8. Commitments and Contingencies Lease Agreements The Company determines if an arrangement is, or contains, a lease at contract inception. These lease agreements have remaining lease terms of 1 to 5 years. The Company recognizes a right-of-use (ROU) asset and a lease liability at the lease commencement date. The lease liability is initially measured at the present value of the unpaid future lease payments as of the lease commencement date. A key estimate includes how the Company determines the discount rate it uses to discount the unpaid lease payments to present value. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor's estimated residual value or the amount of the lessor's deferred initial direct costs. Therefore, the Company generally uses its incremental borrowing rate as the discount rate for the lease. The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Because the Company does not generally borrow on a collateralized basis, it uses quoted interest rates obtained from financial institutions as an input to derive an appropriate incremental borrowing rate, adjusted for the amount of the lease payments, the lease term, and the effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease. In June 2010, the Company entered into an operating lease agreement (Lease) with a landlord for an initial term of 10 years, for its corporate headquarters comprised of one building located in San Diego, California. Occupation of the premises under the Lease began in April 2011. Under the terms of the Lease, the Company pays annual base rent, subject to an annual fixed percentage increase, plus its share of common operating expenses and tax obligations. The annual base rent was subject to abatement of 50% for the first year of the Lease. In September 2014, the Company amended the Lease to extend the term for an additional three years through March 31, 2024 and to an additional 7,315 square feet of leased space. The extended term on the existing space increased total estimated rent payments by approximately $1.4 million. Base rent payments for the new space commenced in December 2014 and increased total estimated rent payments over the life of the Lease by approximately $1.5 million. In November 2015, the Company further amended the Lease to add facilities consisting of 16,811 square feet. Base rent payments for the new space commenced in March 2016 and June 2016 and increased total estimated rent payments over the life of the Lease by approximately $2.3 million. In February 2019, the Company entered into a sublease agreement with a tenant to lease a portion of its office space. The term of the lease agreement commenced on April 1, 2019 and ends on March 31, 2024 (when the underlying lease term ends, unless the underlying lease is terminated early). The sublessee is responsible for all variable lease payments including expenses, costs, taxes, insurance, maintenance, and other charges in connection with the subleased premises . The sublease does not have any renewal options, require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Rent payments increase by 3% each year on the anniversary of the commencement date. The sublease income earned in 2019 was immaterial. The Company adopted ASC 842 effective January 1, 2019 using the alternative transition approach by recording an operating lease right-of-use asset of $3.7 million and corresponding net operating lease liability of $4.2 million. In addition, effective January 1, 2019, the Company recorded a financial lease right-of-use asset of $0.9 million and corresponding net financial lease liability of $0.5 million at that date. The Company continues to account for leases in the prior period financials statements under ASC Topic 840. The following table presents the lease related assets and liabilities recorded on the Companys consolidated balance sheets related to its operating and finance leases: December 31, 2019 (in thousands) Operating lease right-of-use assets $ 3,124 Finance lease right-of-use assets 779 Total right-of-use assets $ 3,903 Operating lease liability-short-term $ 761 Operating lease liability-long-term 2,895 Finance lease liability-short-term 190 Finance lease liability-long-term 1 Total lease liabilities $ 3,847 Weighted average remaining lease term - operating leases 4.2 years Weighted average remaining lease term - finance leases 0.6 years Weighted average discount rate 5% Lease cost was $0.8 million for the year ended December 31, 2019 and rent expense was $0.8 million, and $0.7 million for the years ended December 31, 2018 and 2017, respectively. Lease cost and rent expense is included in cost of revenue, research and development and selling, general and administrative expenses in the accompanying consolidated statements of operations as follows: Years Ended December 31, 2019 2018 2017 (in thousands) Cost of revenue $ 64 $ 42 $  Research and development 496 417 326 Selling, general and administrative 241 293 407 Total rent expense $ 801 $ 752 $ 733 The Companys office space leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. These leases do not have any renewal options or rent escalation clauses. Variable expenses generally represent the Companys share of the landlords operating expenses. In addition to the Lease, the Company has entered into operating and financial lease agreements for office and lab equipment that commenced prior to January 1, 2019 and expire at various dates through 2024. The Company does not have any arrangements where it acts as a lessor except for the one sublease of a portion of its office space referred to above. Supplemental cash flow information related to operating leases for the year ended December 31, 2019 were as follows: (in thousands) Cash paid for amounts included in the measurement of lease liabilities $ 1,175 Lease liabilities arising from obtaining ROU asset  Maturities of operating lease liabilities for each of the next five years and thereafter are as follows: Payment Amounts Finance Leases Operating Leases (in thousands) 2020 $ 198 $ 927 2021 1 941 2022  967 2023  995 2024 and thereafter  244 Total future minimum lease payments $ 199 $ 4,074 As of December 31, 2019, the Company has no additional operating lease commitments that have not yet commenced. As of December 31, 2018, the total estimated future annual minimum lease payment obligations under the Companys non-cancelable leasing arrangements, including the facilities lease described above, are as follows: Payment Amounts Operating Capital Leases Leases Total (in thousands) 2019 $ 901 $ 344 $ 1,245 2020 899 197 1,096 2021 909 1 910 2022 934  934 2023 and thereafter 1,206  1,206 Total future minimum lease payments $ 4,849 $ 542 $ 5,391 Clinical Study and Development Activity Commitments The Company has entered into agreements with subcontractors to further develop its product candidates. These contracts can be cancelled at any time, with some having certain cancellation fees associated with the termination of the contract, and others that only obligate the Company through the termination date. Contingencies From time to time, the Company may be involved in legal proceedings, claims, and litigation in the ordinary course of business. At December 31, 2019, 2018 and 2017, there were no material legal proceedings.