The Company leases office and laboratory space in Wilmington, Delaware under a noncancelable lease (the “Chestnut Run Lease”). The premises include approximately 81,000 rentable square feet and has an initial term of 162 months with 3 five-year extension options and certain expansion rights. Neither the option to extend nor the expansion rights were recognized as part of the Company's measurement of the right-of-use ("ROU") asset and operating lease liability as of June 30, 2024. Under the terms of the Chestnut Run Lease, the landlord provided an allowance towards the cost of completing tenant improvements for the premises. The Company concluded that the improvements resulting from both the landlord's build-out and the tenant improvements are the landlord's assets for accounting purposes. Costs incurred by the Company related to tenant improvements in excess of the landlord's allowance were treated as prepaid rent and increased the right-of-use asset on the commencement date.

Our operating lease costs for the three and six months ended June 30, 2024 were $1.0 million and $2.1 million, respectively. Our operating lease costs for the three and six months ended June 30, 2023 were $0.4 million and $0.9 million, respectively. Supplemental balance sheet and other information related to our operating and finance leases as of June 30, 2024 and December 31, 2023 were as follows:


(in thousands)
Leases	Classification	June 30, 2024			December 31, 2023
Assets
Operating	Operating lease right-of-use assets	$	29,574		$	30,412
Finance	Property and equipment, net		583			—
Total leased assets		$	30,157		$	30,412
Liabilities
Current:
Operating	Current liabilities, operating lease liability	$	2,232		$	1,481
Finance	Current liabilities, finance lease liability		507			—
Non-Current:
Operating	Operating lease liability		15,465			15,407
Total lease liabilities		$	18,204		$	16,888

Weighted-average discount rate
Operating lease			15.0	%		15.0	%
Finance lease			10.5	%
Weighted-average remaining lease term (years)
Operating lease			13.0			13.5
Finance lease			0.8

Supplemental cash flow information related to our leases for the six months ended June 30, 2024 and 2023 were as follows:


	Six months ended June 30,
(in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating lease	$	467	$	964
Operating cash flows from finance lease	10			—
Financing cash flows from finance lease	96			—
Non-cash transaction
Right-of-use asset obtained in exchange for lease obligations:
Finance lease	603			—

Future minimum annual lease payments for operating and finance lease at June 30, 2024 are as follows:


(in thousands)	Operating lease			Finance lease
2024 (remaining)	$	1,145		$	319
2025		2,746			213
2026		2,979			-
2027		3,054			-
2028		3,130			-
2029		3,209			-
Thereafter		26,427			-
Total undiscounted lease payments		42,690			532
Less imputed interest		(24,993	)		(25	)
Lease liability	$	17,697		$	507

The Company paid a security deposit for the Chestnut Run Lease in the form of a letter of credit of $4.0 million, which is included in the accompanying balance sheet as restricted cash as of June 30, 2024. The security deposit may be reduced to $0.5 million over time in accordance with the terms of the Chestnut Run Lease.

In connection with the Company’s expansion of operations in the State of Delaware, the Company was approved for a grant from the State of Delaware in 2021 that will provide up to $2.4 million in reimbursements over three years for the development of lab space and up to $3.1 million to increase jobs in Delaware to meet specific targeted levels through 2023, which was extended to 2026 during the second quarter of 2024. During the third quarter of 2022, the Company was approved for an additional grant from the State of Delaware for the development of lab space in the amount of $1.0 million. In 2022, the Company received cash grants of $3.4 million from the State of Delaware for the development of lab space. The Company has met the minimum requirements stated in the grant agreement in order to not be required to pay back any portion of the $3.4 million disbursed. The Company deferred the recognition of these grant funds as they relate to capitalized costs and has classified them as long-term liabilities in the accompanying balance sheet. The Company recognizes the grant funds in other income as grant income over the length of the lease term. Additionally, if the Company leaves the State of Delaware within five years of the disbursement, the Company is required to return an amount equal to the amount of grant funds disbursed on a pro-rated basis. As of June 30, 2024, the Company has received $0.5 million for increasing jobs which has been recorded in Other income.

The Company entered into employment agreements with key personnel providing for compensation and severance in certain circumstances, as defined in the respective employment agreements.

The Company sponsors a 401(k) defined‑contribution plan covering all employees. Participants are permitted to contribute up to 100% of their eligible annual pretax compensation up to an established federal limit on aggregate participant contributions. The Company provides a match of a maximum amount of 3% of the participant’s compensation. For both the three months ended June 30, 2024 and 2023, the Company made matching contributions of $0.2 million.

In 2023, the Company entered into a multi-year, multi-program agreement with AbCellera Biologics Incorporated ("AbCellera") to jointly discover, develop, and commercialize novel oncology medicines for up to five programs. Under the terms of the agreement, AbCellera will lead manufacturing activities and the Company will lead clinical development and global commercialization, subject to AbCellera’s option to co-promote any resulting commercial products in the United States. If, at any point one party in the collaboration opts-out of future co-development cost sharing, that party will be entitled to a royalty from commercialization of the collaboration target, dependent on the proportion of their co-development contributions compared to the total development costs of a target as defined within the agreement. The Company concluded that the agreement with AbCellera will be accounted for under the scope of ASC 808, Collaborative Arrangements, as both parties will actively participate in joint operating activities and are exposed to significant risks and rewards. Under ASC 808, certain transactions between collaborative arrangement participants should follow the accounting for revenue under ASC 606, Revenue from Contracts with Customers, when the collaborative arrangement participant is a customer for a distinct good or service. The Company determined that co-development arrangement as defined in our agreement with AbCellera does not meet the definition of a customer as defined by ASC 606. As a result, these activities will be accounted for as research and development costs. Costs related to the AbCellera collaboration were not material for the three and six months ended June 30, 2024.

In May 2024, the Company and Pathos AI, Inc. ("Pathos") entered into a license agreement under which the Company granted to Pathos an exclusive, sublicensable, world-wide license to its selective, brain-penetrant PRMT5 inhibitor, PRT811. Under the terms of the license agreement, the Company received a $3.0 million upfront, non-refundable payment. The agreement also includes a near term $4.0 million payment upon the earlier of 180 days following the effective date of the license agreement or the execution of a quality agreement between the parties pursuant to which the Company will transfer title to certain quantities of Active Pharmaceutical Ingredient (“API”). In addition, the Company may receive potential developmental milestone payments up to $37.0 million, potential sales milestone payments up to $100 million and a range of high single-digit to low double-digit royalties on PRT811 global net sales.

The Company assessed the license agreement with Pathos in accordance with ASC 606, Revenue from Contracts with Customer, and concluded that Pathos is a customer. The license agreement with Pathos includes the transfer of the following goods or services: (i) exclusive license to PRT811, (ii) transfer of licensed know-how and materials (i.e. datasets, regulatory and manufacturing documents, etc.), (iii) participation in a Joint Communication Committee ("JCC"), and (iv) execution of a quality agreement pursuant to which the Company will transfer title to certain API. The Company evaluated all of the promised goods or services within the contract and determined which goods and services were separate performance obligations. The Company determined that Pathos could not benefit from the license separately from the related know-how and materials, accordingly they represent one combined performance obligation. The execution of a quality agreement pursuant to which the Company will transfer title to certain API was identified as a separate performance obligation. The Company also determined the participation in the JCC is immaterial in the context of the license agreement as the Company has no decision-making ability through its participation in the JCC.

The transaction price is allocated to the performance obligation based upon relative standalone selling prices, which were estimated for (i) the exclusive license and know-how and materials using an adjusted market approach and (ii) execution of a quality agreement pursuant to which the Company will transfer title to certain API using a cost approach.

With respect to the accounting principles identified above, each performance obligation will be recognized at a point in time. The Company determined that the performance obligation for the license and transfer of related know-how and materials would be fully satisfied when the license is granted and key know-how and materials are transferred to Pathos as that is the point at which Pathos can fully use and benefit from the license to PRT811. The performance obligation for the execution of a quality agreement pursuant to which the Company will transfer title to certain API will be satisfied when the legal title to the API is transferred. Neither performance obligation was met as of June 30, 2024 and the $3.0 million upfront payment is included within deferred revenue on the balance sheet as of June 30, 2024. The Company estimates both performance obligations will be completed in the second half of 2024.

The Company enters into agreements with clinical research organizations ("CROs") to assist in the performance of research and development activities. Expenditures to CROs represent a significant cost in clinical development for the Company.