Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Note 9. Leases

The Company has various non-cancelable operating leases with varying terms through August 2023 primarily for office space. The Company has options to renew some of these leases for three years after their expiration. The Company considers these options, which may be elected at the Company’s sole discretion, in determining the lease term on a lease-by-lease basis. The Company does not have any finance leases or leases with variable lease payments.

The determination of whether an arrangement contains a lease is made at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset.

The Company’s headquarters is located in Temple City, California, which is comprised of various corporate offices and a laboratory certified under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”), accredited by the College of American Pathologists (“CAP”) and licensed by the State of California Department of Public Health. Additional offices are located in El Monte, California and Atlanta, Georgia and are used for certain research and development, customer service, report generation and other administrative functions.

Rent expense was approximately $133,000 and $119,000 for the three months ended and $266,000 and $228,000 for the six months ended June 30, 2019 and 2018, respectively.

The Company adopted new accounting standard ASC 842, Leases, on January 1, 2019. Upon adoption, the Company recorded ROU assets of $3.0 million and short-term and long-term lease liabilities of $384,000 and $2.6 million, respectively. The difference between the ROU asset and liability is due to the existing balance of deferred rent at the date of adoption. There was no impact to retained earnings upon adoption.

Our incremental borrowing rate was used to determine the present value of lease payments since our leases do not provide an implicit rate. The Company determined its incremental borrowing rate based on inquiries with our bank. The Company’s lease agreements do not contain any residual value guarantees, material restrictive covenants, bargain purchase options or asset retirement obligations. Lease expense for our operating leases is recognized on a straight-line basis over the lease term. Our leases do not contain variable lease payments. The Company does not have any short-term leases and thus has excluded short-term costs from the table below. The Company did not enter into any new leases during the six months ended June 30, 2019.

The following was operating lease expense:

	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost	$	146	$	292

Supplemental cash flow information related to leases was the following:

	Three months ended June 30, 2019		Six months ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities	$	116	$	278
Operating cash flows from operating leases	$	101	$	201

Supplemental balance sheet information related to leases was the following:

	June 30, 2019
Weighted average remaining lease term - operating leases	6.1 years
Weighted average discount rate - operating leases		6.25	%

The following is a maturity analysis of operating lease liabilities using undiscounted cash flows on an annual basis with renewal periods included:

	Operating Leases
	(in thousands)
Year Ending December 31,
2019 (remaining 6 months)	$	281
2020		559
2021		550
2022		558
2023		567
2024		330
Thereafter		532
Total lease payments		3,377
Less imputed interest		(591	)
Total	$	2,786

Future minimum payments under non-cancelable operating leases as of December 31, 2018 are as follows:

	Amounts
	(in thousands)
Year ending December 31,
2019	$	560
2020		559
2021		550
2022		558
2023		567
Thereafter		862
Total minimum lease payments	$	3,656