Annual report [Section 13 and 15(d), not S-K Item 405]

LEASES

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LEASES
12 Months Ended
Dec. 31, 2024
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 3.1 to 5.9 years as of December 31, 2024. The Company has finance leases consisting of office and lab equipment with remaining lease terms ranging from approximately 1.25 to 3.0 years as of December 31, 2024, 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 7.41% to 8.03% for the lease term lengths.

 

Leases with an initial term of 12 months or less are not recorded on the consolidated 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 year ended December 31, 2024, and 2023 are as follows:

 

Components of lease expense:   2024     2023  
Amortization of right-of-use assets - finance lease   $ 384,971     $ 128,324  
Interest on lease liabilities - finance lease     83,041       33,838  
Operating lease cost     93,029       39,887  
Total lease cost   $ 561,041     $ 202,049  
                 
Cash paid for amounts included in the measurement of lease liabilities:                
Operating cash flows from finance leases   $ 361,181     $ 93,238  
Operating cash flows from operating leases     133,605       32,489  

 

Operating leases:   2024     2023  
Operating lease right-of-use, assets   $ 463,011     $ 370,312  
Operating lease liability, current     127,498       94,708  
Operating lease liability, non-current     342,098       283,001  
Total operating lease liabilities   $ 469,596     $ 377,709  

 

Financing leases:   2024     2023  
Financing lease right-of-use assets, gross   $ 1,294,168     $ 1,294,168  
Accumulated amortization     (513,296 )     (128,324 )
Finance lease right-of-use assets, net   $ 780,872     $ 1,165,844  
Financing lease liability, current     395,301       365,463  
Financing lease liability, non-current     444,448       835,467  
Total finance lease liabilities   $ 839,749     $ 1,200,930  

 

Weighted-average remaining lease term:   2024     2023  
Operating leases (in years)     4.21       3.58  
Finance leases (in years)     2.39       3.25  

 

Weighted-average discount rate:   2024     2023  
Operating leases     7.41 %     8.07 %
Finance leases     8.03 %     8.01 %

 

 

    Operating Leases    

Finance Leases

 
2025   $ 157,837     $ 448,505  
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     538,969       921,870  
Less discounting     (69,373 )     (82,121 )
Present value of lease liabilities   $ 469,596     $ 839,749