LEASES

6 Months Ended

Jun. 30, 2025

LEASES

The Company accounts for leases over one year under ASC 842. Lease expense for the Company’s operating leases consists of the lease payments recognized on a straight-line basis over the lease term. Expenses for the Company’s financing leases consists of the amortization expenses recognized on a straight-line basis over the lease term and interest expense.

The Company’s lease agreement for a tool used in the development and marketing of the Company’s technology established a monthly lease payment of $150,000 per month. The lease contains a provision for an annual adjustment of lease payments based on tool availability and usage during the preceding 12 months and the adjusted payment is calculated on August 1 of each year of the lease. Effective August 1, 2023, the lease payments for this tool were adjusted to $137,650 per month for the period August 1, 2023 through July 31, 2024. This adjustment to the lease payments also resulted in a reduction in the ROU and corresponding lease liability. Effective August 1, 2024, the lease payments for this tool were adjusted to $124,071 per month for the period August 1, 2024 through July 31, 2025. This adjustment to the lease payments also resulted in a reduction in the ROU and corresponding lease liability.

In December 2024, the Company entered into a lease agreement for a tool in Tempe, Arizona. The term of this lease is for 12 months beginning on January 1, 2025 for $95,000 per month. Since the lease term is not for more than one year and there are no extension provisions in the lease, the future lease payments are not included in the lease obligations on the Company’s condensed balance sheets.

Lease expense for operating leases consists of the lease payments recognized on a straight-line basis over the lease term. Expenses for financing leases consists of the amortization expenses recognized on a straight-line basis over the lease term and interest expense. The components of lease costs were as follows (in thousands):

Schedule of lease costs
	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Financing lease costs:
Amortization of ROU assets	$	250	$	281	$	501	$	562
Interest on lease liabilities		18		35		39		74
Total financing lease costs	$	268	$	316	$	540	$	636

Operating lease costs:
Fixed lease costs	$	66	$	65	$	131	$	131
Variable lease costs		1		–		2		–
Short-term lease costs		286		261		571		522
Total operating lease costs	$	353	$	326	$	704	$	653

Future minimum payments under non-cancellable leases as of June 30, 2025 were as follows (in thousands):

Schedule of future minimum payments
For the Year Ended December 31,	Financing leases			Operating leases
Remaining 2025	$	697		$	104
2026		479			23
Total future minimum lease payments		1,176			127
Less imputed interest		(28	)		(3	)
Total lease liability	$	1,148		$	124

The table below provides supplemental information and non-cash activity related to the Company’s operating and financing leases are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Operating cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	62	$	61	$	164	$	171
Cash paid for amounts included in the measurement of financing liabilities	$	297	$	330	$	594	$	549

The table above does not include short-term leases that are one-year or less. The weighted average remaining discount rate is 5.25% for the Company’s financing leases and 5.54% for the Company’s operating leases. The weighted average remaining lease term is 1.1 years for the financing lease and 0.6 years for operating leases.