Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2020
Leases [Abstract]  


7. Leases


The Company leases office space in Irvine, California that houses its headquarters and manufacturing facility under a non-cancellable operating lease. The lease term commenced on October 1, 2018 and expires in September 2023. The Company has the option to renew the lease for two additional periods of five years each. The Company also leases office space in Solana Beach, California that houses certain management and research and development personnel. The lease term commenced on December 15, 2020, is set to expire on December 31, 2026, and is renewable for an additional five-year period, at the Company’s option, provided that the Company’s landlord has entered into an extension of its lease for the office space that encompasses the Company’s office space for at least five years. Both office leases are classified as operating leases in conformity with the provisions of Topic 842.


The lease cost, included in general and administrative expense, was $0.2 million and $0.1 million for the years ended December 31, 2020 and 2019, respectively.


The assumptions used in determining the Solana Beach lease component of the operating lease right of use asset and operating lease liability included in the accompanying December 31, 2020 consolidated balance sheet are as follows:


· Lease term – Topic 842 provides that the lease term consists of: (a) the non-cancelable period of the lease; and (b) the period covered by the Company option to extend the lease for which the Company is reasonably certain to do so. Based on the foregoing, management determined the lease term to extend to December 2026 for the Solana Beach office lease.


· Discount rate – Topic 842 provides that the discount rate is the rate implicit in the lease unless that rate cannot be determined, in which case the lessee’s incremental borrowing rate shall be used. Because neither the rate implicit in the lease nor the Company’s incremental borrowing rate were determinable, discount rates were obtained with reference to published U.S. High Yield CCC corporate bond rates at the inception dates of the Solana Beach lease, which was 8.8%.


As of December 31, 2020, future minimum lease payments are as follows:


Years ending December 31,     (in thousands)  
2021     $ 432  
2022       541  
2023       542  
2024       472  
2025       486  
Thereafter       500  
Total minimum payments       2,973  
Less: Discount to present value of lease payments       (133 )
Discounted present value of lease payments     $ 2,840