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LEASES
 3 Months Ended
Mar. 31, 2025
Leases  
LEASES

Note 9. LEASES

 

The Company has one operating lease for its real estate and office space for the CAP/CLIA laboratory, as well as multiple finance leases for lab equipment in Texas that were acquired through the September 18, 2023 acquisition. Additionally, the Company entered into another operating lease on September 1, 2024, with regard to office space. The Company has operating leases consisting of office space with remaining lease terms ranging from 2.3 to 5.4 years as of March 31, 2025. The Company has finance leases consisting of office and lab equipment with remaining lease terms ranging from approximately 1.1 to 2.8 years as of March 31, 2025, for which the Company has determined that it will use the equipment for a major part of its remaining economic life.

 

The lease agreements generally do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach as of the date of inception of the leases to derive an appropriate incremental borrowing rate to discount remaining lease payments. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed interest rates ranging from 7.43% to 8.07% for the lease term lengths.

 

Leases with an initial term of 12 months or less are not recorded on the balance sheets. There are no material residual guarantees associated with any of the Company’s leases, and there are no significant restrictions or covenants included in the Company’s lease agreements. Certain leases include variable payments related to common area maintenance and property taxes, which are billed by the landlord, as is customary with these types of charges for office space. The Company has not entered into any lease arrangements with related parties, and the Company is not the sublessor in any arrangement.

 

The Company’s existing leases contain escalation clauses and renewal options. The Company has evaluated several factors in assessing whether there is reasonable certainty that the Company will exercise a contractual renewal option. For leases with renewal options that are reasonably certain to be exercised, the Company included the renewal term in the total lease term used in calculating the right-of-use asset and lease liability.

 

 

The components of lease expense, which are included in selling, general and administrative expense and depreciation and amortization for the three months ended March 31, 2025 and 2024, are as follows:

 

Components of lease expense:  2025   2024 
Amortization of right-of-use assets - finance lease  $96,243   $96,243 
Interest on lease liabilities - finance lease   13,081    23,550 
Operating lease cost   29,793    29,915 
Total lease cost  $139,117   $149,708 
           
Cash paid for amounts included in the measurement of lease liabilities:          
Operating cash flows from finance leases  $100,266   $88,665 
Operating cash flows from operating leases   29,197    30,431 

 

Operating leases:  March 31, 2025   December 31, 2024 
Operating lease right-of-use, assets  $431,746   $463,011 
Operating lease liability, current  $130,342   $127,498 
Operating lease liability, non-current  $308,415   $342,098 
Total operating lease liabilities  $438,757   $469,596 

 

Finance leases:  March 31, 2025   December 31, 2024 
Finance lease right-of-use asset, gross  $1,294,168   $1,294,168 
Accumulated amortization   (609,539)   (513,296)
Finance lease right-of-use asset, net  $684,629   $780,872 
Finance lease liability, current portion  $403,584   $395,301 
Finance lease liability, long-term   335,899    444,448 
Total finance lease liabilities  $739,483   $839,749 

 

Weighted-average remaining lease term:  March 31, 2025   December 31, 2024 
Operating leases (in years)   3.60    4.21 
Finance leases (in years)   2.28    2.39 

 

Weighted-average discount rate:  March 31, 2025   December 31, 2024 
Operating leases   7.38%   7.41%
Finance leases   8.04%   8.03%

 

Future minimum lease payments under non-cancellable lease as of March 31, 2025, are as follows:

 

   Operating Leases   Finance Leases  
Remaining for 2025  $118,497   $ 336,379  
2026   159,282     270,395  
2027   110,063     202,970  
2028   40,616     —  
2029   42,252     —  
2030 and thereafter   28,919     —  
Total undiscounted cash flows   499,629     809,744  
Less discounting   (60,872)    (70,261 )
Present value of lease liabilities  $438,757   $ 739,483