Leased Properties

9 Months Ended

Sep. 30, 2020

LEASED PROPERTIES

The Company's lease for its corporate headquarters (3,169 square feet of office space) commenced on July 1, 2018 and terminates on July 31, 2021. The Company has the option to extend the term of the lease for one year.

Microchips, which the Company acquired in November 2019, leases general office space in Lexington, Massachusetts and warehouse space in Billerica, Massachusetts. The Lexington lease commenced on July 1, 2013 and terminates on September 30, 2021. The Billerica lease commenced on October 1, 2016 and terminates on March 31, 2022.

Under the terms of each lease, the lessee pays base annual rent (subject to an annual fixed percentage increase), plus property taxes, and other normal and necessary expenses, such as utilities, repairs, and maintenance. The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. The leases do not require material variable lease payments, residual value guarantees or restrictive covenants.

The leases do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. The Company uses an incremental borrowing rate of 7% for operating leases that commenced prior to January 2019. The depreciable lives of operating leases and leasehold improvements are limited by the expected lease term.

At September 30, 2020, the Company reported operating lease ROU assets of approximately $306,000 in other non-current assets, and $410,000 and $83,000, respectively, in current and non-current other liabilities on the consolidated balance sheet.

Total operating lease costs were approximately $76,000 and $27,000 for the three months ended September 30, 2020 and September 30, 2019, respectively, and $228,000 and $81,000 for the nine months ended September 30, 2020 and September 30, 2019, respectively. Operating lease costs consist of monthly lease payments expense, common area maintenance and other repair and maintenance costs and are included in general and administrative expenses in the consolidated statement of operations.

Cash paid for amounts included in the measurement of operating lease liabilities were approximately $111,000 and $28,000 for the three months ended September 30, 2020 and September 30, 2019, respectively, and $349,000 and $81,000 for the nine months ended September 30, 2020 and September 30, 2019, respectively. These amounts are included in operating activities in the consolidated statements of cash flows. Further, at September 30, 2020, operating leases had a weighted average remaining lease term of 1.14 years.

As of September 30, 2020, future minimum payments under the Company's operating leases are approximately:



Remainder of 2020	$	112,000
2021	363,000
2022	42,000
Total future minimum lease payments	517,000
Less: Difference between future minimum lease payments and discounted operating lease liabilities	24,000
Total operating lease liabilities	$	493,000