Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.20.1
Leases
6 Months Ended
Jan. 31, 2020
Leases [Abstract]  
Leases

Note 9 – Leases

 

In February 2016, the FASB issued ASU 2016-02, which supersedes previous lease accounting guidance (Topic 840) and establishes a right-of-use model that requires a lessee to record an asset and liability on the balance sheet for all leases with terms longer than 12 months. The Company does not have any material variable payments, residual value guarantees or restrictive covenants for its leases and does not have any leases with terms of 12 months or less.

 

On August 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets of approximately $1.4 million, lease liabilities of approximately $2.1 million and a reduction in deferred rent liabilities of $0.6 million for operating leases. Also, the adoption of ASC 842 did not have an impact on the Company’s beginning accumulated deficit balance.

 

In November 2019, the Company entered into a lease agreement for its office space in California directly with the landlord, ARE-SD Region No. 18, LLC (“ARE”), with an effective date being the earlier of: (a) October 1, 2020 or (b) the day after the termination of the Company’s existing sublease if it ends prior to September 30, 2020. The lease is for a term of 36 months, with one renewal option for an additional 36-month term. The minimum monthly payment is $55,989. The Company accounted for the ARE lease as a contract modification, and accordingly, recorded an additional right-of-use asset for approximately $5.3 million and lease liabilities of approximately $5.2 million for this operating lease.

 

The Company has operating leases for corporate offices and lab space. These leases have remaining lease terms of approximately one year to seven years, some of which include options to extend the lease. For any lease where the Company is reasonably certain that a renewal option will be exercised, the lease payments associated with the renewal option period are included in the ROU asset and lease liability as of January 31, 2020.

 

Supplemental balance sheet information related to leases as of January 31, 2020 was as follows:

 

Operating Leases:        
Operating lease right-of-use assets   $ 6,360,863  
         
Current portion included in current liabilities   $ 640,253  
Long-term portion included in non-current liabilities     6,128,021  
Total operating lease liabilities   $ 6,768,274  

 

Supplemental lease expense related to leases was as follows:

 

   

For the Three
Months Ended

January 31, 2020

   

For the Six
Months Ended

January 31, 2020

 
Operating lease cost   $ 318,404     $ 530,771  
Total lease expense   $ 318,404     $ 530,771  

 

Other information related to leases where the Company is the lessee is as follows:

 

   

As of

January 31, 2020

 
Weighted-average remaining lease term     6.5 years  
         
Weighted-average discount rate     9.99 %

  

Supplemental cash flow information related to operating leases was as follows:

 

   

For the Three
Months Ended

January 31, 2020

   

For the Six
Months Ended

January 31, 2020

 
Cash paid for operating lease liabilities   $ 349,474     $ 682,485  
Total cash flows related to operating lease liabilities   $ 349,474     $ 682,485  

 

Future minimum lease payments under non-cancellable leases as of January 31, 2020 were as follows:

 

Years ending July 31,        
2020   $ 723,682  
2021     1,116,946  
2022     1,392,265  
2023     1,431,473  
2024     1,474,552  
Thereafter     3,290,695  
Total minimum lease payments     9,429,613  
Less: Imputed interest     (2,661,339 )
Total   $ 6,768,274  

 

Disclosures related to periods prior to adoption of ASC 842

 

The future minimum obligations under leases in effect as of July 31, 2019 having a noncancelable term in excess of one year as determined prior to the adoption of ASC 842 are as follows:

 

Years ending July 31,        
2020   $ 1,356,000  
2021     308,000  
Total minimum lease payments   $ 1,664,000