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Leases

3 Months Ended

Mar. 31, 2023

10. Leases

Operating Leases

We are party to a non-cancelable operating lease for our laboratory and office space in Morrisville, North Carolina. The lease expires on October 31, 2026 with an option to extend for an additional period of five years with appropriate notice. We have not included the optional extension period in the measurement of lease liabilities because it is not reasonably certain that we will exercise the option to extend. The payments under this lease is subject to escalation clauses. Operating lease cost is allocated between research and development and general and administrative expenses based on the usage of the leased facilities. The related right-of-use assets are amortized on a straight-line basis over the lesser of the lease term or the estimated useful life of the asset.

Finance Leases

We lease specialized laboratory equipment under finance leases. We do not have access to certain inputs used by our lessors to calculate the rate implicit in its finance leases and, as such, use our estimated incremental borrowing rate at the time of lease inception for the discount rate applied to our finance leases. The incremental borrowing rate used on finance leases was 6.5%. Certain finance leases also include options to purchase the leased property. We recognize all such purchase options as part of our right-of-use assets and lease liabilities if we are reasonably certain that such purchase options will be exercised.

Lease Balances, Costs, and Future Minimum Payments

Leases with an initial term of 12 months or less are not recorded on the balance sheet. As of March 31, 2023, we have not entered into any short-term leases. For lease agreements entered into or reassessed after the adoption of ASC 842 Leases, we combine lease and non-lease components, if any. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Our lease cost is reflected in the accompanying condensed statements of operations and comprehensive loss as follows:


		Three Months Ended March 31,
	Classification	2023		2022
Operating lease cost:
Fixed lease cost	Research and development	$	176	$	176
Fixed lease cost	General and administrative		19		19
Finance lease cost:
Amortization of lease assets	Research and development		30		38
Interest on lease liabilities	Interest expense		5		10
Total Lease Cost		$	230	$	243

The weighted average remaining lease term and discount rates as of March 31, 2023 were as follows:


Weighted average remaining lease term (years):
Operating leases	3.6
Finance leases	2.1
Weighted average discount rate:
Operating leases	10.3	%
Finance leases	6.5	%

The discount rate for leases was estimated based upon market rates of collateralized loan obligations of comparable companies on comparable terms at the time of lease inception.

The future minimum lease payment as of March 31, 2023 were as follows:


	Operating		Finance
Year ending December 31:	Leases		Leases		Total
2023 (nine months remaining)	$	964	$	86	$	1,050
2024		1,317		115		1,432
2025		1,356		64		1,420
2026		1,158		—		1,158
Total minimum lease payments		4,795		265		5,060
Less: interest		(777)		(18)		(795)
Present value of lease liabilities	$	4,018	$	247	$	4,265