5.COMMITMENTS AND CONTINGENCIES

Operating Leases

On November 30, 2011, the Company entered into a commercial lease for 26,342 square feet of office, laboratory, and manufacturing space in Cambridge, Massachusetts (as amended on September 17, 2012 and October 31, 2017, the “Cambridge Lease”). The term of the Cambridge Lease was 6 years and 3 months, with one 5-year extension option. On August 21, 2017, the Company exercised its option for the 5-year extension on the Cambridge Lease. The 5-year renewal lease term was set to commence on November 1, 2018 and end on October 31, 2023. The terms of the Cambridge Lease required a standby letter of credit in the amount of $311 thousand.

On June 13, 2017, the Company entered into a new short-term lease, to sub-lease 5,233 square feet of its facility (the “Moderna Sublease”). The lease term was from July 1, 2017 through October 26, 2018. On June 19, 2017, the Company received a $55 thousand security deposit under the terms of the Moderna Sublease. In connection with Moderna Sublease, the Company did not record any sublease income for the three-month period ended September 30, 2018. In connection with the Moderna Sublease, the Company received sublease income of $112 thousand for the nine-month period ended September 30, 2018, which was recorded as an offset to rent expense. In conjunction with the assignment of the Cambridge Lease on May 3, 2018 further described below, this security deposit was transferred to the third party that assumed the lease. The Company did not record any sublease income associated with the Moderna Sublease during the three or nine months period ended September 30, 2019.

On May 3, 2018, the Company assigned the Cambridge Lease to a third party who assumed all of the Company’s remaining rights and obligations under the Cambridge Lease including the Moderna Sublease. On the same date as the lease assignment, the Company entered into a sublease for 5,104 square feet of space, originally part of the Cambridge Lease, from the third party to which the Company assigned the Cambridge Lease (the “Current Cambridge Lease”). The Current Cambridge Lease commenced on May 3, 2018 and expires October 31, 2023 and contains rent holiday and rent escalation clauses. The Current Cambridge Lease does not contain any renewal options.

In connection with the assignment of the Cambridge Lease and the entry into the Current Cambridge Lease, the $311 thousand standby letter of credit was terminated, and a new standby letter of credit was established for $40 thousand. On November 1, 2018, the standby letter of credit was increased to $60 thousand. The $55 thousand security deposit under the Moderna Sublease was transferred to the third party and $603 thousand of deferred rent was removed from the consolidated balance sheets as of June 30, 2018. The resulting gain was recorded within the consolidated statement of operations during the second quarter of 2018. The Company also wrote off certain furniture, fixtures and equipment (including laboratory equipment) and recorded an impairment charge of $48 thousand for the nine months ended September 30, 2018. The Company did not record any impairment charges for the three-month period ended September 30, 2018.

Under the Current Cambridge Lease, the Company will be required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises in excess of new base year amounts. These costs are considered to be variable lease payments and are not included in the determination of the lease’s right-of-use asset or lease liability.

The Company identified and assessed the following significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities:

As the Company’s Current Cambridge Lease does not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company has estimated its incremental borrowing rate based on electing the remaining lease term as of the adoption date.

Since the Company elected to account for each lease component and its associated non-lease components as a single combined component, all contract consideration was allocated to the combined lease component.

The expected lease terms include noncancelable lease periods.

The elements of lease expense are as follows:


Lease cost (In thousands)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	91	$	273
Short-term lease cost		9		21
Variable lease cost		39		39
Total lease cost	$	139	$	333


Other information (In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from short term leases	$	9	$	21
Operating cash flows from operating leases		90		150
Total cash paid for leases	$	99	$	171
Right-of-use assets obtained in exchange for operating lease liabilities		-		-
Weighted-average remaining lease term - operating leases		4.1 Years		4.1 Years
Weighted-average discount rate - operating leases		7.0%		7.0%

Maturities of lease liabilities due under the Company’s Current Cambridge Lease as of September 30, 2019 is as follows:


Leases (In thousands)	As of September 30, 2019
2019 (excluding the 9 months ended September 30, 2019	$	93
2020		375
2021		386
2022		398
2023		339
Thereafter		—
Total lease payments		1,591
Less: imputed interest		(208)
Present value of lease liabilities	$	1,383


Leases (In thousands)	Classification	As of September 30, 2019
Assets
Lease asset	Operating	$	1,278
Total lease assets		$	1,278

Liabilities
Current	Operating	$	286
Non Current	Operating		1,097
Total lease liabilities		$	1,383

Under FASB Accounting Standards Codification (“ASC”) Topic 840, Leases (“ASC 840”) the Company recognized rent expense on a straight-line basis over the term of the lease and recorded the difference between the amount charged to expense and the rent paid as prepaid rent or deferred rent liability. As of December 31, 2018, the amount of prepaid rent was $17 thousand and this amount was subsequently reversed upon adoption of ASU No. 2016-02 on January 1, 2019.

Under ASC 840, rent expense related to the Company’s real estate lease charged to operations for the three month period ended September 30, 2018 was $107 thousand.

Under ASC 840, rent expense related to the Company’s real estate lease charged to operations for the nine month period ended September 30, 2018 was $746 thousand, and did not include the one-time gain on termination of the Cambridge Lease of $603 thousand that was recorded to the consolidated statement of operations during the second quarter of 2018.

As of December 31, 2018, minimum future lease payments under non-cancellable leases were as follows (in thousands):


Year Ended December 31,
2019	$	243
2020		375
2021		386
2022		398
2023		339
Total	$	1,741