Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

9 Months Ended

Sep. 30, 2023

Our leases principally consist of operating leases related to our corporate office, field offices, and our research, manufacturing, and storage facilities.

At inception, we determine if an arrangement constitutes a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of our lease agreements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance, labor charges, etc.). We account for each component separately based on the estimated standalone price of each component.

Operating leases are included in Right-of-use assets, Lease obligations, current and Long-term liabilities - Lease obligations, net of current portion, on the condensed consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term and using an incremental borrowing rate consistent with the lease terms or implicit rates, when readily determinable. For those leases where it is reasonably certain at the commencement date that we will exercise the option to extend the lease, then the lease term will include the lease extension term. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.

Lease expense for operating leases, which principally consist of fixed payments for base rent, is recognized on a straight-line basis over the lease term. Lease expense for the three and nine months ended September 30, 2023 and 2022 was $209,506 and $616,062 and $201,578 and $608,652, respectively.

Supplemental information related to leases for the nine months ended September 30, 2023 and 2022 is as follows:


	Nine Months Ended September 30,
	2023			2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	558,028		$	549,402
Right-of-use assets obtained in exchange for operating lease liabilities	$	—		$	—
Weighted-average remaining lease term - operating leases	3.90 years			3.60 years
Weighted-average discount rate - operating leases	6		%	6		%

Supplemental information related to operating leases as of September 30, 2023 and December 31, 2022 is as follows:


	September 30, 2023		December 31, 2022
Operating leases
Right-of-use assets	$	754,957	$	1,245,549

Operating lease liability, current	$	367,938	$	687,589
Operating lease liability, long-term	429,737		623,452
Total operating lease liability	$	797,675	$	1,311,041

Future minimum lease commitments under non-cancellable operating leases as of September 30, 2023 were as follows:


	Operating Leases
Year 1	$	398,741
Year 2	127,092
Year 3	119,902
Year 4	61,044
Year 5	53,752
Thereafter	130,553
Total lease payments	891,084
Less: imputed interest	93,409
Total	$	797,675

The lease for our headquarters located in Waltham, Massachusetts which consists of approximately 43,000 square feet of manufacturing, storage and office space, expires on March 31, 2024. Currently, our monthly base rent is $44,254. On March 31, 2023, we entered into two lease agreements for two adjoining buildings, located in Billerica, Massachusetts, containing approximately 26,412 square feet of manufacturing, storage and office space to serve as our headquarters and manufacturing facilities. The lease agreements provide for initial lease terms of five (5) years with two successive options to renew for additional terms of five (5) years. Both leases commence on January 1, 2024 and require payment of the base rent, real estate taxes, common maintenance expenses and aggregate deposits of $38,200. Our costs for initial improvements required to the leased premises is estimated to range between $1,000,000 and $1,250,000. The estimated straight-line monthly rent expense for the initial term of the lease is approximately $24,800 per month. In accordance with ASC 842-20-30-1, we will record the lease liability and right-of-use asset using the discount rate for the lease upon the lease commencement date.