Note 7 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

7. Commitments and Contingencies

Leases

The Company has evaluated its leases under ASC 842, Leases, and determined that it has one lease that is classified as an operating lease. The classification of this lease is consistent with the Company’s determination under the previous accounting standard.

When available, the Company will use the rate implicit in the lease to discount lease payments to present value; however, the Company’s current lease does not provide an implicit rate. Therefore, the Company used its incremental borrowing rate of 6.25% to discount the lease payments based on the date of the lease commencement.

The Company has one operating lease for its corporate office and laboratory facility (“Facility”) that was signed in December 2020. The Company moved into the Facility in January 2021. The Facility lease has an initial term of four years and five months, beginning on January 1, 2021.

The terms of the Facility lease were modified effective September 27, 2024 through the execution of a new lease. The modified terms extended the non-cancelable lease term through May 2031. The modified terms also included the right to use an additional 10,724 square feet that is expected to commence and be available for the Company’s use in May 2025. The classification and incremental borrowing rate for the lease did not change as a result of this lease modification. Right-of-use assets obtained in exchange for new operating lease liabilities due to the lease modification were $6.1 million for a total right-of-use assets as of September 30, 2024 of $7.0 million. The remaining lease term of the Facility lease is 6.7 years as of September 30, 2024. The Company has $568 thousand of restricted cash associated with an irrevocable letter of credit required by the landlord to enter into this lease.

Lease costs related to the Facility were $0.3 million for the three months ending September 30, 2024 and 2023 and $1.0 million for the nine months ending September 30, 2024 and 2023. Cash payments related to the Facility were $0.3 million for the three months ending September 30, 2024 and 2023 and $1.0 million for the nine months ending September 30, 2024 and 2023.

The table below presents the undiscounted cash flows for the lease term. The undiscounted cash flows are reconciled to the operating lease liabilities recorded on the condensed consolidated balance sheet (in thousands):

Remainder of 2024	$	348
2025		733
2026		1,018
2027		1,412
2028		1,441
Thereafter		3,614
Total minimum lease payments		8,566
Less: amount of lease payments representing interest		(1,689	)
Present value of future minimum lease payments		6,877
Less: operating lease obligations, current portion		(557	)
Operating lease obligations, long-term portion	$	6,320

Defined Contribution Plan

The Company has a 401(k) defined contribution plan (the “401(k) Plan”) for substantially all its employees. Eligible employees may make pre-tax or post-tax (Roth) contributions to the 401(k) Plan up to statutory limits. Since January 1, 2020, the Company has been matching employee contributions to the plan up to 4% of salary. On July 1, 2023, the Company increased the employee matching contribution from 4% to 6%. The Company made matching contributions of $0.1 million and $0.1 million for the three months ended September 30, 2024 and 2023, respectively. The Company made matching contributions of $0.3 million and $0.2 million for the nine months ended September 30, 2024 and 2023, respectively.