After the initial adoption of ASC Topic 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 identified asset in exchange for consideration over a period of time. If a lease is identified, the Company will apply the guidance from ASC Topic 842 to properly account for the lease.

On November 23, 2020, the Company entered into a lease agreement, pursuant to which the Company permanently leased approximately 8,051 square feet of office space (the “Permanent Lease”) in San Diego once certain tenant improvements 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 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 are approximately $40,800 with 3% annual escalators.

The Company determined that the Permanent Lease is considered an operating lease under ASC Topic 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) are expensed as incurred.

The table below summarizes the Company’s lease liabilities and corresponding right-of-use assets as of March 31, 2024 (in thousands):


	March 31, 2024
ASSETS
Operating lease right-of-use assets	$	1,299
Total lease right-of-use assets	$	1,299

LIABILITIES
Current
Operating lease liability	$	506
Noncurrent
Operating lease liability, net of current portion	$	888
Total lease liabilities	$	1,394

Weighted average remaining lease term:	2.83
Weighted average discount rate:		6	%

Variable lease expense was approximately $153,000 and $146,000 for the years ended March 31, 2024 and 2023, respectively. Operating lease expense was approximately $503,000 and $499,000 for the years ended March 31, 2024 and 2023, respectively.

Cash outflows associated with the Company’s operating lease for the years ended March 31, 2024 and 2023 were $509,000 and $430,000, respectively.

Future lease payments relating to the Company’s operating lease liabilities as of March, 31, 2024 are as follows (in thousands):


Fiscal year ending March 31, 2025		523
Fiscal year ending March 31, 2026		538
Fiscal year ending March 31, 2027		460
Total future lease payments		1,521
Less: Imputed Interest		(127	)
Total lease obligations		1,394
Less: Current obligations		(506	)
Noncurrent lease obligations	$	888