11. Commitments and contingencies

COVID-19 Pandemic

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China. As of May 2020, COVID-19 has spread to other countries, including Europe and the United States, and has been declared a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified and the United States, Europe and Asia have implemented severe travel restrictions, social distancing requirements, stay-at-home orders and have delayed the commencement of non-COVID-19-related clinical trials, among other restrictions. The Company’s financial results for the three months ended March 31, 2020 were not significantly impacted by COVID-19, however, the Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic will have on its financial condition, operations, and business plans for 2020, including the timing and enrollment of patients in its planned clinical trials and other expected milestones of its product candidate.

Operating leases

In October 2018, the Company entered into a lease agreement for office space in South San Francisco, California. In March 2019, the Company amended this lease agreement (the “First Amendment”) to extend the term of the lease and expand the square footage of the existing leased office space. The First Amendment lease expires in March 2021. Monthly lease payments to be paid under the amended agreement total $19 which are subject to a 3% annual increase beginning in October 2019 and continuing for each successive year until the lease has expired or been terminated. The Company has provided a security deposit of approximately $20, which is included as a component of other assets (non-current) on the Company’s condensed consolidated balance sheets.

On May 7, 2020, the Company entered into an agreement to effectuate an early termination of the 2018 office lease agreement in South San Francisco, California, without penalty. This early termination will be effective as of June 30, 2020 and reduces the Company’s future minimum lease payments by approximately $180 (see Note 13 – Subsequent Event).

In September 2019 the Company entered into an agreement to use office space in Cambridge, Massachusetts. The agreement was for an initial six-month term, which was extended until September 2020, and provides for rolling six-month extensions. The Company has determined this lease to be short term, as the Company is not obligated at any time for more than a six-month term. The Company makes monthly payments of $4 under the agreement.

For the three months ended March 31, 2020, the components of operating lease cost were as follows:


		Three months ended
		March 31, 2020
Lease cost:	Statement of Operations Classification:
Operating lease cost	General and administrative expense	$	59
Variable operating lease cost	General and administrative expense		27
Short-term lease cost	Research and development expense		8
Total operating lease cost		$	94

Other information:
Cash paid for amounts included in the measurement of operating lease liability		$	59
Weighted average remaining lease term			1 year
Weighted average discount rate			8.0%

The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2020:


Year ending December 31,
2020 (remainder)	$	178
2021		61
2022		—
2023		—
2024		—
2025 and thereafter		—
Total future minimum lease payments		239
Less imputed interest		(9)
Total operating lease liabilities	$	230

In February 2020, the Company entered into a seven-year agreement to occupy 6,647 square feet of office space in South San Francisco, California, which has not yet commenced as the space is not currently available for the Company’s use. Under the agreement, the Company is required to make $2,267 in total minimum payments during the term, which is not included in the maturity table above. The Company anticipates that its occupancy of the space will commence on or about June 2020.

Prior to the Company’s adoption of ASC 842 on January 1, 2020, the Company recognized rent expense on a straight-line basis over the respective lease periods and recorded rent expense of $305 for the year ended December 31, 2019. As of December 31, 2019, future minimum commitments due under the Company’s leases totaled $401, of which $321 was due in 2020 and $80 was due in 2021.

Research and manufacturing commitments

The Company has entered into agreements with contract research organizations and contract manufacturing organizations to provide services in connection with its nonclinical studies and clinical trials and to manufacture clinical development materials. As of March 31, 2020, the Company had non-cancelable purchase commitments under these agreements totaling $7,969.

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 and its executive officers 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 currently aware of any indemnification claims and has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of March 31, 2020.

Legal proceedings

The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings.