Property and Equipment and Leases

Property and equipment as of December 31, 2025 and 2024 consisted of the following (in thousands):


	December 31,
	2025		2024
Furniture and equipment	$	104	$	248
Computers and software	34		34
Right-of-use assets	336		741
Leasehold improvements	239		896
Total property and equipment	713		1,919
Less accumulated depreciation	(253)		(710)
Property and equipment, net	$	460	$	1,209

Depreciation expense was $0.3 million and $0.2 million for the year ended December 31, 2025 and 2024, respectively.

Avalo leases its main administrative office space located in Wayne (Chesterbrook), Pennsylvania, which is classified as an operating lease. The initial annual base rent for this office is $0.2 million and the annual operating expenses are approximately $0.1 million. The annual base rent is subject to periodic increases of approximately 2.4% over the term of the lease. The lease has an initial term of 5.25 years from the lease commencement on December 1, 2021 and expires on February 28, 2027.

Additionally, Avalo had an operating lease for administrative office space in Rockville, Maryland, which the Company elected to early-terminate effective January 31, 2026 by providing notice and paying the $0.3 million contractual early termination fee in the fourth quarter of 2024, resulting in a remeasurement and reduction of the lease liability and right-of-use (“ROU”) asset by $0.3 million. Because the Company had vacated the property, the ROU asset related to the property had been fully amortized as of December 31, 2025. The lease liability and lease payments related to the property continued through the early-termination date of January 31, 2026. The annual base rent for this office was $0.2 million and was subject to annual 2.5% increases over the term of the lease. The lease provided for a rent abatement for a period of 12 months following the Company’s date of occupancy. The lease had an initial term of 10 years from the date the Company made its first annual fixed rent payment, which occurred in January 2020.

The weighted average remaining term of the operating leases at December 31, 2025 was 1.1 years.

Supplemental balance sheet information related to the leased properties include (in thousands):


	As of December 31,
	2025		2024
Right-of-use assets	$	336	$	741

Accrued expenses and other current liabilities	$	392	$	568
Other long-term liabilities	35		350
Total operating lease liabilities	$	427	$	918

The operating lease right-of-use assets are included in property and equipment and the lease liabilities are included in accrued expenses and other current liabilities and other long-term liabilities in the Company’s consolidated balance sheets. The Company utilized a weighted average discount rate of 10.3% to determine the present value of the lease payments.

The components of lease expense for the years ended December 31, 2025 and 2024 were as follows (in thousands):


	Year Ended December 31,
	2025		2024
Operating lease cost*	$	477	$	456
*Includes short-term leases, which are immaterial.

The following table shows a maturity analysis of the operating lease liability as of December 31, 2025 (in thousands):



	Undiscounted Cash Flows
2026	392
2027	63
Total lease payments	$	455
Less implied interest	(28)
Total	$	427