LEASES
We determine if an arrangement is a lease at inception and whether the arrangement is classified as an operating or finance lease. At commencement of the lease, we record a right-of-use (“ROU”) asset and lease liability in the balance sheet based on the present value of lease payments over the term of the arrangement. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. If the implicit rate is not readily determinable in the contract, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Contract terms may include options to extend or terminate the lease, and, when we deem it is reasonably certain that we will exercise that option, it is included in the ROU asset and liability.
Operating leases reflect lease expense on a straight-line basis, while any finance leases result in the separate presentation of interest expense on the lease liability and amortization expense of the ROU asset.
In August 2024, we entered into an operating lease for a new location for our corporate headquarters and manufacturing and research operations. This operating lease commenced in April 2025 and expires in 2035. The previous operating lease for our corporate headquarters expired in November 2024 and the previous operating lease for our manufacturing and research operations expired in May 2025.
The components of lease cost are as follows (in thousands):
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| Years Ended December 31, |
| 2025 | | 2024 |
| Operating lease cost | $ | 250 | | | $ | 217 | |
Short-term lease cost (1) | 111 | | | 19 | |
Variable lease cost (2) | 33 | | | 34 | |
| Total lease cost | $ | 394 | | | $ | 270 | |
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(1) Includes amounts related to leases with original terms of 12 months or less and our company has elected the short-term lease exemption.
(2) Includes amounts related to common area maintenance, property taxes and any other lease-related charges that vary based on usage or actual costs and are not included in the operating lease liability.
As of December 31, 2025, the maturities under the operating lease liability were as follows (in thousands):
| | | | | | | | |
| 2026 | | $ | 331 | |
| 2027 | | 338 | |
| 2028 | | 348 | |
| 2029 | | 359 | |
| 2030 | | 369 | |
| Thereafter | | 1,875 | |
| Total operating lease payments | | 3,620 | |
| Less: imputed interest | | (1,149) | |
| Total operating lease liability | | $ | 2,471 | |
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.