The Company early adopted Accounting Standards Update ASU 842 on January 1, 2020. There was no cumulative-effect adjustment recorded to accumulated deficit upon adoption.

Under ASC 842, the Company determines if an arrangement is a lease at inception. In addition, the Company determines whether leases meet the classification criteria of a finance or operating lease at the lease commencement date. As of December 31, 2020, the Company’s lease population consisted of real estate. As of the date of adoption of ASC 842 and December 31, 2020, the Company did not have finance leases.

Operating leases are included in operating lease right-of-use (“ROU”) assets, lease liabilities, current, and lease liabilities, non-current in the Company’s balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date if the rate implicit in the

lease is not readily determinable. The Company determines the incremental borrowing rate base on an analysis of corporate bond yields with a credit rating similar to the Company. The determination of the Company’s incremental borrowing rate requires management judgment including the development of a synthetic credit rating and cost of debt as the Company currently does not carry any debt. The Company believes that the estimates used in determining the incremental borrowing rate are reasonable based upon current facts and circumstances. Applying different judgments to the same facts and circumstances could result in the estimated amounts to vary. The operating lease ROU assets also include adjustments for prepayments and accrued lease payments and exclude lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Operating lease cost is recognized on a straight-line basis over the expected lease term. Lease agreements entered into after the adoption of ASC 842 that include lease and non-lease components are accounted for as a single lease component. Lease agreements with a noncancelable term of less than 12 months are not recorded on the Company’s balance sheet.

The Company leases its office and lab space in Redwood City, California and San Carlos, California respectively. Both of the 12.5 month leases were entered into in August 2020. Future lease payments under the two leases are $50,391 for the remaining six months in 2021.

In February 2021, the Company entered into an 8-month sublease agreement with Level Home, Inc. for additional office space located in Redwood City, California. Rent is $38,766 per month with an abatement of base rent for the first month. This lease will be treated as a short-term lease in accordance with ASC 842 and therefore, is excluded from the right-of -use asset and liability.

In March 2021, the Company signed a 5-year lease for new lab space located in San Carlos, California. The lease commenced on May 1, 2021 with monthly lease payments of $57,638 with annual increases of 3%. This lease is accounted for under ASC 842. Upon initiation, the Company recognized a right-of-use asset and liability of $3.2 million, discounted at 5.4%, the Company’s estimated incremental borrowing rate over the 5 year expected remaining term.

Lease expense was $319,000 and $460,000, respectively, for the three and six months ended June 30, 2021 and $6,000 and $28,000, respectively, for the three and six months ended June 30, 2020.

The undiscounted future non-cancellable lease payments under the Company’s operating leases as of June 30, 2021 is as follows:

(In thousands)
Years ending December 31,
2021 (remaining six months)	$	281
2022		705
2023		727
2024		748
2025		771
Thereafter		259
Total undiscounted lease payments		3,491
Less: Present value adjustments		(440	)
Present value of lease payments	$	3,051