NOTE 11             LEASES

The Company’s operating leases are primarily for corporate, engineering, and administrative office space and the related expense is recorded in general and administrative expenses on the condensed consolidated financial statements. Total operating lease expense for the three and nine months ended June 30, 2026 was $90,000 and $396,000, respectively. Total operating lease expense for the three and nine months ended June 30, 2025 was $155,000 and $465,000, respectively. Cash paid for amounts included in operating lease liabilities for the nine months ended June 30, 2026 and 2025, which have been included in cash flows from operating activities, was $464,000 and $452,000, respectively.

In March 2026, the Company renewed the term of its Minnesota lease through June of 2031. Payments under this operating lease commenced July 1, 2026 and escalate 10% per year.  The monthly rent is approximately $13,000 per month.  In April 2026, due to IPS headcount reductions, the Company decided not to exercise the renewal option that was previously considered reasonably probable on one of its New York leases. As a result, the Company reduced its right of use asset and lease liability for this lease by approximately $1,824,000 in April 2026. Remaining rent expense will be reduced ratably in accordance with the related accounting guidance.

At June 30, 2026, the Company’s operating leases had a weighted average remaining lease term of 3.5 years and a weighted average discount rate of 7.4%.

At June 30, 2026, future minimum payments under non-cancellable operating leases were as follows: