Note 11 - Operating Leases

9 Months Ended

Sep. 30, 2025

11. OPERATING LEASES

On September 12, 2019, we entered into a lease covering approximately 14,300 square feet of office and warehouse space with a possession date of November 15, 2019 and a commencement date of February 13, 2020. The property is located at 175 Industrial Way in Portland (Building 175A), which is a short distance from our headquarters and manufacturing facility at 56 Evergreen Drive (Building 56). We renovated this space to meet our needs in expanding our production capacity for the First Defense^® product line. The original lease term was ten years with a right to renew for a second 10-year term and a right of first offer to purchase. At the time we entered into this lease, we were not reasonably assured that we would exercise this renewal option in place of other real estate options. For that reason, a 10-year period was reflected in the right-of-use (ROU) asset and lease liability on our balance sheet. During the third quarter of 2022, we committed to lease an additional 15,400 square feet of space at 175 Industrial Way (Building 175B), which is connected to the original space, over a 20-year term. The ROU asset and lease liability for the committed space at Building 175B was recorded as of April 1, 2023 after construction of the building shell was completed in accordance with the lease agreement. Monthly lease payments commenced as of August 1, 2023. In connection with the lease commitment for space at Building 175B, the term of the original lease for Building 175A was extended by approximately 13 years. On November 14, 2023, June 11, 2024 and September 20, 2024, we amended this lease further to provide for certain tenant improvements on the leased premises to be paid for by our landlord. These improvements provided heat to an unfinished space, provided additional warehouse space and created a new primary shipping and receiving facility. As a result of these three amendments and in consideration for the landlord agreeing to pay for the cost of those certain tenant improvements, we agreed to make additional rent payments of $20,000 per month from November of 2023 through June of 2025 and a one-time additional rent payment of $248,743 in July of 2025. Because of these modifications to the lease payments, the ROU asset and lease liability associated with the space at Building 175B were remeasured as of the modification dates. Our leases include variable non-lease components. Such payments primarily include common area maintenance charges. As of September 30, 2025, the balance of the operating lease ROU asset was $4,419,527 and the operating lease liability was $4,115,122. As of December 31, 2024, the balance of the operating lease ROU asset was $4,560,679 and the operating lease liability was $4,561,174. The calculated amount of the ROU asset and lease liability is impacted by the length of the lease term and the discount rate used for the present value of the minimum lease payments. We elected not to separate lease and non-lease components for all classes of underlying assets, and instead to account for them as a single lease component. Variable lease cost primarily represents variable payments such as real estate taxes and common area maintenance. The following tables describe our lease costs and other lease information:

	*During the Three-Month*						*During the Nine-Month*
	*Periods Ended September 30,*						*Periods Ended September 30,*
	*2025*			*2024*			*2025*			*2024*
Lease Cost
Operating lease cost	$	106,055		$	106,880		$	319,598		$	320,639
Variable lease cost		18,546			21,486			58,301			50,638
Total lease cost	$	124,601		$	128,366		$	377,899		$	371,277

Operating Lease
Cash paid for operating lease liabilities	$	334,744		$	144,315		$	603,374		$	432,945
Weighted average remaining lease term (in years)		17.3			18.3			17.3			18.3
Weighted average discount rate		6.6	%		6.6	%		6.6	%		6.6	%

Future lease payments required under non-cancelable operating leases in effect as of September 30, 2025 were as follows:

	*Amount*
During the Three-Month Period Ending December 31, 2025	$	86,001
During the Years Ending December 31,
2026		346,874
2027		353,812
2028		360,885
2029		368,397
Thereafter		5,532,789
Total lease payments (undiscounted cash flows)		7,048,758
Less: imputed interest (discount effect of cash flows)		(2,933,636	)
Total operating liabilities	$	4,115,122

IMMUCELL CORP /DE/ 10-Q