PIONEER POWER SOLUTIONS, INC. Commitments Disclosure

7. COMMITMENTS AND CONTINGENCIES

 

Leases

 

The Company leases certain offices, facilities and equipment under operating and financing leases. The Company’s leases have remaining terms ranging from less than 1 year to 5 years, some of which contain options to extend up to 5 years. As of December 31, 2024, and 2023, assets recorded under finance leases were $455 and $638, respectively, and accumulated amortization associated with finance leases were $234 and $235, respectively.

 

As of December 31, 2024, and 2023, assets recorded under operating leases were $995 and $830, respectively, and accumulated amortization associated with operating leases were $465 and $405, respectively. During the fourth quarter of 2024, the Company executed an extension of its operating lease in Miami, Florida. After adjusting for a weighted average discount rate, the Company recognized a right-of-use asset and lease liability of approximately $330 within the consolidated balance sheets.

 

The components of the lease expense were as follows:

 SCHEDULE OF LEASE EXPENSES

		2024				2023
		For the Years Ended
		December 31,
		2024				2023
Operating lease cost		$	247			$	247
Financing lease cost
Amortization of right-of-use asset		$	129			$	324
Interest on lease liabilities			25				42
Total financing lease cost		$	154			$	366

 

Other information related to leases was as follows:

 

Supplemental cash flows information:

 SCHEDULE OF CASH FLOWS INFORMATION

		2024				2023
		For the Years Ended
		December 31,
		2024				2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flow payments for operating leases		$	260			$	255
Operating cash flow payments for financing leases			25				42
Financing cash flow payments for financing leases			129				355
Right-of-use assets obtained in exchange for lease obligations
Operating lease liabilities arising from obtaining right of use assets			330				-

 

Weighted average remaining lease term:

 SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERM AND DISCOUNT RATE

			December 31,
			2024				2023
Operating leases			3 years				2 years
Financing leases			2 years				3 years

 

 

Weighted average discount rate:

 

		December 31,
		2024				2023
Operating leases			5.50	%			5.50	%
Financing leases			6.94	%			6.80	%

 

Future minimum lease payments under non-cancellable leases as of December 31, 2024, were as follows:

 SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

		Operating Leases				Financing Leases
		Operating				Financing
		Leases				Leases
2025		$	270			$	123
2026			97				88
2027			76				42
2028			79				-
Thereafter			82				-
Total future minimum lease payments			604				253
Less imputed interest			(59	)			(23	)
Total future minimum lease payments		$	545			$	230

 

Reported as of December 31, 2024:

 SCHEDULE OF LEASE REPORTED

		Operating				Financing
		Leases				Leases
Right-of-use assets		$	530			$	221
		Operating				Financing
		Leases				Leases
Current portion of lease liabilities		$	244			$	109
Lease liabilities, non-current portion			301				121
Total		$	545			$	230

 

Litigation and Claims

 

From time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

 

On June 15, 2023, Terrence and Kay Mimick (the “Plaintiffs”) filed a complaint in the U.S. District Court, District of Nebraska naming the Company, its wholly-owned subsidiary, Pioneer Critical Power, Inc., and an individual acting in his capacity as an employee of the Company, collectively as defendants. Plaintiffs filed an amended complaint on July 7, 2023, alleging negligent driving, negligent entrustment, and negligent hiring, training and supervision, as a result of a car accident that occurred on September 9, 2019, and seeking special damages related to the injuries allegedly sustained by Plaintiffs. The amended complaint also named Titan Energy Systems, Inc. as a defendant instead of Pioneer Critical Power, Inc. On July 27, 2023, the defendants filed an Answer to Plaintiff’s Amended Complaint. On October 6, 2023, a mediation was held, but the parties did not reach a settlement. As of December 31, 2023, the Company recognized a liability of $5,000 related to this matter, with a corresponding insurance receivable of $5,000 related to the loss recovery, which was included within prepaid expenses and other current assets on the consolidated balance sheet. In June 2024, another mediation was held and the parties reached a settlement for all of the Plaintiffs’ claims. The case was dismissed with prejudice on July 23, 2024. As of December 31, 2024, the Company did not recognize a liability, or a corresponding insurance receivable, related to the loss recovery.