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| LEASES | NOTE 9 – LEASES Operating Leases On May 12, 2026, the Company entered into a lease agreement for a new facility consisting of approximately 24,700 rentable square feet located in Houston, Texas (the “Houston Facility Lease”). The initial lease term is 36 months, with monthly base rental payments ranging from $23,671 to $25,357, plus common area maintenance costs. The Houston Facility Lease contains an option to renew for an additional 60 months at the then-fair market rental rate but shall be no less than the annual base rent amount during the third year of the initial term, exercisable no more than nine months and no less than six months prior to the expiration of the initial term. Management assessed the renewal option as reasonably certain to be exercised, and accordingly the renewal period was included in the measurement of the initial operating lease liability and related right-of-use asset, resulting in a lease term of 96 months. The value of the operating lease liability and related right-of-use asset at inception was $1,536,777, measured using an incremental borrowing rate of 8.75%. The present value of the lease liability includes a $197,600 tenant improvement allowance to be received from the landlord after the Company completes all tenant improvements, which the Company estimates will be received in full. In connection with the Houston Facility Lease, the Company paid a cash security deposit of $67,551, which is included in security deposits on the condensed consolidated balance sheets, and is required to secure a letter of credit of $284,050 within sixty days of the lease effective date. The letter of credit must be maintained in successive twelve-month terms throughout the lease term and, provided no event of default has occurred, is reduced to $142,025 at the beginning of the second year of the lease term and to $71,013 at the beginning of the third year. Upon delivery of the letter of credit, the landlord will refund the cash security deposit. Cash collateralizing the letter of credit is classified as restricted cash; see Note 2. During the three and six months ended June 30, 2026, operating lease expense was $291,451 and $469,591, respectively. During the three and six months ended June 30, 2025, operating lease expense was $186,328 and $337,175, respectively. Maturities of operating lease liabilities as of June 30, 2026, were as follows:
Supplemental cash flow information related to the leases is as follows:
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