COMMITMENTS &amp; CONTINGENCIES (a) Facility Leases Overview In the ordinary course of business, the Company enters lease agreements with unaffiliated parties for the use of office and laboratory facilities and office equipment. As of December 31, 2019, the Company had one active facility lease in Irvine, California, that commenced on March 1, 2019 and expires April 30, 2022. This lease has a renewal option at the end of term, for which the Company was not reasonably certain to exercise at the lease commencement. As such, the renewal option was not included in the lease term used to calculate the right-of-use lease asset and lease liability. Prior to March 1, 2019, the Company did not have any material lease arrangements. The Company entered into two additional facility leases that commenced on June 1, 2020 for adjacent administrative and laboratory suites in Irvine, California. These leases expire on January 31, 2024. One of these leases included a renewal option at the end of its term, for which the Company was not reasonably certain to exercise at the lease commencement. As such, the renewal option was not included in the lease term used to calculate the right-of-use lease asset and lease liability. In connection with these two leases the Company capitalized right-of-use assets along with an accompanying lease liability of $0.7 million. All of the Companys facility leases have minimum annual rent, payable monthly, and carry fixed annual rent increases. Under the arrangements, real estate taxes, certain operating expenses, and common area maintenance are reimbursable to the lessor. These amounts are expensed as incurred, as they are variable in nature and therefore excluded from the measurement of the reported right-of-use asset and liability discussed below. During the years ended December 31, 2019 and during the nine months ended September 30, 2020, the Company had no sublease arrangements with it as lessor. Components of Lease Expense The liability associated with each lease is amortized over the respective lease term using the effective interest rate method. The Companys right-of-use asset is amortized over the lease term on a straight-line basis to lease expense, as reported on an allocated basis within research and development and general and administrative expenses on the accompanying Statements of Operations and Comprehensive Loss. For the three months ended September 30, 2020 and 2019, the Company recognized lease expense of $0.1 million and $16 thousand, respectively. For the nine months ended September 30, 2020 and 2019, the Company recognized lease expense of $0.1 million, and $36 thousand, respectively. There were no significant variable lease payments, including including non-lease components such as common area maintenance fees, recognized as lease expense for the three and nine months ended September 30, 2020 and 2019. Weighted-Average Remaining Lease Term and Applied Discount Rate The Company had one active lease for its Irvine office and laboratory facility, with a remaining lease term of 2 years, 4 months as of December 31, 2019 and a remaining lease ter m of 1 year, 7 months as of September 30, 2020. The Company h ad two add itional facility leases commence on June 1, 2020, with remaining lease term s of 3 years, 4 months as of September 30, 2020. The estimated incremental borrowing rate of 10% is utilized to present value future minimum lease payments since an implicit interest rate is not readily determinable each lease. The weighted average remaining lease term for the Companys leases as of September 30, 2020 is 3 years, 1 month. Future Contractual Lease Payments as of September 30, 2020 The below table summarizes the (i) minimum lease payments over the next five years and thereafter, (ii) lease arrangement imputed interest, and (iii) present value of future lease payments: Operating Leases - future payments September 30, 2020 2020 (remaining three months) $ 5 2021 349 2022 298 2023 281 2024 25 Total future lease payments, undiscounted $ 958 (Less): Imputed interest (143) Present value of operating lease payments $ 815 (b) In-License Agreement for Lotilaner Skin and Eye Disease or Conditions in Humans In January 2019, the Company entered into a license agreement with Elanco Tiergesundheit AG (Elanco), granting it a worldwide license to certain intellectual property for the development and commercialization of lotilaner for the treatment or cure of any eye or skin disease or condition in humans (the "January 2019 Agreement"). The Company has sole responsibility for related development, regulatory, and commercialization activities. The Company made a $1.0 million upfront payment at execution of the January 2019 Agreement, which is reported within research and development expense within the accompanying unaudited Statements of Operations and Comprehensive Loss for the nine months ended September 30, 2019. The Company also made a required $1.0 million clinical milestone payment in the September 2020 as part of an achieved Phase 2b/3 clinical trial milestone for the treatment of Demodex blepharitis; this amount is reported within research and development expense within the accompanying Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020. The Company will make further payments to Elanco under the January 2019 Agreement upon achievement of various clinical milestones for an aggregate maximum of $5.0 million and various commercial and sales threshold milestones for an aggregate maximum of $79.0 million. In addition, the Company will be obligated to pay contractual royalties to Elanco in the single digits of its net sales. If the Company receives payments from any sublicensees, it will be obligated to pay Elanco a variable percentage in the low to mid double-digits of such proceeds, except for territories in which the Company achieved applicable regulatory approval prior to sublicense execution. All Other Disease or Conditions in Humans In September 2020, the Company executed an expanded license agreement with Elanco, granting it a worldwide license to certain intellectual property for the development and commercialization of lotilaner treatment or cure of all other diseases and conditions in humans  beyond that of the eye or skin (the September 2020 Agreement). The Company issued Elanco 222,460 shares of its common stock at the execution of the September 2020 Agreement. The value of these shares was then-determined to equate to $3.1 million (at $14.0003 per share, approximating the Company's Series C preferred stock issuance price  see Note 4 ) and is reported within research and development expense within the accompanying Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020. In addition, upon the 18-month anniversary of contract execution, if not terminated by the Company prior to the anniversary, it is obligated to grant Elanco additional shares that aggregate to $3.0 million (valued as of the Companys IPO price of $16.00 per share - see Note 10(a) ), amounting to a fixed 187,500 shares. The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the gross assets acquired were concentrated in a group of similar identifiable assets thus satisfying the requirements of the screen test in ASU 2017-01. The assets acquired in the transaction were measured based on the upfront payment to Elanco and the fair value of the common stock shares issued to Elanco, as the fair value of the consideration given was more readily determinable than the fair value of the assets received. Because the assets had not yet received regulatory approval and have no alternative future use, the fair value attributable to these assets were initially recorded as in process research and development expenses. The Company will make further payments to Elanco under the September 2020 Agreement upon achievement of various clinical milestones for an aggregate maximum of $4.5 million, and various commercial and sales threshold milestones for an aggregate maximum of $77.0 million. In addition, the Company will be obligated to pay contractual royalties to Elanco in the single digits of its net sales. If the Company receives payments from any sublicensees, it will be obligated to pay Elanco a variable percentage in the low to mid double-digits of such proceeds, except for territories in which the Company achieved applicable regulatory approval prior to sublicense execution. (c) Employment Agreements The Company has entered into employment agreements with four of its named executive officers. These agreements provide for the payment of certain benefits upon separation of employment under specified circumstances, such as termination without cause, or termination in connection with a change in control event. (d) Contingencies From time to time, the Company may be subject to various litigation and related matters arising in the ordinary course of business. The Company is currently not aware of any such matters where there is at least a reasonable probability that a material loss has been or will be incurred for financial statement recognition. (e) Indemnities and Guarantees The Company has certain indemnity commitments, under which it may be required to make payments to its officers and directors in relation to certain transactions to the maximum extent permitted under applicable laws. The duration of these indemnities varies, and in certain cases, is indefinite and does not provide for any limitation of maximum payments. The Company has not been obligated to make any such payments to date and no liabilities have been recorded for this contingency in the accompanying condensed balance sheets.