NOTE 7 – LEASES

The Company leases space under operating leases for administrative, manufacturing and laboratory facilities in Cleveland, Ohio. The Company also leases office space in New York, New York, that the Company sublets. The lease for the office space in New York, New York will terminate in September of 2025, which is the end of the lease term. The Company also leases certain office equipment under operating leases, which have a non-cancelable lease term of less than one year and the Company has elected the practical expedient to exclude these short-term leases from the Company’s right-of-use assets and lease liabilities.

During 2024, the Company signed a lease for 16,566 square feet of office space at 6700 Euclid Avenue, Cleveland, Ohio. Pursuant to the lease agreement, the lease term commences on January 1, 2025 with an initial term through December 30, 2030. Annual lease payments during the term of the lease are approximately $0.3 million. The total lease payments over the duration of the lease term are approximately $1.5 million. The additional space at the 6700 Euclid Avenue facility will allow the Company to convert office space at the 6555 Carnegie Avenue facility into additional manufacturing space to increase ZEVASKYN™ manufacturing capacity. The impact of this lease agreement was to increase the Company’s operating right-of-use lease assets and operating lease liabilities by $1.0 million on January 1, 2025.

The Company has entered into two sublease agreements with unrelated third parties to occupy the Company’s administrative offices in New York, New York. The sublease agreements terminate in September of 2025 at the same time the Company’s lease terminates. The Company expects to receive $0.3 million in future sublease income through September 2025 from the two subleases noted above.

The following table provides a summary of the Company’s operating lease liabilities (in thousands):

SUMMARY OF OPERATING LEASE LIABILITIES 

Lease costs and rent are reflected in general and administrative expenses and research and development expenses in the condensed consolidated statements of operations and comprehensive loss, as determined by the underlying activities.

The following table provides a summary of the components of lease costs and rent (in thousands):

SCHEDULE OF COMPONENTS OF LEASE COST 

Cash paid for amounts included in the measurement of operating lease liabilities was $0.4 million and $0.3 million for the three months ended March 31, 2025 and 2024, respectively.

Future minimum lease payments and obligations, which do not include short-term leases, related to the Company’s operating lease liabilities as of March 31, 2025 were as follows (in thousands):

SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES 

The weighted-average remaining term of the Company’s operating leases was 62 months and the weighted-average discount rate used to measure the present value of the Company’s operating lease liabilities was 8.2% as of March 31, 2025.

The Company received $0.1 million during the three months ended March 31, 2025 and 2024, of sublease income which is recorded in other income on the condensed consolidated statement of operations and comprehensive loss.

Future cash receipts from the Company’s sublease agreements as of March 31, 2025 are as follows (in thousands):

 SCHEDULE OF FUTURE CASH RECEIPTS FROM OPERATING SUBLEASE