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LEASES
 3 Months Ended
Aug. 31, 2023
Leases  
LEASES

NOTE 5: LEASES

 

The Company leases its facilities. On August 31, 2023, the Company had approximately 22,000 square feet of floor space at its corporate headquarters at 17571 Von Karman Avenue in Irvine, California, which it has been leasing since 2009. The lease for its headquarters expired on August 31, 2016.  The Company had an option to extend the term of its lease for two additional sixty-month periods. On November 30, 2015, the Company exercised its option to extend its lease for an additional sixty-month period and entered into the First Amendment to Lease wherein it extended its lease until August 31, 2021. On April 9, 2021, the Company exercised its second option to extend its lease for an additional five years. When the Company extended its lease in April 2021, it was also granted an additional five-year lease extension option. The Company made a security deposit of approximately $22,000.

 

In November 2016, the Company’s Mexican subsidiary, Biomerica de Mexico, entered into a 10-year lease for approximately 8,100 square feet of manufacturing space. The Company has one 10-year option to renew at the end of the initial lease period. Biomerica de Mexico also leases a smaller unit on a month-to-month basis for use in one manufacturing process.

 

 

In addition, the Company leases a small office in Lindau, Germany on a month-to-month basis, as headquarters for BioEurope GmbH, its Germany subsidiary.

 

For purposes of determining straight-line rent expense, the lease term is calculated from the date the Company first takes possession of the facility, including any periods of free rent and any renewal options periods that the Company is reasonably certain of exercising. The Company’s office and equipment leases generally have contractually specified minimum rent and annual rent increases are included in the measurement of the right-of-use asset and related lease liabilities. Additionally, under these lease arrangements, the Company may be required to pay directly, or reimburse the lessors, for some maintenance and operating costs. Such amounts are generally variable and therefore not included in the measurement of the right-of-use asset and related lease liabilities but are instead recognized as variable lease expense in the consolidated statements of operations and comprehensive loss when they are incurred.

 

The following table presents information on our operating leases for the three months ended August 31, 2023 and 2022:

 

   2023   2022 
   Three Months Ended August 31, 
   2023   2022 
Operating lease cost  $88,000   $88,000 
Variable lease cost   3,000    - 
Short-term lease cost   5,000    4,000 
Total lease cost  $96,000   $92,000 

 

The approximate maturity of lease liabilities as of August 31, 2023 are as follows:

 

Year Ending August 31:    
   Operating Leases 
2024  $359,000 
2025   368,000 
2026   378,000 
2027   6,000 
Thereafter   - 
Total minimum future lease payments  $1,111,000 
Less: imputed interest   100,000 
Total operating lease liabilities  $1,011,000 

 

The following table summarizes the Company’s other supplemental lease information for the three months ended August 31, 2023 and 2022:

 

   2023   2022 
   Three Months Ended August 31, 
   2023   2022 
Cash paid for operating lease liabilities  $87,000   $86,000 
Weighted-average remaining lease term (years)   3.02    4.02 
Weighted-average discount rate   6.50%   6.50%

 

The Company also has various insignificant leases for office equipment.