NOTE 5 – OPERATING LEASES

The Company has two operating lease agreements for its warehouse and office facilities. The first lease expired February 28, 2024, and was extended beginning March 1, 2024 to February 28, 2026. The second lease expired August 31, 2024, and was extended beginning September 1, 2024 to August 31, 2026. The aggregate monthly lease payments range from $89 (year one), to $111 (year two), to $125 (year three), with an aggregate commitment of $3,896. The lease amendments to the two operating leases were considered new lease agreements and as a result, the Company recognized operating lease right-of-use assets and related operating lease liabilities of approximately $3,578 upon commencement of the new terms in 2024.

The Company also has a third lease on a month-to-month basis and is charged $25 per month.

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

SCHEDULE OF RENT EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION 

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

SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION 

The Company manufactures and assembles its DC power systems at its two production facilities located in Gardena, California. The Company is currently delinquent in its rent payments to its landlords for its office and warehouse facilities. The landlord for its headquarters and manufacturing facility at 249 E. Gardena Blvd., Gardena, California filed a summons for eviction on October 24, 2025. The Company is negotiating with this landlord on a payment plan for the delinquent rent, and expect to come to a mutually agreeable outcome, which, at this time, such amicable proposal provides that the Company shall agree to pay the delinquent rent by February 28, 2026, and the landlord shall, in consideration of such agreement, release and settle the claim for eviction. The landlord for the other facility for which the Company is delinquent on rent, has not served it any legal documents or assessed late fees for the delinquent rent. However, they may do so in the future. The Company is also negotiating with this landlord on a payment plan for the delinquent rent. While the Company is negotiating with both landlords in good faith on payment plans, there is no guarantee that it and the landlords could reach an agreement on a payment plan, or that even if it reached an agreement, it could raise sufficient capital to pay the delinquent rent. It is possible that the Company will be forced to vacate from any or all facilities, and if that happens, it might have difficulty locating a new headquarters, or new manufacturing or warehouse facilities that are adequate, in a timely manner. Its production could be significantly delayed, access to its inventory could be impaired, and its operations could halt for a significant period of time.

Therefore, the Company determined that for the three and nine months ended September 30, 2025, the Company recorded total impairment charges of $455, which includes $347 related to right-of-use asset and $108 related to lease deposits. These charges were recorded in impairment of lease right-of-use assets and lease deposits in the Company’s Condensed Consolidated Statements of Income.

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

SCHEDULE OF MATURITIES OF LEASE LIABILITIES 

Rent expense for the three months ended September 30, 2025 and 2024 was $325 and $399, respectively. Rent expense for the nine months ended September 30, 2025 and 2024 was $974 and $1,199, respectively. As of September 30, 2025, the Company was delinquent in $398 of past due rents.