Leases

The Company has lease agreements for its facilities in: Skokie, Illinois, which serves as the Company’s principal executive offices and where the Company has laboratory space; Cambridge, Massachusetts, where the Company leases office space; Chicago, Illinois, where the Company leases office and laboratory space; and leases for office equipment (the “Office Equipment Leases”), as further described below. Each of these leases are classified as operating leases.

Skokie Lease – The Company’s lease agreement for office and laboratory space in Skokie, Illinois commenced in March 2012 and expires in February 2021 (the “Skokie Lease”). The Skokie Lease includes a renewal option which the Company is not reasonably certain to exercise. Lease payments for the Skokie Lease include a fixed payment amount as well as variable payments related to a proportionate share of operating and real estate expenses.

Cambridge Lease – The Company’s lease agreement for office space at a multi-tenant facility in Cambridge, Massachusetts commenced in March 2019 and is month-to-month (the “Cambridge Lease”). The Cambridge Lease is cancellable at any time. Due to the nature of the Cambridge Lease, the Company determined that this lease represented a short-term lease with an initial term of less than twelve months and, as such, the Cambridge Lease is not recorded on the balance sheet and related lease costs are recognized in the statement of operations as they are incurred.

Chicago Lease – The Company has approximately thirty-thousand square feet of office and laboratory space in Chicago, Illinois (the “Chicago Lease”). The original term (the “Original Term”) of the Chicago Lease is 10 years, commencing on the date on which the Premises are ready for occupancy under the terms of the Chicago Lease (the "Anticipated Commencement Date"). The Company has options to extend the term of the Chicago Lease for two additional successive periods of five years each (the “Extension Periods”) at the then prevailing effective market rental rate.

The initial annual base rent during the Original Term is $37.00 per square foot per year, or approximately $1,113 for the first 12-month period of the Original Term, payable in monthly installments beginning on the Anticipated Commencement Date. Base rent thereafter is subject to annual increases of 3%, for an aggregate amount of $12,761 over the Original Term. The Company must also pay its proportionate share of certain operating expenses and taxes for each calendar year during the term. During the first 12-month period of the Original Term, the base rent and the Company's proportionate share of operating expenses and taxes are subject to certain abatements.

The Landlord will contribute a maximum of $3,159 toward tenant improvements. In connection with the Chicago Lease, the Company will maintain a letter of credit for the benefit of the Landlord in an initial amount of $1,200, which amount is subject to reduction over time. Upon execution of the Chicago Lease, the Company paid to the Landlord the first installment of base rent and the estimated monthly amount of its pro rata share of taxes and its pro rata share of operating expenses in the aggregate amount of $87 which amount had been adjusted for the abatement as set forth in the lease agreement.

As part of the agreement for the Chicago Lease, the Company is required to maintain a standby letter of credit during the term of the lease, currently in the amount of $1,200, which is secured by a restricted certificate of deposit account and presented within other noncurrent assets on the Company’s unaudited condensed consolidated balance sheet at March 31, 2020.

The Chicago Lease has not yet commenced for accounting purposes as of March 31, 2020. As a result, the Company has not yet recognized an operating lease asset or operating lease liability on the unaudited condensed consolidated balance sheet for the Chicago Lease. The Company currently expects the Chicago Lease to commence in June of 2020.

Office Equipment Leases – The Company has also elected to not record the Office Equipment Leases on the balance sheet since related payment amounts and lease costs are insignificant. Lease costs for the Office Equipment Leases are recognized in the statement of operations on a straight-line basis over the lease term.

The following table summarizes the presentation in the Company’s unaudited condensed consolidated balance sheets of its operating leases:



	March 31, 2020
Assets:
Operating lease asset	$	285
Liabilities:
Operating lease liability	$	275

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Information related to the Company's operating lease asset and related operating lease liabilities were as follows:



	March 31, 2020
Remaining lease term ⁽¹⁾	0.9 years
Discount rate	16.1	%

⁽¹⁾ Does not include a renewal term beyond February 28, 2021. Renewal terms are included in the lease term when it is reasonably certain that the Company will exercise the option.

The following table summarizes lease costs in the Company’s unaudited condensed consolidated statement of operations:



	Three Months Ended March 31,
	2020		2019
Operating lease costs	$	84	$	84
Short term lease costs	38		6
Variable lease costs	57		84
Total lease costs	$	179	$	174

During the three months ended March 31, 2020 and 2019, the Company made cash payments of $114 and $277 for operating leases, respectively.

Maturities of the Company’s lease liability as of March 31, 2020 were as follows:



Years Ending December 31,	Operating Leases ⁽¹⁾
2020 (remaining nine months)	$	235
2021	59
Total	$	294
Less: imputed interest	(19		)
Total lease liability	$	275

Current operating lease liability	$	275

⁽¹⁾Excluded from the table above are the lease payments associated with the Chicago Lease that has not commenced as of the end of the period, which is the date the asset is made available to the Company by the lessor.