At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on the rate implicit in the lease or an incremental borrowing rate commensurate with the term of the lease.

The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets. Right-of-use assets for financing leases are recorded within property and equipment, net in the balance sheet. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Instead, the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The Company leases laboratory, office and storage facilities in San Antonio, Texas, under operating lease agreements that expire in 2028. The Company also leases certain office space in Austin, Texas under a month-to-month operating lease agreement. On March 1, 2021, the Company entered into a lease agreement for office space in Charlottesville, Virginia (the “Charlottesville Lease”). In addition, the Company leases certain equipment under various operating and finance leases. The lease agreements generally provide for periodic rent increases, and renewal and termination options. The Company’s lease agreements do not contain any material variable lease payments, residual value guarantees or material restrictive covenants.

Certain leases require the Company to pay taxes, insurance, and maintenance. Payments for the transfer of goods or services such as common area maintenance and utilities represent non-lease components. The Company elected the package of practical expedients and therefore does not separate non-lease components from lease components.

The table below summarizes the Company’s lease liabilities and corresponding right-of-use assets (in thousands, except years and rates):

	March 31, 2021
Assets
Operating	$	600
Financing		3
Total leased assets	$	603

Liabilities
Current:
Operating	$	113
Financing	3
Noncurrent:
Operating	503
Financing		—
Total lease liabilities	$	619

Weighted-average remaining lease term (years) - operating leases	6.29
Weighted-average remaining lease term (years) - finance leases	0.17
Weighted-average discount rate - operating leases		7.8	%
Weighted-average discount rate - finance leases		5.0	%

The table below summarizes the Company’s lease costs from its unaudited consolidated condensed statement of operations, and cash payments from its unaudited consolidated condensed statement of cash flows during the three months ended March 31, 2021 and 2020 (in thousands):

	Three Months Ended
	March 31, 2021		March 31, 2020
Lease expense:
Operating lease expense	$	50	$	55
Finance lease expense:
Depreciation of right-of-use assets		4	32
Interest expense on lease liabilities		—	2
Total lease expense	$	54	$	89

Cash payment information:
Operating cash used for operating leases	$	49	$	51
Financing cash used for financing leases	6		18
Total cash paid for amounts included in the measurement of lease liabilities	$	55	$	69

Total rent expenses for the three months ended March 31, 2021 and 2020 was $50,000 and $95,000, respectively, which includes leases in the table above, month-to-month operating leases, and common area maintenance charges.

The Company’s future minimum annual lease payments under operating and financing leases at March 31, 2021 are as follows (in thousands):


	Financing Leases		Operating Leases

Remaining 2021	$	3	$	134
2022		—	123
2023		—	100
2024		—	106
2025		—	108
Thereafter		—	233
Total minimum lease payments	$	3	$	804
Less: amount representing interest		—		(188	)
Present value of obligations under leases	$	3	$	616
Less: current portion		—		(113	)
Noncurrent lease obligations	$	3	$	503

The Charlottesville Lease has a term of 12 months and is renewable for four additional one-year periods. The minimum lease payment is $30,000 for the first twelve months, subject to a 3% annual increase if and when the lease is renewed. The lease commencement date is April 1, 2021. The Company expects to measure the operating lease right-of-use asset and related lease liability related to the Charlottesville Lease as of the lease commencement date, using the applicable discount rate at that time. Lease renewable options are included in the estimation of lease term when it is reasonably certain that the Company will exercise such options.

On January 8, 2021, the Company entered into a Master Services Agreement (the “MSA”) with Piramal Pharma Solutions, Inc. (“Piramal”), for Piramal to perform certain services related to the development, manufacture, and supply of the Company’s RNL-Liposome Intermediate Drug Product. The MSA includes the transfer of analytical methods, development of microbiological methods, process transfer and optimization, intermediate drug product manufacturing, and stability studies for the Company. The transfer will be performed at Piramal’s facility located in Lexington, Kentucky. The parties contemplate that the MSA will lead to clinical and commercial supply agreements between the Company and Piramal.

The MSA has a term of five years and will automatically renew for successive one-year terms unless either party notifies the other no later than six months prior to the original term or any additional terms of its intention to not renew the MSA. The Company has the right to terminate the MSA for convenience upon thirty days’ prior written notice. Either party may terminate the MSA upon an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party.

The Company has entered into agreements with various research organizations for pre-clinical and clinical development studies, which have provisions for cancellation. Under the terms of these agreements, the vendors provide a variety of services including conducting research, recruiting and enrolling patients, monitoring studies and data analysis. Payments under these agreements typically include fees for services and reimbursement of expenses. The timing of payments due under these agreements is estimated based on current study progress. As of March 31, 2021, the Company did not have any clinical research study obligations.

The Company is subject to various claims and contingencies related to legal proceedings. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management assesses the probability of loss for such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate.