Notes to Condensed
Consolidated Financial Statements
For the Three
Months Ended March 31, 2023 and 2022
(Unaudited)
Note 1 –
Nature of Operations and Basis of Presentation
SeqLL Inc. was incorporated as a Delaware corporation
on April 3, 2014. On April 8, 2014, SeqLL Inc. acquired a 100% ownership interest in SeqLL, LLC (“Subsidiary”), a domestic
limited liability company formed on March 11, 2013 in the State of Massachusetts. SeqLL Inc. is a holding company of the Subsidiary (together
the “Company”, SeqLL”, “we”, “us” or “our”) and is a life sciences company focused
on the development and application of innovative genetic analysis technologies and the monetization of that technology and related intellectual
property. The Subsidiary owns technology to enable the analysis of large volumes of genetic material by directly sequencing single molecules
of DNA or RNA. The Subsidiary’s principal office is located in Billerica, Massachusetts.
Common Stock Issuance
On February 15, 2023, the Company issued 2,000,000
shares of common stock to investors at a price of $0.90 per share. The gross proceeds of the issuance was $1,800,000. The Company incurred
offering costs of $300,750.
Notice from the Nasdaq Stock
Market
On June
21, 2022, SeqLL received notice from The Nasdaq Stock Market (“Nasdaq”) indicating that, because the closing bid price for
its common stock has fallen below $1.00 per share for 30 consecutive business days, the Company no longer complies with the $1.00 minimum
bid price requirement for continued listing. Initially, the Company had approximately 180 days to regain its compliance with the Nasdaq.
On December
20, 2022, the Company filed with, and received notice from, the Nasdaq that the Company is eligible for an additional 180-day period,
in other words, until June 19, 2023, to regain its Nasdaq compliance.
The notification
of noncompliance has no immediate effect on the listing or trading of the Company’s common stock or its warrants to purchase common
stock under the symbols “SQL” and “SQLLW,” respectively. To regain compliance, the closing bid price of the Company’s
common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days.
If the Company
does not regain compliance by June 19, 2023, and it has been determined that the Company will not be able to cure the deficiency, Nasdaq
will provide notice that the Company’s common stock will be subject to delisting. The Company would have the right to appeal a determination
to delist its common stock, and the common stock would remain listed on The Nasdaq Capital Market until the completion of the appeal process.
Risks and Uncertainties
The Company is subject to a number of risks similar
to other companies in its industries, including rapid technological change, competition from larger pharmaceutical and biotechnology companies
and dependence on key personnel.
Results of operations may be adversely affected
by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond the Company’s
control. The Company’s business could be impacted by, among other things, downturns in the financial markets or in economic conditions,
inflation, increases in interest rates, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants,
and geopolitical instability, such as the military conflict in the Ukraine. The Company cannot at this time fully predict the likelihood
of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact the Company’s
business.
Basis of Presentation
The unaudited condensed consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiary, SeqLL, LLC. All intercompany accounts and transactions
have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of the Company have been
prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments,
which include only normal recurring adjustments, necessary for the fair presentation of the Company’s condensed consolidated financial
position as of March 31, 2023 and its results of operations for the three-month periods ended March 31, 2023 and 2022, and changes in
shareholders’ equity and cash flows for the periods presented. The results disclosed in the condensed consolidated statements of
operation for the three-months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2023. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the year ended December 31, 2022 filed with the Securities and Exchange Commission.
Note 2 – Significant Accounting Policies
During the three-month period ended March 31,
2023, there were no changes to the significant accounting policies in relation to what was described in the Annual Report on Form 10-K
for the year ended December 31, 2022, other than the items noted in the Recently Adopted Accounting Standards section below.
Use of Estimates
The preparation of the financial statements in
conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities
at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include
but are not limited to share-based compensation expense and research and development accruals. Actual results could differ from those
estimates and changes in estimates may occur.
Investments in marketable
securities
The Company accounts for its
investments in debt securities in accordance with Accounting Standards Codification (“ASC”) 320, Investments —
Debt Securities (“ASC 320”). Debt securities, which are comprised of investments in U.S. Treasury Securities, are
measured at fair value, based on quoted market prices. As the Company has classified its investments in debt securities as available-for-sale,
the Company recognizes all unrealized gains and losses in other comprehensive income, net of tax, and recognizes all realized gains and
losses in net income/loss within the Company’s consolidated statement of operations and comprehensive loss.
The Company accounts for its
investments in equity securities in accordance with ASC 321, Investments — Equity Securities (“ASC 321”).
Equity securities, which are comprised of investments in mutual funds shares, are measured at fair value, based on quoted market prices,
with all gains and losses reported in net income/loss within the Company’s consolidated statement of operations and comprehensive
loss.
The Company
may sell its debt or equity securities in response to changes in interest rates, risk/reward characteristics, liquidity needs or other
factors
Accounts Receivable, net
Trade accounts receivable are recorded at the
net invoice value and are not interest-bearing. Receivables are considered past due based on the contractual payment terms. The Company
reserves a percentage of its trade receivable balance based on collection history and current economic trends that it expects will impact
the level of credit losses over the life of the Company’s receivables. These reserves are re-evaluated on a regular basis and adjusted,
as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve. As of March 31, 2023, the Company
has recorded a reserve of $24,507 related to the potential likelihood of not collecting its receivables.
Inventory
Inventory consists of finished goods, work-in-process
and raw materials and is valued at the lower of cost or net realizable value, determined by the first-in, first-out (“FIFO”)
method. As the Company manufactures the finished goods and work-in-process materials, overhead costs are included in inventory. The Company
evaluates the carrying cost of finished goods, work-in-process, and raw materials items. To the extent that such costs exceed future demand
estimates and/or exhibit historical turnover at rates less than current inventory levels, the Company reduces the carrying value of the
applicable inventories. Inventory consisted of the following:
| |
March 31, | | |
December 31, | |
| |
2023 | | |
2022 | |
| |
| | |
| |
Raw materials | |
$ | - | | |
$ | 114,175 | |
Work in process | |
| - | | |
| 51,677 | |
Total inventory | |
$ | - | | |
$ | 165,852 | |
In March of 2023, the Company performed a detailed
evaluation of its inventory and given the lack of sales activity in prior periods, the Company has written off this inventory as of March
31, 2023.
Share-based Compensation
The Company’s share-based compensation program
grant awards include stock options and restricted stock units. The fair value of stock option grants is estimated as of the date of the
grant using the Black-Scholes option pricing model. The fair value of restricted stock units is based on the fair value of the Company’s
common stock on the date of the grant. The fair value of the share-based awards are then expensed over the requisite service period, generally
the vesting period, for each award.
The Company’s expected stock price volatility
assumption is based on the volatility of comparable public companies. The expected term of a stock option granted to employees and directors
(including non-employee directors) is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee
options, the expected term is the contractual term. The risk-free interest rate is based on the yield of U.S. Treasury securities consistent
with the life of the option. The expected dividend yield was set to zero as the Company does not pay dividends on its common stock and
there was no expectation of doing so as of the respective grant dates. The Company recognizes forfeitures related to share-based awards
as they occur.
The Company has periodically granted stock options
and restricted stock units to non-employees for services pursuant to the Company’s stock plans at the fair market value on the respective
dates of grant. Should the Company terminate any of its consulting agreements, the unvested options underlying the agreements would be
cancelled. For awards granted to non-employees, compensation expense is recognized over the vesting period of the awards, which is generally
the period services are rendered by such non-employees.
The assumptions used in determining the fair value
of share-based awards granted in three-month period ended March 31, 2023 are as follows:
|
|
March 31,
2023 |
|
Risk-free interest rate |
|
|
3.59% - 4.13 |
% |
Expected option life |
|
|
6 – 6.1 years |
|
Expected dividend yield |
|
|
0 |
% |
Expected stock price volatility |
|
|
57 |
% |
Segments
The Company operates in a single business segment
that includes the design, development, and manufacturing of genetic analysis technologies.
Leases
In the first quarter of 2022, the Company adopted
ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The Company assesses its contracts at inception to determine
whether the contract contains a lease, including evaluation of whether the contract conveys the right to control an explicitly or implicitly
identified asset for a period of time. The Company has recognized right-of-use assets and lease liabilities that represent the net present
value of future operating lease payments utilizing a discount rate corresponding to the Company’s incremental borrowing rate
and amortizing over the remaining terms of the leases. The Company accounts for leases of less than 12 months as short-term leases.
Net Loss per Share
Basic net loss per share is computed by dividing
the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for potentially
dilutive securities if their effect is antidilutive. Diluted net loss per share is computed by dividing the net loss by the weighted average
number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury stock
and if-converted methods. Dilutive common stock equivalents are comprised of restricted stock units, options outstanding under the Company’s
stock option plan, and warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and
diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive.
The following potential shares of common stock
were not considered in the computation of diluted net loss per share as their effect would have been antidilutive:
| |
March 31, | |
| |
2023 | | |
2022 | |
Restricted stock units | |
| 553,000 | | |
| - | |
Stock options | |
| 2,545,925 | | |
| 2,003,919 | |
Warrants for common stock | |
| 4,388,185 | | |
| 4,393,396 | |
Recently Adopted Accounting Standards
In June 2016, the FASB
issued Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments.
ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification
to ASU 2016-13 within ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives
and Hedging, and Topic 825, Financial Instruments, or ASU 2016-13. The guidance is effective for fiscal years beginning after December
15, 2022. The Company adopted this standard on January 1, 2023, which had no material impact on the Company’s condensed consolidated
financial statements.
Recently Issued Accounting Standards
The Company does not believe that any recently
issued but not yet effective accounting pronouncements will have a material effect on the accompanying condensed consolidated financial
statements.
Note 3 – Accrued Expenses
Accrued expenses consisted of the following:
| |
March 31, | | |
December 31, | |
| |
2023 | | |
2022 | |
| |
| | |
| |
Accrued interest | |
$ | 323,627 | | |
$ | 306,821 | |
Accrued bonuses | |
| 36,450 | | |
| 135,000 | |
Other | |
| 88,414 | | |
| 53,641 | |
| |
$ | 448,491 | | |
$ | 495,462 | |
Note
4 – Fair Value Measurements
The accounting
guidance defines fair value, establishes a consistent framework for measuring fair value and requires disclosure for each major asset
and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing
the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in
pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value as follows:
|
Level 1: |
Observable inputs such as quoted prices in active markets. |
|
Level 2: |
Inputs, other than the quoted prices in active markets that are observable either directly or indirectly. |
|
Level 3: |
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The following table summarizes
fair value measurements by level on March 31, 2023 of the Company’s assets measured at fair value on a recurring basis:
| |
Fair Value Measurements Using | |
| |
Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
U.S. government and agency obligations | |
$ | 1,531,574 | | |
$ | 1,531,574 | | |
| - | | |
| - | |
The following table summarizes
fair value measurements by level on December 31, 2022 of the Company’s assets measured at fair value on a recurring basis:
| |
Fair Value Measurements Using | |
| |
Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
U.S. government and agency obligations | |
$ | 4,036,014 | | |
$ | 4,036,014 | | |
| - | | |
| - | |
There were
no assets or liabilities measured at fair value on a non-recurring basis during the three months ended March 31, 2023 or 2022.
The carrying values of financial instruments such
as accounts receivable, net, other receivables, accounts payable, and accrued expenses approximated fair value as of March 31, 2023 and
December 31, 2022 due to their short-term maturities. The carrying value of the Company’s Non-Convertible Promissory Note approximated
its fair value as of March 31, 2023 and December 31, 2022.
Note 5 – Share-based Compensation
The Company’s 2014 Equity Incentive Plan
(the “2014 Plan”) permits the grant of options and restricted stock units for its common stock and shares of common stock
to its employees, board members and consultants for up to 3,500,000 shares.
As of March 31, 2023, there were 401,075 shares
available for future issuance under the 2014 Plan. Generally, option awards are granted with an exercise price equal to the fair value
of the Company’s stock at the date of grant and vest over a period of three to four years. No option may have a term in excess of
ten years from the option grant date. Certain option and share awards provide for accelerated vesting if there is a change in control
(as defined by the 2014 Plan). The weighted average grant date fair value of options granted in the three-month periods ended March 31,
2023 and March 31, 2022 were $0.29 and $0.89 per share, respectively.
The stock option activity for the period ended
March 31, 2023 is as follows:
| |
Number of Options | | |
Weighted- Average Exercise Price per Share | | |
Weighted Average Remaining Contractual Term (in Years) | |
Outstanding as of December 31, 2022 | |
| 2,003,919 | | |
$ | 1.88 | | |
| 7.09 | |
Granted | |
| 542,006 | | |
$ | 0.50 | | |
| 10.00 | |
Outstanding of March 31, 2023 | |
| 2,545,925 | | |
$ | 1.59 | | |
| 7.48 | |
Exercisable at March 31, 2023 | |
| 1,249,110 | | |
$ | 1.99 | | |
| 5.67 | |
The restricted stock award activity for the period
ended March 31, 2023 is as follows:
| |
Number of Shares | | |
Weighted- Average Exercise
Price per
Share | | |
Weighted Average Remaining Contractual Term (in Years) | |
Outstanding as of December 31, 2022 | |
| - | | |
$ | - | | |
| - | |
Granted | |
| 553,000 | | |
$ | 0.64 | | |
| 10.00 | |
Outstanding of March 31, 2023 | |
| 553,000 | | |
$ | 0.64 | | |
| 9.92 | |
Exercisable at March 31, 2023 | |
| - | | |
$ | - | | |
| - | |
All of the restricted stock units outstanding
belong to the Company’s employees, and cliff vest over a term of three years.
During the three-month periods ended March 31,
2023 and 2022, the Company recorded $82,594 and $55,914, respectively, of share-based compensation associated with vesting of stock options
and restricted stock units, of which $51,520 and $38,746 were included in general and administrative expenses for the three-month periods
ended March 31, 2023 and 2022, respectively, and $31,074 and $17,168 were included in research and development expenses for the three-month
periods ended March 31, 2023 and 2022, respectively. As of March 31, 2023, there was approximately $793,443 and $344,089 of unrecognized
compensation expense related to unvested stock options and restricted stock units, respectively, which will be recognized over a weighted
average period of approximately 1.50 and 1.59 years, respectively.
Note 6 – Related Party Transactions
At March 31, 2023 and December 31, 2022, the Company
had the following outstanding payables, which are included within the Company’s accounts payable above, to affiliates of its shareholders
for past services:
| |
March 31, 2023 | | |
December 31, 2022 | |
| |
| | |
| |
Genomic Diagnostic Technologies | |
$ | - | | |
$ | 925 | |
St. Laurent Institute | |
| 90,362 | | |
| 232,418 | |
St. Laurent Realty, Inc. | |
| 7,558 | | |
| 7,558 | |
Total related party payables | |
$ | 97,920 | | |
$ | 240,901 | |
The above
entities are affiliated with (1) William C. St. Laurent, a former member of the Company’s board of directors, (2) relatives of Mr.
St. Laurent or (3) entities controlled by the St. Laurent family. St. Laurent Realty,
Inc. and Genomic Diagnostic Technologies assisted the Company by previously providing corporate accounting support; St. Laurent Institute,
a non-for-profit company, provided bioinformatics specialist support for certain sequencing services.
Note 7 – Notes Payable
The Company
entered into a series of convertible promissory notes (the “Convertible Notes”) through April 8, 2019, with certain preferred
stockholders amounting to $905,000. The Convertible Notes had a one-year term and accrued interest at 10% per annum. The Convertible Notes
were convertible at the lower of $3.10 per share or a 20% discount to the share price paid by the purchasers of equity securities in the
Company’s next Qualified Financing, as defined in the convertible note agreements.
From April
29, 2019 to April 29, 2020, the Company entered into a series of non-convertible promissory notes (the “Promissory Notes”)
with a certain preferred stockholder amounting to $1,375,000. The Promissory Notes had a one-year term with interest accruing at 10% per
annum.
In November
and December 2020, the Company issued senior secured convertible promissory notes to a third-party investor amounting to $200,000. These
notes accrued interest at 10% per annum, were to be repaid at the earlier of December 31, 2022, or the Company’s next qualified
financing of a minimum of $7.5 million (as defined in the notes agreement), and were convertible into the Company’s common stock
at $3.75 per share.
On December
31, 2020, the Company issued a non-convertible promissory note to St. Laurent Investments LLC amounting to $426,020 due July 31, 2022,
bearing 10% interest per annum in exchange for the accrued interest on all their notes outstanding through that date.
From January
to March 2021, the Company issued senior secured convertible promissory notes to investors for total proceeds of $250,000. The Convertible
Notes accrued interest at 10% per annum, matured at the earlier of December 31, 2022, or the Company’s next qualified equity offering
of a minimum of $7.5 million, and were convertible at $3.75 per share.
On February
3, 2021, the preferred stockholder, and the holder of $2,910,710 in the Convertible Notes and Promissory Notes granted the Company an
extension on all their notes to be repaid on or before July 31, 2022. This amendment was accounted for on a prospective basis under the
troubled debt restructuring guidance.
In March
2021, the Company entered into a series of agreements with the noteholders to automatically convert $786,730 in outstanding Promissory
Notes and $1,305,000 in Convertible Notes (together, “Amended Notes”), to common stock upon the closing of the IPO (“Conversion
Agreements”), of which $1,552,683 was held by St. Laurent Investments, LLC, and its affiliates.
On August
31, 2021 ( the “IPO date”), the Amended Notes automatically converted based on their original terms into 641,895 shares of
common stock.
In October
2021, the Company entered into an agreement with St. Laurent Investments LLC to reduce the interest on $1,375,000 aggregate principal
amount of the Promissory Note from 10% to 5% per year starting on October 1, 2021. In June 2022, the Company entered into an agreement
with St. Laurent Investments LLC to extend the maturity date of the $1,375,000 Promissory Note to July 31, 2024. The Company accounted
for these transactions as modification on a prospective basis.
In October
2021, the Company repaid $270,000 of the Promissory Notes to William C. St Laurent in cash.
In connection
with all the Convertible Notes and Promissory Notes issued during 2021 and 2020, the Company issued warrants to noteholders to purchase
the total of 66,665 and 53,333 shares of the Company’s common stock, including 11,466 to the placement agent (see Note 8). The grant-date
fair values of these warrants were immaterial.
For the three-month periods ended March 31, 2023
and 2022, interest expense was $16,806 and $16,806, respectively.
Note 8 – Common Stock Warrants
The following table summarizes information with
regard to outstanding warrants to purchase common stock as of March 31, 2023, which are exercisable starting at their issuance dates.
All warrants are accounted for as equity based on the US GAAP guidance applicable to the instruments indexed to an entity’s own
stock.
Issuance Date | |
Number of Shares Issuable Upon Exercise of Outstanding Warrants | | |
Exercise Price | | |
Expiration Date |
8/30/2018 | |
| 3,088 | | |
$ | 3.10 | | |
8/29/2023 |
9/30/2018 | |
| 60,506 | | |
$ | 3.10 | | |
9/29/2023 |
9/30/2018 | |
| 486,486 | | |
$ | 2.16 | | |
9/29/2023 |
10/17/2018 | |
| 1,157 | | |
$ | 3.10 | | |
10/16/2023 |
11/2/2018 | |
| 964 | | |
$ | 3.10 | | |
11/1/2023 |
11/9/2018 | |
| 964 | | |
$ | 3.10 | | |
11/8/2023 |
11/16/2018 | |
| 964 | | |
$ | 3.10 | | |
11/15/2023 |
11/29/2018 | |
| 964 | | |
$ | 3.10 | | |
11/28/2023 |
12/21/2018 | |
| 964 | | |
$ | 3.10 | | |
12/20/2023 |
12/27/2018 | |
| 964 | | |
$ | 3.10 | | |
12/26/2023 |
1/31/2019 | |
| 1,930 | | |
$ | 3.10 | | |
1/30/2024 |
2/7/2019 | |
| 1,640 | | |
$ | 3.10 | | |
2/6/2024 |
2/21/2019 | |
| 1,640 | | |
$ | 3.10 | | |
2/20/2024 |
3/20/2019 | |
| 3,378 | | |
$ | 3.10 | | |
3/18/2024 |
4/8/2019 | |
| 1,930 | | |
$ | 3.10 | | |
4/6/2024 |
11/19/2020 | |
| 53,333 | | |
$ | 4.10 | | |
6/30/2024 |
11/19/2020 | |
| 8,533 | | |
$ | 4.10 | | |
6/30/2024 |
1/8/2021 | |
| 13,333 | | |
$ | 4.10 | | |
6/30/2024 |
1/11/2021 | |
| 26,666 | | |
$ | 4.10 | | |
6/30/2024 |
2/13/2021 | |
| 13,333 | | |
$ | 4.10 | | |
6/30/2024 |
3/16/2021 | |
| 10,665 | | |
$ | 4.10 | | |
6/30/2024 |
3/16/2021 | |
| 13,333 | | |
$ | 4.10 | | |
6/30/2024 |
8/31/2021 | |
| 3,519,000 | | |
$ | 4.25 | | |
8/31/2026 |
8/31/2021 | |
| 153,000 | | |
$ | 4.675 | | |
8/26/2026 |
9/29/2021 | |
| 9,450 | | |
$ | 4.675 | | |
8/26/2026 |
| |
| 4,388,185 | | |
| | | |
|
Note 9 – Marketable Securities
The cost and fair value of marketable securities,
which are available-for-sale debt securities, were $1,513,635 and $1,531,574 as of March 31, 2023, respectively, resulting in a $17,939
unrealized gain.
As of March 31, 2023, the contractual maturities
for all available-for-sale debt securities were less than one year.
Note 10 – Commitments and Contingencies
The Company’s office space lease in Woburn,
Massachusetts (the “Woburn Lease”) for the Company’s corporate headquarters was on a month-to-month basis since November
2020 and was terminated in February 2022. The rent expense for this lease was $0 and $14,239 for the three-month periods ended March 31,
2023 and 2022, respectively.
On February 2, 2022, the Company entered into
a lease agreement for approximately 15,638 square feet of its new corporate office space in Billerica, Massachusetts (the “Billerica
Lease”). The Billerica Lease has a term of 92 months from its effective date and included access to certain additional office space
until August 1, 2022. In addition, the Company is required to share in certain taxes and operating expenses of the Billerica Lease.
The Billerica Lease is classified as an operating
lease. At the inception date of the Billerica Lease, the Company recorded a right-of-use asset of $1,481,646 in operating lease right-of-use
asset, as well as a lease liability of $12,222 in current liabilities and $1,547,614 in long-term liabilities. The operating lease right-of
use asset is less than that of the Company’s lease liabilities as of the lease inception date. This is due to the fact that the
Company as part of the Billerica Lease was allowed certain tenant improvement allowances, which amounted to $78,190 at lease inception.
This lease liability represented the net present value of future lease payments for the lease utilizing a discount rate of 5.98%, which
corresponded to the Company’s incremental borrowing rate.
In August 2022, the Company received the tenant
improvement allowance from the landlord, which totaled approximately $312,760. This allowance covered the leasehold improvements to the
Billerica space and was accounted for as a reduction to the right-of-use asset. As of March 31, 2023, the remaining lease term was 6.5
years.
The Company recorded expense related to the Billerica
Lease in the amount of $54,639 and $41,526 for the three-month periods ended March 31, 2023 and 2022, respectively.
Variable lease expenses recorded by the Company
were immaterial for the three-month period ended March 31, 2023.
During the three-month periods ended March 31,
2023 and 2022, the Company made cash payments of $42,950 and $14,017, respectively, for amounts included in the measurement of lease liabilities.
The following table reconciles the undiscounted
lease liabilities to the total lease liabilities recognized on the condensed consolidated balance sheet as of March 31, 2023:
2023 (remaining) | |
$ | 154,352 | |
2024 | |
| 275,875 | |
2025 | |
| 284,151 | |
2026 | |
| 292,676 | |
2027 | |
| 301,456 | |
Thereafter | |
| 548,578 | |
Total undiscounted lease liabilities | |
$ | 1,857,088 | |
Less effects of discounting | |
| (323,265 | ) |
Total lease liabilities | |
$ | 1,533,823 | |
| |
| | |
Reported as of March 31, 2023: | |
| | |
Current portion of operating lease liability | |
$ | 137,478 | |
Operating lease liability, less current portion | |
| 1,396,345 | |
Total lease liabilities | |
$ | 1,533,823 | |