Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.24.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2023
Commitments and Contingencies  
Commitments and Contingencies

8.

Commitments and Contingencies

Operating Leases

The Company leases office space under a non-cancellable operating lease that was set to expire in January 2024. In May 2023, the Company signed a lease amendment that extended the lease expiration date to June 30, 2029, and agreed to new monthly rates. The lease amendment was considered a lease modification and the Company adjusted its right-of-use asset and operating lease liabilities accordingly as shown in the table below.

Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date the Company takes possession of the property. At lease inception, the Company determines the lease term by assuming the exercise of those renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. The lease term is used to determine whether a lease is financing or operating and is used to calculate straight-line rent expense. Additionally, the depreciable life of leasehold improvements is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The following table reflects our lease assets and our lease liabilities at December 31, 2023 and December 31, 2022 (in thousands):

December 31,

    

2023

    

2022

Assets:

 

  

 

  

Operating lease right-of-use assets

$

616

$

120

Liabilities:

 

  

 

  

Operating lease liabilities, current

$

$

154

Operating lease liabilities, non-current

$

636

$

39

Operating lease right-of-use assets are included in other assets. Operating lease liabilities, current, are included in accrued liabilities and Operating lease liabilities, non-current, are include in other liabilities on the consolidated balance sheets.

Lease Costs:

The components of lease costs were as follows (in thousands):

    

December 31,

2023

2022

Operating lease cost

$

162

$

100

Short term lease cost

 

48

 

43

Total lease cost

$

210

$

143

As of December 31, 2023, the maturity of operating lease liabilities was as follows:

(in thousands)

    

Payments due in:

Year ending December 31, 2024

 

$

62

Year ending December 31, 2025

183

Year ending December 31, 2026

189

Year ending December 31, 2027

194

Year ending December 31, 2028

200

Thereafter

103

Total minimum lease payments

 

931

Less: Amounts representing interest

 

(295)

Present value of capital lease obligations

$

636

8.

Commitments and Contingencies, continued

Lease Term and Discount Rate:

December 31, 2023

 

Weighted-average remaining lease term (in years)

    

5.50

Weighted-average discount rate

 

13.0

%

The discount rate was calculated by using the Company’s estimated incremental borrowing rate.

Other Information:

Supplemental cash flow information related to leases was as follows (in thousands):

    

Year Ended December 31,

2023

2022

Operating cash outflows from operating leases

$

149

$

153

Finance Lease

During August 2020, the Company entered into a lease agreement for equipment under a capital lease with a term of 36 months. The equipment under the lease is collateral for the agreement and is included within property and equipment, net on the consolidated balance sheets. The lease expired in August 2023.

Management Team Retention Bonus

On September 1, 2022, the “Company adopted its Management Team Retention Bonus Plan (the “Retention Plan”), to incentivize certain management level employees (the “Managers”) to remain intact through and shortly following a potential “Change of Control” (as defined in the Retention Plan). The aggregate Retention Plan bonus amounts for all Managers is $1,250,000.

The Retention Plan provides that each Manager is eligible to receive a lump sum cash amount under the Retention Plan, on the earlier of the six-month anniversary of the date of a Change of Control or at the time of such Manager’s involuntary termination other than for “Cause” (as defined in the Retention Plan) or termination for “Good Reason” (as defined in the Retention Plan). The Retention Plan will terminate upon the earlier of June 30, 2023 if a Change of Control has not occurred by such date or upon the payment of all Retention Bonus Amounts. The Retention Plan expired on June 30, 2023 unused, and no accruals were made.

Contingencies

In the normal course of business, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of a possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred.

The Company’s management does not believe that any such matters, individually or in the aggregate, will have a materially adverse effect on the Company’s consolidated financial statements.