Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v3.19.3
Commitments and Contingencies
6 Months Ended
Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Operating Leases

 

We lease our headquarters office and laboratory space in South San Francisco, California under the terms of a lease that expires on July 31, 2022 and that provides an option to renew for an additional five years at then-current market rates. Consistent with the guidance in ASC 842, effective beginning April 1, 2019, we have recorded this lease in our Condensed Consolidated Balance Sheet as an operating lease. For the purpose of determining the right-of-use asset and associated lease liability, we determined that the renewal of this lease is reasonably probable. The lease of our South San Francisco facilities does not include any restrictions or covenants requiring special treatment under ASC 842.

 

The following table summarizes the presentation of the operating lease in our Condensed Consolidated Balance Sheet at September 30, 2019:

 

   

As of September

30, 2019

 
Assets      
Right of use asset – operating lease   $ 3,750,200  
         
Liabilities        
Current operating lease obligation   $ 289,600  
Non-current operating lease obligation     3,879,400  
Total operating lease liability   $ 4,169,000  

 

The following table summarizes the effect of operating lease costs in the Company’s condensed consolidated statements of operations:

 

   

For the Three Months 

Ended

   

For the Six Months 

Ended

 
    September 30, 2019     September 30, 2019  
Operating lease cost   $ 203,100     $ 411,900  

 

The minimum (base rental) lease payments related to our South San Francisco operating lease are expected to be as follows:

 

Fiscal Years Ending March 31,

     
2020 (remaining six months)   $ 315,500  
2021     645,800  
2022     668,400  
2023     726,000  
2024     766,000  
Thereafter     2,720,400  
Total lease expense     5,842,100  
Less imputed interest     (1,673,100 )
Present value of operating lease liabilities   $ 4,169,000  

 

Under the prior lease guidance, future minimum lease payments, under the non-cancellable portion (excluding the five-year extension assumed under ASC 842) of the South San Francisco operating lease were as follows at March 31, 2019:

 

Fiscal Years Ending March 31,

     
2020   $ 623,900  
2021     645,800  
2022     668,400  
2023     225,300  
2024     -  
Thereafter     -  
    $ 2,163,400  

 

The remaining lease term, including the assumed five-year extension at the expiration of the current lease period, and the discount rate assumption for our South San Francisco operating lease is as follows:

 

    As of September 30, 2019  
Assumed remaining lease term in years     7.84  
Assumed discount rate     8.54 %

 

The interest rate implicit in lease contracts is typically not readily determinable and, as such, we used our estimated incremental borrowing rate based on information available at the adoption of ASC 842, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.

 

Supplemental disclosure of cash flow information related to the Company’s operating leases included in cash flows used by operating activities in the condensed consolidated statements of cash flows is as follows:

 

 

For the Six Months 

Ended

  September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities   $ 374,200  

 

During the six months ended September 30, 2019, other than the initial adoption of ASC 842 that required right of use assets and lease liabilities to be recorded, we recorded no new right of use assets arising from new lease liabilities.

 

We also lease a small office in the San Francisco Bay Area under a month-to-month arrangement at insignificant cost and have made an accounting policy election not to apply the ASC 842 operating lease recognition requirements to such short-term lease. We recognize the lease payments for this lease in general and administrative expense over the lease term. We recorded rent expense of $3,500 and $6,900 for the three and six months ended September 30, 2019, respectively, attributable to this lease.