Serve Robotics Inc. /DE/SERV

Serve Robotics Inc. /DE/ Commitments Disclosure

10-KFiled Mar 6, 20253 min read
COMMITMENTS AND CONTINGENCIES
Operating Leases – Right of Use Asset and Liability
The Company has leases for office and warehouse space with monthly payments ranging from $9,514 to $18,937, and terms expiring through March 2028. The Company also has leases for cargo vans, each with a monthly payment of $1,450, and terms expiring through December 2026.
The components of lease costs are as follows:
Financial Statement
Line Item		Years Ended
December 31,
Type20242023
Operating leaseGeneral and administrative$55,978 $49,810 
Operating leaseOperations719,253 665,961 
Operating leaseResearch and development241,630 217,890 
Total lease costs $1,016,861 $933,661 
Supplemental cash flow information related to leases are as follows:
 Years Ended
December 31,
 20242023
Operating cash flows paid for operating leases$593,184 $550,470 
Right-of-use assets obtained in exchange for operating lease obligations$1,577,867 $- 
Supplemental information related to leases are as follows:
 December 31,
 20242023
Weighted-average remaining lease term (in years)2.651.30
Weighted-average discount rate7.24 %7.25 %
Future annual minimum payments under operating leases as of December 31, 2024, are as follows:
2025$811,919 
2026658,770 
2027462,028 
202868,054 
Total undiscounted future cash flows2,000,771 
Less: imputed interest(221,423)
Total$1,779,348 
Finance Lease – Failed Sales-Leaseback
In November 2022, the Company entered into a lease agreement with Farnam Capital for its robot assets. As per ASC 842-40-25-1, the transaction was considered a failed sales-leaseback and therefore the lease was accounted for as a financing agreement. The equipment, subject to the lease agreement, is held as collateral. The net book value of such collateral is zero. The outstanding liability at December 31, 2024 was $564,383. The Company has the option to purchase the assets at the end of the lease for 45% of the original equipment cost.
Non-Cancellable Purchase Commitments
The Company has non-cancelable purchase commitments, which primarily relate to the manufacturing of robot assets and software and storage services. These purchase commitments are not recorded as liabilities on the consolidated balance sheet as of December 31, 2024 as the Company has not yet received the related services.
As of December 31, 2024, the future annual minimum payments under the Company's non-cancelable purchase commitments were as follows:
Year Ending December 31,
Amount
2025$3,310,484 
2026146,631
202787,472
Total future minimum payments
$3,544,587 
On December 31, 2021, the Company entered into a strategic non-cancellable supply agreement with a manufacturer of component parts used for the Company’s robot assets. The agreement was amended in January 2024, and increased the total purchase commitment of $6.83 million in purchases over a two-year period ending December 2025. As of December 31, 2024, the Company has $3.25 million in remaining commitment under this supply contract. The vendor has the right to invoice the Company for any shortfall at December 31, 2025 met. The Company has minimum spend agreements related to simulation software and storage services. The purchase commitments extend for a period of two to three years.
Contingencies
The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome arising out of any such matters will have a material adverse effect on its business, financial condition or results of operations.

About Commitments Disclosures

Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.

Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.

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