Leases

In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

Effective May 1, 2019, the Company accounts for its leases under Topic 842 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both an operating lease ROU asset and operating lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred. The Company has elected to apply the short-term lease exemption practical expedient for each class of underlying assets and excludes short-term leases having initial terms of 12 months or less. The Company recognizes rent expense on a straight-line basis over the lease term for these short-term leases. The Company has determined that no material embedded leases exist. Under Topic 842, the Company determined if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As the Company's leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The adoption of the new guidance resulted in the recognition of an operating ROU asset of $3.2 million, net of deferred rent of $900,000 and an operating lease liability of $4.1 million as of May 1, 2019. The incremental borrowing rate based on the information available at commencement date was 7.25%. The weighted average remaining lease term and the weighted average discount rate at the adoption date were 7.68 years and 7.25%, respectively. The Company continues to account for leases in the prior period financial statements in accordance with ASC Topic 840.

Operating Leases

The Company currently leases certain office equipment and its office and laboratory facilities under non-cancelable operating leases. Rent expense for operating leases is recognized on a straight-line basis over the lease term from the lease commencement date through the scheduled expiration date. Rent expenses totaled $955,000 and $822,000 for the years ended April 30, 2020 and 2019, respectively. The Company considers its facilities adequate for its current operational needs.

The Company leases the following facilities:


•	One University Plaza, Suite 307, Hackensack, New Jersey 07601, which, since November 2011, serves as the Company’s corporate headquarters. The lease expires in November 2021. The Company recognized $94,000 and $91,000 of rental costs relative to this lease for fiscal 2020 and 2019, respectively.

•

1330 Piccard Drive, Suite 025, Rockville, MD 20850, which consists of laboratory and office space where the Company conducts operations related to its primary service offerings. The Company executed this lease on January 11, 2017. The operating commencement date was August 11, 2017. This lease expires in August 2028. The Company recognized $604,000 of rental expense for both fiscal 2020 and 2019. On March 30, 2020, the Company executed the first amendment to this lease to expand the existing premises at 1330 Piccard Drive, Suite 025 ("Expansion Premises") to Suites 050 and 104. This amendment also extended the current lease term by six months. The Expansion Premises operating lease commencement date was June 1, 2020 and the lease expires February 28, 2029. In accordance with ASC 842, "Leases", the Company evaluated the first amendment and also performed a reassessment of the existing lease to determine the impact of the six-month term extension. The Company did not recognize rental expense under this amendment during fiscal 2020 as the Expansion Premises operating lease commencement date is during fiscal 2021. Upon the Expansion Premises operating lease commencement date, the Company will recognize an operating ROU asset and related operating lease liability of $3.8 million, each, respectively. The Company will also recognize an operating ROU asset and related operating lease liability of approximately $118,000 and $125,000, respectively, related to the extension of the current lease, as well as interest and amortization expense of $7,000.

•

910 Clopper Road, Suites 260S and 280S, Gaithersburg, Maryland 20878, which consisted of laboratory and office space where the Company conducted operations related to its primary service offerings. The Company executed this lease on April 1, 2018. The operating commencement date was May 1, 2018. The Company transitioned its activities from this location to the New Location, as defined below, and terminated this lease seven days after the commencement date of the New Location. The Company recognized $0 and $41,000 of rental expense for fiscal 2020 and 2019, respectively.

•

1405 Research Boulevard, Suite 125, Rockville, Maryland 20850 (“New Location”), which consists of laboratory and office space where the Company conducts operations related to its primary service offerings. The Company executed this lease on November 1, 2018. The operating commencement date was January 17, 2019. This lease expires in April 2024. The Company recognized $257,000 and $86,000 of rental expense for fiscal 2020 and 2019, respectively. The Company terminated this lease on June 30, 2020 and transition its activities from this location to the Expansion Premises, as defined above, during the first quarter of fiscal 2021. Upon lease termination, the Company will recognize a decrease in the related operating ROU asset and operating lease liability of approximately $850,000 and 926,000, respectively, as well as a gain on lease termination of $76,000.

ROU assets and lease liabilities related to our current operating leases are as follows (in thousands):



	April 30, 2020	May 1, 2019
Operating lease right-of-use assets, net	2,798	3,201
Current portion of operating lease liabilities	503	438
Non-current portion of operating lease liabilities	3,170	3,709

As of April 30, 2020, the weighted average remaining operating lease term and the weighted average discount rate were 6.89 years and 7.25%, respectively.

Future minimum lease payments due each fiscal year as follows (in thousands):



2021	$	1,697
2022	1,851
2023	1,818
2024	1,844
2025	1,867
Thereafter	7,268
Total	$	16,345

The following disclosure as of April 30, 2019 continues to be stated in accordance with ASC 840. Future minimum lease payments for operating and capital leases at April 30, 2019 were as follows:



2021	$	1,471
2022	1,445
2023	1,404
2024	1,419
2025	1,002
Thereafter	3,398
Total	$10,139

Refer to Note 4, Property and Equipment, for more information on financing leases.