Spectral AI, Inc. Leases Disclosure
9. LEASES
The Company leases office space for its principal office in Dallas, Texas, which was amended in April 2024 to extend the lease term to expire in February 2028. The lease amendment also included a landlord-provided tenant improvement allowance of up to $0.3 million to be applied to the costs of the construction of leasehold improvements. The Company determined that it owns the leasehold improvements under the lease and, as such, reflected the $0.3 million lease incentive as a reduction in lease liabilities and right-of-use assets. As of December 31, 2024, the Company has not yet incurred any leasehold improvement costs that were paid for by the lessor.
During 2023, the Company entered into a lease for office space in the United Kingdom for annual payments of $0.1 million under a lease that expired in March 2024. The lease was renewed in March 2024, however the Company has excluded this lease from the tables below as the term is twelve months.
The following table summarizes quantitative information about the Company’s operating leases for the years ended December 31, 2024 and 2023 (in thousands):
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating cash flows used in operating leases | $ | 894 | $ | 744 | ||||
| Right-of-use assets exchanged for operating lease liabilities | $ | 1,771 | $ | 483 | ||||
| Weighted average remaining lease term (in years) | 3.2 | 1.0 | ||||||
| Weighted average discount rate | 8.5 | % | 8.5 | % | ||||
The following table provides the components of the Company’s lease cost included in general and administrative expense in the consolidated statement of operations (in thousands):
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating leases | ||||||||
| Operating lease cost | $ | 751 | $ | 802 | ||||
| Variable lease cost | 407 | 357 | ||||||
| Operating lease expense | 1,158 | 1,159 | ||||||
| Short-term lease rent expense | 149 | 110 | ||||||
| Total rent expense | $ | 1,307 | $ | 1,269 | ||||
Variable lease cost is primarily attributable to amounts paid to lessors for utility charges, parking, and property taxes under an office space lease.
As of December 31, 2024, future minimum payments under the non-cancelable operating leases were as follows (in thousands):
| Year ended December 31, 2025 | $ | 527 | ||
| Year ended December 31, 2026 | 850 | |||
| Year ended December 31, 2027 | 871 | |||
| Year ended December 31, 2028 | 149 | |||
| Total | 2,397 | |||
| Less: imputed interest | (167 | ) | ||
| Less: tenant improvement allowance | (327 | ) | ||
| Operating lease liabilities | $ | 1,903 |
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.