LEASES

6 Months Ended

Jun. 30, 2021

The Company has operating leases for office and laboratory space in the boroughs of Brooklyn and Manhattan in New York, New York, which expire in 2025 and 2026, respectively. In June 2021, the Company entered into an additional lease agreement to lease approximately 2,700 square feet of office and laboratory space in Cambridge, Massachusetts for approximately $56.00 per square foot annually. The lease provides for annual escalation of the base rent based on the year-over-year increase of the consumer price index, as well as the payment of other customary expenses, such as common area maintenance fees, property taxes, and insurance. Upon entering into the lease agreement, the Company paid a lease deposit of $25,331. The lease expires in June 2028.

The Company adopted Accounting Standards Codification (“ASC”) Topic 842, Leases, on December 31, 2020 using the modified transition method without retrospective application to comparative periods. The Company elected the package of three practical expedients allowed for under the transition guidance. Accordingly, the Company did not reassess: (1) whether any expired or existing contracts are/or contain leases; (2) the lease classification for any expired or existing leases; or (3) initial direct costs for any existing leases. The Company has also elected not to recognize right-of-use assets (“ROU assets”) and lease liabilities for short-term leases that have a term of 12 months or less.

Operating lease liabilities represent the present value of lease payments not yet paid. ROU assets represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets. As the rate implicit in the lease is not readily determinable, the Company used its incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. To determine the present value of lease payments not yet paid, the Company estimates secured borrowing rates corresponding to the maturities of the leases.

The Company has elected the practical expedient to not separate non-lease components from the lease components to which they relate and instead account for each as a single lease component for all underlying asset classes. Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance, tax payments and other miscellaneous costs. The variable portion of lease payments is not included in the ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.

Operating leases are included in right of use assets - operating leases and operating lease liabilities, current and long-term, on the balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term and is included in general and administrative costs in the statements of operations.

The Company recognizes operating lease expense and lease payments from the sublease on a straight-line basis in its statements of operations over the lease terms. During the three and six months ended June 30, 2021, the net operating lease expenses were as follows:

	Three months ended June 30, 2021			Six months ended June 30, 2021
Operating lease expense	$	163,752		$	314,617
Sublease income		(21,045	)		(42,090	)
Variable lease expense		1,350			10,352
Total lease expense	$	144,057		$	282,879

The tables below show the beginning balances of the operating ROU assets and liabilities as of January 1, 2021 and the ending balances as of June 30, 2021, including the changes during the period.

	Operating Lease ROU Assets

Operating lease ROU assets at January 1, 2021	$	2,092,878
Amortization of operating lease ROU assets		(148,702	)
Addition of operating lease ROU assets		823,628
Operating lease ROU assets at June 30, 2021	$	2,767,804

	Operating Lease Liabilities
Operating lease liabilities at January 1, 2021	$	2,178,612
Principal payments on operating lease liabilities		(138,895	)
Addition of operating lease liabilities		873,628
Operating lease liabilities at June 30, 2021		2,913,345
Less non-current portion		2,529,422
Current portion at June 30, 2021	$	383,923

As of June 30, 2021, the Company’s operating leases had a weighted-average remaining life of 5.4 years with a weighted-average discount rate of 12.76%. The maturities of the operating lease liabilities are as follows:

	As of June 30, 2021
2021	$	361,318
2022		751,861
2023		769,864
2024		787,275
2025		805,192
Thereafter		514,174
Total payments		3,989,684
Less imputed interest		(1,076,339	)
Total operating lease liabilities	$	2,913,345

Sublease Agreement

On April 18, 2019, the Company entered into a sublease agreement with Nezu Asia Capital Management, LLC (“the Tenant”), whereby the Tenant agreed to sublease approximately 999 square feet of space currently rented by the Company in the borough of Manhattan in New York, New York for an initial term of eight years, commencing on May 15, 2019. The term of the sublease expires on October 31, 2026 with no option to extend the sublease term. Rent payments provided by the Tenant under the sublease agreement began on September 1, 2019. The sublease agreement stipulates an annual rent increase of 2.25%. The Tenant is also responsible for paying to the Company all tenant energy costs, annual operating costs, and annual tax costs attributable to the subleased space during the term of the sublease.

Future lease payments to be received under the sublease agreement as of June 20, 2021 are as follows:

	As of June 30, 2021
2021	$	40,628
2022		82,419
2023		84,194
2024		86,010
2025		87,867
Thereafter		74,590
	$	455,708

The Company received sublease payments in the amount of $40,054 during the six months ended June 30, 2020. In accordance with ASC Topic 842, the Company treats the sublease as a separate lease, as the Company was not relieved of the primary obligation under the original lease. The Company continues to account for the Manhattan lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounts for the sublease as a lessor of the lease. The sublease is classified as an operating lease, as it does not meet the criteria of a sale-type or direct financing lease.