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COMMITMENTS AND CONTINGENCIES
 3 Months Ended
Mar. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Arbitration Proceeding

 

We are currently engaged in an arbitration proceeding with REGENXBIO regarding the former license agreement between the parties relating to use of the AAV9 capsid in our MPS IIIA, MPS IIIB, CLN1 (which has now been sold to Taysha Gene Therapies), and CLN3 programs. The license terminated on May 2, 2020, and on May 25, 2020, we filed an arbitration claim with the American Arbitration Association (“AAA”) alleging that REGENXBIO materially breached the license agreement prior to termination and seeking, among other things, a declaration that as a result of REGENXBIO’s material breach, we are not responsible for payments totaling $28 million (which would otherwise have been due in 2020) plus accrued interest ($4.9 million as of March 31, 2021). REGENXBIO disputes our arbitration claim and has filed a counterclaim seeking payment of these amounts. An arbitration hearing before a tribunal of three AAA arbitrators was held on March 8 and March 9, 2021. The tribunal has not yet issued its opinion, and based on the post-hearing schedule, an opinion is expected in early third quarter 2021.

 

Operating Leases

 

We lease space under operating leases for manufacturing and laboratory facilities and administrative offices in Cleveland, Ohio, as well as administrative offices in New York, New York. We also lease office space in Madrid, Spain as well as certain office equipment under operating leases, which have a non-cancelable lease term of less than one year and, therefore, we have elected the practical expedient to exclude these short-term leases from our right-of-use assets and lease liabilities.

 

Components of lease cost are as follows:

 

   2021   2020 
   For the three months ended March 31, 
   2021   2020 
Operating lease cost  $434,000   $434,000 
Variable lease cost  $135,000   $83,000 
Short-term lease cost  $5,000   $18,000 

 

The following table presents information about the amount and timing of cash flows arising from operating leases as of March 31, 2021:

 

Maturity of lease liabilities:    
2021, remainder  $1,285,000 
2022   1,727,000 
2023   1,741,000 
2024   1,781,000 
2025   1,799,000 
Thereafter   87,000 
Total undiscounted operating lease payments   8,420,000 
Less: imputed interest   1,710,000 
Present value of operating lease liabilities  $6,710,000 
      
Balance sheet classification:     
Current portion of lease liability  $1,716,000 
Long-term lease liability   4,994,000 
Total operating lease liabilities  $6,710,000 
      
Other information:     
Weighted-average remaining lease term for operating leases   58 months  
Weighted-average discount rate for operating leases   9.6%