Commitment and Contingencies - (Notes)

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Leases

As of December 31, 2019, the Company leases an office and laboratory space in Vista, California, under a lease that expires in January 2021, with options to extend the lease for two additional 36-month periods. In addition, the Company also leases an office space in Vista, California, under a lease that expires in January 2021 with an option to extend the lease for an additional 24-month period. The Company's lease payments under each of these leases are subject to escalation clauses.

Minimum annual lease payments under non-cancelable lease arrangements at December 31, 2019 are as follows (in thousands):


Years Ending December 31,	Capital Leases		Operating Leases
2020	$	272	$	411
2021	272		34
2022	246		—
2023	159		—
2024	—		—
Total minimum lease payments	949		$	445
Less: amount representing interest	(75)
Present value of future minimum lease payments	874
Less: current portion	(238)
Long-term capital lease obligations	$	636

For the years ended December 31, 2019 and 2018, rent expense was $0.5 million and $0.4 million, respectively.

Acquisition-related liabilities

In connection with the acquisition of the medical diagnostics division of Cypress Bioscience, Inc. in 2010, the Company was required to pay certain amounts in the event that certain revenue milestones were achieved and upon the first commercial sale of a product associated with this acquisition. The acquisition also included amounts that may be due under several licensing agreements. All milestone payments other than one have been paid as of December 31, 2017. The remaining milestone obligation is for an additional $2.0 million payment due to Prometheus Laboratories, Inc. (Prometheus) for which the fair value was determined to be zero at December 31, 2019 and December 31, 2018.

In addition, the Company has ongoing royalty payment obligations on net sales of products which incorporate certain acquired technologies ranging from 2.5% to 7.5%. Future royalties payable under these arrangements are limited to the lesser of an aggregate of $4.2 million (including an upfront payment of $100,000) or the total royalties earned through January 1, 2024.

Licensing Agreements

The Company has licensed technology for use in its diagnostic tests. In addition to the milestone payments required by these agreements as described above, individual license agreements generally provide for ongoing royalty payments on net sales of products which incorporate licensed technology, as defined, ranging from 3.0% to 20.0%. Royalties are accrued when earned and recorded in costs of revenue in the accompanying statement of operations.

Supply Agreement

In January 2018, the Company entered into a supply agreement with one supplier for reagents which includes a minimum annual purchase commitment of $3.25 million for each of the three years covered by the agreement, which terminates in 2021.

Contingencies

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications; including subpoenas and other civil investigative demands, from governmental agencies, Medicare or Medicaid payers and managed care organizations reviewing billing practices or requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties. The Company's exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Litigation

The Company is not a party to any litigation and does not have contingent reserves established for any litigation liabilities. From time to time, the Company may be subject to various legal proceedings that arise in the ordinary course of business activities.