After the initial adoption of Accounting Standards Codification Topic 842 (“ASC 842”), on an on-going basis, the Company evaluates all contracts upon inception and determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If a lease is identified, the Company will apply the guidance from ASC 842 to properly account for the lease.

From October 2019 to July 2021, the Company rented office space in Solana Beach, California. This agreement was a month-to-month contract and could be terminated at-will by either party at any time. As such, the Company concluded that this agreement did not contain a lease and was expensed as incurred (referred to as “rent expense”). Monthly rental payments were approximately $4,000 per month.

On November 23, 2020, the Company entered into two lease agreements, pursuant to which the Company temporarily leased approximately 3,212 square feet of lab and office space (the “Temporary Lease”) in San Diego and permanently leased approximately 8,051 square feet of lab and office space (the “Permanent Lease”) in San Diego once certain tenant improvements for the Company’s permanent premises were completed by the landlord and the premises were ready for occupancy. Additionally, on November 17, 2021, the Permanent Lease was amended to add an additional 2,892 square feet of office space in the same building. The Temporary Lease commenced on November 27, 2020 and served as temporary premises until the Permanent Lease was ready for occupancy. The Permanent Lease commenced on December 17, 2021 and is intended to serve as the Company’s permanent premises for approximately sixty-two months. Monthly rental payments will be approximately $40,800 with 3% annual escalators.

The Company determined that the Temporary Lease is considered a short term lease under ASC 842 and therefore elected an accounting policy for short term leases to recognize lease payments as an expense on a straight-line basis over the lease term (referred to as “short term lease expense”). Variable lease expenses related to the short term lease, such as payments for additional monthly fees to cover the Company’s share of certain facility expenses (common area maintenance, or CAM) are expensed as incurred.

The Company determined that the Permanent Lease is considered an operating lease under ASC 842, and therefore upon the lease commencement date of December 17, 2021, recognized lease liabilities and corresponding right-of-use assets of $2.3 million. The Company records operating lease expense on a straight-line basis over the life of the lease (referred to as “operating lease expense”). Variable lease expenses associated with the Company’s leases, such as payments for additional monthly fees to cover the Company’s share of certain facility expenses (common area maintenance, or CAM) are expensed as incurred.

The table below summarizes the Company’s lease liabilities and corresponding right-of-use assets as of December 31, 2022 (in thousands):


	December 31, 2022
ASSETS
Operating lease right-of-use assets	$	1,803
Total lease right-of-use assets	$	1,803

LIABILITIES
Current
Operating lease liability	$	488
Noncurrent
Operating lease liability, net of current portion	$	1,414
Total lease liabilities	$	1,902

Weighted average remaining lease term:	4.08 years
Weighted average discount rate:		6	%

The Company recorded no rent expense for the three and nine months ended December 31, 2022, respectively, and approximately $0 and $18,000 for the three and nine months ended December 31, 2021, respectively. Variable lease expense was approximately $34,000 and $110,000 for the three and nine months ended December 31, 2022, respectively, and approximately $9,000 and $27,000 for the three and nine months ended December 31, 2021, respectively. For the three and nine months ended December 31, 2022, short term lease expense was $0, respectively, and approximately $39,000 and $117,000 for the three and nine months ended December 31, 2021, respectively. Lastly, operating lease expense was approximately $114,000 and $373,000 for the three and nine months ended December 31, 2022, respectively, and $43,000 for the three and nine months ended December 31, 2021.

Cash flows associated with the Company’s operating lease for the three and nine months ended December 31, 2022 was approximately $59,000 and $304,000, respectively.

Future lease payments relating to the Company’s operating lease liabilities as of December 31, 2022, are as follows (in thousands):


Fiscal year ending March 31, 2023	$	126
Fiscal year ending March 31, 2024		508
Fiscal year ending March 31, 2025		522
Fiscal year ending March 31, 2026		538
Fiscal year ending March 31, 2027		460
Total future lease payments		2,154
Less: Imputed interest		(252	)
Total lease obligations		1,902
Less: Current obligations		(488	)
Noncurrent lease obligations	$	1,414