Polar Power, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

OPERATING LEASES

OPERATING LEASES

3 Months Ended

Mar. 31, 2023

NOTE 8 – OPERATING LEASES

The Company has two operating lease agreements for its warehouse and office facilities. An amendment, dated January 31, 2023, to one of its operating leases that expired on February 28, 2023, extends that lease term for three years commencing March 1, 2023 through February 28, 2026. Lease payments total $2,596, with monthly lease payments ranging from $58 beginning in March 2023, to $74 beginning in March 2024, to $84 from March 2025 to February 2026. The lease amendment was considered a new lease agreement and as a result, the Company recognized a lease right-of-use asset and related lease liability of $2,392.

The Company’s second operating lease expires in August 2023. Subsequent to March 31, 2023, in May 2023, the Company signed an amendment to the second lease extending the term to August 2026. Lease payments will total $1,304, with monthly lease payments ranging from $31 beginning in September 2023, to $37 beginning in September 2024, to $41 from September 2025 to August 2026.

The components of rent expense and supplemental cash flow information related to leases for the period are as follows:

	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
Lease Cost
Operating lease cost	$	212		$	175
Operating lease cost (of which $28 is included in general and administration and $184 is included in cost of sales in the Company’s statement of operations for the three months ended March 31, 2023, and $25 and $150 for the same period in 2022, respectively)	$	212		$	175

Other Information
Weighted average remaining lease term – operating leases (in years)		1.7			2.2
Average discount rate – operating leases		6.13	%		3.75	%

The supplemental balance sheet information related to leases for the period is as follows:

	At March 31, 2023		At December 31, 2022
Operating leases
Long-term right-of-use assets, net of accumulated amortization of $2,340 and $2,577, respectively	$	2,436	$	240

Current portion of operating lease liabilities	$	738	$	268
Noncurrent portion of operating lease liabilities		1,729		—
Total operating lease liabilities	$	2,467	$	268

Maturities of the Company’s lease liabilities are as follows (in thousands):

Year Ending	Operating Leases
2023 (remaining 9 months)		651
2024		858
2025		990
2026		168
Total lease payments		2,667
Less: Imputed interest/present value discount		(200	)
Present value of lease liabilities	$	2,467

Rent expense for the three months ended March 31, 2023 and 2022 was $287 and $226, respectively.