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Leases | 9 Months Ended
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Sep. 30, 2023
Leases [Abstract] |
Leases | (7) Leases The Company has an operating lease for lab space from Sanford Health, under a lease that started in June 2014 and initially ended in June 2019, at which time the lease was extended through August 2024. This lease can be terminated with one-year advance written notice. This lease was amended again in October 2022 to reduce the Company’s leased area to 21,014 square feet. Additionally, pursuant to the amendment in October 2022, the Company and Sanford Health agreed for the period of October 2022 to September 2023, the Company’s obligation to pay the Annual Rent shall be abated and not required to be paid when normally due (the “Abated Rent”). In exchange for the Abated Rent, effective October 1, 2022, the Company issued Sanford Health an 8% unsecured, convertible promissory note (see Note 9, Notes Payable for further discussion). The October 2022 amendment was accounted for as a lease modification under ASC 842 - Leases and the right-of-use asset and lease liability were remeasured at the modification date of October 1, 2022. The October 2022 lease amendment reduced the lease payment to approximately $45 thousand per month for the remainder of 2023 and approximately $46 thousand per month through 2024. The lease does not provide an implicit rate, and, therefore, the Company used an IBR of 6.92% as the discount rate when measuring the operating lease liability. The operating lease does not include an option to extend beyond the life of the current term. The Company estimated the IBR based upon comparing interest rates available in the market for similar borrowings and the credit quality of the Company. The Company entered into a lease for office, laboratory, and warehouse space in November 2020, which was amended in July 2022 to add additional administrative and lab space. This amended lease has a 3-year term, with options to extend for 3 additional periods of 3 years each. The options were not included in the right of use calculation as it is unclear as to whether or not the location will meet the Company’s requirements beyond the next three years. The July 2022 amendment was accounted for as a separate contract under ASC 842 – Leases. The lease costs are $36 thousand and $3 thousand per month for the original leased space on November 2020 and the amendment on July 2022, respectively. The Company used an IBR of 4.69% and 6.60% as the discount rate when measuring the operating lease liability for the original leased space on November 2022 and the amended on July 2022, respectively. The Company estimated the IBR based upon comparing interest rates available in the market for similar borrowings and the credit quality of the Company. The Company has the following finance leases: • In December 2018, the Company entered into a finance lease with Dakota Ag Properties for a new animal facility which includes the surrounding land. The facility and the land have been accounted for as separate lease components. The lease is based upon payback of $4 million in construction costs, with a 20-year term at an interest rate of 8%. The monthly payment for this lease is $33.5 thousand. The Company has the option to purchase the asset at any time during the term of the lease for the balance of the unamortized lease payments. • In December 2018, the Company entered into an equipment lease for a 12,000-gallon propane tank that is located on the Company’s animal facility. The lease is for five years, with an annual payment of $8 thousand. The Company has the option to purchase the asset at any time during the term of the lease for the balance of the unamortized lease payments. The lease agreements do not require material variable lease payments, residual value guarantees or restrictive covenants. The amortizable lives of the operating lease assets are limited by their expected lease terms. The amortizable lives of the finance lease assets are limited by their expected lives, as the Company intends to exercise the purchase options at the end of the leases. The following is the estimated useful lives of the finance lease assets:
Animal Facility | 40 years
Equipment | 3–7 years
Land | Indefinite
The Company’s weighted-average remaining lease term and weighted-average discount rate for operating and finance leases as of September 30, 2023 are:
|  | Operating |  |  | Finance |
Weighted-average remaining lease term |  | 0.85 |  |  | 15.17 |
Weighted-average discount rate |  |  | 6.77 | % |  |  | 7.72 | %
The table below reconciles the undiscounted future minimum lease payments under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the condensed balance sheet as of September 30, 2023:
|  | Operating |  |  | Finance |
2023 - remaining |  | $ | 174,721 |  |  | $ | 100,374 |
2024 |  |  | 368,320 |  |  |  | 401,496 |
2025 |  |  | — |  |  |  | 401,496 |
2026 |  |  | — |  |  |  | 401,496 |
2027 |  |  | — |  |  |  | 401,496 |
Thereafter |  |  | — |  |  |  | 4,382,998 |
Undiscounted future minimum lease payments |  |  | 543,041 |  |  |  | 6,089,356 |
Less: Amount representing interest payments |  |  | (14,263 | ) |  |  | (2,507,425 | )
Total lease liabilities |  |  | 528,778 |  |  |  | 3,581,931 |
Less current portion |  |  | (528,778 | ) |  |  | (129,489 | )
Noncurrent lease liabilities |  | $ | — |  |  | $ | 3,452,442 |
Operating lease expense was approximately $246 thousand and $304 thousand, respectively, for the three months ended September 30, 2023 and 2022, and $738 thousand and $889 thousand, respectively, for the nine months ended September 30, 2023 and 2022. Operating lease costs are included within research and development expenses on the condensed statements of operations. Finance lease costs for the three months ended September 30, 2023 and 2022 included approximately $22 thousand and $25 thousand, respectively, in right-of-use asset amortization and approximately $70 thousand and $71 thousand, respectively, of interest expense. Finance lease costs for the nine months ended September 30, 2023 and 2022 included approximately $70 thousand and $98 thousand, respectively, in right-of-use asset amortization and approximately $210 thousand and $214 thousand, respectively, of interest expense. Finance lease costs are included within research and development expenses on the condensed statements of operations. Cash payments under operating and finance leases were approximately $118 thousand and $100 thousand, respectively, for the three months ended September 30, 2023. Cash payments under operating and finance leases were approximately $354 thousand and $306 thousand, respectively, for the nine months ended September 30, 2023. Cash payments under operating and finance leases were approximately $309 thousand and $103 thousand, respectively, for the three months ended September 30, 2022. Cash payments under operating and finance leases were approximately $930 thousand and $334 thousand, respectively, for the nine months ended September 30, 2022. Short-term lease expense recognized in the three and nine months ended September 30, 2023 and 2022, was not material.

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