Leases

9 Months Ended

Sep. 30, 2019

12. Leases

The Company has leases for office and laboratory space. The Company occupies approximately 36,309 square feet of office and laboratory space in Cambridge, Massachusetts under a lease that originally expired in June 2020 and an additional 11,237 of office space in the same facility which originally expired in February 2022. In June 2019, the Company executed an amendment to extend the term of the lease until June 30, 2023. The Company determined that these leases are operating leases.

In June 2019, the Company entered into a sublease agreement for a portion of its office space consisting of approximately 4,422 square feet. The sub-lease commenced on June 21, 2019, (the “2019 sublease”) and expires on June 20, 2020.

We recognize our minimum rental expense on a straight-line basis over the term of the lease beginning with the date of initial control of the asset. With the adoption of ASC 842 we recognized all leases with terms greater than 12 months in duration on our Condensed Consolidated Balance Sheets as right-of-use assets and lease liabilities as of January 1, 2019. We adopted the standard using the modified retrospective approach.

Upon adoption of ASC 842 on January 1, 2019, we recorded operating lease assets of $3.1 million and operating lease liabilities of $3.5 million. The adoption of ASC 842 did not have a material impact on our condensed consolidated statements of operations. Prior periods are presented in accordance with ASC 840, Leases.

We have made certain assumptions and judgments when applying ASC 842, the most significant of which are:

•

We elected the package of practical expedients available for transition which allow us to not (i) reassess whether expired or existing contracts contain leases under the new definition of a lease, (ii) determine lease classification for expired or existing leases and (iii) determine whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.

•

We did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset.

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For all asset classes, we elected to not recognize a right-of-use asset and lease liability for short-term leases of less than 12 months.

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For all asset classes, we elected to not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component.

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We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable.

As of September 30, 2019, assets under operating lease were $11.4 million. The elements of lease expense were as follows (in thousands):

	For Nine Months Ended September 30, 2019
Lease cost:
Operating lease cost		2,405
Variable lease cost (1)		323
Sublease income		(105	)
Total Lease cost		2,623

Other information:
Operating cash flows used for operating leases		2,322
Operating lease liabilities arising from obtaining
right-of-use assets		11,863
Weighted-average remaining lease term in years		3.8
Weighted-average discount rate		10.37	%

(1)

The variable lease costs for the nine months ended September 30, 2019 include common area maintenance charges.

Future minimum lease payments under the operating lease as of September 30, 2019 are as follows (in thousands):

Year Ending December 31,
2019 (remainder of year)		838
2020		3,592
2021		3,880
2022		3,997
2023		2,033
	$	14,340
Present value adjustment		(2,477	)
Present value of lease liabilities	$	11,863

Rent expense for each of the three months ended September 30, 2019 and 2018 was $0.8 million and $0.6 million, respectively. Rent expense for each of the nine months ended September 30, 2019 and 2018 was $2.3 million and $1.7 million, respectively.