11.	Commitments and Contingencies

Operating Leases

On August 14, 2018, Rocket entered into a lease for office space, process development, research activities and manufacturing to support the Company’s pipeline in Cranbury, NJ (the “NJ Lease Agreement”). The NJ Lease Agreement was subsequently amended on June 26, 2019. The amendment to the NJ Lease Agreement increased the space rented by the Company by 11,720 square feet to 103,720 square feet and adjusted the lease payment date of rent for the full building (“Lease Payment Date”) to September 1, 2019. The NJ Lease Agreement has a term of 15 years from the Lease Payment Date, with an option to renew for two consecutive five-year renewal terms. The NJ Lease Agreement commencement had not yet occurred at September 30, 2019, since the construction of all landlord owned improvements had not been completed, therefore the right of use asset and lease liability have not been recorded as of September 30, 2019 for this lease.

Estimated rent payments are $1.2 million per annum, payable in monthly installments, depending upon the nature of the leased space, and subject to annual base rent increases of 3%. The total commitment under the lease is estimated to be approximately $29.3 million over the 15-year term of the lease. The Company delivered a cash security deposit of $0.3 million to the landlord in connection with the NJ Lease Agreement which has been reflected in deposits in the consolidated balance sheets. The Company entered into the lease prior to the building being available for use as the building construction was not complete.

The total restricted cash balance for the Company’s operating leases at September 30, 2019 and December 31, 2018 was $1.0 million and $1.4 million, respectively.

The Company determines if an arrangement is a lease at inception. Operating leases are included in our balance sheet as right-of-use assets from operating leases, current operating lease liabilities and long-term operating lease liabilities. Certain of the Company’s lease agreements contain renewal options; however, the Company does not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that the Company is reasonably certain of renewing the lease at inception or when a triggering event occurs. As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company has utilized its incremental borrowing rate based on the long -term borrowing costs of comparable companies in the biotechnology industry. Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration was allocated to the combined lease component. Some of the Company’s lease agreements contain rent escalation clauses (including index-based escalations). The Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. The Company will amortize this expense over the term of the lease beginning with the lease commencement date. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as incurred.

Lease cost	September 30, 2019
Operating lease cost	$	775
Total lease cost	$	775

The following table summarizes the maturity of the Company’s lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our balance sheet as of September 30, 2019:

Maturity of lease liabilities	September 30, 2019
2019 (remaining three months)	$	344
2020		1,150
2021		894
2022		572
2023		74
Total lease payments	$	3,033
Less: interest		(290	)
Total operating lease liabilities	$	2,743

The following disclosure is provided for periods prior to adoption of ASU 2016-02. Future annual minimum lease payment commitments, including the NJ Lease Agreement, as of September 30, 2019 were as follows:

2019 (remaining three months)	$	788
2020		2,405
2021		2,162
2022		1,876
2023		1,738
Thereafter		22,143
Total	$	31,113

Leases	September 30, 2019

Operating right-of-use assets	$	2,254

Operating current lease liabilities		1,052
Operating noncurrent lease liabilities		1,691
Total operating lease liabilities	$	2,743

Other information

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	838
Weighted-average remaining lease term - operating leases	2.7 years
Weighted-average discount rate - operating leases		7.77	%

Rent expense was $0.6 million and $0.6 million for the nine months ended September 30, 2019 and 2018, respectively. Rent expense was $0.1 million and $0.1 million for the three months ended September 30, 2019 and 2018, respectively.

Litigation

From time to time, the Company may be subject to other various legal proceedings and claims that arise in the ordinary course of its business activities. Although the results of litigation and claims cannot be predicted with certainty, the Company does not believe it is party to any other claim or litigation the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

Indemnification Arrangements

Pursuant to its bylaws and as permitted under Delaware law, the Company has indemnification obligations to directors, officers, employees or agents of the Company or anyone serving in these capacities. The maximum potential amount of future payments the Company could be required to pay is unlimited. The Company has insurance that reduces its monetary exposure and would enable it to recover a portion of any future amounts paid. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal.

Throughout the normal course of business, the Company has agreements with vendors that provide goods and services required by the Company to run its business. In some instances, vendor agreements include language that requires the Company to indemnify the vendor from certain damages caused by the Company’s use of the vendor’s goods and/or services. The Company has insurance that would allow it to recover a portion of any future amounts that could arise from these indemnifications. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal.