Right of Use Assets and Liabilities

12 Months Ended

Dec. 31, 2021

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets and operating lease liabilities in the consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate ranges from 3.0% – 5.1%. Lease expense is recognized on a straight-line basis over the lease term. Some of the Company’s leases include options to extend or terminate the lease. The Company includes these options in the recognition of the Company’s ROU assets and lease liabilities when it is reasonably certain that the Company will exercise the option.

In May 2021, the Company entered into a lease for approximately 160,000 square feet of laboratory and office space to be occupied in 2024. In connection with the signing of the lease, and at the Company’s election to increase the landlord’s contribution to the tenant improvement allowance, the Company issued a letter of credit for $4.5 million, collateralized by a certificate of deposit in the same amount, which is presented as restricted cash at December 31, 2021. Once occupied, the base rent will range from $7.7 million to $8.8 million annually over a ten-year lease term.

The Company has operating leases for its corporate office and certain equipment, which expire no later than December 2024. The leases have a weighted average remaining term of three years.

The components of lease expense were as follows:


	Year Ended December 31,
(dollars in millions)	2021		2020
Operating lease cost	$	1.4	$	1.0

Supplemental cash flow information related to leases was as follows:


	December 31,
(dollars in millions)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1.2	$	0.9
Supplemental non-cash information:
Right-of-use assets obtained in exchange for new lease obligations	$	3.2	$	0.6

Maturities of operating lease liabilities as of December 31, 2021 were as follows:


(dollars in millions)
2022	$	1.2
2023	1.5
2024	1.5
Total lease payments	4.2
Less: imputed interest	(0.2)
Total	$	4.0