Leases

9 Months Ended

Sep. 30, 2024

Leases

Leases

11. Leases

For operating leases, the Company records a right-of-use assets and corresponding lease liabilities in the unaudited condensed consolidated balance sheets for all leases with terms longer than twelve months. The Company has three operating leases, with no variable lease costs, and no finance leases as of September 30, 2024. The Company has three operating leases, with no variable lease costs, and no finance leases and December 31, 2023.

In October 2023, Invizyne made changes to an existing lease agreement that was originally entered into in August 2021, which resulted in an extension of the lease term by an additional 14 months. The revised lease maintained the same escalation rate for lease payments as the previous arrangement. To account for this modification, the Company reevaluated the remaining lease term at the time of execution. As the Company was actively utilizing the premises, adjustments were made to reflect the revaluation of both the right-to-use asset and the corresponding lease liability in line with the updated lease term. This was originally entered into in August 2021, with a term of 60 months beginning on August 24, 2021 and ending on September 30, 2026, with an option to extend for 60 additional months and was further modified on April 3, 2023 for an additional 21 months with the lease ending date of April 30, 2028. At the time the lease commenced, it was not probable the Company would exercise the one five-year option to extend the facility lease; therefore, this extension option is not included in the lease analysis. The initial base rent is $14,371 per month. The lease provides for annual increases. The base rent for the lease in the final year is $16,747 per month. Additionally, Invizyne is responsible for annual operating cost increases of 2.5%, which are included in the rent.

Furthermore, in October 2023, Invizyne made changes to a second existing lease agreement that was originally entered into in April 2023, which resulted in an extension of the lease term by an additional 12 months. The revised lease maintained the same escalation rate for lease payments as the previous arrangement. To account for this modification, the Company reevaluated the remaining lease term at the time of execution. As the Company was actively utilizing the premises, adjustments were made to reflect the revaluation of both the right-to-use asset and the corresponding lease liability in line with the updated lease term. This was originally entered into in April 2023, with a term of 60 months beginning on July 1, 2023 and ending on June 30, 2028, with an option to extend for 60 additional months. At the time the lease commenced, it was not probable the Company would exercise the one five-year option to extend the facility lease; therefore, this extension option is not included in the lease analysis. The initial base rent is $13,277per month. The lease provides for annual increases. The base rent for the lease in the final year is $15,391per month. Additionally, Invizyne is responsible for annual operating cost increases of 3.0%, which are included in the rent.

On July 1, 2022, the Company executed a lease for new office space in the Dallas, Texas metropolitan area, the expected occupancy of the space is December 20, 2022. The lease term of 91 months began once we took control of the space in December 16, 2022 and ends on July 20, 2030, without an option to extend. The initial base rent was $12,556 per month, after 7 months of free rent. The lease provides for annual increases. The base rent for the lease in the final year is $13,937 per month.

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s uses the implicit rate in its lease calculations when it is readily determinable. Since the Company’s leases do not provide implicit rates, to determine the present value of lease payments, management uses the Company’s estimated incremental borrowing rate for a fully collateralized loan with a similar term of the lease that is based on the information available at the inception of the lease.

	September 30, 2024			December 31, 2023
Operating leases:
Right-of-use assets	$	2,062,015		$	2,320,119
Operating lease liabilities	$	2,181,780		$	2,415,889
Weighted average remaining lease term in years		4.85			5.33
Weighted average discount rate		7.66	%		7.40	%
Cash paid for amounts included in the measurement of lease liabilities	$	366,948		$	206,837
Right-of-use assets obtained in exchange for lease liabilities	$	-		$	1,018,002
Operating lease cost	$	132,839		$	146,836
Short-term lease costs		258,104			275,589
Total operating lease costs	$	390,943		$	422,425

Future payments due under operating leases as of September 30, 2024 are as follows:

Year	Amount
Remainder of 2024	$	124,676
2025		503,684
2026		516,001
2027		528,586
2028		541,674
Thereafter		451,600
Total	$	2,666,221
Less effects of discounting		(484,441	)
Total operating lease liabilities	$	2,181,780