Operating Lease

6 Months Ended

Jun. 30, 2025

Note 10. Operating Lease

The Company entered into an operating lease with a third party on March 18, 2014 for its headquarters in Columbus, Ohio. The terms of the lease included monthly payments ranging from $9,200 to $9,700 with a maturity date of November 30, 2024. During the third quarter of 2024, the Company modified its operating lease, which included changes to the lease terms and adjustments to the lease payments. The Company extended the lease period for an additional five years with a new maturity date of November 30, 2029. The terms of the lease include monthly payments ranging from $24,700 to $28,900. The modifications did not result in a change in the classification of the lease, which continues to be classified as an operating lease. The lease liability was remeasured using the discount rate as of the effective date of the modification. The right of use asset was adjusted by the amount of the remeasurement of the lease liability. There are no restrictions or covenants associated with the lease. The lease costs were approximately $74,200 and $29,200 for the three months ended June 30, 2025 and 2024, respectively and $148,400 and $58,400 during the six months ended June 30, 2025 and 2024, respectively. Additionally, the variable lease costs were approximately $18,600 and $23,000 for the three months ended June 30, 2025 and 2024, respectively and $59,200 and $38,500 for the six months ended June 30, 2025 and 2024, respectively.

The following is a maturity analysis, by year, of the annual undiscounted cash outflows of the operating lease liabilities as of June 30, 2025:



2025	$	149,434
2026		309,793
2027		322,184
2028		335,072
2029		318,374
Total minimum lease payments		1,434,857
Less debt discount		282,067
Total operating lease obligations	$	1,152,790


	2025			2024
Operating cash outflows from operating leases - year-to-date	$	83,782		$	56,139
Weighted average remaining lease term – operating leases		4.4	years		5.4	years
Weighted average discount rate – operating leases		8.5	%		5.5	%

SCI Engineered Materials, Inc. 10-Q