LEASES
As of December 31, 2025, the Company had an operating lease with Kilroy Realty, L.P. (the "Landlord") for office space located in San Diego, California, which was entered into in April 2019 and subsequently amended in May 2020. Coinciding with the Company's ability to direct the use of the office space and utilizing a discount rate equal to the Company's estimated incremental borrowing rate, the Company established right-of-use assets totaling $34.6 million and lease liabilities totaling $34.5 million. The total right-of-use asset and lease liability at measurement were each offset by lease incentives associated with tenant improvement allowances totaling $7.9 million.
The initial term of the office lease ends in August 2028, and the Landlord has granted the Company an option to extend the term of the lease by a period of five years. At lease inception, it was not reasonably certain that the Company will extend the term of the lease and therefore the renewal period has been excluded from the aforementioned right-of-use asset and lease liability measurements. The measurement of the lease term occurs from the February 2021 occupancy date of the office space.
In November 2024, the Company entered into a sublease of its 5th floor premises. The term of the sublease runs from January 2025 through August 2028. The Company’s sublease arrangement has been classified as an operating lease with sublease income recognized on a straight-line basis over the term of the sublease arrangement. To measure the Company’s periodic sublease income, the Company elected to use a practical expedient under ASC 842 to aggregate non-lease components with the related lease components when (i) the timing and pattern of transfer for the non-lease components and the related lease components are the same and (ii) the lease components, if accounted for separately, would be classified as an operating lease.
During the year ended December 31, 2024, the Company identified an indicator of impairment of the 5th floor operating lease right-of-use assets, property and equipment, and other capitalized assets and compared the carrying value of the asset group to an estimate of the future undiscounted cash flows expected to result from the sublease and eventual disposition of the asset group. The sum of the undiscounted cash flows of the asset group was below the carrying value. Consequently, the Company utilized the present value of the estimated future cash flows attributable to the assets to determine the fair value of the asset group. The resulting fair value of the operating lease right-of-use assets, property and equipment, and other capitalized assets resulted in an impairment of $1.2 million recorded in restructuring expense and categorized the aforementioned measurement of fair value as Level 3 within the ASC Topic 820, "Fair Value Measurements" fair value hierarchy. There were no impairments related to right-of-use assets or property and equipment in the years ended December 31, 2025 and 2023.
The following is a schedule of the future minimum rental commitments for the Company's operating leases reconciled to the lease liability and ROU asset as of December 31, 2025 (in thousands):
| | | | | |
| December 31, 2025 |
| 2026 | $ | 6,775 | |
| 2027 | 6,978 | |
| 2028 | 4,782 | |
| 2029 and thereafter | — | |
| |
| Total undiscounted future minimum payments | 18,535 | |
| Present value discount | (1,526) | |
| Total lease liability | 17,009 | |
| Unamortized lease incentives | (2,539) | |
| Cash payments in excess of straight-line lease expense | (3,894) | |
| Total ROU asset | $ | 10,576 | |
The weighted-average remaining lease term and weighted-average discount rate of the Company's operating leases are as follows:
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Weighted-average remaining lease term in years | 2.7 | | 3.7 |
| Weighted-average discount rate | 6.48 | % | | 6.48 | % |
For the years ended December 31, 2025, 2024 and 2023 the Company recorded $4.4 million, $4.8 million, and $4.9 million, respectively, in expense related to operating leases, including amortized tenant improvement allowances.