COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Operating Leases

We lease space under operating leases for manufacturing and laboratory facilities and administrative offices in Cleveland, Ohio, as well as administrative offices in New York, New York. We also lease office space in Madrid, Spain as well as certain office equipment under operating leases, which have a non-cancelable lease term of less than one year and, therefore, we have elected the practical expedient to exclude these short-term leases from our right-of-use assets and lease liabilities.

Components of lease cost are as follows:

	For the three months ended June 30,		For the three months ended June 30,		For the six months ended June 30,		For the six months ended June 30,
	2020		2019		2020		2019
Operating lease cost	$	434,000	$	434,000	$	868,000	$	723,000
Variable lease cost	$	92,000	$	86,000	$	175,000	$	159,000
Short-term lease cost	$	6,000	$	34,000	$	24,000	$	81,000

The following table presents information about the amount and timing of cash flows arising from operating leases as of June 30, 2020:

Maturity of lease liabilities:
2020, remainder	$	851,000
2021		1,713,000
2022		1,727,000
2023		1,741,000
2024		1,781,000
Thereafter		1,885,000
Total undiscounted operating lease payments		9,698,000
Less: imputed interest		2,224,000
Present value of operating lease liabilities	$	7,474,000
Balance sheet classification:
Current portion of lease liability	$	1,706,000
Long-term lease liability		5,768,000
Total operating lease liabilities	$	7,474,000
Other information:
Weighted-average remaining lease term for operating leases		67 months
Weighted-average discount rate for operating leases		9.6%

Commitment with contract manufacturer

We engaged a contract manufacturer to assist us with developing and defining the processes necessary to manufacture our RDEB product candidate and had a remaining commitment of $6.3 million at March 31, 2020. During the second quarter of 2020, we cancelled the remaining stages of work with the contract manufacturer. We have no remaining commitment at June 30, 2020.

Arbitration Proceeding

We are currently engaged in an arbitration proceeding with REGENXBIO regarding the former license agreement between the parties relating to use of the AAV9 capsid in our MPS IIIA, MPS IIIB, CLN1, and CLN3 programs. The license terminated on May 2, 2020, and on May 25, 2020, we filed an arbitration claim with the American Arbitration Association alleging that REGENXBIO materially breached the license agreement prior to termination and seeking, among other things, a declaration that as a result of REGENXBIO’s material breach, we are not responsible for payments totaling $28 million (which would otherwise have been due in 2020) plus accrued interest of $0.8 million as of June 30, 2020. REGENXBIO disputes our arbitration claim and has filed a counterclaim seeking payment of these amounts. No arbitration schedule has yet been set by the three-arbitrator panel.