XML 33 R19.htm IDEA: XBRL DOCUMENT

Commitments

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

12. Commitments

Operating Leases

The Company leases office and production facilities and equipment under agreements that expire at various dates through 2026. Certain leases contain renewal provisions and escalating rental clauses and generally require the Company to pay utilities, insurance, taxes and other operating expenses.

In August 2018, the Company entered into an agreement to lease approximately 16,000 square feet of office space in Carlsbad, California (the “Carlsbad Lease”). The Company relocated its corporate headquarters to this new location. The term of the Carlsbad Lease is from December 2018 through April 2026. The Company has a one-time option to renew the lease for an additional five-year extension. Base rent is abated by 50% for months two through nine of the term. Base rent escalates annually beginning in December 2019 by approximately 3.5% per year. The Company will pay its share of the lessor’s operating expenses, which includes utilities, insurance, taxes, and other operating expenses.

As required in the Carlsbad Lease, the Company’s bank, Avidbank, issued a letter of credit to the lessor in the amount of $250,000 as security, which amount will reduce by $50,000 each year beginning December 1, 2019, provided there has been no default under the lease. Avidbank required the Company to deposit $250,000 in a restricted cash account maintained with the bank, which amount will reduce in alignment with the amount required under the letter of credit each year. The Company recorded the $250,000 deposit as restricted cash on its balance sheet, with $50,000 being recorded in short-term restricted cash and the balance being recorded in long-term restricted cash. The amount deposited in such account will not count toward the covenant under the Avidbank loan and security agreement that requires the Company to have an aggregate amount of unrestricted cash in deposit accounts or securities accounts maintained with Avidbank of not less than $2,000,000 at all times.

For the years ended December 31, 2018 and 2017, total lease expense under operating leases was $528,000 and $510,000, respectively.

As of December 31, 2018, future minimum lease payments under operating leases are as follows:

Years Ending December 31,		Lease Payment
2019		$	425,000
2020			615,000
2021			620,000
2022			634,000
2023			655,000
Thereafter			1,601,000
Total		$	4,550,000

As a result of Topic 842, which the Company adopted on January 1, 2019, the Company is required to recognize a lease liability, which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Accordingly, on the January 1, 2019 transition date to Topic 842, the Company expects to recognize on its consolidated balance sheet approximately $3.5 million of operating lease liabilities, and approximately $2.3 million of corresponding operating right-of use assets, net of tenant improvement allowances. See “Recent Accounting Pronouncements” in Note 2 for further details on Topic 842.

Capital Leases

As of December 31, 2018 and 2017, property held under current capital leases was as follows:

		For the Years Ended
		December 31,
		2018				2017
Office equipment		$	357,000			$	362,000
Site equipment			-				250,000
Accumulated depreciation			(276,000	)			(322,000	)
Total		$	81,000			$	290,000

Total depreciation expense under capital leases was $81,000 and $95,000 for the years ended December 31, 2018 and 2017, respectively.

As of December 31, 2018, future minimum principal payments under capital leases are as follows:

Years Ending December 31,		Principal Payment
2019		$	45,000
2020			21,000
2021			20,000
Total		$	86,000

The adoption of Topic 842 did not have a material impact on the balances of the Company’s capital lease liabilities or the associated assets on the transition date of January 1, 2019. See “Recent Accounting Pronouncements” in Note 2 for further details on Topic 842.