XML 30 R18.htm IDEA: XBRL DOCUMENT

Leases

3 Months Ended

Mar. 31, 2019

NOTE 12. LEASES

The Company adopted Topic 842 on January 1, 2019. Topic 842 allows the Company to elect a package of practical expedients, which include: (i) an entity need not reassess whether any expired or existing contracts are or contain leases; (ii) an entity need not reassess the lease classification for any expired or existing leases; and (iii) an entity need not reassess any initial direct costs for any existing leases. Another practical expedient allows the Company to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and to purchase the underlying asset. The Company has elected to utilize the package of practical expedients and has not elected the hindsight methodology in its implementation of Topic 842.

The Company elected to adopt this standard using the optional modified retrospective transition method and recognized a cumulative-effect adjustment to the condensed consolidated balance sheet on the date of adoption. Comparative periods have not been restated. With the adoption of Topic 842, the Company’s condensed consolidated balance sheet now contains the following line items: Right-of-use assets, Operating lease liabilities—short-term and Operating lease liabilities—long-term.

The Company determined that it held the following significant operating leases of office and laboratory space as of January 1, 2019:

	●	An operating lease for 10,200 square feet of office space in San Diego, California that expires in December 2021, with an option to extend the term for a five-year period;

	●	An operating lease for 4,500 square feet of office and lab space in Irvine, California that expires in December 2020, with an option to extend the term for up to two five-year periods; and

	●	An operating lease for 25,000 square feet of lab, warehouse and office space in Ledgewood, New Jersey that expires in July 2024, with an option to extend the term for two additional five-year periods.

The extensions within the San Diego, California and Ledgewood, New Jersey operating lease agreements were included within the Company’s calculation of the new lease standard as the Company is reasonably certain it will exercise its option to extend these leases. The Company has elected to not recognize right-of-use assets and lease liabilities arising from short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

The previously classified capital leases are now existing leases classified as finance leases under the new standard. The Company has determined that the identified finance leases did not contain non-lease components and require no further allocation of the total lease cost. The Company has determined that the identified operating leases did contain non-lease components and elected an accounting policy to combine non-lease and lease components to determine the total lease cost. Additionally, the operating agreements in place did not contain information to determine the rate implicit in the leases. As such, the Company calculated the incremental borrowing rate based on the assumed remaining lease term for each lease in order to calculate the present value of the remaining lease payments. At March 31, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 6.36% and 12.05 years, respectively.

Upon adoption of Topic 842, the Company recorded a $6,325 increase in operating lease right-of-use assets, a $388 decrease in accounts payable and accrued expenses and a $6,712 increase in operating lease liability. The Company did not record any cumulative effect adjustments to opening stockholders’ equity. As of March 31, 2019, right-of-use assets and liabilities arising from operating leases were $6,195 and $6,594, respectively. During the three months ended March 31, 2019, cash paid for amounts included for the operating lease liabilities was $223 and the Company recorded operating lease expense of $234 included in selling, general and administrative expenses.

Future lease payments under operating leases as of March 31, 2019 were as follows:

	Operating Leases
Remainder of 2019	$	681
2020		930
2021		809
2022		824
2023		843
Thereafter		5,304
Total minimum lease payments		9,391
Less: amount representing interest payments		(2,797	)
Total operating lease liabilities		6,594
Less: current portion, operating lease liabilities		(511	)
Operating lease liabilities, net of current portion	$	6,083

The Company also has two additional finance leases that are included in its lease accounting but are not considered significant.

Future lease payments under non-cancelable finance leases as of March 31, 2019 were as follows:

	Finance Leases
Remainder of 2019	$	565
2020		9
2021		9
2022		9
2023		10
Total minimum lease payments		602
Less: amount representing interest payments		(11	)
Present value of future minimum lease payments		591
Less: unamortized discount		(6	)
		585
Less: current portion, net of unamortized discount		(553	)
Finance lease obligation, net of current portion	$	32

At March 31, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the finance leases held by the Company were 9.82% and 0.82 years, respectively.

For the three months ended March 31, 2019, debt discount amortization related to a finance lease obligation was $10, and included in interest expense, net.

For the three months ended March 31, 2019, depreciation expense related to the equipment held under the finance lease obligations was $73.

For the three months ended March 31, 2019, cash paid and expense recognized for interest expense related to the finance lease obligation was $11.

Future minimum lease payments under operating leases and future minimum finance lease payments as of December 31, 2018 were as follows (in thousands):

	Finance Leases			Operating Leases
2019	$	751		$	797
2020		-			857
2021		-			742
2022		-			320
2023		-			330
Thereafter		-			196
	$	751		$	3,242

Less: Amounts representing interest		(15	)
Less: Amounts representing unamortized discount		(16	)
Total obligation under capital leases		720
Less: Current portion of capital leases		(720	)
Long term capital lease obligation	$	-