Annual report pursuant to Section 13 and 15(d)

Leases

Leases

12 Months Ended

Dec. 31, 2023

Our leases principally consist of operating leases related to our corporate office, field offices, and our research, manufacturing, and storage facilities. Effective December 19, 2023, we entered into a master finance lease agreement for motor vehicles.

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

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 consists of fixed payments for base rent, is recognized on a straight-line basis over the lease term. Operating lease expense for the years ended December 31, 2023 and 2022 was $812,515 and $811,664, respectively. Lease expense for finance leases, consisting of fixed payments for base rent and initial costs for the year ended December 31, 2023 was $2,338.

Supplemental information related to operating leases for the years ended December 31, 2023 and 2022 was as follows:


	December 31, 2023			December 31, 2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	743,849		$	733,284
Right-of-use assets obtained in exchange for operating lease liabilities	$	148,093		$	—
Weighted-average remaining lease term - operating leases	4.6 Years			3.6 Years
Weighted-average discount rate - operating leases	6.4		%	6.0		%

Finance Leases

Finance 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.

Supplemental information for finance leases for the year ended December 31, 2023 is as follows:


	December 31, 2023
Right-of-use assets obtained in exchange for finance lease liabilities	$	200,187
Weighted-average remaining lease term - finance leases	5.0 years
Weighted-average discount rate - finance leases	10.4		%

Supplemental balance sheet information related to operating leases for the years ended December 31, 2023 and 2022 was as follows:


	December 31, 2023		December 31, 2022
Operating leases
Right-of-use assets	$	743,096	$	1,245,549

Operating lease liability, current	$	248,933	$	687,589
Operating lease liability, long-term	523,660		623,452
Total operating lease liability	$	772,593	$	1,311,041

Supplemental balance sheet information related to finance leases for the year ended December 31, 2023 is as follows:


	December 31, 2023
Finance leases
Right-of-use assets - motor vehicles	$	200,187

Finance lease liability, current	$	40,540
Finance lease liability, long-term	159,647
Total finance lease liability	$	200,187

Future minimum lease commitments under non-cancellable operating and finance leases as of December 31, 2023 were as follows:


	Operating Leases		Finance Leases		Total
2024	$	292,168	$	58,931	$	351,099
2025	158,593		48,931		207,524
2026	147,606		48,931		196,537
2027	88,825		48,931		137,756
2028	87,137		48,931		136,068
Thereafter	117,004		—		117,004
Total lease payments	891,333		254,655		1,145,988
Less: imputed interest	118,740		54,468		173,208
Total	$	772,593	$	200,187	$	972,780

Operating Lease - Commencement date January 1, 2024

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 $500,000 and $750,000. The estimated straight-line monthly rent expense for the initial term of the lease is approximately $26,962 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, January 1, 2024.