NOTE 13 - COMMITMENTS AND CONTINGENCIES

Operating and Finance Leases

As of June 30, 2026, the Company has operating lease agreements for the office premises, laboratory space, and two data center co-location contracts and one finance lease agreement for the equipment used in its AI cloud computing business.

The balances of the operating and finance lease related accounts as of June 30, 2026 and December 31, 2025 are as follows (in thousands):

The components of lease expense and supplemental cash flow information as of and for the six months ended June 30, 2026 and 2025 are as follows (in thousands):

Amortization expense related to the leases above, was $1.1 million for the six months ended June 30, 2026.

Total operating cash flows from operating leases included in the measurement of leases liabilities for the six months ended June 30, 2026 and 2025 was $1.3 million and $168 thousand, respectively.

Information relating to the lease term and discount rates for the years ended June 30, 2026 and 2025 were as follows:

Future minimum lease payments for the operating and finance leases as of June 30, 2026 are as follows (in thousands):

Leases Not Yet Commenced

As of June 30, 2026, the Company had executed a lease agreement for additional data center capacity that had not yet commenced. The aggregate amount of estimated future undiscounted lease payments associated with the lease is approximately $7.7 million. The lease is expected to commence between November and December 2026 and has an estimated lease term of 36 months.

The lease agreement provides access to 517.5 kW of capacity under Phase 4 and 1,200 kW of capacity under Phase 5. Phase 4 and Phase 5 are expected to be delivered no later than November 30, 2026 and December 31, 2026, respectively, subject to extensions for certain delays outside of the Company’s reasonable control.

The Company is also obligated for approximately $0.7 million of non-recurring infrastructure charges associated with the development of Phases 4 and 5. Upon satisfaction of certain conditions specified in the lease agreement, the Company is required to make a $2.5 million prepayment, which will be applied as a credit against monthly recurring charges during the first twelve months of billing for Phases 4 and 5.

The lease agreement also provides for variable charges based on actual power consumption. Such variable charges are excluded from the estimated future undiscounted lease payments described above.

Litigation

From time to time, the Company may become involved in various litigation and administrative proceedings relating to claims arising from its operations in the normal course of business. Management is not currently aware of any matters that may have a material adverse impact on the Company’s business, financial position, results of operations or cash flows.

Indemnification

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future but have not yet been made. The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual.

No amounts associated with such indemnifications have been recorded as of June 30, 2026.