Leases

3 Months Ended

Mar. 31, 2020

The Company has lease agreements for its facilities in Cambridge, Massachusetts, which is the Company’s principal executive offices; Vienna, Austria, which is the Company’s research and development center; Waltham, Massachusetts, which the Company has sublet to a third party; and Allston, Massachusetts, as further discussed below. There are no restrictions or financial covenants associated with any of the lease agreements.

Cambridge Lease— In August 2017, the Company entered into a non-cancellable operating lease agreement for office space of approximately thirteen thousand square feet in Cambridge, Massachusetts (“Cambridge Lease”) which expires on July 31, 2022. The Cambridge Lease includes an annual rent escalation clause and the Company has the option to extend the lease for one period of five additional years. Base rent is approximately $825 thousand annually and the monthly rent expense is being recognized on a straight-line basis over the term of the lease as the Company amortizes the associated operating lease right-of-use asset. In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, in accordance with the terms of lease. These costs are not included in the determination of the leases’ right-of-use operating assets or lease operating liabilities.

Waltham Lease— The Company has six thousand square feet of office space in Waltham, Massachusetts (“Waltham Lease”). The Waltham Lease, as amended, commenced on January 1, 2019, and expires approximately 5 years from the commencement date. The base rent is approximately $262 thousand annually. In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, which costs are not included in the determination of the leases’ right-of-use assets or lease liabilities. The Company is subleasing the space to a third party for the duration of the lease. The right-of-use asset is being amortized to rent expense over the 5-year term of the lease.

Vienna Austria Lease— The Company has an operating lease for approximately four hundred square meters of laboratory and office space in Vienna, Austria, (“Vienna Austria Lease”) which commenced on March 1, 2019, as amended, for a term of 2 years. The lease is cancellable by the Company upon three months’ notice with no penalty. The annual base rent is approximately $155 thousand. The Company has classified this lease as a short-term lease as it is not reasonably certain that the Company will not terminate the lease within one year and, accordingly, has not recorded a right-of-use asset. Accordingly, rent expense is recorded on a straight-line basis as incurred over the term of the lease.

Allston Lease— On November 11, 2019, the Company entered into a lease agreement for approximately 28,000 square feet of office space currently under construction in a building located in Allston, Massachusetts (“Allston Lease”). The office space is expected to replace the Company’s current headquarters located in Cambridge, Massachusetts. The Company intends to move into the premises upon the completion of construction, which is anticipated to be in 2020. Monthly rent payments under the lease are expected to commence in May 2020, reflecting a 180-day rent-free period following the execution of the Lease, subject to the timely completion of construction of the premises. Base rental payments will be approximately $1.0 million annually, plus certain operating expenses. The term of the lease will continue until November 2026, unless earlier terminated in accordance with the terms of the lease. The Company has the right to sublease the premises, subject to landlord consent. The Company also has the right to renew the lease for an additional five years at the then prevailing effective market rental rate. The Company is required to provide the landlord with a $1.1 million security deposit in the form of a letter of credit, which is classified as restricted cash.

For the Allston Lease, the Company is participating in the construction of the office space and has incurred construction costs to prepare the office space for its use, which will be partially reimbursed by the landlord. The Company has concluded that these construction costs generate and enhance the landlord’s assets and, as such, costs that are not reimbursed will be classified as prepaid rent and then reclassified to the right-of-use asset on the lease commencement date. The lease commencement date is expected to occur once the landlord's asset is completed and available for additional leasehold improvements funded by the Company. Upon the date of lease commencement, which had not yet occurred as of March 31, 2020, the Company will recognize the lease liability, which will reflect the future rent payments for the term of the lease discounted at the Company's collateralized borrowing rate, and the right-of-use asset, which will be measured as the lease liability plus the prepaid rent incurred to date.

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 utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.

The components of lease expense for the three months ended March 31, 2020 and 2019 were as follows (dollars in thousands):


	For the three months ended March 31,
Lease Cost	2020			2019
Fixed operating lease cost	$	218		$	187
Short-term lease costs	38			8
Total lease expense	$	256		$	195
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	242		$	201
Sublease income	$	48		$	—
Leased assets obtained in exchange for new operating lease liabilities (1)				$	484
Weighted-average remaining lease term—operating leases	2.8 years			3.9 years
Weighted-average discount rate—operating leases	9.0		%	9.0		%

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(1)Acquired in the Merger

Maturities of lease liabilities due under lease agreements that have commenced as of March 31, 2020 are as follows (in thousands):


Maturity of lease liabilities	Operating Leases
2020	$	853
2021	1,098
2022	754
2023	263
2024	—
Total lease payments	2,968
Less: interest	(365)
Total operating lease liabilities as of March 31, 2020	$	2,603