From time to time, the Company may be involved in legal proceedings in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. Legal fees and other costs associated with such actions are expensed as incurred. As of August 31, 2024, the Company was not a party to any material legal proceedings.

In the ordinary course of business, the Company often includes standard indemnification provisions in its arrangements with its partners, suppliers and vendors, among others. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred in connection with its service, breach of representations or covenants, intellectual property infringement or other claims made against such parties. These provisions may limit the time within which an indemnification claim can be made. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. The Company has not incurred any material costs as a result of such indemnifications and has not accrued any liabilities related to such obligations in these condensed consolidated financial statements as management believes such liability is immaterial.

In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s condensed consolidated financial statements. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not specified in the agreements. However, the Company currently has directors’ and officers’ insurance that reduces its exposure and may enable the Company to recover a portion of any future amounts paid.

The Company leases office and laboratory facilities totaling approximately 57,902 square feet within the same building in San Francisco, California under several lease agreements. The terms of these lease agreements expire in April 2025. The Company had an option to renew these leases for an additional two years, and the option expired. In September 2024, an amendment was signed to extend the lease term for these leases through October 2025, and the minimum rent payable by the Company pursuant to this amendment is approximately $0.4 million per month.

In July 2021, the Company entered into a lease agreement for the lease of approximately 19,320 square feet of office space in a different building in San Francisco, California (the Mission Bay Lease). The lease commenced in December 2021 and was scheduled to expire in June 2024. In March 2024, the Company entered into a second amendment (the Second Amendment) to the Mission Bay Lease, pursuant to which the lease term was extended through April 2025. The minimum rent payable by the Company under the Second Amendment is approximately $0.1 million per month. In September 2024, the Mission Bay Lease was further amended (the Third Amendment) to extend the lease term through October 2025, and the minimum rent payable by the Company under the Third Amendment is approximately $0.1 million per month.

In March 2022, the Company entered into a lease agreement for the lease of approximately 46,434 square feet of office space in The Woodlands, Texas. In August 2023, the lease agreement was amended to increase the square footage of the leased premise to 50,094 square feet. The amendment had no impact on the accounting for the lease. The Company has an option to renew for two additional terms of five years each, and the renewal terms have not been included in the lease term used to calculate the ROU asset and lease liability as it is not reasonably certain that the Company will exercise the option. The lease commenced in September 2023 when the underlying assets became available for use and will expire in March 2035.

The Company is required to pay base rent plus its proportionate share of operating expenses, as defined in the applicable lease agreement on all of its leases. Variable lease payments related to operating expenses, including utilities, maintenance costs and real estate taxes, were $1.8 million and $5.2 million for the three and nine months ended August 31, 2024, respectively, and $1.6 million and $4.6 million for the three and nine months ended August 31, 2023, respectively.

Operating lease expenses, excluding variable lease payments, were $2.2 million and $6.8 million for the three and nine months ended August 31, 2024, respectively, and $1.5 million and $4.5 million for the three and nine months ended August 31, 2023, respectively. Short-term lease expense was not material for the periods presented.