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Leases

9 Months Ended

Sep. 30, 2022

13. Leases

Current Corporate Headquarters

The Company has limited leasing activities as a lessee which are primarily related to its corporate headquarters located at 99 Hayden Avenue, Suite 390, Lexington, Massachusetts. The lease is for approximately 22,000 square feet of office and lab space under a lease with 99 Hayden LLC which was subsequently amended on April 30, 2020 and October 6, 2021, and will expire on June 30, 2023. The lease provides for base rent, and the Company is responsible for real estate taxes, maintenance, and other operating expenses applicable to the leased premises.

The Company also leases small office equipment which is primarily short-term or immaterial in nature. Therefore, no right-of-use assets and lease liabilities are recognized for these leases.

The components of lease expense for the Company for the three and nine months ended September 30, 2022 and 2021 were as follows (dollars in thousands):

	2022		2021		2022			2021
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022			2021
Lease cost
Fixed lease cost	$	357	$	259	$	1,072		$	777
Variable lease cost		206		97		556			319
Total lease cost	$	563	$	356	$	1,628		$	1,096
Other information
Immaterial office equipment lease obligation, 4-year lease					$	7		$	11
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	431	$	299	$	1,046		$	896
Weighted-average remaining lease term — operating leases						0.7 year
Weighted-average discount rate — operating leases						3.0	%

Maturities of lease liabilities due under these lease agreements as of September 30, 2022 are as follows:

	Operating Leases
Maturity of lease liabilities
2022 (three months)	$	431
2023		863
Total lease payments		1,294
Less interest		(13	)
Total lease liabilities	$	1,281

Schedule of Operating Lease Liability


Reported as of September 30, 2022
Lease liabilities — short term	$	1,281
Lease liabilities — long term		-
Total lease liabilities	$	1,281

Future Corporate Headquarters

On January 7, 2022, the Company executed a lease agreement with Cobalt Propco 2020, LLC for its new corporate headquarters at 36 Crosby Drive, Bedford, Massachusetts. The leased premises comprises approximately 20,000 square feet of office and lab space and is expected to commence in May 2023, following completion of construction to prepare the premises for the Company’s intended use. Based on the Company’s current plans, management anticipates the improvements will be funded by (i) the landlord through a tenant allowance of $3.9 million, (ii) a landlord funded advance on tenant improvements of $0.5 million which will be repaid over the lease term, and (iii) approximately $2.9 million by the Company. The lease provides for base rent of $101 thousand per month, which will increase 3% each year over the ten-year noncancellable term. The Company has the option to extend the lease for one additional 5-year term and is responsible for real estate taxes, maintenance, and other operating expenses applicable to the leased premises.

As of September 30, 2022, the lease was not recorded on the consolidated balance sheet as the facility is under construction and no payments relating to landlord-owned leasehold improvements have been made by the Company. When payments are made by the Company relating to landlord-owned leasehold improvements, they will be recorded to prepaid rent as a component of other long-term assets. On the lease commencement date, the Company plans to reclassify the prepayment to the right-of-use asset, thereby increasing its initial value, but the prepayment will not be included in the measurement of the lease liability. The lease will be recorded as a component of the Company’s right-of-use asset and operating lease liabilities when the lease commencement date occurs.