Discount Rate |  |  |  |  |  |
Operating leases |  |  | 6.0% |  |  | 6.0%
Finance leases |  |  | 6.3% |  |  | 6.3%
As of September 30, 2021, maturities of lease liabilities were as follows: Maturities of Lease Liabilities
(in thousands) |  |  | Operating |  |  | Finance
Years Ended December 31, |  |  | leases |  |  | leases
2021 |  | $ | 170 |  | $ | 6
2022 |  |  | 696 |  |  | 26
2023 |  |  | 175 |  |  | 21
2024 |  |  | - |  |  | -
Thereafter |  |  | - |  |  | -
Total minimum lease payments |  |  | 1,041 |  |  | 53
Less: amount representing interest |  |  | (43) |  |  | (3)
Present value of capital lease liabilities |  | $ | 998 |  | $ | 50

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- Definition The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing. + References Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 + Details
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