NOTE－10 RIGHT-OF-USE ASSETS, NET

The Company adopted ASU 2016-02, Leases (ASC 842), Leases, on January 1, 2019, the beginning of the fiscal 2019, using the modified retrospective approach. The Company determines whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient. Some of the operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one (1) year and, as such, are accounted for as short-term leases as we have elected the practical expedient.

Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheets. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, the incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term.

The Company adopts 5.0% as weighted average incremental borrowing rate to determine the present value of the lease payments. The weighted average remaining life of the lease was three (3) years.

The finance lease arrangements held by the Company are summarized as follows:

SCHEDULE OF FINANCIAL LEASE ARRANGEMENTS 

Amortization expenses of assets under finance lease arrangements for the six months ended June 30, 2026 and 2025 and the amounted to approximately $0.5 million and $0.5 million, respectively.

Right-of-use assets consisted of the following:

 SCHEDULE OF RIGHT OF USE ASSETS

Lease liabilities for the amount recognized in the consolidated balance sheet in the table below:

SCHEDULE OF LEASE LIABILITIES 

Finance lease liabilities

Operating lease liabilities

Components of Lease Expense

We recognize lease expense on a straight-line basis over the term of the operating leases, as reported within “general and administrative” expense on the accompanying consolidated statement of operations.

Future lease payments, excluding short-term leases, as of June 30, 2026 and December 31, 2025 are detailed as follows:

 SCHEDULE OF LEASE LIABILITIES

Future Contractual Lease Payments as of June 30, 2026

The below table summarizes our (i) minimum lease payments over the next five periods, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the period ending June 30:

SCHEDULE OF FUTURE LEASE PAYMENTS 

The Company excludes short-term leases (those with lease terms of less than one (1) year at inception) from the measurement of lease liabilities or right-of-use assets. The following tables summarize the lease expense for the financial years. The operating lease expenses are approximately $0.5 million and $0.6 million for the financial period ended June 30, 2026 and 2025.