4. Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

4. Leases

The Company adopted Topic 842 on January 1, 2019 using the modified retrospective approach and elected to apply the transition method that allows companies to continue applying guidance under the lease standard in effect at that time in the comparative period financial statements and recognize a cumulative-effect adjustment to the balance sheet on the date of adoption. The Company has also elected the package of practical expedients to not reassess our prior conclusions about lease identification, lease classification and indirect costs and to not separate lease and non-lease components. With the adoption of Topic 842, the Company’s balance sheet now contains line items for right of use asset, current lease liability and noncurrent lease liability.

The Company determined that it held an operating lease for its office and laboratory space as of January 1, 2019. The Company held no other lease agreements. The Company leases 7,581 square feet of office and laboratory space for its corporate headquarters and primary research facility in Marlborough, Massachusetts. On January 1, 2019, the Company recorded a right of use asset and corresponding lease liability of $28,000.

On January 22, 2019, the Company amended the lease for its office and laboratory space to extend the term by five years, such that the lease will expire on March 31, 2024. With the amendment, the Company also has the option to terminate the lease after two or three years by providing advance written notice. Due to the extension of the lease agreement, the Company increased the right of use asset and corresponding lease liability by $592,000.

Additionally, the lease agreements did not contain information to determine the rate implicit in the lease. The Company calculated its incremental borrowing rate based on what the Company would have to pay to borrow on a collateralized basis over the lease term for an amount equal to the remaining lease payments. At June 30, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the Company’s operating lease was 4.58% and 4.37 years, respectively.

As of June 30, 2019, the right of use asset and liability arising from the Company’s operating lease was $565,000 and $567,000, respectively. During the three months ended June 30, 2019, cash paid for the amounts included in the measurement of liabilities was $31,000 and the Company recorded operating lease expense of $33,000, which was included in operating expense. During the six months ended June 30, 2019, cash paid for the amounts included in the measurement of liabilities was $59,000 and the Company recorded operating lease expense of $61,000.

Future lease payments for non-cancellable operating leases as of June 30, 2019 were as follows, in thousands:

2019 (remaining)	$	63
2020		128
2021		132
2022		135
2023		139
Thereafter		35
Total undiscounted lease payments		632
Less: Interest expense		(65	)
Total operating lease liabilities	$	567