Note 7 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

7. Commitments and Contingencies

2022 Loan Agreement

On September 20, 2022, the Company and Robert W. Duggan, the Company's majority stockholder and Co-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. There were no additional amounts are owed to Mr. Duggan under the 2022 Loan Agreement at  December 31, 2024 and 2023.

Operating Leases

Hayward Lease

In January 2017, the Company entered into a five-year lease (the "Existing Lease") for approximately 15,700 square feet for its principal operating facility located in Hayward, California. The lease commenced during 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 ("ROU") 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.

Miami Lease

In November 2024, the Company entered into a 65-month lease for approximately 2,000 square feet for its corporate headquarters located in Miami, Florida, which commenced on November 8, 2024. The lease contains one five-year extension option, however, as of the lease commencement date, the Company has determined that it is not reasonably certain to exercise the option to extend the lease and has not included the extension period in the lease term. The monthly lease payment is approximately $0.02 million with annual escalation of approximately 3%. Variable lease costs are comprised primarily of the Company's proportionate share of operating expenses, property taxes, and insurance. Operating lease ROU assets and liabilities on our balance sheet are based on the net present value of the remaining lease payments over the remaining lease term. As the lease did not provide an implicit rate, the Company used its incremental borrowing rate based on the information available in determining the present value of lease payments. The Company’s incremental borrowing rate of 8% was based on the term of the lease, the economic environment of the lease, and reflects the rate the Company would have had to pay to borrow on a secured basis. The Company recorded a ROU asset and lease liability upon lease commencement in the amount of $0.8 million.

During the years ended December 31, 2024 and 2023, total rent expense, including common area maintenance charges, was $2.5 million and $2.3 million, respectively. The variable portion of the lease costs included in the totals were immaterial for the years ended December 31, 2024 and 2023.

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

	Year Ended December 31,
Assets:	2024		2023
Operating right-of-use assets	$	7,163	$	7,256

	Year Ended December 31,
Liabilities:	2024		2023
Lease liability, current	$	1,355	$	1,058
Lease liability, less current portion		7,543		8,086
Total lease liabilities	$	8,898	$	9,144

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

	Year Ended December 31,
	2024		2023
Cash paid for operating lease liabilities	$	1,938	$	1,845

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

Year ending December 31:
2025	$	2,151
2026		2,225
2027		2,302
2028		2,381
2029		2,080
Thereafter		73
Total lease payments		11,212
Less imputed interest		(2,314	)
Total lease liabilities	$	8,898

Weighted-average remaining lease term and discount rate for both the Hayward Lease and Miami Lease, as of December 31, 2024, were as follows:

Weighted-average remaining lease term	4.88
Weighted-average discount rate	9.8	%

Legal Proceedings

From time to time, we may be involved in various legal proceedings arising in the ordinary course of business.  Having resolved our earlier dispute with our former Chief Financial Officer, we are not presently a party to any legal proceedings that, in the opinion of management, could have a material adverse effect on our results of operations or financial condition. Regardless of outcome, however, any litigation could have an adverse impact on us because of defense and settlement costs, diversion of management resources, negative publicity, reputational harm, and other factors.