Fulgent Genetics, Inc. Leases Disclosure

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, including sublease consideration, was approximately $548,000 and $418,000 for the years ended December 31, 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. The Company terminated the lease in Georgia on August 31, 2019 and entered into a new lease on September 1, 2019. Upon entering the new lease, the Company recorded ROU assets of $110,000 and short term and long-term lease liabilities of $23,000 and $87,000, respectively.

 

As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the discount rate used to calculate present value lease payment. The Company determined its incremental borrowing rate based on inquiries with its 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 the Company’s operating leases is recognized on a straight-line basis over the lease term. The Company’s 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. Other than the new lease in Georgia, the Company did not enter into any new leases during the year ended December 31, 2019.

 

The following was operating lease expense:

 

 

Supplemental cash flow information related to leases was the following:

 

 

 

Supplemental information related to leases was the following:

 

 

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

 

 

Supplemental Information for Comparative Periods

 

As of December 31, 2018, prior to the adoption of Topic 842, future minimum payments under non-cancelable operating leases are as follows: