Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

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Commitments and Contingencies
9 Months Ended
Dec. 31, 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 December 31, 2019:

 

   

 

As of 

December 31, 2019

Assets    
Right of use asset – operating lease   $ 3,665,600  
         
Liabilities        
Current operating lease obligation   $ 301,400  
Non-current operating lease obligation     3,798,400  
Total operating lease liability   $ 4,099,800  

 

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 Nine Months Ended
   

December 31, 2019

 

December 31, 2019

Operating lease cost   $ 203,100     $ 615,000  

 

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 three months)     $ 157,800  
  2021       645,800  
  2022       668,400  
  2023       726,000  
  2024       766,000  
  Thereafter       2,720,400  
  Total lease expense       5,684,400  
  Less imputed interest       (1,584,600 )
  Present value of operating lease liabilities     $ 4,099,800  

 

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 December 31, 2019
Assumed remaining lease term in years     7.58  
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 Nine Months Ended
   

December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities   $ 561,900  

 

During the nine months ended December 31, 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 $10,500 for the three and nine months ended December 31, 2019, respectively, attributable to this lease.