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LEASES

12 Months Ended

Dec. 31, 2021

15. LEASES

In 2011, the Company executed a lease (the “Lease”) with Brandywine Operating Partnership, L.P. (Brandywine), a Delaware limited partnership, for a 10,870 square foot premises located in Lawrenceville, New Jersey and relocated its offices to Lawrenceville, New Jersey from Columbia, Maryland. The Lease had an initial term of 66 months. In late 2015, Lenox Drive Office Park LLC, purchased the real estate and office building and assumed the Lease. This Lease was set to expire on April 30, 2017. In April 2017, the Company and the landlord amended the Lease effective May 1, 2017. The 1^st Lease Amendment extended the term of the agreement for an additional 64 months, reduced the premises to 7,565 square feet, reduced the monthly rent and provided four months free rent. The monthly rent ranged from approximately $18,900 in the first year to approximately $20,500 in the final year of the 1^st Lease Amendment. Effective January 9, 2019, the Company amended the terms of the 1^st Lease Amendment to increase the size of the premises by 2,285 square feet to 9,850 square feet and extended the lease term by one year to September 1, 2023. The Company had a one-time option to cancel the lease after 40 months as part of the 1^st Lease Amendment, which was extended with the 2^nd Lease Amendment. The option to cancel the lease expired on August 31, 2020. The monthly rent under the 2^nd Lease Amendment ranges from approximately $25,035 in the first year to approximately $27,088 in the final year of the lease.

In connection with the EGEN Asset Purchase Agreement in June 2014, the Company assumed the existing lease with another landlord for an 11,500 square foot premises located in Huntsville Alabama. In January 2018, the Company and the Huntsville landlord entered into a new 60-month lease which reduced the premises to 9,049 square feet with rent payments of approximately $18,100 per month. On June 9, 2021 and, as amended on July 7, 2021, the Company and the Huntsville landlord entered into a 22-month lease for an additional 2,197 square foot premises with rent payments of approximately $5,500 per month.

As previously mentioned in Note 4, the Company adopted ASC Topic 842 on January 1, 2019 using the modified retrospective transition method for all lease arrangements at the beginning of the period of adoption. Results for reporting periods beginning January 1, 2019 are presented under ASC Topic 842, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 840, Leases. The standard had a material impact on the Company’s Consolidated Condensed Balance Sheet but had no impact on the Company’s consolidated net earnings and cash flows. The most significant impact of adopting ASC Topic 842 was the recognition of the right-of-use (ROU) asset and lease liabilities for operating leases, which are presented in the following three-line items on the Consolidated Condensed Balance Sheet: (i) operating lease right-of-use asset; (ii) current operating lease liabilities; and (iii) operating lease liabilities. Therefore, on date of adoption of ASC Topic 842, the Company recognized a ROU asset of $1.4 million, operating lease liabilities, current and non-current collectively, of $1.5 million and reduced other liabilities by approximately $0.1 million. The Company elected the package of practical expedients for leases that commenced before the effective date of ASC Topic 842 whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. In addition, the Company has lease agreements with lease and non-lease components, and the Company has elected the practical expedient for all underlying asset classes and account for them as a single lease component. The Company has no finance leases. The Company determines if an arrangement is a lease at inception. The Company has operating leases for office space and research and development facilities. Neither of the Company’s leases include options to renew, however, one contains an option for early termination. The Company has considered the option of early termination in measurement of right-of-use assets and lease liabilities and has determined it is not reasonably certain to be terminated. In connection with the 2^nd Lease Amendment for the New Jersey office lease in January 2019, the Company considered this as one modified lease and not as two separate leases. Therefore, in January 2019, the Company determined this lease was an operating lease and remeasured the ROU asset and lease liability. Therefore, the Company increased the ROU asset and operating lease liabilities by $0.4 million to $1.8 million and $1.9 million, respectively. Following is a table of the lease payments and maturity of the Company’s operating lease liabilities as of December 31, 2021:

	For the year ending December 31,
2022	$	601,495
2023		238,609
2024 and thereafter		-
Subtotal future lease payments		840,104
Less imputed interest		(60,485	)
Total lease liabilities	$	779,619

Weighted average remaining life		1.45 years

Weighted average discount rate		9.98	%

For 2021, operating lease expense was $560,513 and cash paid for operating leases included in operating cash flows was $568,269. For 2020, operating lease expense was $522,380 and cash paid for operating leases included in operating cash flows was $525,809.