LEASES

12 Months Ended

Dec. 31, 2019

In July 2014, the Company entered into a five-year noncancelable operating lease for its offices and laboratory space in South San Francisco, California that was scheduled to expire in June 2019, with an option for the Company to extend the lease for an additional three years. In August 2017, the Company entered into an amendment which extended the existing operating lease to June 2021 and added 13,258 square feet of additional lease space resulting in a total of 26,987 square feet being leased in the aggregate under the amended lease. In November 2017, the Company entered into a second amendment which reduced the common areas resulting in a total of 26,897 square feet being leased in aggregate under the second amendment.

On August 14, 2019, the Company entered into a third amendment to the existing operating lease which will extend the leased space by an additional 19,177 square feet, or Second Expansion Premises, and will result in a total of 46,074 square feet being leased in aggregate. The operating lease for the Second Expansion Premises will commence on the date they are delivered to the Company, which is expected to be September 1, 2020 (the Second Expansion Premises Commencement Date). In conjunction with the third amendment, the Company also agreed to lease 5,569 square feet of temporary office space effective August 15, 2019 to the Second Expansion Premises Commencement Date. The third amendment will extend the lease by 84 months from the Second Expansion Premises Commencement Date, with an option to extend the lease for an additional 36 months subject to certain conditions. The Company determined that the Second Expansion Premises shall be accounted for as a new lease at the Second Expansion Premises Commencement Date. Further, the Company determined that the amendment to the existing operating lease and temporary office space shall be accounted as a lease modification as of September 30, 2019. The Company recognized an operating lease ROU asset of $8.1 million and operating lease liability of $8.1 million on its balance sheet upon the execution of the third amendment on August 14, 2019, and will measure and record an additional ROU asset and operating lease liability for the Second Expansion Premises upon the Second Expansion Premises Commencement Date.

Operating lease expense was $1.3 million, $1.0 million and $0.7 million for the years ended December 31, 2019, 2018 and 2017. Operating cash flows for the year ended December 31, 2019 included $1.1 million in cash payments for operating leases. Expense related to short-term leases was not significant for the year ended December 31, 2019.

The following table presents the maturity analysis of the Company's operating lease liabilities showing the aggregate lease payments as of December 31, 2019.


(in thousands)	December 31, 2019
2020	$	1,108
2021	1,377
2022	1,662
2023 and thereafter	8,434
Total lease payments⁽¹⁾	12,581
Less: imputed interest	(2,726)
Total operating lease liabilities	$	9,855

⁽¹⁾ As noted above, the operating lease for the Second Expansion Premises will commence in fiscal year 2020 and therefore the lease related to the Second Expansion Premises is not recognized on the balance sheet as of December 31, 2019. As of December 31, 2019, future minimum lease payments related to the Second Expansion Premises are expected to be $8.2 million over the lease term of 7.0 years.

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate. The weighted average incremental borrowing rate used to determine the operating lease liabilities as of December 31, 2019 was 6.0%. The Company's weighted average remaining lease term was 7.7 years as of December 31, 2019.

ASC Topic 840 Disclosures

The Company elected the alternative modified transition method. The following table presents the future minimum lease commitments under the Company’s operating leases as of December 31, 2018 as previously disclosed under prior lease accounting standards.


(in thousands)	December 31, 2018
2019	$	1,076
2020	1,108
2021	562
2022 and thereafter	—
Total future minimum lease payments	$	2,746