Note 8 - Leases

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

NOTE 8.  Leases

The Company has obtained the right of use for office and manufacturing facilities under six operating lease agreements with initial terms exceeding one year.

The Company obtained the right of use of real estate located in South San Francisco, California, in November 2020 under a lease that was scheduled to terminate on September 30, 2025, which has been extended until March 31, 2029, with no additional extension option. The Company obtained the right of use of another property also located in South San Francisco, California, in June 2015 that was scheduled to terminate on April 30, 2020, with a five-year extension option that the Company exercised in July 2019, extending the lease until April 30, 2025, which has been further extended until March 31, 2029, with an option to extend for an additional eight years. In September 2021, the Company executed a lease for a facility in South San Francisco, California, with an initial term expiring on March 31, 2029, with an option to extend for an additional eight years. This lease includes a component for tenant improvements that were substantially completed in the three months ended September 30, 2022, when the lease for this component was deemed to have commenced for accounting purposes. It also includes a component for which tenant improvements of $3.1 million were completed and were recorded within right-of-use assets in the consolidated balance sheets when they were substantially completed in the three months ended March 31, 2023. Further, the Company has the right of use of a facility located in South San Francisco, California, under a lease that terminates on March 30, 2029, with a five-year renewal option. The Company also has the right of use of two facilities in Burlingame, California, under leases that terminate on  May 31, 2025, both of which have two 30-month extension options.

As of December 31, 2023, the weighted average discount rate for operating leases with initial terms of more than one year was 9.80% and the weighted average remaining term of these leases was 5.12 years. Discount rates were determined using the Company’s marginal rate of borrowing at the time each lease was executed or extended.

The following table summarizes the Company’s undiscounted cash payment obligations for its operating lease liabilities with initial terms of more than twelve months as of  December 31, 2023 (in thousands):

Year Ending December 31,	Amount
2024	$	4,381
2025		4,511
2026		5,031
2027		5,207
2028		5,389
Thereafter		1,348
Undiscounted total		25,867
Less: imputed interest		(5,779	)
Present value of future minimum payments		20,088
Current portion of operating lease liability		(2,703	)
Operating lease liability, net of current portion	$	17,385

Certain operating lease agreements for facilities include non-lease costs, such as common area maintenance, which are recorded as variable lease costs. Operating lease expenses for the years ended December 31, 2023 and 2022, including variable lease costs for one lease that has not yet commenced for accounting purposes, are summarized as follows (in thousands):

	Year Ended December 31,
	2023		2022
Operating lease cost	$	6,170	$	4,159
Short-term lease cost		52		436
Variable lease cost		1,864		1,312
Total operating lease cost	$	8,086	$	5,907