Leases

3 Months Ended

Mar. 31, 2024

Note 7. Leases

Lease-related costs for the three months ended March 31, 2024 and 2023 are as follows (in thousands):

	2024		2023
Operating lease cost	$	864	$	982
Variable lease cost		436		394
Total lease cost	$	1,300	$	1,376

As of March 31, 2024, the maturities of the operating lease liabilities and a reconciliation to the present value of lease liabilities were as follows (in thousands):

	Remaining Lease Payments
Remainder of 2024	$	3,339
2025		4,527
2026		4,585
2027		4,549
2028		2,975
Thereafter		10,053
Total remaining undiscounted lease payments	$	30,028
Less: Imputed interest		(6,441	)
Less: Lease incentives ⁽¹⁾		(9,104	)
Total operating lease liabilities		14,483
Less: current portion		(1,610	)
Long-term operating lease liabilities	$	12,873
Weighted-average remaining lease term (in years)		6.2
Weighted-average discount rate		7.9	%

(1)	Includes lease incentives that may be realized in 2024 for the costs of leasehold improvements.

The following table provides certain cash flow and supplemental cash flow information related to the Company’s lease liabilities for the three months ended March 31, 2024 and 2023 (in thousands):

		2024				2023
Operating cash paid to settle operating lease liabilities		$	1,097			$	1,059

In December 2021, the Company signed a 10-year lease for approximately 67,000 square feet of space in New Haven, Connecticut. The lease commenced on January 8, 2022 with rent payments beginning on July 7, 2022. Under the lease, the landlord agreed to reimburse the Company for up to $9.1 million in improvements to the space, to be used for such improvements as the Company deems “necessary or desirable”. On September 13, 2022, the Company filed a lawsuit against the landlord, alleging that the landlord has: (i) refused to reimburse the Company for costs related to improvements already incurred and submitted, (ii) delayed the Company’s completion of improvements, in order to avoid reimbursing the costs of those improvements, and (iii) improperly rejected the Company’s proposed improvement plans. The Company accounted for these lease incentives as an offset to the lease liability recorded at the inception of the lease. Although the Company believes it is contractually entitled to the $9.1 million of lease incentives, based on the current status of the litigation, the Company cannot determine the likely outcome or estimate the impact on such carrying values.

The Company incurred and recognized total leasehold improvements of approximately $1.6 million related to reimbursable construction costs which were included in construction in progress within Property and equipment, net, in the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023.