LEASES

3 Months Ended

Mar. 31, 2022

The Company has operating leases for office and laboratory space in the borough of Manhattan in New York, New York and in Cambridge, Massachusetts, which expire in 2026 and 2028, respectively. On March 31, 2022, the Company entered into the Torrey Pines Science Center Lease in San Diego, California (the “San Diego Lease”) with Torrey Pines Science Center Limited Partnership for approximately 5,200 square feet of lab and office space. The term of the San Diego Lease is 62 months and the lease commencement date was April 19, 2022, which is the date the Company will record a right-of-use (“ROU) asset and corresponding operating lease liability. The San Diego Lease will expire in June 2027.

Base rent for the San Diego Lease is $6.35 per square foot in the first year of the San Diego Lease, with a rent abatement for the second and third full months of the first year. The base rent will increase by approximately 3% on each anniversary of the lease commencement date. The Company is also required to pay its share of operating expenses and property taxes. The San Diego Lease provides for a one-time option to extend the lease term for an additional five years at the then fair rental value.

On March 5, 2022, the Company entered into an Agreement to Assign Space Lease with Regen Lab USA LLC (“Regen”) pursuant to which the Company agreed to assign its Brooklyn, New York lease (the “Brooklyn Lease”) to Regen. The effective date of the assignment was contingent upon, among other things, a consent from BioBat, Inc. (the “Landlord”) to assign the Brooklyn Lease. Additionally, Regen agreed to purchase certain equipment from the Company for $50,000, partly reimburse the Company $50,000 toward certain existing unamortized leasehold improvements, and to reimburse the Company for the existing security deposit the Company had under the Brooklyn Lease of approximately $63,000.

On March 25, 2022, the Company entered into an Assignment and Assumption of Lease Agreement (the “Assignment Agreement”) with Regen, the consent of which was provided by the Landlord in the Assignment Agreement. The effective date of the assignment was March 28, 2022. Under the Assignment Agreement, Regen (i) accepts the assignment of the Brooklyn Lease; (ii) assumes all of the obligations, liabilities, covenants and conditions of the Company’s as tenant under the Brooklyn Lease; (iii) assumes and agrees to perform and observe all of the obligations, terms, requirements, covenants and conditions to be performed or observed by the Company under the Brooklyn Lease; and (iv) makes all of the representations and warranties binding under the Brooklyn Lease with the same force and effect as if Regens had executed the Brooklyn Lease originally as the tenant.

Notwithstanding the above assumptions by Regen, the Company shall be and remain liable and responsible for the due keeping, and full performance and observance, of all the provisions of the Brooklyn Lease on the part of the tenant to be kept, performed and observed. As a result of the Assignment Agreement, the Company wrote off the remaining ROU asset balance and the corresponding lease liability.

The Company accounts for leases under ASC 842, Leases. Operating leases are included in “Right-of use assets - operating leases” within the Company’s balance sheets and represent the Company’s right to use an underlying asset for the lease term. The Company’s related obligation to make lease payments are included in “Operating lease liabilities, non-current” and “Operating lease liabilities, current” within the Company’s balance sheets. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Because the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term.

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.

During the three months ended March 31, 2022 and 2021, the net operating lease expenses were as follows (in thousands):

	Three months ended March 31,
	2022			2021
Operating lease expense	$	186		$	151
Sublease income		(21	)		(21	)
Variable lease expense		3			9
Total lease expense	$	168		$	139

The tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2022 and the ending balances as of March 31, 2022, including the changes during the period (in thousands).

	Operating Lease ROU Assets
Operating lease ROU assets at January 1, 2022	$	2,567
Amortization of operating lease ROU assets		(102	)
Write off of ROU asset due to lease termination		(1,372	)
Operating lease ROU assets at March 31, 2022	$	1,093

	Operating Lease Liabilities
Operating lease liabilities at January 1, 2022	$	2,723
Principal payments on operating lease liabilities		(103	)
Write off of operating lease liability due to lease termination		(1,453	)
Operating lease liabilities at March 31, 2022		1,167
Less non-current portion		1,018
Current portion at March 31, 2022	$	149

As of March 31, 2022, the Company’s operating leases had a weighted-average remaining life of 5.8 years with a weighted-average discount rate of 10.23%. The maturities of the operating lease liabilities are as follows (in thousands):

	As of March 31,
2022	$	201
2023		270
2024		272
2025		274
2026		267
Thereafter		245
Total payments		1,529
Less imputed interest		(362	)
Total operating lease liabilities	$	1,167