Enzo Biochem, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

6 Months Ended

Jan. 31, 2023

Note 8 - Leases

The Company determines if an arrangement is or contains a lease at contract inception. The Company leases buildings, office space, patient service centers, and equipment primarily through operating leases, and equipment through a limited number of finance leases. Generally, a right-of-use asset, representing the right to use the underlying asset during the lease term, and a lease liability, representing the payment obligation arising from the lease, are recognized on the balance sheet at lease commencement based on the present value of the payment obligation. For operating leases, expense is recognized on a straight-line basis over the lease term. For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the right-of-use asset is recognized on a straight-line basis over the lease term. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company primarily uses its incremental borrowing rate in determining the present value of lease payments as the Company’s leases generally do not provide an implicit rate.

The Company has lease agreements with (i) right-of-use asset payments and (ii) non-lease components (i.e. payments related to maintenance fees, utilities, etc.,) which have generally been combined and accounted for as a single lease component. The Company’s leases have remaining terms of less than 1 year to 6 years, some of which include options to extend the leases for up to 5 years. The Company’s lease terms may include renewal options that are reasonably certain to be exercised and early termination options that are reasonably certain not to be exercised.

Certain of the Company’s lease agreements include rental payments adjusted periodically for inflation or a market rate which are included in the lease liabilities.

Leases	Balance Sheet Classification	January 31, 2023		July 31, 2022
Assets
Operating	Right-of-use assets	$	13,569	$	15,174
Finance	Property, plant and equipment, net (a)		134		172
Total lease assets		$	13,703	$	15,346

Liabilities
Current:
Operating	Current portion of operating lease liabilities	$	3,425	$	3,432
Finance	Finance leases short term		78		81

Non-current:
Operating	Operating lease liabilities, non-current		11,132		12,729
Finance	Other liabilities and finance leases long term		—		39
Total lease liabilities		$	14,635	$	16,281

(a)

Accumulated amortization of finance lease assets was approximately $248 and $210 as of January 31, 2023 and July 31, 2022, respectively.

Components of lease cost were as follows:

	Three months ended January 31,				Six months ended January 31,
	2023		2022		2023		2022
Operating lease cost – net (a)	$	912	$	1,129	$	1,960	$	2,287
Finance lease cost:
Amortization of leased assets		19		19		38		38
Interest on lease liabilities		1		2		3		5
Total lease cost	$	932	$	1,150	$	2,001	$	2,330

(a)

Net of $114 sublease income for the three and six months ended January 31, 2023.

The maturity of the Company’s lease liabilities as of January 31, 2023 is as follows:

Maturity of lease liabilities, years ending July 31,	Operating leases			Finance leases			Total
2023	$	2,080		$	44		$	2,124
2024		3,874			36			3,910
2025		3,541			—			3,541
2026		3,351			—			3,351
2027		2,507			—			2,507
Thereafter		808			—			808
Total lease payments		16,161			80			16,241
Less: Interest (a)		(1,604	)		(2	)		(1,576	)
Present value of lease liabilities	$	14,557		$	78		$	14,665

(a)

Primarily calculated using the Company’s incremental borrowing rate.

Lease term and discount rate for the six months ended January 31 were as follows:

Lease term and discount rate	2023			2022
Weighted-average remaining lease term (years):
Operating leases		4.3 years			5.2 years
Finance leases		0.9 years			2.0 years

Weighted-average discount rate:
Operating leases		4.96	%		4.98	%
Finance leases		2.95	%		5.96	%

See Note 4 for cash flow information on cash paid for amounts included in the measurement of lease liabilities for the three and six months ended January 31, 2023 and 2022.