What changed in this filing

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Item 9A. Controls and Procedures

2023-02-10 compared with 2022-02-09 · 69 added, 74 removed, 723 unchanged (17% of the section changed)

9 unchanged sentences

Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including the individuals serving as our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013

Based on this assessment, our management concluded that, as of December 31, 2022, our internal control over financial reporting was effective based on those criteria.

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Form of Common Stock Certificate.

Form of Common Stock Warrant issued by Viking Therapeutics, Inc.

to purchasers in the June 2017 offering.

Description of Registrant’s Securities

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and Ligand Pharmaceuticals Incorporated.

Registration Rights Agreement, dated May 21, 2014, by and among Viking Therapeutics, Inc., Metabasis Therapeutics, Inc.

and Ligand Pharmaceuticals Incorporated.

First Amendment to Registration Rights Agreement, dated January 22, 2016, by and between Viking Therapeutics, Inc.

and Ligand Pharmaceuticals Incorporated.

Voting Agreement, dated May 21, 2014, by and among Viking Therapeutics, Inc., Ligand Pharmaceuticals Incorporated, Metabasis Therapeutics, Inc., Brian Lian, Ph.D.

and Michael Dinerman, M.D.

Founder Common Stock Purchase Agreement, dated September 26, 2012, by and between Viking Therapeutics, Inc.

and Brian Lian, Ph.D.

Amendment No.

1 to Founder Common Stock Purchase Agreement, dated May 4, 2015, by and between Viking Therapeutics, Inc.

and Brian Lian, Ph.D.

Common Stock Purchase Agreement, dated February 20, 2014, by and between Viking Therapeutics, Inc.

115 unchanged sentences

Right-of-use assets

Deferred public offering and other financing costs

Deferred financing costs

Liabilities and stockholders’ equity

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78,257,258 shares issued and outstanding at December 31, 2022 and 78,248,401 shares issued and outstanding at December 31, 2021

Treasury stock at cost, 2,193,251 shares at December 31, 2022, no shares at December 31, 2021

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Total stockholders’ equity

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Interest income, net

Realized gain on investments

Realized loss on investments, net

Foreign exchange gain

Total other income, net

Other comprehensive gain (loss), net of tax:

Other comprehensive loss, net of tax:

Unrealized loss on securities

Foreign currency translation loss

Comprehensive loss

20 unchanged sentences

Issuance of common stock from warrant exercises

Stock repurchase through Stock Repurchase Program

Sale of common stock, net of issuance costs

Unrealized gain (loss) on investments

Unrealized currency translation gain (loss)

Balance at December 31, 2022

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Value of shares withheld related to employee tax withholding

Proceeds from stock issuance under employee stock purchase plan and warrant exercises

Repurchase of common stock

Proceeds from warrant and option exercises and stock issuances under employee stock purchase plan

ATM offering, net of fees

Net cash provided by financing activities

1 unchanged sentence

Cash and cash equivalents beginning of period

Effect of exchange rate changes on cash

Cash and cash equivalents end of period

1 unchanged sentence

Unpaid deferred public offering and other financing costs

Receivable from exercise of warrants

Right-of-use asset obtained in exchange for lease obligation

The accompanying notes are an integral part of these consolidated financial statements.

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Clinical site initiation and patient enrollment have been, and may continue to be, delayed due to the prioritization of hospital resources toward the COVID-19 pandemic.

Some patients have not been able to, and others may not be able to, comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.

Similarly, any inability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, may adversely impact the Company’s clinical trial operations.

The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s service providers, suppliers, contract research organizations (“CROs”) and the Company’s clinical trials, all of which are uncertain and cannot be predicted, as well as the timing, rollout and availability of vaccines worldwide and the effectiveness thereof, and the willingness of the general population to be vaccinated, and the potential emergence and spread of any new variants, including Omicron and sub-variants thereof.

As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

6 unchanged sentences

To date, the aggregate operations of this subsidiary have not been significant and all intercompany transactions and balances have been eliminated in consolidation.

Reclassification

Certain amounts reported in prior years in the Consolidated Statements of Cash Flows have been reclassified to conform to the current year’s presentation.

Cash and Cash Equivalents

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2014-09, Revenue from Contracts with Customers and all related amendments (“ASC 606” or “the revenue standard”).

ASC 606 is a single comprehensive model for entities to use in

accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-s pecific guidance.

The revenue standard is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

ASC 606 is a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-s pecific guidance.

exchange for those goods or services.

To achieve this core principle, ASC 606 provides that an entity should apply the following steps:

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Accordingly, assets acquired in the preclinical and clinical stages of development are expensed as incurred in the Company’s statement of operations.

Related to the Company’s Australian subsidiary, Viking Therapeutics, PTY LTD, the Company is eligible, and has received, under the AusIndustry Research and Tax Development Tax Incentive Program, an amount of cash from the Australian Taxation Office (ATO).

The annual tax incentive is available to the Company on the basis of specific criteria with which the Company must comply related to research and development expenditures in Australia.

As there is no specific GAAP guidance related to how to record this research and development tax incentive, the Company looked to International Accounting Standard (IAS) 20 and determined that it will recognize these research and development tax incentives as contra research and development expense once received.

The amounts are determined based on a cost-reimbursement basis, and the incentive is related to the Company’s research and development expenditures and is due regardless of whether any Australian tax is owed.

Costs related to filing and pursuing patent applications are expensed as incurred to general and administrative expense, as recoverability of such expenditures is uncertain.

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As of December 31, 2022

Certificates of deposit (2)

Commercial paper (2)

Corporate debt securities (2)

Government debt securities (2)

Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss.

At December 31, 2021, there were three securities in an unrealized gain position and 75 securities in an unrealized loss position.

The unrealized gains were less than $ 1,000 individually and $ 2,000 in the aggregate.

At December 31, 2022, there were no securities in an unrealized gain position and 39 securities in an unrealized loss position.

The unrealized losses were less than $ 124,000 individually and $ 842,000 in the aggregate.

Twenty-nine of these securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months.

Twenty-two of these securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months.

The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity.

1 unchanged sentence

Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

At December 31, 2021, none of these securities were classified as cash and cash equivalents on the Company’s balance sheet and $ 56.7 million of the corporate debt securities were scheduled to mature outside of one year at the time of purchase.

At December 31, 2022, none of these securities were classified as cash and cash equivalents on the Company’s balance sheet and none of the corporate debt securities were scheduled to mature outside of one year at the time of purchase.

Investments classified as available-for-sale as of December 31, 2021 consisted of the following (in thousands):

As of December 31, 2021

Certificates of deposit (2)

Commercial paper (2)

1 unchanged sentence

Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss.

At December 31, 2020, there were 38 securities in an unrealized gain position and 80 securities in an unrealized loss position.

At December 31, 2021, there were three securities in an unrealized gain position and 75 securities in an unrealized loss position.

The unrealized gains were less than $ 1,000 individually and $ 1,000 in the aggregate.

The unrealized losses were less than $ 73,000 individually and $ 546,000 in the aggregate.

Four of these securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months.

Twenty-nine of these securities have been in a continuous unrealized loss or unrealized gain position for more than 12 months.

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Short-term investments

Certificates of deposit

Commercial paper, available for sale

Corporate debt securities, available-for-sale

Government debt securities, available-for-sale

Total financial assets

2 unchanged sentences

Cash equivalents:

Government money market funds

Short-term investments

Certificates of deposit

Commercial paper, available for sale

30 unchanged sentences

Operating Leases – Right-of-Use Assets and Lease Liability Obligations

As of December 31, 2021, the Company has only one operating lease which is for office space that expired in January 2022 .

As of December 31, 2022, the Company has only one operating lease (the “Office Lease”), which is for office space under a lease that commenced on March 1, 2022 and expires in July 2027 (the “Term”).

Below is a summary of the Company’s right-of-use assets and lease liabilities as of December 31, 2022 and 2021 (in thousands, except for years and %):

10 unchanged sentences

Total lease liability obligations

The Company signed a new 65 -month operating lease in November 2021, which begins in March 2022 , for 7,940 square feet of office space in San Diego, CA.

The operating lease provides the Company with an option to extend the term of the lease for a period of five years beyond the expiration date in July 2027.

If the option is exercised, the renewal term will be upon the same terms and conditions as the original agreement, except that the base rent will be equal to the prevailing market rate as determined pursuant to the terms of the lease.

The Company will add the new operating lease into its lease liability and right-of-use assets during the first quarter of 2022, once the landlord completes the tenant improvements and provides the Company with access to the office space.

The option to extend the operating lease will not be recognized as part of the Company’s lease liability and right-of-use assets until such option is exercised, if exercised.

The Office Lease provides the Company with an option to extend the term of the Office Lease for a period of five years beyond the Term.

If the option is exercised, the renewal term will be upon the same terms and conditions as the original Office Lease, except that the base rent will be equal to the prevailing market rate as determined pursuant to the terms of the Office Lease.

The option to extend the term of the Office Lease was recognized as part of the Company’s lease liability and right-of-use assets.

Stockholders’ Equity

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Wainwright & Co.

LLC (each, an “Agent” and, together, the “Agents”), pursuant to which the Company may offer and sell, from time to time, through or to the Agents, as sales agent or principal (the “ATM Offering”), shares of the Company’s common stock having an aggregate offering price of up to $ 125.0 million (the “ATM Shares”).

Any ATM Shares offered and sold in the ATM Offering are to be issued pursuant to the Shelf Registration Statement and the 424(b) prospectus supplement relating to the ATM Offering dated July 28, 2021.

LLC (together, the “Agents”), pursuant to which the Company may offer and sell, from time to time, through or to the Agents, as sales agent or principal (the “ATM Offering”), shares of the Company’s common stock having an aggregate offering price of up to $ 125.0 million (the “ATM Shares”).

The Shelf Registration Statement will expire on August 11, 2024 .

No shares of the Company’s common stock were sold under the ATM Agreement from its inception through December 31, 2021.

From its inception through December 31, 2022, 1.4 million shares of the Company’s common stock were sold under the ATM Agreement for aggregate net proceeds to the Company of approximately $ 11.7 million.

On March 17, 2020, the Company’s Board of Directors authorized a stock repurchase program, whereby the Company may purchase up to $ 50.0 million in shares of its common stock and outstanding warrants to purchase its common stock, over a period of up to two years (the “Repurchase Program”).

The Repurchase Program may be carried out at the discretion of a committee of the Company’s Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions.

Through December 31, 2021, no shares of the Company’s common stock or warrants to purchase its common stock were repurchased by the Company under the Repurchase Program.

Shares repurchased by the Company under the Repurchase Program, if any, are expected to be held in treasury until such time as they are reissued or retired by the Company.

The Repurchase Program could be carried out at the discretion of a committee of the Company’s Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions.

Through March 17, 2022, the termination date of the Repurchase Program, an aggregate of 1,464,217 shares of the Company’s common stock were repurchased by the Company under the Repurchase Program.

These shares repurchased by the Company under the Repurchase Program are being held in treasury until such time as they are reissued or retired by the Company.

On March 10, 2022, the Company’s Board of Directors authorized a new stock repurchase program effective March 18, 2022, whereby the Company may purchase up to $ 50.0 million in shares of its common stock over a period of up to two years (the “New Repurchase Program”).

The New Repurchase Program may be carried out at the discretion of a committee of the Company’s Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions.

Through December 31, 2022, 729,034 shares of the Company’s common stock were repurchased by the Company under the New Repurchase Program.

Shares repurchased by the Company under the New Repurchase Program are being held in treasury until such time as they are reissued or retired by the Company.

During the years ended December 31, 20 2 2 and 20 2 1 , and in accordance with the ESPP, the Company issued an aggregate of 111,750 and 43,408 shares of its common stock to certain employees, respectively.

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A total of 1,527,770 shares of the Company’s common stock were initially reserved for issuance under the 2014 Plan, and 458,331 shares of the Company’s common stock were initially reserved for issuance under the ESPP.

From January 1, 2016 and through December 31, 2021, in accordance with the terms of the 2014 Plan, an additional 9,929,367 shares of the Company’s common stock were added to the number of shares reserved for issuance under the 2014 Plan, respectively, and, in accordance with the terms of the ESPP, an additional 2,836,961 shares of the Company’s common stock were added to the number of shares reserved for issuance under the ESPP, respectively.

From January 1, 2016 and through December 31, 2022, in accordance with the terms of the 2014 Plan, an additional 12,668,061 shares of the Company’s common stock were added to the number of shares reserved for issuance under the 2014 Plan, and, in accordance with the terms of the ESPP, an additional 3,619,445 shares of the Company’s common stock were added to the number of shares reserved for issuance under the ESPP.

The Company generally uses the straight-line method to allocate compensation cost to reporting periods over each optionee’s requisite service period, which is generally the vesting period, and estimates the fair value of stock-based awards or restricted stock units to employees and directors using the Black-Scholes option-valuation model.

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Prior to the commencement of any future offering under the ESPP, the Compensation Committee may determine that the current offering shall end, may commence a new offering on the first day after the end of such terminal purchase period (or any desired later date), and may decide that future offerings will consist of one or more consecutive purchase periods, each to be of such duration as determined by the Compensation Committee;

however, no offering will exceed 27 months and no purchase period will exceed one year .

Section 423 of the Internal Revenue Code of 1986, as amended), is eligible to participate in the ESPP for each purchase period within such offering.

however, no offering will

exceed 27 months and no purchase period will exceed one year .

Each employee of the Company who (1) is an employee on the first date of any offering under the ESPP, (2) is customarily scheduled to work for more than 20 hours per week and more than five months per calendar year, and (3) meets such other criteria as may be determined by the Compensation Committee (consistent with Section 423 of the Internal Revenue Code of 1986, as amended), is eligible to participate in the ESPP for each purchase period within such offering.

The purchase price per share of the Company’s common stock under the ESPP may not be less than, and will initially be equal to, the lesser of:

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The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100 % of the PRSU awards vesting upon the achievement of three of the milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

As of December 31, 2022, 40,000 PRSU awards were forfeited and three of the milestones had been met, resulting in the Company recording stock-based compensation expense of $ 1.4 million through December 31, 2022 and $ 0.2 million during the year ended December 31, 2022.

As of December 31, 2021, 40,000 PRSU awards were forfeited, one of the three milestones had been met and the remaining two were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 1.2 million through December 31, 2021 and $ 86,000 during the year ended December 31, 2021.

1 unchanged sentence

As of December 31, 2021, 10,500 PRSU awards were forfeited, two of the three milestones had been met and the remaining one was deemed as probable of achievement, resulting in the Company recording stock-based compensation expense of $ 1.7 million through December 31, 2021 and $ 485,000 during the year ended December 31,2021.

As of December 31, 2022, 10,500 PRSU awards were forfeited, two of the three milestones had been met and the remaining one was deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 1.7 million through December 31, 2022 and $ 0 during the year ended December 31, 2022.

As of December 31, 2021, 10,500 PRSU awards were forfeited, two of the three milestones had been met and the remaining one was deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 1.7 million through December 31, 2021 and $ 485,000 during the year ended December 31, 2021.

In January 2021, the Company issued 205,500 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity.

The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100 % of the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3 % of the PRSU vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

As of December 31, 2022, 7,500 PRSU awards were forfeited, one of the four milestones had been met and two of the four milestones were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 893,000 through December 31, 2022 and $ 358,000 during the year ended December 31, 2022.

As of December 31, 2021, 7,500 PRSU awards were forfeited, none of the four milestones had been met and three of the four milestones were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 535,000 during the year ended December 31, 2021.

In January 2022, the Company issued 657,500 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity.

The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100 % of the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3 % of the PRSU vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant dates.

As of December 31, 2022, no PRSU awards were forfeited, none of the four milestones had been met and three of the four milestones were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $ 2.0 million during the year ended December 31, 2022.

The following table summarizes stock option activity during the years ended December 31, 2022 and 2021:

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Expected Volatility.

The expected volatility rate used to value stock option grants is based on volatilities of a peer group of similar companies whose share prices are publicly available.

Historically through December 31, 2021, the expected volatility rate used to value stock option grants was based on volatilities of a peer group of similar companies whose share prices are publicly available.

The peer group was developed based on companies in the pharmaceutical and biotechnology industry in a similar stage of development to the Company.

Given the length of time the Company’s common stock has been publicly traded, starting January 1, 2022, the expected volatility rate used to value stock option grants is based on the volatility of the Company’s historical share prices.

Expected Term .

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On April 13, 2016, pursuant to an underwritten public offering (the “April 2016 Offering”), the Company sold 7,500,000 shares of its common stock and warrants to purchase up to 7,500,000 shares of its common stock at a public offering price of $ 1.25 per share of common stock and related warrant.

The warrants had an exercise price of $ 1.50 per share of common stock, were immediately exercisable upon issuance and expired on April 13, 2021 .

The warrants had an exercise price of $ 1.50 per share of common stock and were immediately exercisable upon issuance and expired on April 13, 2021 .

Additionally, on April 13, 2016, the underwriters for the April 2016 Offering partially exercised the over-allotment option for warrants to purchase an additional 1,125,000 shares of the Company’s common stock at a public offering price of $ 0.01 per warrant to purchase a share of common stock.

Warrants to purchase an aggregate of 3,618,312 and 348,493 warrants were exercised during the years ended December 31, 2021 and 2020, respectively, and 29,101 warrants expired unexercised on April 13, 2021.

During the year ended December 31, 2021, 3,618,312 warrants were exercised, and 29,101 warrants expired unexercised on April 13, 2021.

On April 13, 2016, pursuant to the terms of the loan and security agreement with Ligand, the Company issued to Ligand a warrant to purchase up to 960,000 shares of the Company’s common stock (the “Ligand Warrant”).

The Ligand Warrant had an exercise price of $ 1.50 per share of Company common stock, was immediately exercisable upon issuance (subject to a limitation on exercise to the extent that any exercise thereof would increase Ligand’s beneficial ownership of the Company’s common stock to greater than 49.9 %) and was set to expire on April 13, 2021 .

The Ligand Warrant was issued to Ligand as a part of the repayment of $ 1.2 million of the Company’s obligation under the secured convertible promissory note issued by the Company to Ligand pursuant to that certain loan and security agreement with Ligand.

The Ligand Warrant had an exercise price of $ 1.50 per share of the Company’s common stock, was immediately exercisable upon issuance (subject to a limitation on exercise to the extent that any exercise thereof would increase Ligand’s beneficial ownership of the Company’s common stock to greater than 49.9 %) and was set to expire on April 13, 2021 .

The Ligand Warrant was issued to Ligand as part of the repayment of $ 1.2 million of the Company’s obligation under the secured convertible promissory note issued by the Company to Ligand pursuant to that certain loan and security agreement with Ligand.

The Ligand Warrant was exercised in full during the year ended December 31, 2021.

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The closing of the issuance of the Shares and the Warrants occurred on June 19, 2017.

The Warrants have an exercise price of $ 1.30 per share, subject to adjustment as provided therein, and became exercisable beginning on December 19, 2017 through December 19, 2022 .

Each holder of a Warrant does not have the right to exercise any portion of its Warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99 % of the number of shares of common stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”);

provided, however, that upon 61 days’ prior notice to the Company, the holder may increase the Beneficial Ownership Limitation;

however, in no event shall the Beneficial Ownership Limitation exceed 9.99 %.

The exercise price and number of shares of common stock issuable upon the exercise of the Warrants will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants.

On January 16, 2018, the resale Registration Statement on Form S-1 (File No.

333-222202) that the Company filed related to the 1,987,337 shares subject to unexercised Warrants was declared effective by the SEC.

The Warrants had an exercise price of $ 1.30 per share, subject to adjustment as provided therein, and became exercisable beginning on December 19, 2017 through December 19, 2022 .

As of December 31, 2022, Warrants to purchase an aggregate of 0 shares were outstanding and 487,087 and 150,000 Warrants were exercised during the years ended December 31, 2022 and 2021, respectively.

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Additionally, the Consolidated Appropriations Act of 2021 was signed on December 27, 2020, which provided additional COVID-19 relief provisions for businesses.

The Company has evaluated the impact of the both Acts and has determined that any impact is not material to its financial statements.

The Company has evaluated the impact of both Acts and determined that any impact is not material to its financial statements.

The Company has reviewed its operations and has not identified any material uncertain tax positions.

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The Office Lease is for approximately 7,940 rentable square feet of space located at 9920 Pacific Heights Blvd, Suite 350, San Diego, California 92121 (the “Premises”).

The Premises will be the Company’s new corporate headquarters.

The Office Lease will commence on March 1, 2022 and will expire on July 31, 2027 (the “Term”).

Monthly base rent payments due under the Office Lease for the Premises will be $ 28,187 , subject to annual increases of 3.0 % during the Term.

Under the Office Lease, the Company will be responsible for certain charges for common area maintenance and other costs, including utility expenses and the Office Lease provides for abatement of rent during certain periods and escalating rent payments throughout the Term.

Rent expense will be recorded on a straight-line basis over the life of the Office Lease and the difference between the rent expense and rent paid will be recorded as deferred rent.

The Premises are now the Company’s corporate headquarters.

Monthly base rent payments due under the Office Lease for the Premises are $ 28,187 , subject to annual increases of 3.0 % during the Term.

Under the Office Lease, the Company is responsible for certain charges for common area maintenance and other costs, including utility expenses and the Office Lease provides for abatement of rent during certain periods and escalating rent payments throughout the Term.

The Office Lease provides the Company with an option to extend the term of the Office Lease for a period of five years beyond the Term.

If the option is exercised, the renewal term will be upon the same terms and conditions as the original Term, except that the base rent will be equal to the prevailing market rate as determined pursuant to the terms of the Office Lease.

Rent expense was $ 320,000 and $ 319,000 for the years ended December 31, 2021 and 2020, respectively.

Future minimum payments pursuant to the Lease are as follows (in thousands):

Year Ending December 31:

2026 and beyond

Total minimum lease payments

Subsequent Events

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures