Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

9 Months Ended

Sep. 30, 2024

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

At lease 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.

On March 31, 2023, we entered into two lease agreements for two adjoining buildings, located in North 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 commenced 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 $850,000 and $1,000,000. 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 recorded the lease liability and right-of-use asset using the discount rate for the lease upon the lease commencement date, January 1, 2024.

On January 1, 2024 we extended our lease for the 2,800 square foot Valley Stream, NY service center for an additional three (3) years through December 31, 2026, with an option to renew for an additional term of three (3) years. The straight-line base monthly rent for the extension is $4,560 per month. On February 1, 2024 we entered into a lease agreement for 2,063 square feet of office and storage space in East Syracuse, New York for an initial lease term of three (3) years, expiring on January 31, 2027, with an option for an additional lease term of two (2) years. The straight-line base monthly rent for the initial lease term is $1,891 per month. On June 17, 2024, we extended our lease for 1,751 square foot Hayward, CA service center for an additional three (3) years through July 31, 2027. The straight-line monthly rent for the extension is $3,662 per month.

The lease on our former headquarters located in Waltham, Massachusetts which consists of approximately 43,000 square feet of manufacturing, storage and office space, expired on April 30, 2024. The base monthly rent in 2024 was $44,254.

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 three and nine months ended September 30, 2024 and 2023 was $164,627 and $631,840 and $209,506 and $616,062, respectively.

Supplemental information related to operating leases for the nine months ended September 30, 2024 and 2023 is as follows:


	Nine Months Ended September 30,
	2024			2023
Cash paid for amounts included in the measurement of operating lease liabilities	$	589,455		$	558,028
Right-of-use assets obtained in exchange for operating lease liabilities	$	1,547,800		$	—
Weighted-average remaining lease term - operating leases	4.3 Years			3.9 Years
Weighted-average discount rate - operating leases	7.5		%	6.0		%

Supplemental balance sheet information related to operating leases as of September 30, 2024 and December 31, 2023 was as follows:


	September 30, 2024		December 31, 2023
Operating leases
Right-of-use assets	$	1,839,031	$	743,096

Operating lease liability, current	$	426,498	$	248,933
Operating lease liability, long-term	1,452,924		523,660
Total operating lease liability	$	1,879,422	$	772,593

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 he 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. Effective December 19, 2023, we entered into a master finance lease agreement for motor vehicles and acquired five (5) service vehicles. During the three months ended September 30, 2024 we acquired four (4) additional service vehicles under the master finance agreement. On May 21, 2024 we entered into a lease for a waste oil boiler.

Supplemental information for finance leases for the nine months ended September 30, 2024 was as follows:


	September 30, 2024
Right-of-use assets obtained in exchange for finance lease liabilities	$	256,811
Weighted-average remaining lease term - finance leases	4.5 Years
Weighted-average discount rate - finance leases	9.8		%

Supplemental balance sheet information related to finance leases as of September 30, 2024 and December 31, 2023 is as follows:


	September 30, 2024		December 31, 2023
Finance leases
Right-of-use assets - motor vehicles	$	410,841	$	200,187
Right-of-use assets - boiler	27,282		—
Total finance lease assets	$	438,123	$	200,187

Finance lease liability, current	$	84,814	$	40,540
Finance lease liability, long-term	315,797		159,647
Total finance lease liability	$	400,611	$	200,187

Future minimum lease commitments under non-cancellable operating and finance leases as of September 30, 2024 were as follows:


	Operating Leases		Finance Leases		Total
Year 1	$	546,070	$	119,920	$	665,990
Year 2	545,587		104,844		650,431
Year 3	466,245		104,844		571,089
Year 4	425,465		104,844		530,309
Year 5	117,232		62,375		179,607
Thereafter	75,457		—		75,457
Total lease payments	2,176,056		496,827		2,672,883
Less: imputed interest	296,634		96,216		392,850
Total	$	1,879,422	$	400,611	$	2,280,033