The Company accounts for its leases in accordance with ASU No. 2016-02 (Topic 842), which requires that a lessee recognize the assets and liabilities that arise from operating leases. The ASU requires lessees to recognize a liability for lease obligations, which represents the discounted obligation to make future lease payments, and a corresponding right-of-use (ROU) asset on the balance sheet. The Company leases office space facilities and a research and development laboratory under non-cancelable operating leases, with varying expirations extending through fiscal year 2035. The lease agreements provide for renewal options and rent escalation over the lease terms, as well as require the Company to pay maintenance, insurance and property taxes. Lease expense is recognized on a straight-line basis over the term of the lease.

In June 2026, the Company entered into a new office lease for 10,564 rentable square feet in Los Angeles, California. The lease has a contractual term of approximately 8 years and is scheduled to commence on April 1, 2027. The Company may receive limited early access to the premises prior to the commencement date for move-in and related activities. Because the lease had not commenced and the Company did not have the right to access or use the premises as of June 30, 2026, no right-of-use asset or lease liability has been recognized under ASC 842.

As of June 30, 2026 and December 31, 2025, the Company had ROU assets of $1.8 million and $2.2 million, respectively, and corresponding operating lease liabilities of $2.3 million and $2.8 million, respectively. For the three and six months ended June 30, 2026 and 2025, the components of operating lease expense are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2026		2025		2026		2025
Operating leases
Operating lease expense	$	226	$	227	$	452	$	445
Variable lease expense (1)	124		88		246		186
Operating lease expense	350		315		698		631
Short-term lease rent expense	4		3		9		7
Total expense	$	354	$	318	$	707	$	638

(1) Variable lease costs, including property taxes and insurance and common area maintenance fees, are classified in cost of sales in the Company's Unaudited Condensed Consolidated Statements of Operations.


Year	(In thousands)
2026 (Remainder)	$	594
2027	782
2028	657
2029	338
2030	263


Total	2,634
Less present value discount	(305)
Present value of total operating lease liabilities	2,329
Less current portion	(917)
Long-term obligations under operating leases	$	1,412