7. Commitments and Contingencies

 

Operating Leases

 

In March 2015, the Company entered into an operating lease for approximately 21,488 rentable square feet of office and laboratory space in Cambridge, Massachusetts (the “2015 Lease”), with a lease term commencing in August 2015 and ending in October 2020, assuming occupancy in August 2015. The Company has an option to extend the lease for five additional years. The Company’s lease agreement has escalating rent payments and the Company records rent expense on a straight-line basis over the term of the lease, including any rent-free periods. The Company recorded rent expense of $320,000 for the year ended December 31, 2015 and $221,000 and $441,000 for the three and six months ended June 30, 2016, respectively, related to the 2015 Lease. The lease agreement required the Company to issue an original letter of credit in the amount of $483,000, which is included in restricted cash in the accompanying balance sheet at December 31, 2015 and June 30, 2016.

 

The 2015 Lease includes certain lease incentives in the form of tenant allowances. The Company has capitalized the improvements made with the tenant allowance into fixed assets and established a liability for the deferred lease incentive upon occupancy. The Company recorded these incentives as a component of deferred rent and will amortize these incentives as a reduction of rent expense over the lease term. The related fixed assets will be amortized over the lease term.

 

License Agreements

 

Whitehead Institute for Biomedical Research and Dana-Farber

        

 Effective April 1, 2013, the Company entered into a license agreement with the Whitehead Institute for Biomedical Research ("Whitehead") and the Dana-Farber Cancer Institute (“Dana-Farber”), pursuant to which the Company was granted a worldwide, sublicensable license under specified patents relating to modulators of Myc/Max Screen, relating to Chem-Seq owned or controlled by Whitehead and Dana-Farber.

 

Whitehead Institute for Biomedical Research

 

        Effective April 4, 2013, the Company entered into an additional license agreement with Whitehead, pursuant to which the Company was granted a worldwide license under specified patents relating to super-enhancers owned or controlled by Whitehead.

 

 In connection with the Whitehead agreements, the Company issued 171,674 shares of its common stock to Whitehead in April 2013. Payments are due under the Whitehead agreements when the Company achieves certain milestones. The future potential milestone payments due under the Whitehead agreements have not been accrued as of June 30, 2016 and December 31, 2015, respectively, as no milestones have been achieved and the agreement can be cancelled at the Company's option. Therefore, the Company had no obligation to pay any of these amounts.  The Company paid the Whitehead Institute Genome Technology Core $0.4 million for the year ended December 31, 2015 and $0.6 million and $0.2 million for the six months ended June 30, 2016 and 2015, respectively.

 

TMRC Co. Ltd.

 

        In April 2016, the Company amended and restated its license agreement with TMRC Co. Ltd. (“TMRC”). Under the amended and restated license agreement, in addition to royalties owed on patents rights, the Company is obligated to pay the remainder of the upfront license fee of $1.0 million and will pay low single-digit royalties on net sales with respect to know-how licensed by TMRC during a predefined royalty term. The Company paid the remaining license fee of $500,000 in May 2016.

 

        The Company also entered into a supply management agreement with TMRC and agreed to pay TMRC a fee for each kilogram of SY-1425 active pharmaceutical ingredient produced.