12.Lease Agreements

 

We currently lease our research and office space under a noncancelable lease agreement with our landlord, HCP BTC, LLC (formerly known as Slough BTC, LLC) which was originally set to expire in 2018. The lease term provides for renewal option for up to two additional periods of five years each. In July 2017, we exercised our option to extend the term of our lease for another five years through January 2023 and modified the amount of monthly base rent during such renewal period.

 

In December 2014, we entered into a sublease agreement, which was amended in 2017, with an unrelated third party to occupy approximately 57,000 square feet of our research and office space. In February 2017, we entered into an amendment to the sublease agreement to increase the subleased research and office space for an additional 9,328 square feet under the same term of the sublease. Effective July 2017, the sublease agreement was amended primarily to extend the term of the sublease through January 2023 and modified the monthly base rent to equal the amount we will pay our landlord. Because the future sublease income under the extended sublease agreement is the same as the amount we will pay our landlord, we did not recognize any loss on sublease relative to this amendment. We expect to receive approximately $17.2 million in future sublease income (excluding our subtenant’s share of facilities operating expenses) through January 2023. 

 

We adopted Topic 842 on January 1, 2019 using a modified retrospective approach and elected the transition method and the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification and our assessment on whether a contract is or contains a lease.  We also elected to combine lease and non-lease components, such as common area maintenance charges, as single lease, and elected to use the short-term lease exception permitted by the standard. 

 

As a result of the adoption of Topic 842 on January 1, 2019, we recognized $32.8 million in operating right-of-use asset and $33.2 million in lease liability, and derecognized $399,000 of deferred rent in the balance sheet at adoption date.  These were calculated using the present value of our remaining lease payments using an estimated incremental borrowing rate of 9%, which represents the weighted average discount rate for our lease. There was no cumulative-effect adjustment on our accumulated deficit as of January 1, 2019. As of March 31, 2019, we had operating lease right-of-use asset of $31.1 million and lease liability of $31.7 million in the balance sheet. The weighted average remaining term of our lease as of March 31, 2019 was 3.83 years.

 

For the three months ended March 31, 2019, the components of our operating lease expense were as follows (in thousands):

 

 

Supplemental information related to the Company’s operating lease for the three months ended March 31, 2019 was as follows (in thousands):

 

 

The following table presents the maturity of our operating lease liabilities as of March 31, 2019 (in thousands):

 

 

As of March 31, 2019, we do not have any additional significant lease that had not yet commenced.

 

For the three months ended March 31, 2019, we have the following operating sublease information (in thousands):

 

 

The following table presents the future lease payments expected to be received under our sublease as of March 31, 2019 (in thousands):