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Note 8 - Leases

12 Months Ended

Dec. 31, 2021

NOTE 8. Leases

The Company has obtained the right of use for office and manufacturing facilities under five operating lease agreements with initial terms exceeding one year and has three operating lease agreements for facilities and one for manufacturing equipment with initial terms of one year or less.

The Company obtained the right of use of real estate located in South San Francisco, California, in November 2020 under a lease that was scheduled to terminate on September 30, 2025, which has been extended until March 31, 2029, with no extension option. The Company also obtained the right of use of real estate located in South San Francisco, California, in June 2015 that was scheduled to terminate on April 30, 2020, with a five-year extension option that the Company exercised in July 2019, extending the lease until April 30, 2025, which has been extended until March 31, 2029, with an option to extend for an additional eight years. The right of use of these premises was assessed as partially impaired as of December 31, 2019 (see Note 14). In addition, the Company has the right of use of a facility located in South San Francisco, California, under a lease that, following a one-year extension, now terminates on July 31, 2022, with no extension option. Further, the Company has the right of use of a facility located in South San Francisco, California, under a lease that terminates on March 30, 2029, with a five-year renewal option. Further, the Company had identified an embedded lease for the rental of facilities in Burlingame, California, within a Statement of Work for the manufacture of bulk vaccine product that was expected to be completed early in September 2022. This lease was partially extended until May 31, 2025, with two 30-month extension options, in connection with the business combination (see Note 3) and partially terminated, for which a gain of $116,000 was recorded within research and development expense. Further, the Company obtained, via the Merger in February 2018, the right of use of facilities located in Alpharetta, Georgia, that terminated on February 28, 2021, with no extension option. These facilities were subleased for the remainder of the lease term effective November 30, 2018. The Company has also identified a short-term lease for the rental of facilities in Burlingame, California, and short-term embedded leases for the rental of facilities in South San Francisco, California and Lodi, Wisconsin.

As of December 31, 2021, the weighted average discount rate for operating leases with initial terms of more than one year was 9.27% and the weighted average remaining term of these leases was 6.93 years. Discount rates were determined using the Company’s marginal rate of borrowing at the time each lease was executed or extended.

The following table summarizes the Company’s undiscounted cash payment obligations for its operating lease liabilities with initial terms of more than twelve months as of December 31, 2021 (in thousands):

Year Ending December 31,	Amount
2022	$	2,071
2023		2,123
2024		2,195
2025		2,297
2026		2,852
Thereafter		6,770
Undiscounted total		18,308
Less: imputed interest		(5,300	)
Present value of future minimum payments		13,008
Current portion of operating lease liability		(1,011	)
Operating lease liability, net of current portion	$	11,997

The Company presently has no finance leases and future obligations of $14,000 for facilities and $8,000 for equipment under operating leases with initial terms of one year or less.

Certain operating lease agreements for facilities include non-lease costs, such as common area maintenance, which are recorded as variable lease costs. Operating lease expenses for the years ended December 31, 2021, 2020 and 2019, are summarized as follows (in thousands):

	*Year Ended December 31,*
	*2021*			*2020*			*2019*
Lease cost
Operating lease cost	$	2,513		$	1,145		$	959
Short-term lease cost		340			13			15
Variable lease cost		1,233			264			162
Sublease income		(36	)		(217	)		(217	)
Total lease cost	$	4,050		$	1,205		$	919

Net cash outflows associated with operating leases totaled $4.4 million, $1.1 million and $983,000 in the years ended December 31, 2021, 2020 and 2019, respectively.