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14. Operating Lease Obligation
On September 10, 2021, the Company entered into a lease for approximately 11,383 square feet of space in San Diego, California. Terms of the lease include the following:
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The length of term of the lease is 88 months from the lease commencement date (as defined).
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The lease commencement date is estimated to be on or around January 1, 2022. |
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The monthly rent for the first year of the lease is $51,223 and increases approximately 3% per year.
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The lease provides for a base rent abatement for months two through five in the first year of the lease.
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The landlord is providing a tenant improvement allowance of $81,860 to be used for improvements as specified in the lease.
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The Company is responsible for other expenses such as electric, janitorial, etc. |
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The Company opened an irrevocable letter of credit in the amount of $188,844 in favor of the landlord. The letter of credit expires on October 8, 2022.
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As discussed above, the lease provides for scheduled increases in base rent and scheduled rent abatements. Rent expense is charged to operations using the straight-line method over the term of the lease which results in rent expense being charged to operations at inception of the lease in excess of required lease payments. This excess (formerly classified as deferred rent) is shown as a reduction of the
operating lease right-of-use asset in the accompanying balance sheet. As the Company has already started making improvements to the facility, the rent expense will be spread commencing from September 10, 2021.
The following tables present the components of lease expense and supplemental balance sheet information related to the operating lease obligation (in thousands).
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Three Months Ended |
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September 30, |
|
2021 |
Operating lease cost: |
$ |
35 |
Total lease cost |
$ |
35 |
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Other information: |
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Cash paid for amounts included in the measurement lease liability: |
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|
Operating cash flows from operating lease |
$ |
35 |
Operating cash flows from operating lease obligation |
$ |
— |
Future minimum payments under the operating lease obligation are due as follows (in thousands):
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Fiscal period ending on September 30: |
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Principal |
|
Imputed Interest |
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Total |
2022 |
|
$ |
147 |
|
$ |
196 |
|
$ |
343 |
2023 |
|
|
385 |
|
|
244 |
|
|
629 |
2024 |
|
|
432 |
|
|
215 |
|
|
647 |
2025 |
|
|
485 |
|
|
182 |
|
|
667 |
2026 |
|
|
542 |
|
|
145 |
|
|
687 |
Thereafter |
|
|
1,612 |
|
|
172 |
|
|
1,784 |
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|
|
|
|
|
|
|
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Total minimum lease payments |
|
|
3,603 |
|
$ |
1,154 |
|
$ |
4,757 |
Less: current portion |
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(147) |
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Long-term portion of minimum lease obligation |
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$ |
3,456 |
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