Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Operating Leases

The Company leases office and laboratory facilities in South San Francisco and San Diego, California and Austin Texas under various non-cancelable lease agreements. The lease terms extend to January 2029 and contain extension of lease term and expansion options. The leases have a weighted average remaining lease term of 5.2 years as of March 31, 2021. The Company had deposits of $749,000 and 603,000 included in long-term assets as of March 31, 2021 and December 31, 2020, respectively, restricted from withdrawal and held by banks in the form of collateral for irrevocable standby letters of credit held as security for the leases.

The Company determined its operating lease liabilities using payments through their current expiration dates and a weighted average discount rate of 6.7% based on the rate that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments in a similar economic environment. Operating lease liabilities along with the associated right-of-use assets are disclosed in the accompanying condensed consolidated balance sheets. After the adoption of ASC 842, Leases, the Company classified its deferred rent for tenant improvements with its operating lease right-of-use assets on the consolidated balance sheets. In connection with the acquisition of Decipher Biosciences, the Company identified certain off-market rate leases and has preliminarily estimated an intangible asset of $1.8 million which is included in operating lease assets and will be amortized over the remaining lease term. See Note 4 for more information on the acquisition of Decipher Biosciences.

Future minimum lease payments under non-cancelable operating leases as of March 31, 2021 are as follows (in thousands of dollars):


Year Ending December 31,	Amounts
Remainder of 2021	$	2,760
2022	3,770
2023	3,880
2024	3,991
2025	4,103
Thereafter	1,661
Total future minimum lease payments	20,165
Less: amount representing interest	3,251
Present value of future lease payments	16,914
Less: short-term lease liabilities	2,878
Long-term lease liabilities	$	14,036

The Company recognizes operating lease expense on a straight-line basis over the non-cancelable lease period. Operating lease expense was $0.6 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively. Cash paid for amounts included in the measurement of lease liabilities was $0.6 million for each of the three months ended March 31, 2021 and 2020.

Contingencies

From time to time, the Company may be involved in legal proceedings arising in the ordinary course of business. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its condensed consolidated financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company believes there is no legal proceeding pending that could have, either individually or in the aggregate, a material adverse effect on the Company’s condensed consolidated financial statements.