Company: NEOV
Filing Date: 2025-02-07
Form Type: 10-Q
Source: 0001683168-25-000834
Chunk: 15

Company: NeoVolta Inc.
Filing Date: 2025-02-07
Form: 10-Q
Item: Part I, Item 1
Chunk 15
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encies 

Effective January 1, 2021,
we secured new corporate and manufacturing office space under a sublease agreement with a company that served as our contract manufacturer
at that time. Under the terms of the sublease agreement, we were required to make rental payments of $10,350 per month during the initial
one-year term of the agreement. Further, under the terms of the sublease agreement, we were granted the right to renew the sublease for
additional terms of 12 months each upon mutual agreement of both parties, provided thirty days’ notice is given for each subsequent
term, at a modest increase in the monthly rent, through December 31, 2024, with no obligation to renew it. At inception of the sublease,
management determined that exercise of the renewal option was not reasonably certain and, notwithstanding that the Company elected to
renew the agreement for additional one year periods as of January 1, 2022, 2023 and 2024. Accordingly, we have accounted for it as a short-term
lease under ASC 842, Leases. Effective December 31, 2024, the parties mutually agreed to a short-term extension of the sublease
agreement, on essentially the same terms, through February 28, 2025. Prior to expiration of the extended sublease, the Company relocated
its corporate and manufacturing office space to another facility in the same vicinity under a one year sublease agreement with the sublandlord,
at a base rental of $15,532 per month.

As indicated in Note 1, we
sell our proprietary ESS units through wholesale dealers, primarily in California. In that regard, we have entered into agreements with
several wholesale dealers operating in California and other states under which we have incentivized the dealers to achieve quarterly sales
above targeted levels by agreeing to grant them shares of our common stock for exceeding such quarterly sales targets, determined as of
the calendar year end, subject to defined maximums, as determined annually on a calendar year basis.

We are dependent on our two
main component vendors for our suppliers of batteries, inverters and other raw materials and the inability of these single-source suppliers
to deliver necessary components of our products according to our schedule and at prices, quality levels and volumes acceptable to us,
or our inability to efficiently manage these components, could have a material adverse effect on our financial condition and operating
results.

From time to time in the ordinary
course of our business, the Company may be involved