Leases

12 Months Ended

Dec. 31, 2022

The Company’s lease arrangements at December 31, 2022 consist of (i) a lease for office and laboratory space at its headquarters in Chicago, Illinois that commenced in July 2020 (the “Chicago Lease”) and (ii) leases for office equipment (the “Office Equipment Leases”). The Chicago Lease and the Office Equipment Leases are classified as operating leases.

The Company’s lease arrangement for office and laboratory space at its former headquarters in Skokie, Illinois ended in February 2021 in accordance with the terms of that lease arrangement.

Chicago Lease

The Company has approximately thirty thousand square feet of office and laboratory space in Chicago, Illinois (the “Chicago Lease”). The original term (the “Original Term”) of the Chicago Lease is 10 years, commencing on July 1, 2020 (the “Commencement Date”), which is the date the premises were ready for occupancy under the terms of the Chicago Lease. The Company has options to extend the term of the Chicago Lease for two additional successive periods of five years each (the “Extension Periods”) at the then prevailing effective market rental rate.

The initial annual base rent during the Original Term is approximately $1,113 for the first 12-month period of the Original Term, payable in monthly installments beginning on the Commencement Date. Base rent thereafter is subject to annual increases of 3%, for an aggregate amount of $12,761 over the Original Term. The Company must also pay its proportionate share of certain operating expenses and taxes for each calendar year during the term. During the first 12-month period of the Original Term, the base rent and the Company's proportionate share of operating expenses and taxes are subject to certain abatements.

Upon execution of the Chicago Lease, the Company paid to the landlord the first installment of base rent and the estimated monthly amount of its pro rata share of taxes and its pro rata share of operating expenses in the aggregate amount of $87 which amount had been adjusted for the abatement as set forth in the lease agreement. The Company also paid the landlord a net amount of $697 toward tenant improvements.

As part of the agreement for the Chicago Lease, the Company is required to maintain a standby letter of credit during the term of the lease, currently in the amount of $1,200 and subject to reduction over time, which is secured by a restricted certificate of deposit account and presented within other noncurrent assets on the Company’s consolidated balance sheet at December 31, 2022.

The Company recognized a right of use asset of $8,931 and a lease liability of $8,147 on the Commencement Date. Because the rate implicit in the Chicago Lease is not readily determinable, the Company used its incremental borrowing rate of 8.3% on the Commencement Date to determine the present value of the lease payments over the Original Term. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. As of December 31, 2022, the Company determined it is not reasonably certain that the renewal option would not be exercised.

Information related to the Company’s operating lease asset and related operating lease liabilities were as follows:


	December 31,
	2022		2021
Weighted-average remaining lease term	7.5 years		8.5 years
Weighted-average discount rate	8.3	%	8.3	%

The following table summarizes lease costs in the Company’s consolidated statement of operations:


	December 31,
	2022		2021
Operating lease costs	$	1,305	$	1,306
Variable lease costs	1,529		1,070
Short term lease costs	17		130
Total lease costs	$	2,851	$	2,506

The Company made cash payments for operating leases of $3,024 and $2,134 during the years ended December 31, 2022 and 2021, respectively.

Maturities of the Company’s lease liability as of December 31, 2022 were as follows:


Years Ending December 31,	Operating Leases
2023	1,100
2024	1,235
2025	1,271
2026	1,310
Thereafter	4,897
Total	$	9,813
Less: imputed interest	(2,507)
Total lease liability	$	7,306

Current operating lease liability	$	539
Noncurrent operating lease liability	6,767
Total lease liability	$	7,306