Leases and Commitments

12 Months Ended

Dec. 31, 2021

(a)Operating Leases

The Company has a single lease for real estate, including laboratory and office space, and certain equipment. The lease for the current real estate property used for office, research and laboratory space located at 128 Spring Street in Lexington, Massachusetts commenced on May 1, 2020 which is the date when the property became available for use to the Company. In accordance with the accounting requirements under ASC 842, the lease obligation was not recorded until its commencement. In July 2020 the Company prospectively remeasured the lease as a result of the change to the timing of lease payments, the change was not material. The discount rate associated with the Company's right-of-use asset was 9.95%. The total cash obligation for the base rent over the seven-year term of this lease is approximately $9.3 million, of which $2.3 million was paid during the year ended December 31, 2021. The payments included a payment of $1.1 million for tenant improvements.

All of the Company's leases qualify as operating leases. The following table summarizes the presentation in the Company's consolidated balance sheet for the operating leases:


	December 31,
(in thousands)	2021		2020
Assets:
Operating lease right-of-use asset	$	5,749	$	6,578

Liabilities:
Operating lease liability - short-term	$	682	$	1,731
Operating lease liability - long-term	$	4,358	$	5,040
Total operating liability	$	5,040	$	6,771

The following table summarizes the effect of lease costs in our consolidated statements of income.


	For the Year Ended December 31,
(in thousands)	2021		2020		2019
Operating lease cost
Research and development	$	1,042	$	1,061	$	651
General and administrative	311		275		351
	$	1,353	$	1,336	$	1,002

The Company’s lease payments for the next five years and thereafter is expected to be as follows:


Year Ending December 31,	(in thousands)
2022	$	1,145
2023	1,178
2024	1,213
2025	1,250
2026	1,287
Thereafter	433
Total lease payments	$	6,506
Less: interest	1,466
Present value of operating lease liabilities	$	5,040

On January 27, 2022, the Company amended its lease agreement for its real estate property used for office, research and laboratory at 128 Spring Street ("Lease Amendment"). The Lease Amendment added approximately 9,340 square feet to the existing space for $30 per square foot, or $0.3 million per year in base rent subject to annual rent increases. The Lease Amendment also reduces the term of the lease to expire on December 31, 2025. Rent for the additional space will be paid on a “gross amount” basis and the Company is not obligated to reimburse the landlord for taxes or operating expenses on the additional space. Payments under the Lease Amendment will commence at the commencement date, which is expected in the second quarter of 2022. In addition, the Lease Amendment provides the Company and the landlord each with an option to terminate the lease agreement early. The Company's early termination option becomes effective on the lease commencement

date of a new lease for larger premises within the landlord’s commercial real estate portfolio (“New Lease”), and the Company may exercise our early termination option by providing the landlord with written notice of such election to terminate the lease agreement concurrently with the execution of the New Lease. The landlord has the option to terminate the lease agreement early by providing written notice to the Company eighteen months prior to December 31, 2025.

(b)License Agreements

In exchange for the right to use licensed technology in its research and development efforts, the Company has entered into various license agreements. These agreements generally stipulate that the Company pay an annual license fee and is obligated to pay royalties on future revenues, if any, resulting from use of the underlying licensed technology. Such revenues may include up-front license fees, contingent payments upon collaborators’ achievement of development and regulatory objectives, and royalties. In addition, some of the agreements commit the Company to make contractually defined payments upon the attainment of scientific or clinical milestones. The Company expenses these payments as they are incurred and expenses royalty payments as related future product sales or as royalty revenues are recorded. The Company accrues expenses for scientific and clinical objectives over the period that the work required to meet the respective objective is completed, provided that the Company believes that the achievement of such objective is probable. For the years ended December 31, 2021, 2020, and 2019, the Company also recognized $0.5 million, $0.5 million, and $0.5 million, respectively, as cost of royalty revenues in its Consolidated Statements of Operations and Comprehensive Loss related to such obligations (see Note 11 (a)).