Leases

9 Months Ended

Sep. 30, 2020

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 July 1, 2020 (the “Commencement Date”), which is the date the premises were ready for occupancy under the terms of the Chicago Lease. 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 approximately $1,113 for the first 12-month period of the Original Term, payable in monthly installments beginning on the 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.

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. The Company also paid the Landlord a net amount of $697 toward tenant improvements.

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 September 30, 2020.

The Company recognized a right of use asset of $8,931 and a lease liability of $8,147 on the Commencement Date. Because the rate implicit in the Chicago Lease is not readily determinable, the Company used its incremental borrowing rate of 8.3% on the Commencement Date to determine the present value of the lease payments over the original term of 10 years. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. As of September 30, 2020, the Company determined it is not reasonably certain that the renewal option would be exercised.

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”). In connection with the Company’s relocation of its headquarters from Skokie, Illinois to its new facility in Chicago, Illinois on July 1, 2020, the Company determined that the remaining useful life of the right of use asset underlying the Skokie Lease at June 30, 2020 was zero and therefore recognized remaining amortization expense related to the Skokie Lease of $211 during the three month period then ended.

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 it 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.

Information related to the Company’s operating lease asset and related operating lease liabilities were as follows:


	September 30, 2020
Weighted-average remaining lease term	9.6 years
Weighted-average discount rate	8.4	%

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating lease costs	$	333	$	84	$	712	$	252
Short term lease costs	29		42		96		79
Variable lease costs	172		84		322		259
Total lease costs	$	534	$	210	$	1,130	$	590

The Company made cash payments for operating leases of $490 and $207 during the three months ended September 30, 2020 and 2019, respectively, and $1,717 and $634 during the nine months ended September 30, 2020 and 2019, respectively.

Maturities of the Company’s lease liability as of September 30, 2020 were as follows:


Years Ending December 31,	Operating Leases
2020 (remaining three months)	$	166
2021	952
2022	1,163
2023	1,198
2024	1,235
2025	1,272
Thereafter	6,207
Total	$	12,193
Less: imputed interest	(3,929)
Total lease liability	$	8,264

Current operating lease liability	$	177
Noncurrent operating lease liability	8,087
Total lease liability	$	8,264