11. Lease Commitments

Operating Leases

The Company leases office space in Miami, Florida and laboratory space in Bothell, Washington under operating leases that expire on August 31, 2021 and January 31, 2024, respectively. The lease for our Miami office is with a related party (see below).

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

Prior to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases (“ASC 842”), which requires an entity to recognize a right-of-use asset and a lease liability for certain leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019, resulted in the recognition of operating lease right-of-use assets of $833,000 and corresponding lease liabilities of approximately the same amount. There was no cumulative-effect adjustment to accumulated deficit. As of December 31, 2020, the unamortized right of use asset was $498,000 and total lease liabilities were $523,000, of which $178,000 was current.

The components of rent expense and supplemental cash flow information related to leases for the period are as follows (tables in thousands):

The supplemental balance sheet information related to leases for the period is as follows (tables in thousands):

The minimum lease payments above do not include common area maintenance (CAM) charges, which are contractual obligations under the Company’s Bothell, Washington lease, but are not fixed and can fluctuate from year to year. CAM charges for the Bothell, Washington facility are calculated and billed based on total common expenses for the building incurred by the lessor and apportioned to tenants based on square footage. In 2020 and 2019, approximately $74,000 and $86,000 of CAM charges for the Bothell, Washington lease were included in operating expenses in the consolidated statements of operations, respectively.

On September 1, 2018, the Company entered into a lease agreement with a limited liability company controlled by Dr. Phillip Frost, a director, and a principal shareholder of the Company for the lease of its Miami office (see Note 16 – Transactions with Related Parties). The lease term is three years with an optional three-year extension. Monthly lease payments under this lease total $155,000 through September 2021. The minimum lease payments above include taxes and fees, which are expected to be approximately $9,000 annually. As of December 31, 2020, the remaining right of use asset relating to this lease was $39,000 and the remaining lease obligation was $39,000.

Rent expense, excluding capital leases and CAM charges, for 2020 and 2019 totaled $228,000 and $226,000, respectively.

Finance Leases

In November 2018, the Company entered into two lease agreements to acquire equipment with 18 monthly payments of $18,000 payable through May 27, 2020 and 36 monthly payments of $1,000 payable through November 21, 2021. The lease agreements have an effective interest rate of 8.00%.

Future minimum finance lease payments, by year and in aggregate, are as follows:

The leased lab equipment is included under property and equipment and depreciable over five years. Total assets and accumulated depreciation recognized, net, under finance leases was $92,000 and $119,000 as of December 31, 2020, respectively. Total assets and accumulated depreciation recognized, net, under finance leases was $347,000 and $75,000 as of December 31, 2019.