LEASES
The Company leases certain equipment, manufacturing, warehouse and office space under non-cancellable operating leases with expirations through 2027 under which it is responsible for related maintenance, taxes and insurance. Effective July 1, 2024, our warehouse and office lease was amended to reduce the rentable square feet from 62,335 square feet to 29,692 square feet, and the rent expenses were decreased in proportion to the reduction in rentable square feet. The Company recorded this as a lease modification in accordance with ASC 842 Leases (“ASC 842”) and recorded a reduction to the right of use asset and lease liability of approximately $395 thousand using an incremental borrowing rate of approximately 13.64%. The Company recognized a gain on the lease modification of $63 thousand during the third quarter of 2024.
On October 3, 2025, the Company further amended the lease to reduce the rentable area, from 29,692 square feet to 25,392 square feet, and rent expenses were decreased in proportion to the reduction in rentable square feet. The Company recorded a reduction to the right of use asset and lease liability of approximately $40 thousand using an incremental borrowing rate of approximately 13.64% and the Company recognized a gain on the lease modification of $2 thousand. The weighted average remaining lease term for the operating leases is 1.5 years.
Components of the operating lease costs recognized in net loss were as follows (in thousands):
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| For the years ended December 31, |
| 2025 | | 2024 |
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| Lease cost | $ | 175 | | | $ | 303 | |
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Supplemental Consolidated Balance Sheet information related to the Company’s operating leases as of December 31, 2025 and 2024 are follows (in thousands):
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| At December 31, | |
| | 2025 | | 2024 | |
| Operating Leases | | | | |
| Operating lease right-of-use assets | $ | 207 | | | $ | 377 | | |
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| Operating lease liabilities | 217 | | | 393 | | |
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The maturities of lease liabilities under operating leases by years at December 31, 2025 are as follows (in thousands):
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| Operating Leases | | | |
| 2026 | 159 | | | | |
| 2027 | 80 | | | | |
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| Total future undiscounted lease payments | 239 | | | | |
| Less imputed interest | (22) | | | | |
| Total lease obligations | $ | 217 | | | | |
Supplemental cash flow information related to leases was as follows (in thousands):
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| Years ended December 31, | |
| | 2025 | | 2024 | |
| Supplemental Cash Flow Information: | | | | |
| Cash paid, net, for amounts included in the measurement of lease liabilities: | | | | |
| Operating cash flows from operating leases | $ | 175 | | | $ | 343 | | |
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About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.