The Company entered into a lease agreement for its corporate office facility in South San Francisco, California in March 2020, which expires in January 2023. Such agreement was determined to be a lease since the right to control the use of the identified asset was conveyed to the Company for a period of time in exchange for consideration. The Company can extend the lease term for additional three years at market rates upon the notice of extension. The Company is obligated to pay monthly rent expense and its pro rata share of utilities, common area maintenance expenses and property taxes. The landlord also provided an allowance of $10,000 for any tenant improvements. The Company concluded that it is an operating lease. Common area expenses are a non-lease component and a variable consideration and included in operating expenses as incurred. The extension period has not been included in the determination of the Right of Use, or ROU, asset or the lease liability for operating leases as the Company concluded that it is not reasonably certain that it would exercise this option.

In April 2022, the Company entered into a lease agreement for approximately 12,000 square feet of general use office space in Brisbane, California. Such agreement was determined to be a lease since the right to control the use of the identified asset was conveyed to the Company for a period of time in exchange for consideration. The term of the lease is for 31 months and commenced in May 2022. There is no option to extend the lease term nor is there an option to terminate the lease term prior to its expiration. The Company is obligated to pay monthly rent expense and its pro rata share of the landlord's operating expenses which include utilities, common area maintenance expenses, and property taxes. Such expenses are a non-lease component and a variable consideration and included in the Company's operating expenses as incurred. The Company

concluded that this lease is also an operating lease. The total payments for base rent over the term of the lease is approximately $1.1 million. Additionally, the Company paid a security deposit of approximately $40,000.

The Company determined the lease incremental borrowing rate, or IBR, based on the information available at the applicable lease commencement date as the Company’s leases do not provide an implicit rate. The IBR is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment where the asset is located. As of June 30, 2022, the weighted-average remaining lease term and weighted-average discount rate were 2.2 years and 8.9%, respectively.

The Company’s leases do not require any contingent rental payments, impose financial restrictions, or contain any residual value guarantees.

Lease expense of right-of-use assets is recognized on a straight-line basis over the applicable lease term. Lease expense was $148,000 and $44,000 for the three months ended June 30, 2022 and 2021, respectively, and was $195,000 and $88,000 for the six months ended June 30, 2022 and 2021, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $143,000 and $102,000 for the six months ended June 30, 2022 and 2021, respectively. Variable payments expensed during the three and six months ended June 30, 2022 and 2021 were immaterial.

As of June 30, 2022, the future lease obligations were as follows (in thousands):


For the Years Ending December 31,	June 30, 2022
Remaining in 2022	$	255
2023		476
2024		424
Total future minimum lease payments		1,155
Less: Imputed interest		111
Present value of operating lease liabilities		1,044
Less: current portion of operating lease liabilities		427
Operating lease liabilities	$	617

The Company enters into contracts in the normal course of business with clinical research organizations for clinical trials, with contract manufacturing organizations for clinical supplies manufacturing and with other vendors for preclinical studies, supplies and other services and products for operating purposes. These contracts generally provide for termination on notice, with the exception of one vendor with a potential termination fee if a purchase order is cancelled within a specified time, and another vendor where labor costs are non-cancellable after the approval of the project plan. As of June 30, 2022 and December 31, 2021, there were no amounts accrued related to termination and cancellation charges as these are not probable.

The Company entered into the license agreements, as disclosed in Note 5, pursuant to which the Company is required to pay milestones contingent upon meeting of specific events. The first milestone related to the Viracta License Agreement was achieved and recorded to research and development expense during the year ended December 31, 2021. The second milestone related to the MRKDG License Agreement was achieved and recorded to research and development during the six months ended June 30, 2022. The Company may be required to pay royalties on sales of products developed under these agreements. All products are in development as of June 30, 2022 and December 31, 2021, and no such royalties were due.

The Company, from time to time, may be party to litigation arising in the ordinary course of business. The Company is not subject to any material legal proceedings, and to the best of its knowledge, no material legal proceedings are currently pending or threatened.

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for indemnification for certain liabilities. The exposure under these agreements is unknown because it involves claims that may be made against it in the future but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company

may record charges in the future as a result of these indemnification obligations. The Company also has indemnification obligations to its directors and executive officers for specified events or occurrences, subject to some limits, while they are serving at its request in such capacities. There have been no claims, to date and the Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company had not recorded any liabilities for these agreements as of June 30, 2022 and December 31, 2021.