NOTE 9 – LEASES

On January 1, 2019, the Company adopted a new accounting standard that amends the guidance for the accounting and reporting of leases. Required disclosures have been made on a modified retrospective basis in accordance with the guidance of the standard. See Note 1, “Organization and Summary of Significant Accounting Policies” of the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 13, 2020 for further discussion of the Company’s Lease accounting policy.

The Company has operating leases for administrative offices and research and development facilities, and certain finance leases for equipment. The operating leases have remaining terms of three years to eight years, and the finance leases have remaining terms of less than one year. Leases with an initial term of 12 months or less will not be recorded on the condensed consolidated balance sheets as operating leases or finance leases, and the Company will recognize lease expense for these leases on a straight-line basis over the lease term. For leases commencing in 2019 and later, the Company will account for lease components (e.g., fixed payments including

rent, real estate taxes, and insurance costs) with non-lease components (e.g. common area maintenance costs). Certain leases include options to renew, with renewal terms that can extend the lease term from three to five years. The exercise of lease renewal options for the Company’s existing leases is at its sole discretion and not included in the measurement of lease liability and ROU asset as they are not reasonably certain to be exercised. Certain finance leases also include options to purchase the leased equipment. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The leases do not contain any residual value guarantees or material restrictive covenants.

In January 2019, the Company entered into a lease agreement for an additional 57,000 square feet of administrative office and research and development space in Austin, Texas. The lease commenced March 2019 and expires August 2028 and does not contain an option to renew. The tables below include the impact of this lease. Upon the commencement of the lease, the Company recorded an operating lease ROU asset and a lease liability of $7.2 million. In connection with entering into the lease and in lieu of a cash deposit, the Company obtained a letter of credit of $3.0 million. Additionally, the Company has recorded an asset retirement obligation as a result of this lease which has a balance of $0.4 million at June 30, 2020.

In June 2020, the Company entered into a lease agreement for office space in New York, New York.  The space will consist of an initial 9,289 square feet and an additional 3,000 square feet upon expansion.  The lease for the initial space commenced on August 1, 2020.  The expansion space will commence on the later of (i) the commencement date or (ii) the date on which there has been delivery of vacant possession. The possession of the expansion space shall not commence prior to November 1, 2020. The term for both spaces will expire on October 30, 2025 and does not contain an option to renew.  In connection with entering into the lease and in lieu of a cash deposit, the Company obtained a letter of credit in the amount of $0.2 million.

The components of lease expense were as follows (in thousands):

The following table summarizes the balance sheet classification of leases at June 30, 2020 (in thousands):

The following table presents other information on leases as of June 30, 2020:

Maturities of lease liabilities were as follows as of June 30, 2020 (in thousands):

Supplemental cash flow information related to the Company’s leases were as follows for the six months ended June 30, 2020 (in thousands):