Quarterly report pursuant to Section 13 or 15(d)

COMMITMENTS AND CONTINGENCIES

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COMMITMENTS AND CONTINGENCIES
6 Months Ended
Jun. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
Operating Lease
In August 2016, the Company entered into a five-year lease for office space in Boulder, Colorado that was scheduled to expire on October 31, 2021 (the “Boulder Lease”), subject to the Company’s option to renew the Boulder Lease for two additional terms of three years each. Pursuant to the Boulder Lease, the Company leases 3,038 square feet of space in a multi-suite building. Base rental payments under the Boulder Lease were $4,430 per month during the first year of the Boulder Lease with an annual increase of 3.5% through October 31, 2021. In addition to base rental payments included in the contractual obligations table below, the Company is responsible for its pro rata share of the operating expenses for the building, which includes common area maintenance, utilities, property taxes, and insurance. Upon adoption of ASC 842, on January 1, 2019, the Company recognized a lease liability and corresponding right-of-use asset for the lease agreement by calculating the present value of lease payments, discounted at the Company’s estimated incremental borrowing rate of 12.0%, over the expected remaining term of 2.8 years.
Effective June 17, 2021, the Boulder Lease was amended. The amendment extends the lease term to December 31, 2022. Base rent through October 31, 2021, was unchanged. The amendment provides for two months free rent and a fixed rate of $6,076 per month thereafter. The amendment also provides for an option to extend the lease for two additional terms of three years each with monthly rent payments determined at the time of renewal at the lower of $6,076 per month or current market rental rates. In accordance with ASC 842, upon modification of the Boulder Lease, the Company reassessed classification of the lease and determined that the lease still met the criteria to be classified as an operating lease. Furthermore, the Company remeasured the lease liability as of the effective date by calculating the present value of the new lease payments, discounted at the Company’s updated incremental borrowing rate of 11.0%, over the extended term of 18 months. Because the Company was not reasonably certain to exercise the renewal option, the option was not considered in determining the lease term, and associated potential additional payments were excluded from lease payments.
Operating lease cost for the three months ended June 30, 2021 and 2020 was $23 thousand and $22 thousand, respectively. Lease expense for each of the six months ended June 30, 2021 and 2020 was less than $0.1 million.
The following is a summary of the contractual obligations related to operating lease commitments as of June 30, 2021, and the effect such obligations are expected to have on the Company’s liquidity and cash flows in future periods (in thousands):
2021 (remaining six months) $ 57 
2022 36 
Total maturities 93 
Less imputed interest (7)
Present value of lease liability $ 86 
Amended and Restated License Agreement with Bodor
In February 2020, the Company, together with Brickell Subsidiary and Bodor Laboratories, Inc. and Dr. Nicholas S. Bodor (collectively, “Bodor”) entered into an amended and restated license agreement (the “Amended and Restated License Agreement”). The Amended and Restated License Agreement supersedes the License Agreement, dated December 15, 2012, entered into between Brickell Subsidiary and Bodor, as amended by Amendment No. 1 to License Agreement, effective as of October 21, 2013, and Amendment No. 2 to License Agreement, effective as of March 31, 2015.
The Amended and Restated License Agreement retains with the Company a worldwide, exclusive license to develop, manufacture, market, sell, and sublicense products containing the proprietary compound sofpironium bromide based upon the patents referenced in the Amended and Restated License Agreement for a defined field of use. As of June 30, 2021, under the original License Agreement and the Amended and Restated License Agreement, the Company had remaining obligations to pay Bodor (i) a royalty on sales of product outside Kaken’s territory, including a low single-digit royalty on sales of certain product not covered by the patent estate licensed from Bodor; (ii) approximately 50 to 55% of all royalties the Company receives from Kaken for sales of product within its territory; (iii) a percentage of non-royalty sublicensing income the Company receives from Kaken or other sublicensees; and (iv) up to an aggregate of $0.8 million (plus an additional $0.1 million for approvals of additional products) in cash payments and $1.0 million of shares of the Company’s common stock upon the achievement of certain regulatory and other milestones.
During the three and six months ended June 30, 2020, under the terms of the Amended and Restated License Agreement, the Company made a $0.5 million milestone payment to Bodor following the closing of a public offering in June 2020 and accrued an additional $1.0 million related to its plan to initiate its U.S. Phase 3 pivotal program in the fourth quarter of 2020. As a result, the Company recorded $1.5 million as research and development expense in the condensed consolidated statements of operations during the three and six months ended June 30, 2020. No similar or associated research and development expense was incurred in the three or six months ended June 30, 2021, but the Company paid Bodor the applicable amount with respect to the royalties it received from Kaken for sales of product in Japan during those periods.