Note 5 - Related Party Lease

3 Months Ended

Mar. 31, 2024

5.	Related Party Lease

Z3 Investment

On March 24, 2022, the Company entered into a five-year Lease Agreement with Z3 Investment LLC, an affiliate of the Company’s Chairman and CEO, and COO, beginning April 1, 2022, for approximately 35,000 square feet of laboratory and office space in Rancho Cordova, California. Under the terms of the agreement, monthly rent is $108,000 per month (with a 4% annual increase). Additionally, the Company will pay all operating expenses as they become due estimated to be approximately $20,000 per month and will be expensed in the period incurred. The Company has the option to renew the lease for up to ten years after the commencement of the initial five-year term.

Operating Lease

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we use the Company’s cost of capital based on existing debt instruments. We recognize the expense for this lease on a straight-line basis over the lease term.

The following summarizes the Company’s operating lease:

	March 31, 2024			December 31, 2023
Right-of-use operating lease assets – related party, net	$	2,956,000		$	3,088,000
Current lease liability (included in other current liabilities)		641,000			595,000
Non-current lease liability – related party		2,720,000			2,900,000

Weighted average remaining lease term		3.5			3.8
Discount rate		22	%		22	%

Maturities of lease liabilities by year for our operating lease are as follows:

2024 (Remaining)	$	983,000
2025		1,359,000
2026		1,428,000
2027		1,133,000
Thereafter		-
Total lease payments	$	4,903,000
Less: imputed interest		(1,542,000	)
Present value of operating lease liabilities	$	3,361,000

Statement of Cash Flows

Cash paid for amounts included in the measurement of operating lease liabilities was $324,000 and $311,000 for the three months ended March 31, 2024 and 2023, respectively.

ThermoGenesis Holdings, Inc. 10-Q