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Leases

9 Months Ended

Sep. 30, 2025

Note 10. Leases

The Company determines if an arrangement is a lease at its inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if the Company obtains the rights to direct the use of, and to obtain substantially all of the economic benefits from the use of, the underlying asset. Lease expense for variable leases and short-term leases is recognized when the obligation is incurred.

The Company has an operating lease for its facility, which was amended and extended in 2024, with a remaining lease term of 6.3 years (including renewal options) as of September 30, 2025. As of September 30, 2024, the weighted average remaining lease term was 0.5 years. The initial term of the lease expires on December 31, 2027 with renewal options that potentially extend expiration through December 31, 2031. Operating leases are included in Operating lease ROU assets, other current liabilities and long-term lease liabilities on the condensed consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized at each lease’s commencement date based on the present value of its lease payments over its respective lease term. The Company does not have an established incremental borrowing rate as it does not have any debt. The Company uses the stated borrowing rate for a lease when readily determinable. When the interest rate implicit in its lease agreements is not readily determinable, the Company uses an interest rate based on the marketplace for public debt. The incremental borrowing rate associated with the operating lease as of September 30, 2025 and 2024 is 7.0% and 5.5%, respectively. Cash rent paid for the nine months ended September 30, 2025 and 2024 was $163,000 and $174,000, respectively.

Maturities of operating lease liabilities as of September 30, 2025 were as follows:

	September 30, 2025
Year 1	$	222,000
Years 2-3		461,000
Years 4-5		492,000
Thereafter		322,000
Total lease payments		1,497,000
Less: Imputed lease interest		(297,386	)
Present value of lease liabilities		1,199,614
Less: Current portion of operating lease liability		(141,894	)
Operating lease liability, net of current portion	$	1,057,720