Cancer Genetics, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leasing Arrangements

Leasing Arrangements

3 Months Ended

Mar. 31, 2020

Operating Leases

The Company leases its laboratory, research facility and administrative office space under various operating leases. The Company also leases scientific equipment under various finance leases. Following the Business Disposals, the Company has assigned its office leases in North Carolina and New Jersey to Buyer.

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and operating lease liabilities, non-current on its unaudited condensed consolidated balance sheets. Finance leases are included in fixed assets, net of accumulated depreciation and obligations under finance leases.

ROU assets represent the Company's right to use an underlying asset for the lease term and lease obligations represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease obligations are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company's incremental borrowing rate was determined by adjusting its secured borrowing interest rate for the longer-term nature of its leases. The Company's variable lease payments primarily consist of maintenance and other operating expenses from its real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. The operating lease ROU asset also includes any lease payments made and excludes lease incentives incurred. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components. The Company has elected to account for these lease and non-lease components as a single lease component. The Company is also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term.

The components of operating and finance lease expense were as follows for the three months ended March 31, 2020 and 2019, respectively, for continuing operations (in thousands):



	Three months ended March 31, 2020		Three months ended March 31, 2019
Finance lease cost:
Amortization of right-of use assets	$	21	$	10
Interest on lease liabilities	3		1
Operating lease cost	56		44
Short-term lease cost	28		30
Variable lease cost	15		24
	$	123	$	109

Supplemental cash flow related to leases of the Company's continuing operations was as follows for the three months ended March 31, 2020 and March 31, 2019 (in thousands):



	Three months ended March 31, 2020		Three months ended March 31, 2019
Cash paid amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	56	$	44

Other supplemental information related to leases of the Company's continuing operations was as follows at March 31, 2020 and 2019, respectively:



	Three months ended March 31, 2020		Three months ended March 31, 2019
Weighted average remaining lease term (in years)
Operating leases	0.63		1.73
Finance leases	3.13		1.89

Weighted average discount rate
Operating leases	7.99	%	7.96	%
Finance leases	8.24	%	10.28	%

At March 31, 2020, future estimated minimum lease payments under non-cancelable operating leases were as follows (in thousands):



	Finance Leases		Operating Leases		Total
2020 (remaining 9 months)	$	60	$	158	$	218
2021	39		20		59
2022	31		11		42
2023	31		2		33
2024	7		—		7
Total minimum lease payments	$	168	191		359
Less amount representing interest	21		17		38
Present value of net minimum obligations	147		174		321
Less current obligation under finance and operating leases	66		153		219
Long-term obligation under finance and operating leases	$	81	$	21	$	102