Note 8 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

8. Commitments and Contingencies

2022 Loan Agreement

On  September 20, 2022, the Company and Robert W. Duggan, the Company's majority stockholder and Executive Chairman, entered into a Loan Agreement (“2022 Loan Agreement”) in connection with Mr. Duggan lending the principal sum of $65.0 million to the Company. The 2022 Loan Agreement bore interest at a rate per annum equal to 5.0%, payable quarterly commencing on   January 1, 2023, with the principal sum payable on   March 20, 2024. On   March 17, 2023, the Company and Mr. Duggan amended certain terms of the 2022 Loan Agreement. There were no changes to the interest rate, but the principal sum repayment date was changed to  September 30, 2024. During the year ended  December 31, 2023, the Company made cash payments of $1.7 million for accrued interest on the loan, and recorded an additional $1.1 million of interest expense in relation to the 2022 Loan Agreement. On  April 30, 2023, the Company entered into a Securities Purchase Agreement with Mr. Duggan, pursuant to which the Company agreed to issue and sell to Mr. Duggan 10,022,937 shares of the Company’s common stock, par value $0.001 per share, in a Private Placement, at a price per share of $6.51. These shares were paid for through the cancellation of the amounts then owed by the Company under the 2022 Loan Agreement, the principal sum of $65.0 million and all accrued and unpaid interest outstanding, which totaled approximately $0.2 million as of  April 30, 2023. The parties completed the Private Placement on  May 9, 2023 and, upon closing and satisfaction of the outstanding debt, the 2022 Loan Agreement terminated, without early termination fees or penalties being owed by the Company. No additional amounts are owed to Mr. Duggan under the 2022 Loan Agreement.

Operating Leases

In January 2017, the Company entered into a five-year lease (the “Existing Lease”) for approximately 15,700 square feet for its corporate headquarters located in Hayward, California. The lease commenced in July 2017.

In May 2019, the Company entered into Lease Amendment 1 (the “Lease Amendment”) in relation to the Existing Lease and added the lease of new premises of approximately 13,300 square feet and 21,300 square feet, (“Expansion Premises 1” and “Expansion Premises 2”, respectively). Additionally, the term of the Existing Lease was extended to October 2029 to be coterminous with Expansion Premises 1 and Expansion Premises 2.

The Company evaluated the lease amendment under the provisions of ASC 842. It concluded that the Lease Amendment would be accounted for as a single contract with the Existing Lease because the additional lease payments due to the Lease Amendment was not commensurate with the right-of-use asset granted to the Company. Though the Lease Amendment was accounted for as a single contract, the Existing Premises, Expansion Premises 1 (occupied in November 2019) and Expansion Premises 2 (occupied in May 2020) are accounted for as separate lease components. Accordingly, the Company measured and allocated consideration to each lease component as of the modification date.

Supplemental balance sheet information related to leases (in thousands):

	March 31,		December 31,
Assets:	2024		2023
Right-of-use assets	$	7,040	$	7,256

	March 31,		December 31,
Liabilities:	2024		2023
Current operating lease liabilities	$	1,101	$	1,058
Non-current operating lease liabilities		7,796		8,086
Total lease liabilities	$	8,897	$	9,144

Total cash paid for operating lease liabilities (in thousands):

	Three Months Ended March 31,
	2024		2023
Cash paid for operating lease liabilities	$	469	$	453

Maturities of operating lease liabilities were as follows (in thousands):

Year ending December 31:
2024 (remaining 9 months)	$	1,441
2025		1,977
2026		2,046
2027		2,117
Thereafter		4,074
Total lease payments		11,655
Less imputed interest		(2,758	)
Total lease liabilities	$	8,897

Weighted-average remaining lease term and discount rate, as of March 31, 2024, were as follows:

Weighted-average remaining lease term	5.59
Weighted-average discount rate	10	%

Rent expense, including common area maintenance charges, was approximately $0.6 million and $0.5 million for the three-month periods ended March 31, 2024 and 2023, respectively.

Legal Proceedings

From time to time, we  may be involved in a variety of claims, lawsuits, investigations, and proceedings relating to securities laws, product liability, patent infringement, contract disputes, and other matters relating to various claims that arise in the normal course of our business, including the matter described below. The outcome of any legal proceedings is unpredictable but, regardless of outcome, they can have an adverse impact on us because of defense and settlement costs, diversion of management resources, negative publicity, reputational harm, and other factors. We maintain insurance that  may provide coverage for such matters, including customary employment practices liability insurance.

In   November 2022, the employment of our former Chief Financial Officer, Sandra Gardiner, terminated. Ms. Gardiner’s departure was not the result of any disagreement with the Company on any matter relating to its operations, accounting policies or practices, although the Company determined that she was not eligible to receive any severance benefits under the terms and conditions of her then existing employment agreement. In  March 2023, Ms. Gardiner filed an arbitration demand with JAMS seeking severance benefits and other remedies, alleging breach of contract and unlawful termination in violation of public policy, among other things. We believe that Ms. Gardiner’s claims are without merit and we intend to vigorously defend ourselves against them. Because of the difficulty in predicting the outcome of any legal proceeding, particularly one that is in its early stages, the Company is not able to conclude that a liability is probable and cannot predict what the final outcome of Ms. Gardiner’s arbitration proceeding will likely be or provide a reasonable estimate for the range of ultimate possible loss, if any. However, at this time, we believe that the final resolution of this matter will not adversely affect our consolidated position, results of operations, or cash flows and that a liability is not probable at this time.