Leases

12 Months Ended

Jun. 30, 2026

13. Leases.

The Company is party to leasing contracts in which the Company is the lessee. These lease contracts are classified as either operating or finance leases. The Company’s lease contracts include land, buildings, and equipment. Remaining lease terms range from 1 to 15 years with various term extension options available. The Company includes optional extension periods and early termination options in its lease term if it is reasonably likely that the Company will exercise an option to extend or terminate early.

ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term, at the later of the commencement date or business combination date. Because most of the Company’s leases do not provide an implicit rate of return, the discount rate is based on the collateralized borrowing rate of the Company, on a portfolio basis.

We have corrected the presentation of the ROU assets and lease liabilities as of June 30, 2025 to include the impact of a lease amendment that was signed in 2024, but was not previously included in the balances. The error resulted in an increase in the operating lease ROU asset by $1,822,000 and the current portion of operating lease liabilities by $9,000 and the operating lease liabilities, net of current portion by $1,813,000 on the condensed consolidated balance sheets. We evaluated the effects of these errors in the previously issued consolidated financial statements for both the prior annual periods and interim periods of the current and prior years. We concluded, based on the relevant quantitative and qualitative factors, that the errors were not material, individually or in the aggregate, in relation to the consolidated financial statements taken as a whole.

As of June 30, 2025, the Company leased space from a related party under a non-cancelable operating lease for its corporate headquarters. The lease had monthly payments of $375 through September 30, 2025. The lease does not include a renewal option. The Company continues to rent the space on a month-to-month basis, with a monthly rental payment of $375.

The weighted average remaining lease term and weighted average discount rate is as follows at:


		June 30, 2026		June 30, 2025
Weighted average remaining lease term (years)
Finance leases		4.9		5.8
Operating leases		12.2		13.4
Weighted average discount rate applied
Finance leases		8.0	%	8.1	%
Operating leases		8.2	%	8.2	%

The components of lease expense from continuing operations are as follows within the consolidated statements of operations:


	Year Ended		Six Months Ended		Year Ended
	June 30, 2026		June 30, 2025		December 31, 2024
Operating lease expense:
Operating lease cost	$	4,480,000	$	2,127,000	$	3,608,000
Short-term and variable lease cost		183,000		161,000		374,000
Finance lease expense:
Finance lease cost - amortization		256,000		50,000		8,000
Finance lease cost - interest		47,000		50,000		2,000
Total lease expense	$	4,966,000	$	2,388,000	$	3,992,000

Supplemental cash flow information related to leases where the Company is the lessee is as follows:


		Year Ended		Six Months Ended		Year Ended
		June 30, 2026		June 30, 2025		December 31, 2024
Operating cash flows from operating leases		$	4,030,000	$	1,896,000	$	2,330,000
Operating cash flows from finance leases			47,000		50,000		2,000
Financing cash flows from finance leases			120,000		39,000		16,000
Leased assets obtained in exchange for operating lease liabilities			212,000		64,000		34,289,000
Leased assets obtained in exchange for finance lease liabilities			1,875,000		263,000		84,000

As of June 30, 2026, the maturities of the operating and finance lease liabilities are as follows:


		Operating Leases			Finance Leases
2027		$	4,114,000		$	538,000
2028			4,177,000			538,000
2029			4,230,000			512,000
2030			4,301,000			478,000
2031			4,348,000			398,000
Thereafter			33,233,000			2,000
Total lease payments			54,403,000			2,466,000
Less discount to present value			(20,487,000)			(411,000)
Lease liability balance		$	33,916,000		$	2,055,000