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COMMITMENTS AND CONTINGENCIES
 6 Months Ended
Jun. 30, 2025
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

 

10. COMMITMENTS AND CONTINGENCIES

 

Legal Matters:

 

The Company may from time to time become party to actions, claims, suits, investigations or proceedings arising from the ordinary course of our business, including actions with respect to intellectual property claims, breach of contract claims, labor and employment claims and other matters. Any litigation could divert management time and attention from the Company, could involve significant amounts of legal fees and other fees and expenses, or could result in an adverse outcome having a material adverse effect on our financial condition, cash flows or results of operations. Actions, claims, suits, investigations and proceedings are inherently uncertain, and their results cannot be predicted with certainty. We are not currently involved in any legal proceedings that we believe are, individually or in the aggregate, material to our business, results of operations or financial condition. However, regardless of the outcome, litigation can have an adverse impact on us because of associated cost and diversion of management time. As of June 30, 2025, after consulting with legal counsel, management believes there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

 

Other Commitments:

 

The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception, the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor relations, public relations, software licenses, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions, and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company.

 

We face uncertainty related to tariffs and other trade policies, which may increase the costs of securing products from our vendors. Tariffs and other non-tariff trade practices and policies may adversely affect our business in other ways beyond increased costs for our products. Historically, we have taken steps to shift our sourcing strategy away from countries with higher tariff rates in favor of other jurisdictions, but these countermeasures may prove to be ineffective and the ability to predict tariff rates in different countries may be difficult as policies may change on short notice. Uncertainty about trade policy, tariff rates, retaliatory tariffs, and other changes in practices affecting international trade might have an adverse effect on our business and results of operation and we may face challenges in implementing optimal responses to changing trade conditions. We continue to monitor macroeconomic trends and uncertainties and changes in international trade relations and trade policy, including those related to tariffs. The U.S. government has implemented a general tariff on all imports from countries not exempted under certain trade reciprocity criteria and elevated tariffs have been imposed on imports from major trading partners. Impacted countries have and may impose retaliatory tariffs, and such actions could give rise to an escalation of other trade measures by the countries subjected to such tariffs. Furthermore, the tariff policy environment is rapidly evolving and there is no guarantee that additional or increased tariffs will not be imposed.

 

Leasing:

 

On June 26, 2025, the Company entered into a Lease Extension Agreement with PNN Holdings, LP relating to the Company’s headquarters located at 5660 Eastgate Drive, San Diego, CA 92121. The term of the existing lease is extended for an additional six (6) months and now terminates on February 28, 2026. During the extension term, the monthly base rent will be $62,400, plus additional rent of $9,080 for common area maintenance and other NNN charges, for a total monthly payment of $71,480. The agreement also provides that any time after November 1, 2025, the Landlord may terminate the lease upon sixty (60) days’ prior written notice to the Company. Except as modified by the agreement, the terms and conditions of the original lease remain in full force and effect.

 

The table below summarizes the Company’s lease related assets and liabilities as of June 30, 2025 and December 31, 2024 (in thousands):

Schedule of lease assets and liabilities          
   For the period ending 
   30-Jun-25   31-Dec-24 
Lease assets  $1,771   $1,893 
           
Lease liabilities          
Current operating lease liabilities, included in current liabilities  $744   $696 
Noncurrent operating lease liabilities, included in long-term liabilities   836    971 
Total Lease liabilities  $1,580   $1,667 

 

As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate to discount the lease payments to present value. The estimated incremental borrowing rate is derived from information available at the lease commencement date.

 

The future rental commitments for our operating leases are as follows (in thousands):

    
2025   544 
2026   489 
2027   377 
2028   390 
2029   – 
Total undiscounted future minimum payments   1,800 
Less imputed interest   (220)
Total lease liability  $1,580