Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

9 Months Ended

Sep. 30, 2021

The Company currently occupies two leased properties, both of which serve as administrative office space. The Company determined that both of these leases are operating leases based on the lease classification test performed at lease commencement.

The annual base rent for the Company’s office located in Rockville, Maryland is $0.2 million, subject to annual 2.5% increases over the term of the lease. The applicable lease provided for a rent abatement for a period of 12 months following the Company’s date of occupancy. The lease has an initial term of 10 years from the date the Company makes its first annual fixed rent payment, which occurred in January 2020. The Company has the option to extend the lease two times, each for a period of five years, and may terminate the lease as of the sixth anniversary of the first annual fixed rent payment, upon the payment of a termination fee. As of the lease commencement date, it was not reasonably certain that the Company will exercise the renewal periods or early terminate the lease and therefore the end date of the lease for accounting purposes is January 31, 2030.

The Company entered into a sublease for additional administrative office space in Chesterbrook, Pennsylvania in May 2020 (the “Chesterbrook Lease”). The annual base rent under the Chesterbrook Lease is $0.3 million. The lease expires on November 30, 2021.

In anticipation of the expiry of the Chesterbrook Lease on November 30, 2021, in September 2021, the Company entered into a lease for administrative office space in Chesterbrook, Pennsylvania that commences on December 1, 2021 (the “New Chesterbrook Lease”). The New Chesterbrook Lease has an initial term of 5.25 years from the lease commencement date. The initial annual base rent under the New Chesterbrook Lease is approximately $0.2 million. The Company will evaluate the accounting impact in the fourth quarter of 2021, including the lease classification test and the recognition of the lease right-of-use (“ROU”) asset and corresponding lease liability as of the lease commencement date on December 1, 2021. Therefore, the information contained below excludes the New Chesterbrook Lease.

Supplemental balance sheet information related to the leased properties (excluding the New Chesterbrook Lease) is as follows (in thousands):


	As of
	September 30, 2021		December 31, 2020
Property and equipment, net	$	698	$	917

Accrued expenses and other current liabilities	$	219	$	426
Other long-term liabilities	977		1,038
Total operating lease liabilities	$	1,196	$	1,464

The operating lease ROU assets are included in property and equipment and the lease liabilities are included in accrued expenses and other current liabilities and other long-term liabilities in our condensed consolidated balance sheets. The Company utilized a weighted average discount rate of 7.6% to determine the present value of the lease payments. The weighted average remaining term of the operating leases at September 30, 2021 was 8.0 years.

The components of lease expense for the three and nine months ended September 30, 2021 and 2020 were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating lease cost*	$	97	$	102	$	287	$	244

*Includes short-term leases, which are immaterial.

The following table shows a maturity analysis of the operating lease liabilities as of September 30, 20211 (in thousands):



	Undiscounted Cash Flows
October 1, 2021 through December 31, 2021	$	89
2022	174
2023	178
2024	183
2025	187
2026	192
Thereafter	621
Total lease payments	$	1,624
Less implied interest	(428)
Total	$	1,196

1The New Chesterbrook Lease is not included in the table above given its lease commencement date for accounting purposes is December 1, 2021. The New Chesterbrook lease has an initial lease term of 5.25 years from the lease commencement date and annual base rent is approximately $0.2 million.