On May 12, 2022, the Company entered into a new, non-cancelable facility operating lease (the "Corporate Office Lease") of office space for its corporate headquarters, replacing its existing corporate headquarters lease that expired on July 31, 2022. The Corporate Office Lease is for 2,747 square feet of an office building in Carlsbad, California. The initial contractual term is for 39-months commencing on June 1, 2022 and expiring on August 31, 2025. The Company has the option to renew the Corporate Office Lease for an additional 36-month period at the prevailing market rent upon completion of the initial lease term. The Company has determined it is not reasonably certain that it will exercise this renewal option.

Commencing on June 1, 2022, the Company is subject to contractual monthly lease payments of $10,850, plus certain utilities, for the first 12 months with 3 percent escalations at the first, second and third lease commencement anniversaries. The Corporate Office Lease is subject to conditional abatement of fifty percent (50%) of such base rent during the second, third and fourth full calendar months of the initial lease term, as set forth in the lease agreement, as well as a $28,000 tenant improvement allowance.

The Corporate Office Lease is also subject to additional variable charges for common area maintenance, insurance, taxes and other operating costs. This additional variable rent expense is not estimable at lease inception. Therefore, it is excluded from the Company’s straight-line expense calculation at lease inception and is expensed as incurred.

As of September 30, 2022, the Company recognized an operating right-of-use asset related to the Corporate Office Lease in the amount of $324,000 and a current and noncurrent operating lease liability related to the Corporate Office Lease of $101,000 and $239,000, respectively, calculated using a discount rate of 10.75%. As of September 30, 2022, the total remaining future minimum lease payments associated with the Corporate Office Lease of approximately $395,000, less imputed interest of $55,000, will be paid over the remaining lease term of approximately 2.9 years.

The Company recognized operating lease expense associated with its Corporate Office Lease and its predecessor corporate headquarters lease of approximately $49,000 and $157,000 in the three and nine months ended September 30, 2022, respectively.

Maturities of the Company's operating lease liabilities as of September 30, 2022 are as follows:


Year ending December 31,
2022 (remaining)	$	43
2023		133
2024		137
2025		82
Total operating lease payments		395
Less: imputed interest		(55	)
Total operating lease obligations	$	340

Consistent with past practice, on May 9, 2022 and May 24, 2022, the Company entered into agreements to finance certain insurance policies which renewed in April 2022 and May 2022. The financing arrangements entered into on May 9, 2022 and May 24, 2022 have stated interest rate of 3.82% and 6.92%, respectively, and are payable over a 9-month period and 10-month period, respectively, with the first payment commencing May 27, 2022. The insurance financing arrangements are secured by the associated insurance policies. As of September 30, 2022 and December 31, 2021, the aggregate remaining balance under the Company's insurance financing arrangements was $0.4 million and $0.1 million, respectively.

In order to better utilize the Company’s resources on the implementation of its refocused clinical programs and corporate strategy, on September 9, 2022 the Company committed to a cost-reduction plan. This cost-reduction plan consisted of an approximately 20% reduction in workforce force to better align the Company’s resources on its clinical studies, including its lead asset, LB1148.

Associated with the reduction in workforce, the Company has recognized restructuring costs of $410,000 at the condensed consolidated statements of operations for the three and nine months ended September 30, 2022, consisting of severance and benefits payments pursuant to employment agreements and the execution of severance and release agreements. As of September 30, 2022, the Company has recognized a liability in the amount of approximately $392,000 associated with the restructuring in accrued liabilities at the condensed consolidated balance sheets. The Company expects to substantially complete the remaining cash payments of the employee severance and benefits incurred by the end of the first quarter of 2023.

Although the Company will continue to identify other cost-saving opportunities in its normal course of business, it does not expect to incur any other significant costs associated with the cost reduction-plan announced on September 9, 2022.

From time to time, the Company may be involved in various lawsuits, legal proceedings, or claims that arise in the ordinary course of business. Management believes there are no claims or actions pending against the Company through September 30, 2022, which will have, individually or in the aggregate, a material adverse effect on its business, liquidity, financial position, or results of operations. Litigation, however, is subject to inherent uncertainties, and an adverse result in such matters may arise from time to time that may harm the Company’s business.

In accordance with the Company’s amended and restated memorandum and articles of association, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving in such capacity. There have been no claims to date, and the Company has a directors and officers liability insurance policy that may enable it to recover a portion of any amounts paid for future claims.