Serve Robotics Inc. /DE/SERV

Serve Robotics Inc. /DE/ Commitments Disclosure

10-KFiled Mar 12, 20263 min read
COMMITMENTS AND CONTINGENCIES
Operating Leases – Right of Use Asset and Liability
The Company leases its facilities, which include office and warehouse space, under non-cancelable lease agreements with terms expiring between May 2026 and September 2031. The Company also has leases for cargo vans with terms expiring between November 2026 and December 2027. Certain of these arrangements have free rent, escalating rent payment provisions, lease renewal options, and tenant allowances. Under such arrangements, the Company recognizes an ROU asset and lease liability on the consolidated balance sheets. Lease costs are recognized on a straight-line basis over the non-cancelable lease term.
The components of lease costs related to the Company’s operating leases are classified in the statements of operations as follows (in thousands):
Financial Statement Line ItemYear Ended
December 31,
20252024
Operations$1,918 $719 
Research and development80 242 
General and administrative68 56 
Sales and marketing8 — 
Total lease costs$2,074 $1,017 
Supplemental cash flow information related to leases is as follows (in thousands):
 Year Ended
December 31,
 20252024
Operating cash flows paid for operating leases$1,518 $593 
Right-of-use assets obtained in exchange for operating lease obligations$4,818 $1,578 
Supplemental information related to leases is as follows:
 December 31,
 20252024
Weighted-average remaining lease term (in years)3.422.65
Weighted-average discount rate7.39%7.24%
The maturities of lease liabilities as of December 31, 2025 are as follows (in thousands):
Year Ending December 31,
Amount
2026$2,087 
20271,805 
2028872 
2029577 
2030441 
Thereafter136 
Total undiscounted future cash flows5,918 
Less: imputed interest(664)
Total minimum payments$5,254 
As of December 31, 2025, the Company had additional operating lease commitments of $4.4 million for non-cancelable leases that have not yet commenced. The nature of such lease commitments is consistent with the nature of the leases that the Company has executed thus far.
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. In April 2025, the Company exercised the option to purchase the assets at the end of the lease for $2.2 million. There was no outstanding liability at December 31, 2025.
Contingencies
From time to time, the Company is a party to litigation and subject to claims incidental to its business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of ongoing matters will not have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of judgment, defense and settlement costs, diversion of management resources, and other factors. At each reporting period, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable, requiring recognition of a loss accrual, or whether the potential loss is reasonably possible, requiring disclosure. Legal fees are expensed as incurred.
In December 2024, a class action complaint was filed in the Superior Court of California, County of Los Angeles, alleging that the Company violated the California Labor Code, among other claims. In December 2025, the Company agreed with the plaintiff to settle for the amount of $375.0 thousand. As a result, the Company recorded a total of $408.8 thousand in legal settlement expense, of which $375.0 thousand was recorded for the settlement with the plaintiff and the remaining $33.8 thousand was recorded for the related payroll tax expense as a result of the settlement payment. The legal settlement expense is included in operating expense on the consolidated statement of operations during the year ended December 31, 2025 and a corresponding amount was recorded in accrued liabilities, on the consolidated balance sheet.
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Historical Timeline

Fiscal YearFiled
2025Mar 12, 2026Showing above
2024Mar 6, 2025
2023Feb 29, 2024
2022Mar 31, 2023
2021Mar 31, 2022
2020Apr 28, 2021

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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