Leases

Operating Leases

The Company leases the Rancho Cordova, California and Gurgaon, India facilities pursuant to operating leases. The Rancho Cordova lease expires in

May 2024.

The Gurgaon lease expires in

September 2023;

however, either party can terminate after

September 2019

with

three

months’ notice. As such it was accounted for as a short-term lease.

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of remaining minimum lease payments. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments

not

yet paid, we use the Company’s cost of capital based on existing debt instruments. Our material leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term.

The following summarizes the Company’s operating leases:

	December 31, 2019
Right-of-use operating lease assets, net	$	859,000
Current lease liability		118,000
Non-current lease liability		761,000

Weighted average remaining lease term		4.4
Discount rate		22	%

Maturities of lease liabilities by calendar year for our operating leases are as follows:

2020		301,000
2021		310,000
2022		319,000
2023		328,000
2024		139,000
Thereafter		--
Total lease payment	$	1,397,000
Less: imputed interest		(538,000	)
Present value of operating lease liabilities	$	859,000

Statement of Cash Flows

January 2019,

the Company signed an amendment to its lease for office space at its corporate headquarters in Rancho Cordova, CA. The amendment was accounted for as a modification and resulted in a right-of-use asset of

$966,000

being recognized as a non-cash addition on the date of the amendment. Cash paid for amounts included in the measurement of operating lease liabilities in cash flows from operating activities were

$291,000

for the years ended

December 31, 2019.

Operating Lease Costs

Operating lease costs were

$410,000

during the year ended

December 31, 2019,

which included

$204,000

for interest expense,

$108,000

in amortization expense,

$72,000

in variable lease costs and

$26,000

for short term lease costs. These costs are primarily related to long-term operating leases, but also include immaterial amounts for variable lease costs and short-term leases with terms greater than

days.

Finance Leases

Finance leases are included in equipment and other current and non-current liabilities in the accompanying condensed consolidated balance sheet. The amortization and interest expense are included in general and administrative expense and interest expense, respectively in the accompanying statements of operations. These leases are

not

material as of

December 31, 2019.