Annual report [Section 13 and 15(d), not S-K Item 405]

Property and Equipment

Property and Equipment

12 Months Ended

Dec. 31, 2024

Property, Plant and Equipment [Abstract]

Property and equipment as of December 31, 2024 and 2023 consisted of the following (in thousands):


	December 31,
	2024		2023
Furniture and equipment	$	248	$	248
Computers and software	34		34
Right-of-use assets	741		1,329
Leasehold improvements	896		896
Total property and equipment	1,919		2,507
Less accumulated depreciation	(710)		(542)
Property and equipment, net	$	1,209	$	1,965

Depreciation expense was $0.2 million for each of the years ended December 31, 2024 and 2023.

Leases

Avalo currently occupies two leased properties, both of which serve as administrative office space. The Company determined that both leases are operating leases based on the lease classification test performed at lease commencement.

The initial annual base rent for the Company’s office located in Chesterbrook, Pennsylvania 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.

The annual base rent for the Company's office located in Rockville, Maryland is $0.2 million, 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. In the fourth quarter of 2024, the Company elected to early-terminate the lease effective January 31, 2026, which represents the sixth anniversary of the first annual fixed rent payment and paid the $0.3 million contractual early termination fee in December 2024. As a result of the early-termination, the lease liability and ROU asset were remeasured and reduced by $0.3 million.

The weighted average remaining term of the operating leases at December 31, 2024 was 1.9 years.

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


	As of December 31,
	2024		2023
Property and equipment, net	$	741	$	1,329

Accrued expenses and other current liabilities	$	568	$	537
Other long-term liabilities	350		1,366
Total operating lease liabilities	$	918	$	1,903

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 9.5% to determine the present value of the lease payments.

The components of lease expense for the years ended December 31, 2024 and 2023 were as follows (in thousands):


	Year Ended December 31,
	2024		2023
Operating lease cost*	$	456	$	460
*Includes short-term leases, which are immaterial.

The following table shows a maturity analysis of the operating lease liability as of December 31, 2024 (in thousands):



	Undiscounted Cash Flows
2025	558
2026	392
2027	63


Thereafter	—
Total lease payments	$	1,013
Less implied interest	(95)
Total	$	918