Polar Power, Inc. Leases Disclosure
NOTE 6 – 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 $125,000. The balance of the right of use asset assets and lease obligations at December 31, 2024 was $1,645 and $1,856, respectively. During 2025 the Company became 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. 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. The Company expects to be in the position to make significant payment towards the delinquent rents in the near term and/or provide a payment plan mutually agreeable to both parties. The landlord for the other facility for which the Company is delinquent on rent, has not served the Company 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 they reached an agreement, they could raise sufficient capital to pay the delinquent rent. It is possible that we will be forced to vacate from any or all facilities, and if that happens, we might have difficulty locating a new headquarters, or new manufacturing or warehouse facilities that are adequate, in a timely manner. Our production could be significantly delayed, access to our inventory could be impaired, and our 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 includes $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. Right of use assets as of December 31, 2025 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 December 31, 2025, the remaining lease obligation for both leases is $1,052, which includes $577 of 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 December 31, 2025, the Company was past due in rents of $155, which amount is included in accounts payable on the accompanying balance sheet.
During the first quarter of 2026, the Company paid $206 towards its past due lease obligations reported as of December 31, 2025.
The components of rent expense and supplemental cash flow information related to leases for the period are as follows:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Lease Cost (in thousands) | ||||||||
| Operating lease cost (of which $173 is included in general and administration and $1,126 is included in cost of sales in the Company’s statement of operations for the year ended December 31, 2025, and $124 is included in general and administration and $1,126 is included in cost of sales in the Company’s statement of operations for the year ended December 31, 2024) | $ | 1,299 | $ | 1,250 | ||||
| Other Information | ||||||||
| Weighted average remaining lease term – operating leases (in years) | 0.4 | 1.4 | ||||||
| Average discount rate – operating leases | 6.13 | % | 6.13 | % | ||||
The supplemental balance sheet information related to leases for the period is as follows:
| At December 31, 2025 | At December 31, 2024 | |||||||
| Operating leases (in thousands) | ||||||||
| Long-term right-of-use assets, net of accumulated amortization of $2,953 and $1,931, respectively | $ | 624 | $ | 1,645 | ||||
| Impairment charge | (346 | ) | ||||||
| Net right-of-use asset | 278 | 1,645 | ||||||
| Current portion of operating lease liabilities | $ | 475 | $ | 1,382 | ||||
| Noncurrent portion of operating lease liabilities | 474 | |||||||
| Total operating lease liabilities | $ | 475 | $ | 1,856 | ||||
Rent expense for the years ended December 31, 2025 and 2024 was $1,586 and $1,618, respectively (including short-term and other rentals).
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 15, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 31, 2021 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.