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Leases
 12 Months Ended
Dec. 31, 2023
Leases  
Leases

8. Leases

 

The Company’s leases are comprised of operating leases for office space. At the inception of the lease, the Company determines whether the lease contract conveys the right to control the use of identified property for a period of time in exchange for consideration. Leases are classified as operating or finance leases at the commencement date of the lease. Operating leases are recorded as operating lease right-of-use assets, other current liabilities, and operating lease liabilities in the Balance Sheets. The Company did not have any finance leases at December 31, 2023 and 2022.

 

The Company had three leases primarily consisting of office space in Versailles, Indiana and Carmel, Indiana. Two of the leases in Versailles started January 1, 2017. Both have an initial term of five years with an option for an additional five-year term. The monthly lease payments for these leases are $550 and $1,600 with a 3% per annum increase starting with the optional five-year term. The lease in Carmel started March 1, 2016. The initial term is five years and three months with an option for an additional three-year term. The monthly lease payment started at $1,472 with an annual increase of approximately 2.7%. On December 16, 2020, the Company entered into an amendment of the Carmel lease that extended the initial term by two years.

 

Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the implicit interest rate is generally not readily determinable, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate reflects the estimated rate of interest that the Company would pay to borrow on a collateralized basis over a similar economic environment. Lease expense for the operating lease is recognized on a straight-line basis over the lease term.

 

Leases may include renewal options, and the renewal option is included in the lease term if the Company concludes that it is reasonably certain that the option will be exercised. Certain leases may contain rent escalation clauses, either fixed or adjusted periodically for inflation of market rates, that are factored into the calculation of lease payments to the extent they are fixed and determinable at lease inception. The Company also has variable lease payments that do not depend on a rate or index, primarily for items such as common area maintenance and real estate taxes, which are recorded as expenses when incurred.

 

For the years ended December 31, 2023 and 2022, the Company recognized $49,051 and $47,571 of operating lease expense, including short-term lease expense and variable lease costs, which are immaterial.

 

The following table presents information related to the Company’s operating leases:

 

   December 31, 2023   December 31, 2022 
Operating lease right-of-use assets  $70,263   $101,382 
           
Other current liabilities   49,127    33,395 
Operating lease liabilities   27,071    76,199 
Total  $76,198   $109,594 
Weighted-average remaining lease term (in years)   3.75    4.00 
Weighted-average discount rate   15.0%   15.0%

 

As of December 31, 2023, the maturities of the Company’s operating lease liabilities were as follows:

 

      
2024  $27,072 
2025   22,316 
2026   26,810 
Total lease payments   76,198 
Less: imputed interest   — 
Total present value of lease payments  $76,198