NOTE 8 – OPERATING LEASES

The Company manufactures and assembles its DC power systems at its two production facilities located in Gardena, California under two operating lease agreements that expire in 2026, requiring aggregate monthly payments of $125. During 2025 the Company became delinquent in its rent payments to its landlords for its office and warehouse facilities. The landlord for its headquarters facility at 249 E. Gardena Blvd., Gardena, California filed a summons for eviction on October 24, 2025. On February 23, 2026, the landlord stopped the actions for eviction and continued discussions with the Company to resolve the delinquent rents and expired lease agreement. On May 11, 2026, the Company entered into settlement agreements with the landlords of its headquarters and one of the warehouse facilities. On May 19, 2026, the landlord of the Company’s headquarters facility evicted the Company from that facility for failing to make payment per the settlement agreement. On May 22, 2026, the Company entered into a new settlement agreement under which it paid the landlords a combined $755 and regained access to its headquarters facility. The new settlement agreement provides for a schedule of monthly payments through April 2027 in exchange for the landlord’s agreement not to seek to evict the Company from the headquarters facility through June 30, 2027, and provides for the Company to vacate the warehouse facility by August 31, 2026 in exchange for a waiver of June, July and August 2026 rents. If the Company fails to satisfy the conditions of the new settlement agreement, the landlords may resume eviction proceedings and we may be liable for liquidated damages and previously waived rents. The Company made timely rent payments in July 2026 and August 2026 and is in compliance with the new settlement agreement as of the filing date. However, it is possible that the Company will be forced to vacate from any or all facilities in the event it fails to keep up with the terms of the settlement agreement, 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. The Company’s production could be significantly delayed, access to its inventory could be impaired, and its operations could halt for a significant period of time.

Due to the circumstances described above, during 2025 the Company recorded total impairment charges of $455, which included $347 related to right-of-use asset on its headquarters and manufacturing facility, 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 Statements of Operations as of December 31, 2025. Right of use assets as of June 30, 2026 of $66 on the accompanying balance sheet represents the remaining right of use asset under its other facility which the Company expects to utilize until August 2026. As of June 30, 2026, the remaining lease obligation for both leases is $76 plus $364 in past due lease payments that is included in accounts payable.

The Company also has a third lease on a month-to-month basis and is charged $25 per month. As of June 30, 2026, $290 is delinquent and owed on the lease which is included in accounts payable.

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 

Rent expense for the three months ended June 30, 2026 and 2025 was $337 and $325, respectively. Rent expense for the six months ended June 30, 2026 and 2025 was $697 and $630, respectively.