After the initial adoption of ASC 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.

On November 23, 2020, the Company entered into a lease agreement, pursuant to which the Company permanently leased approximately 8,051 square feet of lab and 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 will be approximately $40,800 with 3% annual escalators.

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) are expensed as incurred.

The table below summarizes the Company’s lease liabilities and corresponding right-of-use assets as of December 31, 2025 (in thousands except the year and percentage):


	December 31, 2025
ASSETS
Operating lease right-of-use assets	$	525
Total lease right-of-use assets	$	525

LIABILITIES
Current
Operating lease liability	$	533
Noncurrent
Operating lease liability, net of current portion	$	44
Total lease liabilities	$	577

Weighted average remaining lease term:	1.08
Weighted average discount rate:		6	%

Variable lease expense was approximately $40,000 and $113,000 for the three and nine months ended December 31, 2025, respectively, and approximately $34,000 and $56,000 for the three and nine months ended December 31, 2024, respectively. Operating lease expense was approximately $126,000 and $378,000 for the three and nine months ended December 31, 2025, respectively, and approximately $126,000 and $378,000 for the three and nine months ended December 31, 2024, respectively.

Cash outflows associated with the Company’s operating lease for the three and nine months ended December 31, 2025, were approximately $135,000 and $402,000, respectively, and approximately $129,000 and $389,000 for the three and nine months ended December 31, 2024, respectively.

Future lease payments relating to the Company’s operating lease liabilities as of December 31, 2025 are as follows (in thousands):


Fiscal year ending March 31, 2026		138
Fiscal year ending March 31, 2027		459
Total future lease payments		597
Less: Imputed interest		(20	)
Total lease obligations		577
Less: Current obligations		(533	)
Noncurrent lease obligations	$	44