9. Leases

For operating leases, the Company records right-of-use assets and corresponding lease liabilities in the consolidated balance sheets for all leases with terms longer than twelve months. The Company has two operating leases, with no variable lease costs, and one finance lease as of March 31, 2026.

On April 3, 2023, the Company executed a lease for new office space next to the existing space at eXoZymes in the Los Angeles, California metropolitan area. The lease with a term of 60 months began on July 1, 2023, and ends on June 30, 2028, without an option to extend. The initial base rent was $13,277 per month. The lease provides for annual increases. The base rent for the lease in the final year is $14,943 per month.

In April 2023, eXoZymes made changes to an existing lease agreement, which resulted in an extension of the lease term by an additional 21 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 May 1, 2023 and ending on April 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 $14,371 per month. The lease provides for annual increases. The base rent for the lease in the final year is $16,259 per month. Additionally, eXoZymes is responsible for annual operating cost increases of 2.5%, which are included in the rent.

On October 30, 2023, the Company executed an addendum to the current lease for additional office space in Monrovia, California. The expected occupancy of the additional space was May 1, 2023. The lease adds a term of 20 months to the current term for a total of 72 months for the current term. The additional space is for 72 months, both spaces will expire on April 30, 2028, without an option to extend. The expansion space will have an initial base rent of $13,277 per month, along with the current lease of $14,371 per month for the current leased space for a new total of $27,648. The lease provides for annual increases. The base rent for the lease in the final year is $15,391 per month for the expansion space and $16,747 for the current space for a total of $32,138.

eXoZymes entered into a 36-month equipment lease with Thermo Fisher Scientific in December 2024 for medical equipment to be used in research and development. The Company took possession of the equipment in May 2025. The lease agreement provides for a purchase option at the end of the lease term for a purchase value of the then fair market value of the equipment.

Discussions with management indicate that it is unlikely that the purchase option will be exercised at the end of the lease term. Some contributing factors to this decision include the uncertainty of the purchase price and the possible changes in technology over the next three years. Accordingly, an assumed purchase option is not included in the calculation of the total lease liability.

The fair value of the equipment is documented in the lease agreement as $146,642 at the inception of the lease. Management does not believe there is any change in fair value from the inception date to the commencement date. The Company has used its assumed incremental borrowing rate (IBR) to determine the present value of future rent payments. The assumed rate is 7.54% and is also equal to the IBR used in its operating lease for office space. The resulting present value is $136,391 or 93% of the asset’s fair value.

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 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.

 Schedule of Operating Leases

For the three months ended March 31, 2026, and 2025, the Company recognized operating lease expenses of $93,633 in each period. Finance lease payments totaled $12,736 for the three months ended March 31, 2026, with no finance lease payments made during the comparable period in 2025.

As of March 31, 2026, the future minimum lease payments under non-cancelable operating and finance leases are as follows:

 Schedule of Future Payments Due Under Operating and Finance Leases