7. Commitments and Contingencies Leases On March 1, 2018, the Company entered into a long-term lease agreement for approximately 19,275 square feet of office space in Jersey City, New Jersey, that the Company identified as an operating lease under ASC 840 (the Lease). The lease term is eleven years from August 1, 2018, the commencement date, with total lease payments of $7.3 million over the lease term. The Company has the option to renew for two consecutive five-year periods from the end of the first term and the Company is not reasonably certain that the option to renew the Lease will be exercised. Under the Lease, the Company must furnish a security deposit in the form of a standby letter of credit in the amount of $0.3 million, which will be reduced by fifty-five thousand dollars every two years for ten years after the commencement of the lease. The security deposit is classified as restricted cash in the accompanying balance sheets . On January 1, 2019, a right-of-use asset and a corresponding operating lease liability of $3.4 million was recognized for the Lease. The consideration in the Lease allocated to the single lease component includes the fixed payments for the right to use the office space as well as common area maintenance. The Lease also contains costs associated with certain expense escalation, property taxes, insurance, parking, and utilities which are all considered variable payments and are excluded from the operating lease liability. In determining the operating lease liability at January 1, 2019, the Company utilized its incremental borrowing rate. The incremental borrowing rate approximated the prevailing market interest rate the Company would incur to borrow a similar amount equal to the total Lease payments on a collateralized basis over the term of the Lease. The following table summarizes certain quantitative information associated with the amounts recognized in the unaudited condensed consolidated financial statements for the Lease (dollars in thousands): Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Operating lease cost $ 166 $ 498 Variable lease cost 8 25 Total operating lease expense $ 174 $ 523 Cash paid for amounts included in the measurement of operating lease liability $ 111 $ 330 September 30, 2019 Remaining Lease term (years) 9.84 Discount rate 15 % Rent expense was approximately $0.2 million and $0.3 million for the three and nine months ended September 30, 2018. Future minimum lease payments for the Lease as of September 30, 2019 and December 31, 2018 are as follows (in thousands): December 31, 2018 2019 $ 498 2020 508 2021 518 2022 529 2023 716 Thereafter 4,203 Total $ 6,972 September 30, 2019 2019 $ 167 2020 507 2021 517 2022 527 2023 715 Thereafter 4,263 Total $ 6,696 The presentation of the operating lease liability and right-of-use asset as of September 30, 2019 and January 1, 2019 are as follows (in thousands): September 30, 2019 January 1, 2019 Present value of future minimum lease payments $ 3,409 $ 3,368 Operating lease liability, current portion $ 31 $ 23 Operating lease liability, long-term portion 3,378 3,345 Total operating lease liability $ 3,409 $ 3,368 Difference between future minimum lease payments and discounted cash flows $ 3,287 $ 3,604 Operating lease right-of-use asset $ 3,238 $ 3,365 License Arrangement with Potential Future Expenditures As of September 30, 2019, the Company had a license arrangement with Merck Sharp &amp; Dohme Corp., or Merck, that involves potential future expenditures. Under the license arrangement, the Company exclusively licensed from Merck its rights to ibrexafungerp in the field of human health. Ibrexafungerp is the Companys lead product candidate. Pursuant to the terms of the license agreement, Merck is eligible to receive milestone payments from the Company that could total $19.0 million upon occurrence of specific events, including initiation of a Phase 3 clinical study, new drug application, and marketing approvals in each of the U.S., major European markets and Japan. In addition, Merck is eligible to receive tiered royalties from the Company based on a percentage of worldwide net sales of ibrexafungerp. The aggregate royalty percentages are mid- to high-single digits. In December 2014, the Company and Merck entered into an amendment to the license agreement that deferred the remittance of a milestone payment due to Merck, such that no amount would be due upon initiation of the first Phase 2 clinical trial of a product containing the ibrexafungerp compound (the Deferred Milestone). The amendment also increased, in an amount equal to the Deferred Milestone, the milestone payment that would be due upon initiation of the first Phase 3 clinical trial of a product containing the ibrexafungerp compound. In December 2016 and January 2018, the Company entered into second and third amendments, respectively, to the license agreement with Merck which clarified what would constitute the initiation of a Phase 3 clinical trial for the purpose of milestone payment. Except as described above, all other terms and provisions of the license agreement remain in full force and effect. In January 2019, a milestone payment became due to Merck as a result of the initiation of the VANISH Phase 3 VVC program and was paid in March 2019. The milestone payment was recognized in the unaudited statement of operations in research and development expense for the nine months ended September 30, 2019 and is included in cash used in operating activities on the statement of cash flows. Clinical Development Arrangements The Company has entered into, and expects to continue to enter into, contracts in the normal course of business with various third parties who support its clinical trials, preclinical research studies, and other services related to its development activities. The scope of the services under these agreements can generally be modified at any time, and the agreement can be terminated by either party after a period of notice and receipt of written notice.