Right-of-use Asset and Leasing Liabilities

6 Months Ended

Jun. 30, 2025

Right-of-use Asset And Leasing Liabilities

Right-of-use Asset and Leasing Liabilities

3. Right-of-use Asset and Leasing Liabilities

The Company has operating and finance leases where it records the right-of-use (“ROU”) assets, and a related lease liability as required under the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) 842. The lease liabilities are determined by the net present value of total lease payments and amortized over the life of the lease. The Company’s leases are for the following types of assets:

· Computer hardware and copy machines- The Company’s finance lease right-of-use assets consist of computer hardware and copy machines. These leases have two and three year lives and are in various stages of completion.

· Office space - The Company’s operating lease right-of-use assets include its rental agreements for its offices in Plano, Texas, and a data service center in Allen, Texas. The Plano offices operating lease expires on April 30, 2035. The data service center operating lease liability has a life of four months as of June 30, 2025.

In accordance with ASC 842, the Company has elected practical expedients to combine lease and non-lease components, which consist principally of common area maintenance charges, for all classes of underlying assets and to exclude leases with an initial term of 12 months or less.

As the implicit rate is not readily determinable for the Company's lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments.

For the three and six months ended June 30, 2025, the Company made operating lease payments of $0.1 million and $0.2 million, respectively, compared to $32 thousand and $37 thousand for the same periods in 2024. For the same periods, finance lease payments were $0.1 million and $0.2 million in 2025, and $0.2 million and $0.3 million in 2024, respectively.

Schedule of Items Appearing on the Unaudited Condensed Consolidated Statements of Operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Operating expense:
Amortization expense – Finance ROU	$	22	$	163	$	194	$	329
Lease expense – Operating ROU	$	98	$	118	$	109	$	201
Other expense:
Interest expense – Finance ROU	$	17	$	–	$	37	$	–
Total lease expense	$	137	$	281	$	340	$	530

Future minimum lease obligations consisted of the following as of June 30, 2025 (in thousands):

	Operating			Finance
Year ending December 31,	ROU Leases			ROU Leases			Total
Remaining 2025	$	103		$	174		$	277
2026		214			200			414
2027		146			4			150
2028		223			3			226
2029		228			–			228
Thereafter		1,308			–			1,308
	$	2,222		$	381		$	2,603
Less interest*		(766	)		(65	)
	$	1,456		$	316

* Interest is imputed for operating ROU leases and classified as lease expense and is included in operating expenses in the accompanying unaudited condensed consolidated statements of operations.