Note 6 - Leases

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note 6—Leases

In December 2011, the Company entered into a non-cancelable operating lease for office space in Los Angeles, California, which lease was subsequently amended in November 2012, December 2013, March 2014, July 2015, and December 2017. The initial term of the lease was for seven years and commenced on December 10, 2011. As amended, the Company rents approximately 65,656 square feet. The term of the lease runs until March 2026, and rent amounts payable by the Company increase approximately 3% per year. Concurrent with the execution of the lease, the Company provided the landlord an automatically renewable stand-by letter of credit in the amount of $1.0 million. The stand-by letter of credit is collateralized by a high-yield savings account, which is classified as restricted cash, long-term on the accompanying consolidated balance sheets.

In June 2012, the Company entered into a long-term lease agreement for office space in South San Francisco, California, which was subsequently amended in May 2014 and July 2015. As amended, the Company rents approximately 29,470 square feet. The term of this lease runs until March 2026, with the option to extend for an additional five-year term, and rents payable by the Company increase approximately 3% per year. The Company provided the landlord an automatically renewable stand-by letter of credit in the amount of $1.1 million. The stand-by letter of credit is collateralized by a high-yield savings account, which is classified as restricted cash, long-term on the accompanying consolidated balance sheets.

The Company also leases copier equipment for use in the office spaces. Components of copier lease expense include both fixed and variable lease expenses. 

Total rent expense for years ended December 31, 2023, 2022 and 2021 was approximately $4.9 million, $4.9 million and $5.1 million, respectively. For purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of the facility, including any periods of free rent and any renewal option periods that the Company is reasonably certain of exercising. The Company’s office and equipment leases generally have contractually specified minimum rent and annual rent increases are included in the measurement of the ROU asset and related lease liability. Additionally, under these lease arrangements, the Company may be required to pay directly, or reimburse the lessors, for real estate taxes, insurance, utilities, maintenance and other operating costs. Such amounts are generally variable and therefore not included in the measurement of the ROU asset and related lease liability but are instead recognized as variable lease expense in selling, general and administrative costs in the consolidated statements of operations when they are incurred.

The future minimum lease payments under ASC 842 as of December 31, 2023 were as follows (in thousands):

	Amount
2024	$	5,805
2025		5,983
2026		1,508
Total minimum lease payments	$	13,296
Less: imputed interest		(1,462	)
Total lease liabilities	$	11,834

In February 2019, the Company entered into a long-term sublease agreement for 12,429 square feet of the office space in Los Angeles, California. Also, in August 2023, the Company entered into a long-term sublease agreement for an additional 13,916 square feet of the office space in Los Angeles, California, which commenced in  November 2023. As a result of the long-term sublease entered during 2023, the Company recorded an impairment expense on the right-of-use asset of approximately $0.6 million. For both subleases, the term of the leases run until  March 2026 and the rent amounts payable to the Company increase approximately 3% per year. The Company recorded sublease income of $0.5 million for each of the years ended  December 31, 2023, 2022 and 2021, in other income (expenses) in the consolidated statements of operations.

The future minimum lease payments to be received as of December 31, 2023 were as follows (in thousands):

	Amount
2024	$	1,013
2025		1,044
2026		266
Total	$	2,323

Supplemental cash flow information related to leases for the year ended December 31, 2023:

Supplemental cash flow information related to leases for the twelve months ended December 31, 2023:
Operating cash flows used for operating leases (in thousands)	$	6,084
Right-of-use assets obtained in exchange for new operating lease liabilities		—
Weighted average remaining lease term (in years)		2.2
Weighted average discount rate		10.9	%