12. Commitments and contingencies

Leases

In December 2015, the Company entered into a lease agreement for office space in Woburn, Massachusetts, which expires on March 30, 2021. The Company has the option to extend the lease agreement for successive periods of five years. Monthly lease payments, inclusive of base rent and ancillary charges, total $7. Monthly base rent is subject to increase each year in proportion to the Consumer Price Index. The lease was terminated by the Company in March 2020, prior to the expiration of the lease term.

In April 2016, the Company entered into a lease agreement for office and laboratory space in Abingdon, England, which expires on April 3, 2026. The Company has the right to terminate the lease as of April 4, 2021 upon at least nine months’ prior written notice. Monthly lease payments are inclusive of base rent, ancillary charges, non‑rent shared tenant occupancy costs and the respective value added tax to be paid. Monthly lease payments include base rent of approximately $23 through December 3, 2016 and $31 thereafter. Monthly base rent is subject to increase after April 2021 in proportion to the Retail Price Index. The lease is classified as an operating lease.

In June 2018, the Company entered into an agreement to lease approximately 63,000 square feet of office, manufacturing and laboratory space in Framingham, Massachusetts. Pursuant to the lease agreement, the lease term commenced in December 2018, subject to the landlord completing certain agreed upon landlord improvements. The rent commencement date started in August 2019. The initial lease term is ten years from the rent commencement date and includes two optional five-year extensions. Annual lease payments during the first year were $2,373 with increases of 3.0% each year thereafter until the expiration of the lease.

Prior to the adoption of ASC 842 on April 1, 2019, the Company was deemed to be the accounting owner of the leased space during the construction period, which began in December 2018, because of certain indemnification provisions within the lease agreement. As a result, the Company had capitalized $11,514 as a build-to-suit lease asset within property and equipment as of March 31, 2019. Upon transition to ASC 842 on April 1, 2019, the Company determined that it did not control the build-to-suit lease asset and the arrangement has been accounted for under the guidance set forth within ASC 842, leases. Upon the adoption of ASC 842, the Company derecognized $11,514 of the build-to-suit lease asset and $6,561 of financing obligations and recorded long term prepaid rent of $5,006 on the consolidated balance sheet as landlord owned tenant improvements were determined to be prepaid rent under the guidance set forth within ASC 842. The Company continued to record construction costs incurred during the construction period subsequent to April 1, 2019 as prepaid rent.

Construction was completed associated with approximately 10,500 square feet of the leased space in Framingham, Massachusetts and the Company occupied the building as office space beginning August 1, 2019. The Company recorded a right-of-use asset and lease liability associated with the occupied space as of August 1, 2019. The Company recorded $2,368 in related construction costs to the right-of-use asset upon the lease commencement date which were reclassified from prepaid rent. The Company occupied the remainder of the facility, approximately 53,000 square feet used as laboratory space, on October 22, 2019. The Company recorded a right-of-use asset and lease liability associated with the remaining space as of October 22, 2019. The Company recorded $18,164 in related construction costs and $261 in rent payments made prior to the lease commencement date to the right-of-use asset upon the lease commencement date which were reclassified from prepaid rent. The lease is classified as a financing lease.

In June 2019, the Company entered into an agreement to lease approximately 18,700 square feet of office space in Woburn, Massachusetts. Pursuant to the lease agreement, the lease term commenced in August 2019. The rent commenced in September 2019. The initial lease term is ten years from the rent commencement date and includes an optional five-year extension. Annual lease payments during the first year are $488 with increases of approximately 1.6% each year. The Company recorded a right-of-use asset and a lease liability of $4,363 upon the commencement date of the lease and the lease is classified as an operating lease.

The Company determines if an arrangement is a lease at inception. Operating leases are included in our balance sheet as right-to-use—operating leases, operating lease liabilities , current and operating lease liabilities , non-current. Finance leases are included in the balance sheet as right-to-use asset—finance lease finance lease liabilities, current, and finance lease liabilities, non-current. Certain of the Company’s lease agreements contain renewal options; however, the Company does not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that the Company is reasonably certain of renewing the lease at inception or when a triggering event occurs. As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration was allocated to the combined lease component. Some of the Company’s lease agreements contain rent escalation clauses (including index-based escalations). The Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. The Company amortizes this expense over the term of the lease beginning with the date of initial possession, which is the date the Company can enter the leased space and begin to make improvements in preparation for its intended use. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as incurred.


	Year Ended
	March 31, 2020
Lease cost
Finance lease costs:
Amortization of right-to-use asset	$	1,274
Interest on lease liabilities		1,185
Operating lease costs		885
Total lease cost	$	3,344

Finance lease costs of $239 are recognized in general and administrative expenses for the year ended March 31, 2020 and $1,034 in research and development expenses for the year ended March 31, 2020. Operating leases costs are recognized in general and administrative expenses for the year ended March 31, 2020. The following table summarizes the maturity of the Company’s lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating and financing lease liabilities recognized on our balance sheet as of March 31, 2020:


	March 31, 2020
	Operating leases		Financing lease		Total
2021	$	873	$	2,411	$	3,284
2022		586		2,483		3,069
2023		596		2,558		3,154
2024		605		2,634		3,239
2025		614		2,714		3,328
Thereafter		2,791		43,685		46,476
Total lease payments		6,065		56,485		62,550
Less: interest		1,455		29,107		30,562
Total lease liabilities	$	4,610	$	27,378	$	31,988

The following table summarizes the future minimum lease payments due under the Company's operating leases as of March 31, 2019:


2020	$	2,062
2021		2,901
2022		2,493
2023		2,568
2024		2,645
2025		2,725
Thereafter		12,770
	$	28,164

The following table provides lease disclosure as of and for the year ended March 31, 2020:


	March 31, 2020
Leases
Right-to-use operating lease asset	$	4,425
Right-to-use finance lease asset		46,925
Total lease assets	$	51,350
Operating lease liabilities, current	$	873
Finance lease liabilities, current		2,411
Operating lease liabilities, non-current		3,737
Finance lease liabilities, non-current		24,967
Total lease liabilities	$	31,988
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	747
Operating cash flows from finance leases	$	1,185
Financing cash flows from finance leases	$	59
Right-to-use asset obtained in exchange for new operating lease liabilities	$	5,152
Right-to-use asset obtained in exchange for new financing lease liabilities	$	48,224
Variable lease costs	$	—
Short term lease costs	$	—
Weighted-average remaining lease term-operating leases		8.7 years
Weighted-average remaining lease term-financing leases		19.3 years
Weighted-average discount rate-operating leases		7	%
Weighted-average discount rate-financing leases		8	%

The variable lease costs and short-term lease costs were insignificant for the year ended March 31, 2020.

Manufacturing commitments

The Company has entered into an agreement with a contract manufacturing organization to provide clinical trial products. As of March 31, 2020, the Company had committed to minimum payments under these arrangements totaling $3,569 through March 31, 2021. As of March 31, 2019, the Company had committed to minimum payments under these arrangements totaling $4,694 through March 31, 2020.

Indemnification agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any claims under indemnification arrangements, and therefore it has not accrued any liabilities related to such obligations in its consolidated financial statements as of March 31, 2020 or 2019.

Legal proceedings

The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.