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 initially required a standby letter of credit in the amount of $311 thousand.

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. 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 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.

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. To calculate the present value of remaining lease payments, the Company elected to use an incremental borrowing rate based on the remaining lease term at transition.

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 June 30, 2020		Three Months Ended June 30, 2019		Six Months Ended June 30, 2020		Six Months Ended June 30, 2019
Operating lease cost	$	91	$	91	$	182	$	182
Short-term lease cost		5		6		13		12
Variable lease cost		51		—		76		—
Total lease cost	$	147	$	97	$	271	$	194


Other information (In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from short term leases	$	5	$	6	$	13	$	12
Operating cash flows from operating leases		93		60		186		60
Total cash paid for leases	$	98	$	66	$	199	$	72
Right-of-use assets obtained in exchange for operating lease liabilities	$	—	$	—	$	—	$	—
Weighted-average remaining lease term - operating leases		3.3 Years		4.3 Years		3.3 Years		4.3 Years
Weighted-average discount rate - operating leases		7.0%		7.0%		7.0%		7.0%

Maturities of lease liabilities due under the Company’s Current Cambridge Lease as of June 30, 2020 is as follows:


Leases (In thousands)	As of June 30, 2020
2020 (excluding the 6 months ended June 30, 2020)	$	189
2021		386
2022		398
2023		339
Total lease payments		1,312
Less: imputed interest		(141)
Present value of lease liabilities	$	1,171

Right-of-use lease assets and lease liabilities are reported in the Company’s consolidated balance sheets as follows:


Leases (In thousands)	Classification	June 30, 2020		December 31, 2019
Assets
Lease asset, net	Operating	$	1,072	$	1,211
Total lease assets		$	1,072	$	1,211

Liabilities
Current	Operating	$	310	$	294
Non-Current	Operating		861		1,020
Total lease liabilities		$	1,171	$	1,314

Clinical Trial Commitments

The Company has engaged and executed contracts with a clinical research organization (“CRO”) consultant to assist with the administration of its ongoing INSPIRE 1.0 and INSPIRE 2.0 clinical trials. As of June 30, 2020, approximately $5.1 million remains to be paid on these contracts over the term of the clinical trials which are expected to be completed in November 2023. The costs may vary depending on actual pass-through expenses incurred to execute the trial. In the event the Company were to terminate the INSPIRE 2.0 trial, certain financial penalties would become payable to the CRO for costs to wind down the terminated trial.