false Q1 --12-31 0001622345 0001622345 2026-01-01 2026-03-31 0001622345 2026-05-20 0001622345 2026-03-31 0001622345 2025-12-31 0001622345 us-gaap:RelatedPartyMember 2026-03-31 0001622345 us-gaap:RelatedPartyMember 2025-12-31 0001622345 us-gaap:NonrelatedPartyMember 2026-03-31 0001622345 us-gaap:NonrelatedPartyMember 2025-12-31 0001622345 2025-01-01 2025-03-31 0001622345 us-gaap:CommonStockMember 2025-12-31 0001622345 us-gaap:AdditionalPaidInCapitalMember 2025-12-31 0001622345 us-gaap:RetainedEarningsMember 2025-12-31 0001622345 us-gaap:TreasuryStockCommonMember 2025-12-31 0001622345 us-gaap:CommonStockMember 2024-12-31 0001622345 us-gaap:AdditionalPaidInCapitalMember 2024-12-31 0001622345 us-gaap:RetainedEarningsMember 2024-12-31 0001622345 us-gaap:TreasuryStockCommonMember 2024-12-31 0001622345 2024-12-31 0001622345 us-gaap:CommonStockMember 2026-01-01 2026-03-31 0001622345 us-gaap:AdditionalPaidInCapitalMember 2026-01-01 2026-03-31 0001622345 us-gaap:RetainedEarningsMember 2026-01-01 2026-03-31 0001622345 us-gaap:TreasuryStockCommonMember 2026-01-01 2026-03-31 0001622345 us-gaap:CommonStockMember 2025-01-01 2025-03-31 0001622345 us-gaap:AdditionalPaidInCapitalMember 2025-01-01 2025-03-31 0001622345 us-gaap:RetainedEarningsMember 2025-01-01 2025-03-31 0001622345 us-gaap:TreasuryStockCommonMember 2025-01-01 2025-03-31 0001622345 us-gaap:CommonStockMember 2026-03-31 0001622345 us-gaap:AdditionalPaidInCapitalMember 2026-03-31 0001622345 us-gaap:RetainedEarningsMember 2026-03-31 0001622345 us-gaap:TreasuryStockCommonMember 2026-03-31 0001622345 us-gaap:CommonStockMember 2025-03-31 0001622345 us-gaap:AdditionalPaidInCapitalMember 2025-03-31 0001622345 us-gaap:RetainedEarningsMember 2025-03-31 0001622345 us-gaap:TreasuryStockCommonMember 2025-03-31 0001622345 2025-03-31 0001622345 us-gaap:SubsequentEventMember POLA:SettlementAgreementMember 2026-05-11 2026-05-11 0001622345 us-gaap:SubsequentEventMember POLA:SettlementAgreementMember 2026-05-10 2026-05-10 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember 2020-09-30 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember srt:MaximumMember 2025-01-01 2025-12-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember 2026-01-01 2026-03-31 0001622345 2025-10-06 0001622345 us-gaap:CommonStockMember POLA:ATMOfferingMember 2025-01-01 2025-12-31 0001622345 us-gaap:CommonStockMember POLA:ATMOfferingMember 2025-12-31 0001622345 us-gaap:CommonStockMember 2025-12-12 2025-12-12 0001622345 us-gaap:CommonStockMember POLA:ATMOfferingMember 2025-12-12 2025-12-12 0001622345 POLA:ATMOfferingMember 2026-01-01 2026-03-31 0001622345 POLA:ATMOfferingMember 2026-03-31 0001622345 2025-12-23 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember POLA:October2024Member 2025-12-23 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember 2025-12-23 0001622345 2025-12-23 2025-12-23 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember POLA:October2024Member 2025-12-26 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember POLA:October2024Member 2026-01-01 2026-03-31 0001622345 POLA:InternationalSalesMember 2026-01-01 2026-03-31 0001622345 POLA:InternationalSalesMember 2025-01-01 2025-03-31 0001622345 POLA:LargestCustomerOneMember POLA:SalesToTelecommunicationsCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:LargestCustomerOneMember POLA:SalesToTelecommunicationsCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember 2025-01-01 2025-03-31 0001622345 POLA:CustomerMember POLA:SalesToTelecommunicationsCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:SalesToTelecommunicationsCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:RevenueFromRightsConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:SalesToTelecommunicationsCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:RevenueFromRightsConcentrationRiskMember 2025-01-01 2025-03-31 0001622345 POLA:SalesToInternationalCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:RevenueFromRightsConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:SalesToInternationalCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:RevenueFromRightsConcentrationRiskMember 2025-01-01 2025-03-31 0001622345 POLA:NoOtherCustomersMember us-gaap:RevenueFromContractWithCustomerMember us-gaap:CustomerConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:LargestReceivableAccountsMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:LargestReceivableAccountsOneMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2025-01-01 2025-12-31 0001622345 POLA:LargestReceivableAccountsTwoMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2025-01-01 2025-12-31 0001622345 POLA:NoOtherCustomerMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:NoOtherCustomerMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2025-01-01 2025-12-31 0001622345 POLA:LargestVendorsOneMember us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:LargestVendorsTwoMember us-gaap:AccountsPayableMember us-gaap:CustomerConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:LargestVendorsThreeMember us-gaap:AccountsPayableMember us-gaap:CustomerConcentrationRiskMember 2026-01-01 2026-03-31 0001622345 POLA:LargestVendorsOneMember us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember 2025-01-01 2025-12-31 0001622345 POLA:LargestVendorsTwoMember us-gaap:AccountsPayableMember us-gaap:CustomerConcentrationRiskMember 2025-01-01 2025-12-31 0001622345 POLA:LargestVendorsThreeMember us-gaap:AccountsPayableMember us-gaap:CustomerConcentrationRiskMember 2025-01-01 2025-12-31 0001622345 POLA:DCPowerSystemsMember 2026-01-01 2026-03-31 0001622345 POLA:DCPowerSystemsMember 2025-01-01 2025-03-31 0001622345 POLA:EngineeringAndTechSupportServicesMember 2026-01-01 2026-03-31 0001622345 POLA:EngineeringAndTechSupportServicesMember 2025-01-01 2025-03-31 0001622345 POLA:AccessoriesMember 2026-01-01 2026-03-31 0001622345 POLA:AccessoriesMember 2025-01-01 2025-03-31 0001622345 POLA:TelecommunicationsMember 2026-01-01 2026-03-31 0001622345 POLA:TelecommunicationsMember 2025-01-01 2025-03-31 0001622345 POLA:GovernmentAndMilitaryMember 2026-01-01 2026-03-31 0001622345 POLA:GovernmentAndMilitaryMember 2025-01-01 2025-03-31 0001622345 POLA:MarineMember 2026-01-01 2026-03-31 0001622345 POLA:MarineMember 2025-01-01 2025-03-31 0001622345 POLA:OtherMember 2026-01-01 2026-03-31 0001622345 POLA:OtherMember 2025-01-01 2025-03-31 0001622345 country:US 2026-01-01 2026-03-31 0001622345 country:US 2025-01-01 2025-03-31 0001622345 POLA:SouthPacificIslandsMember 2026-01-01 2026-03-31 0001622345 POLA:SouthPacificIslandsMember 2025-01-01 2025-03-31 0001622345 country:CA 2026-01-01 2026-03-31 0001622345 country:CA 2025-01-01 2025-03-31 0001622345 POLA:EuropeAndMiddleEastMember 2026-01-01 2026-03-31 0001622345 POLA:EuropeAndMiddleEastMember 2025-01-01 2025-03-31 0001622345 2025-01-01 2025-12-31 0001622345 us-gaap:EmployeeStockOptionMember 2026-01-01 2026-03-31 0001622345 us-gaap:EmployeeStockOptionMember 2025-01-01 2025-03-31 0001622345 us-gaap:FurnitureAndFixturesMember 2026-03-31 0001622345 us-gaap:FurnitureAndFixturesMember 2025-12-31 0001622345 us-gaap:VehiclesMember 2026-03-31 0001622345 us-gaap:VehiclesMember 2025-12-31 0001622345 us-gaap:LeaseholdImprovementsMember 2026-03-31 0001622345 us-gaap:LeaseholdImprovementsMember 2025-12-31 0001622345 POLA:ComputerSoftwareAndOfficeEquipmentMember 2026-03-31 0001622345 POLA:ComputerSoftwareAndOfficeEquipmentMember 2025-12-31 0001622345 us-gaap:RelatedPartyMember 2023-12-31 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember 2026-03-31 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember POLA:April2026Member 2026-03-31 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember POLA:May2026Member 2026-03-31 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember POLA:August2026Member 2026-03-31 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember POLA:September2026Member 2026-03-31 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember POLA:October2026Member 2026-03-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember POLA:StandardInterestRateMember POLA:AbovePrimeRateMember 2026-01-01 2026-03-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember srt:MaximumMember POLA:StandardInterestRateMember 2026-01-01 2026-03-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember POLA:StandardInterestRateMember 2026-01-01 2026-03-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember POLA:StandardInterestRateMember 2025-01-01 2025-12-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember POLA:InventoryInterestRateMember POLA:AbovePrimeRateMember 2026-01-01 2026-03-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember srt:MaximumMember POLA:InventoryInterestRateMember 2026-01-01 2026-03-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember POLA:InventoryInterestRateMember 2026-01-01 2026-03-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember POLA:InventoryInterestRateMember 2025-01-01 2025-12-31 0001622345 POLA:FifthModificationLoanMember 2026-01-01 2026-03-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember srt:MaximumMember 2026-01-01 2026-03-31 0001622345 POLA:PinnacleBankMember POLA:LoanAndSecurityAgreementMember 2025-01-01 2025-12-31 0001622345 POLA:LoanAndSecurityAgreementMember 2025-01-01 2025-12-31 0001622345 POLA:LoanAndSecurityAgreementMember 2026-01-01 2026-03-31 0001622345 POLA:LoanAndSecurityAgreementMember 2025-01-01 2025-03-31 0001622345 us-gaap:NonrelatedPartyMember 2026-01-01 2026-03-31 0001622345 us-gaap:RelatedPartyMember 2023-12-23 0001622345 srt:ChiefExecutiveOfficerMember POLA:NoteAgreementMember 2025-12-26 0001622345 POLA:GardenaCaliforniaMember 2026-01-01 2026-03-31 0001622345 POLA:GardenaCaliforniaMember 2026-03-31 0001622345 POLA:GardenaCaliforniaMember 2025-12-31 0001622345 us-gaap:ManufacturingFacilityMember 2025-01-01 2025-12-31 0001622345 POLA:LeaseThreeMember 2026-01-01 2026-03-31 0001622345 us-gaap:CommonStockMember POLA:ThinkEquityLLCMember 2025-10-06 2025-10-06 0001622345 us-gaap:CommonStockMember POLA:ATMOfferingMember 2025-01-01 2025-12-31 0001622345 us-gaap:CommonStockMember POLA:ATMOfferingMember 2025-12-31 0001622345 POLA:ATMOfferingMember 2025-01-01 2025-12-31 0001622345 us-gaap:CommonStockMember POLA:ATMOfferingMember 2025-12-11 2025-12-11 0001622345 us-gaap:CommonStockMember POLA:ATMOfferingMember 2026-01-01 2026-03-31 0001622345 us-gaap:CommonStockMember POLA:ATMOfferingMember 2026-03-31 0001622345 POLA:ATMOfferingMember 2026-01-01 2026-03-31 0001622345 POLA:TwoThousandSixteenOmnibusIncentivePlanMember 2016-07-08 0001622345 srt:MinimumMember 2026-03-31 0001622345 srt:MaximumMember 2026-03-31 0001622345 POLA:DecemberTwoThosandTwentySevenMember 2026-01-01 2026-03-31 0001622345 POLA:DecemberTwoThosandTwentySevenMember 2026-01-01 2026-12-31 0001622345 us-gaap:SubsequentEventMember POLA:ArthurSamesMember 2026-04-09 2026-04-09 0001622345 srt:MinimumMember us-gaap:SubsequentEventMember 2026-05-01 2026-05-01 0001622345 us-gaap:SubsequentEventMember 2026-05-01 0001622345 us-gaap:SubsequentEventMember 2026-05-01 2026-05-01 0001622345 us-gaap:SubsequentEventMember POLA:StoneLoanAgreementMember 2026-05-13 0001622345 us-gaap:SubsequentEventMember POLA:StoneLoanAgreementMember 2026-05-13 2026-05-13 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure POLA:Segment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number: 001-37960

POLAR POWER, INC.

(Exact name of registrant as specified in its charter)

Delaware		33-0479020
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

249 E. Gardena Blvd., Gardena, California		90248
(Address of principal executive offices)		(Zip Code)

(310) 830-9153

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		POLA		The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.05 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

	Large Accelerated Filer ☐		Accelerated Filer ☐
	Non-Accelerated Filer ☒		Smaller Reporting Company ☒
			Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the Registrant’s common stock, $0.0001 par value, as of May 20, 2026 was 3,640,159.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	1

ITEM 1. Condensed Financial Statements	1

ITEM 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	12

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	18

ITEM 4. Controls and Procedures	18

PART II – OTHER INFORMATION	19

ITEM 1. Legal Proceedings	19

ITEM 1A. Risk Factors	19

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	36

ITEM 3. Defaults Upon Senior Securities	36

ITEM 4. Mine Safety Disclosure	36

ITEM 5. Other Information	36

ITEM 6. Exhibits	36

FORWARD LOOKING AND CAUTIONARY STATEMENTS

All statements included or incorporated by reference in this Quarterly Report on Form 10-Q, other than statements or characterizations of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Examples of forward-looking statements include, but are not limited to, statements concerning projected net sales, costs and expenses and gross margins; our accounting estimates, assumptions and judgments; the demand for our products; the effect and consequences of the novel coronavirus, or COVID-19, pandemic and recovery on matters including U.S., local and foreign economies, wars and international conflicts including the current military actions involving the Russian Federation and Ukraine and conflicts between Israel and Hamas, our business operations, the ability of financing and the health and productivity of our employees; the competitive nature of and anticipated growth in our industry; production capacity and goals; our ability to consummate acquisitions and integrate their operations successfully; and our prospective needs for additional capital. These forward-looking statements are based on our current expectations, estimates, approximations and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, some of which are listed under “Risk Factors” in Part II, Item 1A, and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Quarterly Report on Form 10-Q. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

References in this Quarterly Report on Form 10-Q to “Polar,” the “Company,” “we,” “us,” and “our” refer to Polar Power, Inc., a Delaware corporation, and its consolidated subsidiaries.

FINANCIAL PRESENTATION

All dollar amounts in this Quarterly Report on Form 10-Q are presented in thousands, except share and per share data and where otherwise noted. Share and per share data have been retroactively adjusted to reflect the decreased number of shares resulting from a 1 for 7 reverse stock split which took effect on November 18, 2024.

PART I – FINANCIAL INFORMATION

ITEM 1. Condensed Financial Statements

POLAR POWER, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and per share data)

	March 31, 2026			December 31, 2025
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	27		$	200
Accounts receivable		1,511			330
Inventories		9,547			9,425
Prepaid expenses		78			76
Total current assets		11,163			10,031

Other assets:
Operating lease right-of-use assets		172			278
Property and equipment, net		112			128

Total assets	$	11,447		$	10,437

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable (includes $1,070 and $778 of rents payable)	$	2,617		$	2,506
Customer deposits		756			764
Accrued liabilities and other current liabilities		807			1,462
Line of credit		3,704			4,036
Notes payable-related party		611			612
Notes payable, current		365			438
Current portion of operating lease liabilities		197			475
Total current liabilities		9,057			10,293

Total liabilities		9,057			10,293

Commitments and Contingencies		-

Stockholders’ Equity
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $0.0001 par value, 50,000,000 shares authorized, 3,642,656 shares issued and 3,640,159 shares outstanding on March 31, 2026, and 2,680,156 shares issued and 2,677,659 shares outstanding on December 31, 2025		—			—
Additional paid-in capital		42,077			39,653
Accumulated deficit		(39,647	)		(39,469	)
Treasury Stock, at cost (2,497 shares)		(40	)		(40	)
Total stockholders’ equity		2,390			144

Total liabilities and stockholders’ equity	$	11,447		$	10,437

See Accompanying Notes to the Condensed Financial Statements

POLAR POWER, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	2026			2025
	Three Months Ended March 31,
	2026			2025
Net Sales	$	1,728		$	1,723
Cost of Sales		593			1,403
Gross profit		1,135			320

Operating Expenses
Sales and marketing		159			260
Research and development		169			160
General and administrative		783			1,001
Total operating expenses		1,111			1,421

Income (loss) from operations		24			(1,101	)

Other income (expenses)
Interest expense and finance costs		(202	)		(164	)
Total other income (expenses), net		(202	)		(164	)

Net loss	$	(178	)	$	(1,265	)

Net loss per share – basic and diluted	$	(0.05	)	$	(0.50	)
Weighted average shares outstanding, basic and diluted		3,477,937			2,510,669

See Accompanying Notes to the Condensed Financial Statements

POLAR POWER, INC.

UNAUDITED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Three Months Ended March 31, 2026

	Number		Amount		capital		Deficit)			Stock			Equity
	Common Stock				Additional paid-in		(Accumulated			Treasury			Total Stockholders’
	Number		Amount		capital		Deficit)			Stock			Equity
Balance, December 31, 2025		2,680,156	$	—	$	39,653	$	(39,469	)	$	(40	)	$	144
Shares of common stock issued for cash, net of offering costs		962,500		—		2,424		—			—			2,424
Net loss		—		—				(178	)		—			(178	)
Balance, March 31, 2026 (unaudited)		3,642,656	$	—	$	42,077	$	(39,647	)	$	(40	)	$	2,390

Three months Ended March 31, 2025

	Common Stock					Additional paid-in		(Accumulated			Treasury			Total Stockholders’
	Number		Amount			capital		Deficit)			Stock			Equity
Balance, December 31, 2024		2,511,350	$	2		$	38,886	$	(30,336	)	$	(40	)	$	8,512

Adjustment of common stock for reverse stock split		—		(2	)		2		—			—			—
Issuance of common stock to director for accrued fees		2,679		—			8		—			—			8
Net loss		—		—					(1,265	)		—			(1,265	)
Balance, March 31, 2025 (unaudited)		2,514,029	$	—		$	38,896	$	(31,601	)	$	(40	)	$	7,255

See Accompanying Notes to the Condensed Financial Statements

POLAR POWER, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

	2026			2025
	Three Months Ended March 31,
	2026			2025
Cash flows from operating activities:
Net loss	$	(178	)	$	(1,265	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		16			17
Changes in warranty liability reserve		(427	)
Changes in operating assets and liabilities
Accounts receivable		(1,181	)		466
Inventories		(122	)		(241	)
Prepaid expenses		(2	)		(21	)
Operating lease right-of-use asset		106			302
Accounts payable		111			309
Customer deposits		(8	)		151
Accrued expenses and other current liabilities		(228	)		17
Operating lease liabilities		(278	)		(319	)
Net cash used in operating activities		(2,191	)		(584	)

Cash flows from financing activities:
Net proceeds from issuance of common stock under ATM facility		2,424			—
Proceeds from notes payable-related party		—			163
Repayment of notes payable-related party		(1	)		—
Repayment of notes payable		(73	)		—
Repayment of advances from credit facility		(332	)		(9	)
Net cash provided by financing activities		2,018			154

Decrease in cash and cash equivalents		(173	)		(430	)
Cash and cash equivalents, beginning of period		200			498
Cash and cash equivalents, end of period	$	27		$	68

Supplemental Cash Flow Information:
Interest paid	$	169		$	188
Supplemental non-cash investing and financing activities:
Issuance of common stock to director for accrued fees	$	—		$	8

See Accompanying Notes to the Condensed Financial Statements

POLAR POWER, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025

(In thousands, except for share and per share data and where otherwise noted)

(UNAUDITED)

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Polar Power, Inc. was incorporated in the State of Washington as Polar Products, Inc. and in 1991 reincorporated in the State of California under the name Polar Power, Inc. In December 2016, Polar Power, Inc. reincorporated in the State of Delaware (the “Company”, “we” or “us”). The Company designs, manufactures and sells direct current, or DC, power systems to supply reliable and low-cost energy to off-grid, bad-grid and backup power, electric vehicle (“EV”) charging, and nano-grid applications. The Company’s products integrate DC generator, proprietary electronic control systems, lithium batteries and solar photovoltaic (“PV”) technologies to provide low operating cost and emissions for telecommunications, Defense, automotive, nano-grid, EV charging and industrial markets.

Going concern

The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company’s management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying financial statements were issued. For the three months ended March 31, 2026, the Company recorded a net loss of $178 and used cash in operations of $2,191. In addition, our independent registered public accounting firm, in its audit report to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company manufactures and assembles its DC power systems at two production facilities located in Gardena, California. It is currently delinquent in rent payments to its landlords for 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. During the first quarter of 2026, the Company paid $206 towards its past due lease obligations reported as of December 31, 2025.

On May 11, 2026, the Company entered into a Settlement Agreement with the landlord for each of its headquarters facility and its warehouse facility that became effective as of May 7, 2026. The Settlement Agreement addressed the matter of delinquent rents and an expired lease. Regarding the Company’s headquarters facility, the Company agreed to make immediate payment of $400 towards past due rents, and the landlord agreed to cease eviction procedures. The landlord also agreed to extend the property lease commencing June 1, 2026, to April 1, 2027, and reduce the monthly rent from $84 to $55. Regarding the warehouse facility, the Company agreed to vacate the facility by August 31, 2026 and leave the premises in the condition required by the relevant lease agreement; in exchange, the landlord agreed to waive rents for the months of June, July, and August 2026. Each landlord reserved the right to charge for any waived rents or continue with eviction action should the Company fail to meet the requirements listed in the Settlement Agreement. The Company also may have to pay liquidated damages if it fails to vacate the properties in the event either or both landlords decide to exercise their rights for eviction.

As of May 19, 2026, the Company had not made a payment per the Settlement Agreement, and on May 19, 2026, the landlord for the Company’s headquarters facility evicted the Company from that facility. The headquarters facility is where the Company, among other things, has its offices, conducts design work, and assembles and tests it products. The Company is currently relocating these activities to its warehouse facility. The Company is continuing its operations, but expects there to be disruptions and difficulties with this change. Further, if the landlord for the warehouse facility were to evict the Company from that facility, the Company could have difficulty finding an appropriate location from which to operate its business, which would have a material adverse effect on its operations, financial results and financial condition.

As of the date hereof, the Company is pursuing third-party financing that it would use to pay the landlords and certain other expenses.

There is no guarantee that Company will raise sufficient capital to pay the delinquent rent or that the landlord for the headquarters facility would agree to let the Company use that facility if the Company were to pay the rent. It is possible that the Company will be forced to vacate from both facilities, and if that happens, it may have difficulty securing new headquarters, or new manufacturing or warehouse facilities that are adequate. Our production could be significantly delayed, access to our inventory could be impaired, and our operations could halt for a significant period of time. As of March 31, 2026, the Company was delinquent in $858 of rent to these landlords which is included in accounts payable.

Effective September 30, 2020, the Company entered into a loan agreement (the “Loan Agreement”) with Pinnacle Bank (“Pinnacle”) which will expire on September 30, 2026. The Loan Agreement, as amended, provides for a revolving credit facility under which Pinnacle may, in its sole discretion upon the Company’s request, make advances to us up to $7,500, subject to certain limitations and adjustments. The Loan Agreement contains certain affirmative and negative covenants. At March 31, 2026, and December 31, 2025, the Company was not in compliance with the affirmative covenant requiring the Company to attain a minimum effective tangible net worth greater than $6,000. On March 10, 2026, the Company and Pinnacle executed a Notice of Additional Defaults and Forbearance Agreement (the “Forbearance Agreement”), in which Pinnacle agrees to forbear from exercising certain rights and remedies under the Loan Agreement and related documents (the “Loan Documents”) arising from the Specified Existing Defaults (as defined by the Forbearance Agreement) for the period commencing March 10, 2026 (the “Effective Date”), to July 31, 2026 (the “Forbearance Termination Date”), considering the Company 1) on or prior to the Effective Date, pays Pinnacle the amount of $250, 2) on or prior to the Effective Date, assigns to Pinnacle new Eligible Accounts in the aggregate amount of at least $185, with 85% of the Net Face Amount (as defined by the Forbearance Agreement) of such new Eligible Accounts (as defined by the Forbearance Agreement) to be applied to reduce the loan obligations, 3) within forty-five (45) days of the Effective Date, reduce the loan obligations by the aggregate amount of $225, which reduction can result from a cash payment or the assignment of sufficient new Eligible Accounts, with 85% of the Net Face Amount of such new Eligible Accounts to be applied towards such reduction amount, 4) does not create any new events of default, 5) pays in full all obligations to Pinnacle by the Termination Date. If the Company timely complies with all terms listed above, and so long as the Forbearance Termination Date has not occurred, Pinnacle agrees that it will re-commence making Advances to the Company in the amount equal to 42.5% of the Net Face Amount of the thereafter arising Eligible Accounts, with the remaining 42.5% of the Net Face Amount of such Eligible Accounts to be applied to reduce the then outstanding obligations. In March 2026, the Company paid $250 to Pinnacle and timely complied with the requirements under the Forbearance Agreement and commenced taking advances at 42.5% of the Net Face Amount of Eligible Accounts on March 12, 2026. While the Company expects to stay in compliance and pay the full obligation to Pinnacle by July 31, 2026, there is no guarantee that the Company will be able to do so. If the Company is unable to comply with the Loan Agreement, or pay the full obligation to Pinnacle by the July 31, 2026, Pinnacle may immediately enforce its claims, rights, liens, and security interests under the Forbearance Agreement and the Loan Documents, including but not limited to, taking possession of its collateral, or any portion thereof, and foreclosing upon its collateral, or any portion thereof, in accordance with the Loan Documents and applicable law.

On October 6, 2025, the Company entered into an ATM sales agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time (the “ATM Offering”) through the Sales Agent, shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), up to a maximum amount as set forth in the Sales Agreement, subject to the terms and conditions of the Sales Agreement. The Company filed a prospectus supplement to its registration statement on Form S-3 (File No. 333-276705) offering the Shares up to an aggregate offering price of up to $2,382.

As of December 31, 2025, the Company sold 166,127 shares of Common Stock in the ATM Offering at a weighted-average price of $4.70 per share, for net proceeds of $757, after deducting commissions to the sales agent and other ATM Offering related expenses of $23. On December 12, 2025, the Company filed a prospectus supplement to its registration statement on Form S-3 (File No. 333-276705) to increase the amount of shares of Common Stock that the Company may offer and sell under the Sales Agreement and applicable registration statement to an aggregate offering price of up to $2,500, which amount does not include the shares of Common Stock having an aggregate gross sales price of approximately $757 that were sold under the ATM Offering through December 11, 2025, in accordance with the limitations set forth in Instruction I.B.6 of Form S-3. During the three months ended March, 31, 2026, the Company sold 962,500 shares of Common Stock in the ATM Offering at a weighted-average price of $2.60 per share, for net proceeds of $2,424, after deducting commissions to the sales agent and other ATM Offering related expenses of $75.

On December 23 2025, the Company entered into a business loan and security agreement (the “WWCM Loan Agreement”) with World Wide Capital Management (“WWCM”), pursuant to which the Company borrowed net proceeds of $399 from WWCM, after deducting fees as outlined in the WWCM Loan Agreement. The loan amount is $500, with a loan origination fee of $20, providing for an advance amount of $480. The loan is to be paid in 48 weekly payments of $13 with the first six payments paid in advance and deducted from the initial funding. Net proceeds of $399 were received by the Company on December 26, 2025. The total remaining repayment obligation to the Company is $365 as of March 31, 2026.

Furthermore, the Company’s ability to secure other financing is uncertain. The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing, grow and diversify our revenue, improve operational efficiency, reduce overhead and fixed costs, and to create a profitable operation. Its ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, its performance and investor sentiment with respect to the Company and its industry. The Company has taken action to diversify sales to consume existing inventory, increase higher margin aftermarket parts revenue, to fund operations. In the event that the Company does not generate sufficient cash flows from operations and is unable to obtain funding, the Company will be forced to delay, reduce, or eliminate some or all of its discretionary spending, which could adversely affect the Company’s business prospects, ability to meet long-term liquidity needs or ability to continue operations.

Impact of inflation

The impact of inflation and changing prices during the three months ended March 31, 2026 has had modest effect on the financial condition or results of operations of the Company. Rapid changes in the global economy may cause significant spikes in inflation which may have an impact in our financial condition during 2026 and beyond. Because some of our contracts are at a fixed price, we face the risk that cost overruns or inflation may exceed, erode or eliminate our expected profit margin, or cause us to record a loss on certain projects. We are taking actions to manage the potential impacts of these matters and we will continue to assess the actual and expected impacts and the need for further action.

Basis of Presentation of Unaudited Financial Information

The unaudited condensed financial statements of the Company for the three months ended March 31, 2026 and 2025 have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2025 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended December 31, 2025 and 2024 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 15, 2026. These financial statements should be read in conjunction with that report.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Material estimates relate to the assumptions made in determining estimates for credit loss reserves for accounts receivable, assumptions used in valuing inventories at net realizable value, impairment testing of recorded long-term assets, the realizability of deferred tax assets and the related valuation allowance, accruals for warranty reserves, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in the determination of the Company’s liquidity. Actual results may differ from those estimates.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying the Company’s performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.

Substantially all of the Company’s revenue is derived from product sales. Product revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to its customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the products or services to a customer. The Company determines whether delivery has occurred based on when title transfers and the risks and rewards of ownership have transferred to the customer, which usually occurs when the Company places the product with the customer’s carrier or delivers assured. the product to a customer’s location. The Company regularly reviews its customers’ financial positions to ensure that collectability is reasonably

The Company also recognizes revenues from engineering services, technical support, and sale of accessories that support the Company’s direct current, or DC, power systems. Revenue is recognized when transfer of control to the customer has been made and the Company’s performance obligation has been fulfilled. The Company’s revenue from engineering services, technical support services, and product accessories are clearly defined in each transaction with its customers and have not been significant to date.

The Company also recognizes revenues from the rental of equipment. The Company’s rental revenues have not been significant to date and were $nil for the periods ended March 31, 2026 and 2025. The Company’s rental contracts are fixed price contracts for fixed durations of time and include freight and delivery charges and are recognized on a straight-line basis over the rental period.

Disaggregation of Net Sales

The following table shows the Company’s disaggregated net sales by product type:

SCHEDULE OF DISAGGREGATED NET SALES

	2026		2025
	Three months ended March 31,
	2026		2025
	(Unaudited)		(Unaudited)
DC power systems	$	1,510	$	1,230
Engineering & Tech Support Services		24		—
Accessories		194		493
Total net sales	$	1,728	$	1,723

The following table shows the Company’s disaggregated net sales by customer type:

	2026		2025
	Three months ended March 31,
	2026		2025
	(Unaudited)		(Unaudited)
Telecom	$	1,660	$	1,419
Government/Military		49		294
Marine		2		7
Other (backup DC power to various industries)		17		3
Total net sales	$	1,728	$	1,723

The following tables shows the Company’s net sales by the respective geographical regions of our customers (in thousands):

	2026		2025
	Three months ended
	March 31,
	2026		2025
	(Unaudited)		(Unaudited)
United States	$	1,650	$	1,421
South Pacific Islands		60		6
Canada		3		1
Europe and Middle East		15		295
Total net sales	$	1,728	$	1,723

For the three months ended March 31, 2026, and 2025, international sales totaled $78 and $302 respectively.

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. The Company records adjustments to its inventory based on an estimated forecast of the inventory demand, taking into consideration, among others, inventory turnover, inventory quantities on hand, unfilled customer order quantities, forecasted demand, current prices, competitive pricing, and trends and performance of similar products. If the estimated net realizable value is determined to be less than the recorded cost of the inventory, the difference is recognized as a loss in the period in which it occurs. Once inventory has been written down, it creates a new cost basis for inventory that may not be subsequently written up. There were no write downs of inventory for the three months ended March 31, 2026.

As of March 31, 2026 and December 31, 2025, inventories consisted of the following:

SCHEDULE OF INVENTORIES NET

	March 31, 2026		December 31, 2025
	(unaudited)
Raw materials	$	8,726	$	8,704
Finished goods		821		721
Total Inventories	$	9,547	$	9,425

Product Warranties

The Company provides limited warranties for parts and labor at no cost to its customers within a specified time period after the sale. As of December 31, 2025, the Company had a warranty reserve of $600. During the period ended March 31, 2026, the Company adjusted the warranty reserve to $150 after conducting a reserve study of warranty expense over the previous three years. The results of the study indicate warranty expense has decreased as a result diminishing number of products sold with warranty over the last four years and an increase in sold products with warranty falling off the warranty period. As of March 31, 2026, and December 31, 2025, the Company had accrued a liability for warranty reserve of $150 and $600, respectively, which are included in other accrued liabilities in the accompanying condensed balance sheets. The following is a tabular reconciliation of the product warranty liability, excluding the deferred revenue related to the Company’s warranty coverage:

Changes in estimates for warranties	March 31, 2026			December 31, 2025
	(unaudited)
Balance at beginning of the period	$	600		$	600
Payments		(23	)		(67	)
Provision for warranties		(427	)		67
Balance at end of the period	$	150		$	600

Stock-Based Compensation

The Company periodically issues stock-based compensation to officers, directors, and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date.

Stock-based payments to employees, directors, and for acquiring goods and services from non-employees, which include grants of employee stock options, are recognized in the financial statements based on their grant date fair values in accordance with ASC 718, Compensation-Stock Compensation. Stock option grants to employees, which are generally time vested, are measured at the grant date fair value and depending on the conditions associated with the vesting of the award, compensation cost is recognized on a straight-line or graded basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The fair value of stock options granted is estimated using the Black-Scholes option-pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life, and future dividends. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

Financial Assets and Liabilities Measured at Fair Value

The Company uses various inputs in determining the fair value of its financial assets and liabilities. Financial assets recorded at fair value in the balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value.

Authoritative guidance provided by the Financial Accounting Standards Board (“FASB”) defines the following levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these financial assets:

	Level 1	Quoted prices in active markets for identical assets or liabilities.

	Level 2	Inputs, other than the quoted prices in active markets, that is observable either directly or indirectly.

	Level 3	Unobservable inputs based on the Company’s assumptions.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values because of the short maturity of these instruments. The carrying values of the notes and loans payable approximate their fair values since the interest rates on these obligations are based on prevailing market interest rates.

Segments

Under ASC 280, Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company’s operating segment consists of one component, and the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment.

Concentrations

Revenues. For the three months ended March 31, 2026, 72% of revenues was generated from the Company’s largest customer, a Tier-1 telecommunications wireless carrier in the U.S. For the three months ended March 31, 2025, 71% of revenues was generated from the Company’s largest customer, a Tier-1 telecommunications customer in the U.S., and 17% of the revenue was generated from a customer in the military market in the United Kingdom. For the three months ended March 31, 2026 and March 31, 2025, sales to telecommunications customers accounted for 96% and 82% of total revenues, respectively. For the three months ended March 31, 2026 and March 31, 2025, sales to international customers accounted for 5% and 18%, of total revenue, respectively. There was no other revenue from customers in excess of 10% of revenues in either period.

Accounts receivable. At March 31, 2026, the largest receivable account represented 83% of the Company’s accounts receivable. At December 31, 2025, the Company’s two largest receivable accounts represented 59% and 18% of the Company’s total accounts receivable. There was no other customer that accounted for more than 10% of the Company’s accounts receivable as of March 31, 2026 or December 31, 2025.

Accounts payable. At March 31, 2026, accounts payable to the Company’s three largest vendors represented 28%, 8% and 7%, respectively, of the Company’s accounts payable. On December 31, 2025, the three largest accounts payable accounts to the Company’s vendors represented 21%, 7%, and 7%, respectively.

Net Loss Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share is computed by dividing the net income applicable to common stockholders by the weighted average number of shares of common stock outstanding plus the number of additional shares of common stock that would have been outstanding if all dilutive potential shares of common stock had been issued using the treasury stock method. Potential shares of common stock are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of shares of common stock during the reporting period.

The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:

SCHEDULE OF DILUTED EARNINGS PER SHARE

	March 31, 2026		March 31, 2025
	(Unaudited)		(Unaudited)
Options		12,858		12,858

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (FASB) issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which includes amendments that require disclosure in the notes to financial statements of specified information about certain costs and expenses, including purchases of inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included. The amendments are effective for the Company’s annual periods beginning January 1, 2027, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is in the process of evaluating this ASU to determine its impact on the Company’s disclosures.

The Company’s management has evaluated all other recently issued, but not yet effective, accounting standards and guidance that have been issued or proposed by the FASB or other standards-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position and results of operations.

NOTE 2 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

	March 31, 2026			December 31, 2025
	(Unaudited)
Production and shop equipment and machinery and fixtures	$	3,654		$	3,654
Vehicles		177			177
Leasehold improvements		390			390
Computer software and office equipment		291			291
Total property and equipment, cost		4,512			4,512
Less: accumulated depreciation and amortization		(4,400	)		(4,384	)
Property and equipment, net	$	112		$	128

Depreciation and amortization expense on property and equipment for the three months ended March 31, 2026 and 2025 was $16 and $17, respectively. During the three months ended March 31, 2026 and 2025, $15 and $16, respectively, of the depreciation expense was included in the balance of cost of sales.

NOTE 3 – NOTES PAYABLE, RELATED PARTY

During 2023, the Company’s Chief Executive Officer made three loans to the Company for aggregate principal amount of $260 pursuant to terms of the note agreements. During 2025, the Company’s Chief Executive Officer made three additional loans to the Company for aggregate principal amount of $330 pursuant to terms of the note agreements. The notes have relatively similar terms, are unsecured, and accrue interest at 3.5% per annum. As of March 31, 2026, the aggregate outstanding balance of the loans including accrued interest is $611, with $166 due in April 2026, $172 due in May 2026, $71 due in August 2026, $71 due in September 2026, and $131 due in October 2026.

NOTE 4 – LINE OF CREDIT

Credit Facility

Effective September 30, 2020, the Company entered into the Loan Agreement with Pinnacle. The Loan Agreement, as amended, provides for a revolving credit facility under which Pinnacle may, in its sole discretion upon our request, make advances to the Company up to $7,500, subject to certain limitations and adjustments, of up to $7,500, subject to certain limitations and adjustments. The Loan Agreement contains certain affirmative and negative covenants.

Borrowings based on receivables bears an interest on the daily balance at a rate of 1.25% above the prime rate, but in no event less than 3.75% per annum (8.0% at March 31, 2026 and 8.0% at December 31, 2025). Interest on the portion of the daily balance consisting of advances against inventory accrues interest at a rate of 2.25% above the prime rate, but in no event less than 4.75% per annum (9.0% at March 31, 2026 and 9.0% at December 31, 2025).

Pursuant to the Loan Agreement, as amended, the standards of eligible accounts receivable include AT&T accounts receivable up to 120 days of invoice date, and eligible accounts receivable with other customers have up to 90 days of invoice date. Customer accounts with eligible accounts receivable cannot exceed a concentration percentage which is a customer’s total obligations to the Company as a percentage of eligible accounts receivable from all customers. The concentration percentage applicable to certain Tier-1 telecommunications customers is 75% of all eligible accounts receivable, and the concentration percentage applicable to all other customer is 25% of all eligible accounts.

Pinnacle may terminate the Loan Agreement at any time upon ninety days prior written notice and immediately upon the occurrence of an event of default. Under the Loan Agreement, the Company granted Pinnacle a security interest in all presently existing and thereafter acquired or arising assets of the Company.

At March 31, 2026, and December 31, 2025, the Company was not in compliance with the affirmative covenant requiring the Company to attain a minimum effective tangible net worth greater than $6,000. On March 10, 2026, the Company and Pinnacle executed the Forbearance Agreement, in which Pinnacle agrees to forbear from exercising certain rights and remedies under the Loan Documents arising from the Specified Existing Defaults for the period commencing March 10, 2026, the Effective Date, to July 31, 2026, the Forbearance Termination Date, considering the Company 1) on or prior to the Effective Date, pays Pinnacle the amount of $250, 2) on or prior to the Effective Date, assigns to Pinnacle new Eligible Accounts in the aggregate amount of at least $185, with 85% of the Net Face Amount of such new Eligible Accounts to be applied to reduce the loan obligations, 3) within forty-five (45) days of the Effective Date, reduce the loan obligations by the aggregate amount of $225, which reduction can result from a cash payment or the assignment of sufficient new Eligible Accounts, with 85% of the Net Face Amount of such new Eligible Accounts to be applied towards such reduction amount, 4) does not create any new events of default, 5) pays in full all obligations to Pinnacle by the Termination Date. If the Company timely complies with all terms listed above, and so long as the Forbearance Termination Date has not occurred, Pinnacle agrees that it will re-commence making Advances to the Company in the amount equal to 42.5% of the Net Face Amount of the thereafter arising Eligible Accounts, with the remaining 42.5% of the Net Face Amount of such Eligible Accounts to be applied to reduce the then outstanding obligations. In March 2026, the Company paid $250 to Pinnacle and timely complied with the requirements under the Forbearance Agreement and commenced taking advances at 42.5% of the Net Face Amount of Eligible Accounts on March 12, 2026. While the Company expects to stay in compliance and pay the full obligation to Pinnacle by July 31, 2026, there is no guarantee that the Company will be able to do so. If the Company is unable to comply with the Loan Agreement, or pay the full obligation to Pinnacle by the July 31, 2026, Pinnacle may immediately enforce its claims, rights, liens, and security interests under the Forbearance Agreement, and the Loan Documents, including, but not limited to, taking possession of its collateral, or any portion thereof, and foreclosing upon its collateral, or any portion thereof, in accordance with the Loan Documents and applicable law.

The balance of the loan agreement at December 31, 2025 was $4,036. During 2026, the Company repaid a net of $332 to reduce the Loan. At March 31, 2026, the outstanding balance under the line of credit was $3,704 which includes interest, fees and financing costs (see below), and $1,498 of the Company’s accounts receivable is held as collateral under the credit facility.

The total interest expense, fees, and financing costs incurred under the Loan Agreement during the three months ended March 31, 2026 and 2025 were $125 and $160, respectively, and were recorded under interest expense and finance costs in the accompanying statements of operations.

NOTE 5 – NOTES PAYABLE

On December 23 2025, the Company entered into the WWCM Loan Agreement with WWCM, pursuant to which the Company borrowed net proceeds of $399, after deducting fees as outlined in the WWCM Loan Agreement.

The loan amount is $500, with a loan origination fee of $20, providing for an advance amount of $480. The loan is to be paid in 48 weekly payments of $13 with the first six payments paid in advance and deducted from the initial funding. Net proceeds of $399 were received by the Company on December 26, 2025. The total repayment obligation to the Company is $640 resulting in an effective rate of approximately 34%. As of March 31, 2026, the outstanding loan balance including interest and fees is $365.

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. The balance of the right of use asset assets and lease obligations at March 31, 2026, and December 31, 2025, was $172 and $278, 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, the Company 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. 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 March 31, 2026 of $172 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 March 31, 2026, the remaining lease obligation for both leases is $197 plus $858 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 March 31, 2026, $213 is 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:

	Three Months Ended March 31, 2026			Three Months Ended March 31, 2025
Lease Cost (in thousands)	(Unaudited)			(Unaudited)

Operating lease cost (of which $81 is included in general and administration and ($30) is included in cost of sales in the Company’s statement of operations for the three months ended March 31, 2026, and $43 and $282 for the same period in 2025, respectively)	$	51		$	325

Other Information
Weighted average remaining lease term – operating leases (in years)		0.2			2.2
Average discount rate – operating leases		6.13	%		6.13	%

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

	At March 31, 2026		At December 31, 2025
Operating leases (in thousands)	(Unaudited)
Long-term right-of-use assets, net of accumulated amortization of $977 and $2,953, respectively	$	172	$	624
Impairment charge		—		(346	)

Net right-of-use asset	$	172	$	278

Current portion of operating lease liabilities	$	197	$	475

Rent expense for all three of the Company’s facilities for the three months ended March 31, 2026 and 2025 was $333 and $398, respectively.

NOTE 7 – STOCKHOLDERS’ EQUITY

Common Stock

●

Issuance of common stock under ATM facility

On October 6, 2025, the Company entered into the Sales Agreement with ThinkEquity LLC, pursuant to which the Company may sell and issue, subject to the limitations in the Sales Agreement, shares up to $2,382 of Common Stock from time to time in the ATM Offering. Under the Sales Agreement, ThinkEquity LLC is entitled to compensation of 3.0% of the gross offering proceeds of all shares of Common Stock sold through it pursuant to the Sales Agreement.

As of December 31, 2025, the Company has sold 166,127 shares of Common Stock in the ATM Offering at a weighted-average price of $4.70 per share, for net proceeds of $757, after deducting commissions to the sales agent and other ATM Offering related expenses of $23.

On December 12, 2025, the Company filed a prospectus supplement to its registration statement on Form S-3 (File No. 333-276705) to increase the amount of shares of Common Stock that the Company may offer and sell under the Sales Agreement and applicable registration statement to an aggregate offering price of up to $2,500, which amount does not include the shares of Common Stock having an aggregate gross sales price of approximately $757 that were sold under the ATM Offering through December 11, 2025, in accordance with the limitations set forth in Instruction I.B.6 of Form S-3. During the three months ended March 31, 2026, the Company sold 962,500 shares of Common Stock in the ATM Offering at a weighted-average price of $2.60 per share, for net proceeds of $2,424, after deducting commissions to the sales agent and other ATM Offering related expenses of $75.

At March 31, 2026 and December 31, 2025, the Company had 2,497 shares of Common Stock held as treasury stock at a cost of $40.

NOTE 8 – STOCK OPTIONS

The following table summarizes stock option activity:

SCHEDULE OF STOCK OPTION ACTIVITY

	Number of		Weighted Average
	Options		Exercise Price
Outstanding, December 31, 2025		12,858	$	37.42
Granted		—		—
Exercised		—		—
Outstanding, March 31, 2026 (unaudited)		12,858	$	37.42
Exercisable, March 31, 2026 (unaudited)		12,858	$	37.42

Effective July 8, 2016 the Company’s board of directors approved the Polar Power 2016 Omnibus Incentive Plan (the “2016 Plan”), authorizing the issuance of up to 250,627 shares of Common Stock as incentives to employees and consultants to the Company with awards limited to a maximum of 50,125 shares to any one participant in any calendar year.

At December 31, 2025, the Company had total outstanding options of 12,858, which were carried forward to March 31, 2026. These options are fully vested, exercise prices ranging from $33.88 to $39.20, and with 1,429 option shares set to expire in December 2027 and the remaining 11,429 option shares set to expire in April 2028.

The outstanding options had no intrinsic value at March 31, 2026.

On November 13, 2025, the Company’s Board of Directors, at the recommendation of the compensation committee, approved the 2026 Equity Incentive Plan (the “2026 Plan”), subject to approval by our stockholders at the stockholders meeting. On December 15, 2025, at the stockholders meeting, the 2026 Plan was passed and became effective January 1, 2026. The Company has not made any grants under the 2026 Plan yet.

NOTE 9. SEGMENT INFORMATION

The Company operates and manages its business as one reportable and operating segment. The Company designs, manufactures, and sells DC power systems for applications that do not have access to the utility grid (i.e., prime power and mobile applications) or have critical power needs and cannot be without power in the event of utility grid failure (i.e., back-up power applications). The measure of segment assets is reported on the balance sheet as total assets. In addition, the Company generates revenue primarily from the sale of its DC power systems, and to a lesser extent from the sale of parts and services to support its DC power systems. The Company manages the business activities on a consolidated basis.

The Company’s chief operating decision maker (“CODM”), Arthur D. Sams, reviews financial information presented on a consolidated basis and decides how to allocate resources based on net income (loss). Consolidated net income (loss) is used for evaluating financial performance and in establishing management’s compensation.

Significant segment expenses include research and development, salaries, insurance, and stock-based compensation. Operating expenses include all remaining costs necessary to operate our business, which primarily include external professional services and other administrative expenses. The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM:

	2026			2025
	Three Months Ended March 31,
	2026			2025
Net sales	$	1,728		$	1,723
Cost of goods sold		(593	)		(1,403	)
Compensation		(514	)		(577	)
Consulting and professional fees		(256	)		(350	)
Other cost and expenses, net		(341	)		(493	)
Other expenses, net		(202	)		(165	)
Net loss	$	(178	)	$	(1,265	)

NOTE 10. SUBSEQUENT EVENTS

On April 9, 2026, the Company issued a promissory note of $150,000 to Arthur Sames, the Company’s CEO, for a personal loan to the Company for the Company’s payment of NASDAQ listing fees, audit expenses relating to the Company’s Form 10-K filings, and related regulatory compliance costs. The payment under the note is due April 10, 2027 with finance charges of 18%.

On May 1, 2026, the Company received a letter from the Nasdaq Stock Market, LLC (the “Nasdaq”) stating that the Company was not in compliance with Nasdaq’s continued listing standards under the Rules of the Nasdaq Stock Market, specifically Listing Rule 5550(b)(1) which requires the Company to have a minimum shareholders’ equity of $2.5 million. The Company reported $144 in stockholders’ equity in its Form 10-K for the period ended December 31, 2025, filed April 30, 2026. The Nasdaq letter granted the Company 45 days, or until June 15, 2026, to provide a plan to regain compliance with the minimum stockholders’ equity of $2.5 million for continued listing. If the plan is accepted by Nasdaq, the company may be extended to 180 calendar days from May 1, 2026, to evidence compliance. The Company intends to submit such a plan to Nasdaq. If Nasdaq does not accept the Company’s plan, or if it accepts the plan but the Company does not then regain compliance by the 180-day deadline, Nasdaq will begin delisting procedures, which the Company may appeal to a Nasdaq Hearings Panel.

On May 13, 2026, the Company entered into a Revolving Loan Agreement (the “Stone Loan Agreement”) with Stone Brothers Capital (the “Lender”). The Stone Loan Agreement provides for a revolving credit facility under which the Lender may, in its sole discretion upon the request of the Company, make loans (the “Loans”) to the Company, in an aggregate principal amount at any one time outstanding not to exceed $2,500,000. Each Loan shall bear interest accruing at an annual rate of 12%.

On May 14, 2026, Keith Albrecht and Katherine Koster, two of the Company’s independent directors, resigned as members of the Board of the Company, effective May 19, 2026. On May 18, 2026, Keith Albrecht rescinded his resignation as a director, and the Board approved the rescinding of Keith Albrecht’s resignation, effective immediately.

On May 18, 2026, the Company sent a written termination notice to the Lender to terminate the Loan Agreement. The termination is effective after five business days. The Lender has not made any loans to the Company as of May 18, 2026.

Headquarters and Warehouse Facilities

As of the date hereof, the Company is pursuing third-party financing that it would use to pay the landlords and certain other expenses. There is no guarantee that Company will raise sufficient capital to pay the delinquent rent or that the landlord for the headquarters facility would agree to let the Company use that facility if the Company were to pay the rent. It is possible that the Company will be forced to vacate from both facilities, and if that happens, it may have difficulty securing new headquarters, or new manufacturing or warehouse facilities that are adequate. Our production could be significantly delayed, access to our inventory could be impaired, and our operations could halt for a significant period of time. As of March 31, 2026, the Company was delinquent in $858 of rent to these landlords which is included in accounts payable.

ITEM 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” and elsewhere in this report. Our historical results are not necessarily indicative of the results to be expected for any future period, and results for any interim period are not necessarily indicative of the results to be expected for the full year.

All dollar amounts are presented in thousands, except share and per-share data and where otherwise noted. Share and per share data have been retroactively adjusted to reflect the decreased number of shares resulting from a 1 for 7 reverse stock split which took effect on November 18, 2024.

Overview

We design, manufacture, and sell DC power generators, renewable energy and cooling systems for applications primarily in the telecommunications market and, to a lesser extent, in other markets, including military, electric vehicle charging, marine and industrial. We are continuously diversifying our customer base and are selling our products into non-telecommunication markets and applications at an increasing rate.

Within the various markets we service, our DC power systems provide reliable and low-cost DC power to service applications that do not have access to the utility grid (i.e., prime power applications and mobile applications) or have critical power needs and cannot be without power in the event of utility grid failure (i.e., back-up power applications) or charge batteries of various chemistries to be used in electric vehicle or renewable storage applications.

Serving these various markets, we offer the following configurations of our DC power systems, with output power ranging from 5 kW to 50 kW:

	●	*Base power systems*. These stationary systems integrate a DC generator with automated controls and remote monitoring, contained in an environmentally regulated enclosure.

	●	*Hybrid power systems*. These systems integrate lithium-ion batteries (or other advanced battery chemistries) storage and our standard DC power systems to provide power in both bad and off-grid applications.

	●	*DC solar hybrid power systems*. These stationary systems incorporate photovoltaic and other sources of renewable energy into our DC hybrid power system.

	●	*Mobile power systems*. These are very light weight and compact power systems used for EV charging, robotics, communications, security.

Our DC power systems are available in diesel, natural gas, LPG / propane and renewable formats, with diesel, natural gas and propane gas being the predominate formats.

During the three months ended March 31, 2026 and March 31, 2025, 96% and 82%, respectively, of our total net sales were within the telecommunications market. During the first quarter of 2026, our largest customer, a Tier-1 telecommunications customer in the U.S., represented 72% of our total net sales. During the same period in 2025, our two largest customers represented 71% and 17% of our total net sales, respectively, one being a Tier-1 telecommunications customer in the U.S. and one being a customer in the military market in the U.K. There was no other revenue from customers in excess of 10% of total net sales in either period. During those periods, the majority of our sales were of our DC base powers systems. During three months ended March 31, 2026 and 2025, sales to international customers accounted for 5% and 18% of total net sales, respectively. Sales to military customers during three months ended March 31, 2026 and 2025 accounted for 3% and 17% of total net sales, respectively. During three months ended March 31, 2026 and 2025, sales to customers in the marine and other markets accounted for 1% and 1% of total net sales, respectively.

During 2024, we launched our prime power DC generators incorporating the Toyota 1KS engines optimized for propane, natural gas, and extremely long operational life. We believe that with the increasing installation restrictions on small diesel engines along with their limited availability due to stringent EPA regulations will force a change to natural gas and propane (LPG) generators. LPG and natural gas are lower in cost than diesel fuel in many areas throughout the world. Our new LPG and natural gas generators will provide strong opportunities for growth and diversification in line with our long-term plan.

At the international level, we have several telecommunications customers in the south pacific region purchasing our DC generators to develop the telecommunications infrastructure in this region. We believe the implementation and ongoing development of 5G networks along with programs to develop the telecommunications infrastructure in rural and underdeveloped countries will continue to fuel our growth in the telecommunications market over the next five to ten years.

In May 2023, we announced plans to expand our mobile offerings by upgrading our mobile CHAdeMO EV chargers to the universal combined charging system standard to reach the mobile EV charging market. Mobile EV chargers are used for emergency roadside service providing a fast-charging solution for EVs that have run out of charge before reaching a stationary charging facility. We believe this configuration of remote mobile electric vehicle charger is just an initial model and based on power and fuel needs will result in various additional configurations.

We also continue to market our DC generators for the military, advanced mobility and marine markets as part of our ongoing customer diversification strategy. The military’s increasing use of robotics, drones, and computerization in the field is driving the demand for battery charging with DC generators. Military sales are advantageous because of their long-term contracts and they tend to cover the cost of product development.

We expect that opportunities in the bad-grid (i.e., areas where wireless towers are connected to an electrical grid that loses power for more than eight hours), and off-grid (i.e., areas where wireless towers are not connected to an electrical grid) applications, which include telecommunications towers, commercial and residential backup power, electric vehicle charging, “mini-grid” and various other power applications, will help to expand the market for our natural gas/LPG (propane) product lines domestically and internationally. In 2024, we demonstrated a microgrid product that can provide 24/7 electric power to a commercial facility. This project was funded by United Nations High Commissioner for Refugees (“UNHCR”), a United Nations organization. The product included a DC generator, battery storage, AC inverter, solar charge controller and remote monitoring in a single container which can be delivered to any remote location to provide power. We believe this product in its current configuration can serve mid-level micro grid needs in residential and commercial areas. We plan to develop new configurations of DC power system, battery storage and solar products to optimize the match between our solutions and various application needs.

Effects of Inflation

The impact of inflation and rapidly changing prices has not impacted our operations during the three months ended March 31, 2026. Rapid changes in the global economy may cause significant spikes in inflation which may have an impact in our financial condition during 2026 and beyond. Very small portion of our sales is a result of fixed contracts thereby resulting in negligible impact on our gross profits.

Recent Business Events

None.

Critical Accounting Policies

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in reserves for uncollectible receivables, inventory reserves and returns, impairment analysis of long-term assets, valuation allowance on deferred tax assets, income tax accruals, accruals for potential liabilities and warrant reserves and assumptions made in valuing equity instruments issued for services. There were no changes to our critical accounting policies described in the financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, that impacted our condensed financial statements and related notes included herein.

Impact of New Accounting Pronouncements

See “Note 1 – Organization and Summary of Significant Accounting Policies – Recent Accounting Pronouncements” of the Notes to our condensed financial statements.

Financial Performance Summary and Outlook

Our net sales for the three months ended March 31, 2026 were $1,728, compared to $1,723 for the three months ended March 31, 2025. We reported a net loss of $178 for the three months ended March 31, 2026, as compared to a net loss of $1,265 for the same period in 2025. Cost reductions in operating expenses helped improve the net loss from 2025 to 2026.

We believe revenue during the quarter ended March 31, 2026 continued to be impacted by excess inventory at our customer’s warehouse in addition to economic and geopolitical factors influencing our customers’ buying decisions.

During 2026, we plan to hire sales and marketing staff to continue to market our products globally and expand our customer base in all market segments. We also plan to continue to be proactive in managing our operations and mitigate the financial impacts of higher costs, supply chain issues, and geopolitical factors.

See “Risk Factors” commencing on page 20 of this Quarterly Report on Form 10-Q for additional considerations.

Results of Operations

The tables presented below, which compare our results of operations from one period to another, present the results for each period, the change in those results from one period to another in both dollars and percentage change, and the results for each period as a percentage of net revenues. The columns present the following:

	●	The first two data columns in each table show the absolute results for each period presented.

	●	The columns entitled “Dollar Variance” and “Percentage Variance” shows the change in results, both in dollars and percentages. These two columns show favorable changes as a positive and unfavorable changes as negative. For example, when our net revenues increase from one period to the next, that change is shown as a positive number in both columns. Conversely, when expenses increase from one period to the next, that change is shown as a negative in both columns.

	●	The last two columns in each table show the results for each period as a percentage of net revenues.

Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

	Three Months Ended March 31,						Dollar Variance			Percentage Variance			Results as a Percentage of Net Sales for the Period Ended March 31,
	2026			2025			Favorable (Unfavorable)			Favorable (Unfavorable)			2026			2025
	(unaudited)			(unaudited)
Net sales	$	1,728		$	1,723		$	5			—	%		100.0	%		100.0	%
Cost of sales		593			1,403			810			58	%		34.3	%		81.4	%
Gross profit		1,135			320			815			255	%		65.7	%		18.6	%
Sales and marketing expenses		159			260			101			39	%		9.2	%		15.1	%
Research and development expenses		169			160			(9	)		(6	)%		9.8	%		9.3	%
General and Administrative expenses		783			1,001			218			22	%		45.3	%		58.1	%
Total operating expenses		1,111			1,421			310			22	%		64.3	%		82.5	%
Income (loss) from operations		24			(1,101	)		1,125			102	%		1.4	%		(63.9	)%
Interest and finance costs		(202	)		(164	)		(38	)		(23	)%		(11.7	)%		(9.5	)%
Loss before income taxes		(178	)		(1,265	)		1,087			86	%		(10.3	)%		(73.4	)%
Income tax benefit		—			—			—			—	%		—	%		—	%
Net loss	$	(178	)	$	(1,265	)	$	1,087			86	%		(10.3	)%		(73.4	)%

Net Sales. Net sales increased $5 to $1,728 for the three months ended March 31, 2026, as compared to $1,723 for the same period in 2025. During the three months ended March 31, 2026, our largest customer accounted for 72% of our total net sales. During the same period in 2025, our two largest customers accounted for 71% and 17% of our total net sales, respectively. There was no other revenue from customers in excess of 10% of total net sales in either period.

Net sales to telecommunications customers in the U.S. accounted for 96% of our total net sales for the three months ended March 31, 2026, as compared to 82% for the same period in 2025. Our international sales represented 5% of our net sales in the three months ended March 31, 2026, as compared to 18% in international sales in the same period in 2025.

Cost of Sales. Cost of sales during the three months ended March 31, 2026 decreased by $810, or 58%, to $593, as compared to $1,403 during the same period in 2025. Cost of sales as a percentage of net sales during the three months ended March 31, 2026 decreased to 34.3% as compared to 81.4% in the same period in 2025. The decrease in cost of sales was primary attributable to a $450 adjustment to warranty reserve and decrease in factory overhead absorption in three months ended March 31, 2026 as compared to the same period in 2025.

Gross Profit. We had a gross profit of $1,135 for the three months ended March 31, 2026, which is an increase of $815, or 255%, as compared to gross profit of $320 during the same period in 2025. The increase in gross profit for the three months ended March 31, 2026, was primarily a result of a $450 adjustment to warranty reserve and a decrease in factory overhead absorption during the three months ended March 31, 2026. Our gross profit as a percentage of net sales was 65.7% for the quarter ended March 31, 2026, as compared to a gross profit as a percentage of net sales of 18.6% in the same period in 2025.

Sales and Marketing Expenses. During the three months ended March 31, 2026, sales and marketing expenses decreased by $101, or 39%, to $159, as compared to $260 during the same period in 2025. The decrease was attributable to a decrease in marketing expenditures during three months ended March 31, 2026 as compared to the same period in 2025. We plan to increase our sales force and increase our marketing and tradeshow activities in 2026 to support our diversification strategy and expand our customer base in all market segments.

Research and Development Expenses. During the three months ended March 31, 2026, research and development expenses increased by $9 or 6%, to $169, as compared to $160 during the same period in 2025. The decrease in research and development expenses resulted from a decrease in new product development activity during the same period in 2026. We plan to recruit additional engineers during 2026 to support new product developments and our customer diversification efforts.

General and Administrative Expenses. General and administrative expenses were $783 for the three months ended March 31, 2026, as compared to $1,001 for the same period in 2025. The 22% decrease in general and administrative expenses resulted from consolidating administrative tasks to improve efficiency.

Interest and Finance Costs. Interest expense for the three months ended March 31, 2026 was $202, as compared to $164 during the same period in 2025. The interest expense was primarily from an interest on amount borrowed from our line of credit with Pinnacle Bank (“Pinnacle”).

Net Loss. As a result of the factors identified above, we reported net loss of $178, or $(0.05) per basic and diluted share, for the three months ended March 31, 2026, as compared to net loss of $1,265, or $(0.50) per basic and diluted share, for the same period in 2025.

Liquidity and Capital Resources

Going concern

Sources of Liquidity

During the three months ended March 31, 2026, we funded our operations primarily from cash on hand. As of March 31, 2026, we had working capital of $2,106, as compared to working capital deficit of $(262) at December 31, 2025. This $2,368 increase in working capital was primarily attributable to $173 decrease in cash and cash equivalents resulting from net cash of $2,191 used in operating activities, net cash of $nil used in investing activities, and net cash of $2,018 from financing activities.

On March 31, 2026 and December 31, 2025, our net trade receivables totaled $1,511 and $330, respectively. On March 31, 2026, $1,252 (83%) represented the largest open customer account balance, while $196 (59%) and $58 (18%) represented the two largest open customer account balances on December 31, 2025.

Our available capital resources on March 31, 2026 consisted primarily of $27 in cash and cash equivalents, as compared to $68 as of December 31, 2025. We expect our future capital resources will consist primarily of cash on hand, cash generated by operations, if any, drawdowns on our credit facility with Pinnacle and future debt or equity financings, if any.

Credit Facility

Effective September 30, 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Pinnacle. The Loan Agreement, as amended, provides for a revolving credit facility under which Pinnacle may, in its sole discretion upon our request, make advances to the Company up to $7,500, subject to certain limitations and adjustments. The Loan Agreement contains certain affirmative and negative covenants.

Borrowings based on receivables bear an interest on the daily balance at a rate of 1.25% above the prime rate, but in no event less than 3.75% per annum (8.0% at March 31, 2026 and 8.0% at December 31, 2025). Interest on the portion of the daily balance consisting of advances against inventory accrues interest at a rate of 2.25% above the prime rate, but in no event less than 4.75% per annum (9.0% at March 31, 2026 and 9.0% at December 31, 2025).

At March 31, 2026, and December 31, 2025, the Company was not in compliance with the affirmative covenant requiring the Company to attain a minimum effective tangible net worth greater than $6,000On March 10, 2026, the Company and Pinnacle executed a Notice of Additional Defaults and Forbearance Agreement (the “Forbearance Agreement”), in which Pinnacle agrees to forbear from exercising certain rights and remedies under the Loan Agreement and related documents (the “Loan Documents”) arising from the specified existing defaults for the period commencing March 10, 2026 (the “Effective Date”), to July 31, 2026 (the “Forbearance Termination Date”), considering the Company 1) on or prior to the Effective Date, pays Pinnacle the amount of $250, 2) on or prior to the Effective Date, assigns to Pinnacle new Eligible Accounts (as defined by the Forbearance Agreement) in the aggregate amount of at least $185, with 85% of the Net Face Amount (as defined by the Forbearance Agreement) of such new Eligible Accounts to be applied to reduce the loan obligations, 3) within forty-five (45) days of the Effective Date, reduce the loan obligations by the aggregate amount of $225, which reduction can result from a cash payment or the assignment of sufficient new Eligible Accounts, with 85% of the Net Face Amount of such new Eligible Accounts to be applied towards such reduction amount, 4) does not create any new events of default, 5) pays in full all obligations to Pinnacle by the Termination Date. If the Company timely complies with all terms listed above, and so long as the Forbearance Termination Date has not occurred, Pinnacle agrees that it will re-commence making advances to the Company in the amount equal to 42.5% of the Net Face Amount of the thereafter arising Eligible Accounts, with the remaining 42.5% of the Net Face Amount of such Eligible Accounts to be applied to reduce the then outstanding obligations. In March 2026, the Company paid $250 to Pinnacle and timely complied with the requirements under the Forbearance Agreement and commenced taking advances at 42.5% of the Net Face Amount of Eligible Accounts on March 12, 2026. While the Company expects to stay in compliance and pay the full obligation to Pinnacle by July 31, 2026, there is no guarantee that the Company will be able to do so. If the Company is unable to comply with the Loan Agreement, or pay the full obligation to Pinnacle by the July 31, 2026, Pinnacle may immediately enforce its claims, rights, liens, and security interests under the Forbearance Agreement, and the Loan Documents, including, but not limited to, taking possession of its collateral, or any portion thereof, and foreclosing upon its collateral, or any portion thereof, in accordance with the Loan Documents and applicable law.

Cash Flow

The following table sets forth the significant sources and uses of cash for the three-month periods set forth below:

	March 31, 2026			March 31, 2025
	(Unaudited)			(Unaudited)
Net Cash Provided By (Used In)
Operating Activities	$	(2,191	)	$	(584	)
Investing Activities		—			—
Financing Activities		2,018			154
Net decrease in cash	$	(173	)	$	(430	)

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2026 was $2,191 as compared to net cash used in operating activities of $584 for the same period in 2025. This increase in net cash used in the three months ended March 31, 2026 was primarily due to a net loss of $178, an increase in accounts receivable of $1,181, and an increase in accounts payable of $111.

Investing Activities

We did not have any investing activities for the three months ended March 31, 2026 and March 31, 2025.

Financing Activities

Net cash provided by financing activities totaled $2,018 for the three months ended March 31, 2026, as compared to $154 provided by financing activities during the same period in 2025. This cash provided during 2026 was primarily proceeds from shares sold under the ATM facility.

Backlog

As of March 31, 2026, we had a backlog of $3,744. The amount of backlog represents revenue that we anticipate recognizing in the future, as evidenced by purchase orders and other purchase commitments received from customers, but on which work has not yet been initiated or with respect to which work is currently in progress. Backlog at March 31, 2026 was comprised of the following elements: 82% in purchases of DC power systems by telecommunications customers, and 18% in purchases by customers in the military markets. We believe the majority of our backlog will be shipped within the next six months.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer have concluded that as of March 31, 2026, our disclosure controls and procedures were effective at the reasonable assurance level. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

From time to time, we may be involved in general commercial disputes arising in the ordinary course of our business. Other than as disclosed below, we are not currently involved in legal proceedings that could reasonably be expected to have material adverse effect on our business, prospects, financial condition or results of our operation.

On May 19, 2026, we were evicted from 249 E. Gardena Boulevard, Gardena, California 90248, our headquarters facility, under a writ of possession for the recovery by the landlord of such facility. See “Note 10 – Subsequent Events – Headquarters and Warehouse Facilities” of the Notes to our condensed financial statements.

ITEM 1A. Risk Factors

Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in addition to the other information contained in this Quarterly Report on Form 10-Q and in our other filings with the SEC, including subsequent reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on us, our business, financial condition, results of operations and/or liquidity could be seriously harmed. In that event, the market price for our common stock will likely decline, and you may lose all or part of your investment.

Risks Related to Our Business and Industry

We have been evicted from our headquarters facility and may face eviction from our warehouse facility; it we fail to have appropriate facilities to operate our business, our operations, financial condition and results of operations will be adversely affected.

On May 11, 2026, we entered into a Settlement Agreement with the landlord for each of our headquarters facility and our warehouse facility that became effective as of May 7, 2026. The Settlement Agreement addressed the matter of delinquent rents and an expired lease. Regarding our headquarters facility, we agreed to make immediate payment of $400,000 towards past due rents, and the landlord agreed to cease eviction procedures. The landlord also agreed to extend the property lease from June 1, 2026, to April 1, 2027, and reduce the monthly rent from $84,000 to $55,000. Regarding the warehouse facility, we agreed to vacate the facility by August 31, 2026 and leave the premises in the condition required by the relevant lease agreement; in exchange, the landlord agreed to waive rents for the months of June, July, and August 2026. Each landlord reserved the right to charge for any waived rents or continue with eviction action should we fail to meet the requirements listed in the Settlement Agreement. We also may have to pay liquidated damages if we fail to vacate the properties in the event either or both landlords decide to exercise their rights for eviction.

On May 19, 2026, the landlord for our headquarters facility evicted us from that facility. The headquarters facility is where we, among other things, have our offices, conduct design work, and assemble and tests our products. We are currently relocating these activities to our warehouse facility. We are continuing our operations, but expect there to be disruptions and difficulties with this change. Further, if the landlord for the warehouse facility were to evict us from that facility, we could have difficulty finding an appropriate location from which to operate our business, which would have a material adverse effect on our operations, financial results and financial condition.

As of the date hereof, we are pursuing third-party financing that we would use to pay the landlords and certain other expenses. There is no guarantee that we will raise sufficient capital to pay the delinquent rent or that the landlord for the headquarters facility would agree to let us use that facility if we were to pay the rent. It is possible that we will be forced to vacate from both facilities, and if that happens, we may have difficulty securing new headquarters, or new manufacturing or warehouse facilities that are adequate. Our production could be significantly delayed, access to our inventory could be impaired, and our operations could halt for a significant period of time.

Rising inflation in the economies in which we operate may adversely affect our operating margins and our results of operation.

In general, we believe that our results of operations are not dependent on moderate changes in the inflation rate. Historically, we have been able to manage the impacts of more significant changes in inflation rates through our customer relationships, customer agreements that may provide for price increases and continued focus on improvements of operational productivity. However, the current inflationary environment, we believe, has impacted the Company’s business in 2025 and 2026, including as a result of increased energy costs, increase materials costs due to higher tariffs on key components which may not be able to pass to customers as well as increasing wages in the labor markets in which we compete. Inflation could continue to pressure our margins in future periods. Adverse economic conditions resulting from inflationary pressures, U.S. Federal Reserve actions, geopolitical issues or otherwise are difficult to predict and may have a material adverse impact on our business, results of operations and financial condition.

Terrorist attacks and threats of war may impact all aspects of our operations, revenues, costs and stock price in unpredictable ways.

The impacts of war and other geopolitical events, including but not limited to Russia’s invasion of Ukraine and the military conflicts between U.S., Israel, and Iran, are difficult to predict. The resulting geopolitical uncertainty are likely to have a significant impact on the European Union, the United Kingdom and other countries, including the U.S. The threat that these military operations may expand beyond Ukraine, Israel, and the Gaza Strip may have a negative impact as well. Significant increases in the price of oil and natural gas have occurred and are likely to continue putting additional inflationary pressures on central banks, including Federal Reserve System (the “FRB”). It is possible that interest rate hikes by the FRB will continue to occur in 2026, but the amount, timing, and frequency of such increases are not fully known at this time. As a result of these conflicts, the threat of cyberattacks has increased which could affect banks in the U.S. and their customers. Additionally, the United States and European nations have imposed very significant financial sanctions on the Russian Federation, including targeted sanctions on Russian banks and wealthy individuals as well as halting certification of the Nord Stream 2 gas pipeline. They have denied Russian banks access the Society for Worldwide Interbank Financial Telecommunications or SWIFT which is expected to slow international trade and make such transactions costlier to accomplish which could also negatively affect banks in the U.S. and their customers. In response to the Russian military actions, many businesses headquartered in the Eurozone and the United States have stopped doing business with Russia, which may negatively affect the profitability of those companies. The international turmoil has already had and may continue to have a negative impact on the stock market generally and, in turn, on our stock price.

The continuation or escalation of events like the U.S.-Israel-Iran conflict may also disrupt business operations of our suppliers and/or customers, causing supply chain constraints or delayed spending by our customers. The full impact of such events are not known at this time, but they could have a material adverse impact on our business, financial condition, results of operations, and stock price.

We have incurred significant losses in the past and we may incur losses in the future, which may hamper our operations and impede us from expanding our business.

We have incurred significant losses in the past. For the years ended December 31, 2025 and 2024, we incurred net losses of approximately $9.1 million and $4.6 million, respectively. For the three months ended March 31, 2026, we realized a net loss of approximately $178. We may incur net and gross losses in the future. We expect to rely on cash on hand, cash, if any, generated from our operations, borrowing availability under our line of credit and proceeds from our future financing activities, if any, to fund all of the cash requirements of our business. Additional losses may hamper our operations and impede us from expanding our business.

We are dependent on, and derive substantially all of our revenue from, sales of our DC base power systems to one customer within the U.S. telecommunications market. Our efforts to expand our customer base, our product portfolio or markets within which we operate may not succeed and may reduce our revenue growth rate.

We derive substantially all our revenues from sales of our DC base power systems to one Tier-1 customer within the telecommunications market. The volume of sales to them may vary significantly from year to year. Any factor adversely affecting sales of these power systems to this customer or to other customers within this market, including market acceptance, product competition, performance and reliability, reputation, price competition and economic and market conditions, could adversely affect our business and results of operations.

In addition, any unfavorable change in our business relationship with our Tier-1 telecommunications wireless carrier customers, or delays in customer implementation and deployment of our products, could have a material adverse effect on our results of operation and financial condition. Our plans to invest in the development of electric vehicle chargers, residential and commercial power products and higher capacity DC hybrid solar systems may not result in an anticipated growth in sales and may reduce our revenue growth rate.

Many of our DC power systems involve long design and sales cycles, which could have an adverse impact on our results of operations and financial performance.

The design and sales cycle for our DC power systems, from initial contact with our potential customer to the shipments of our product, may be lengthy. Customers generally consider a wide range of factors before making a purchase decision. Prior to purchasing our products, many of our customers often require a significant technical review, tests and evaluations over long periods of time (i.e., three to twenty-four months), assessments of competitive products and approval at a number of management levels within their organization. During the time our customers are evaluating our products, we may incur substantial sales and service, engineering and research and development expenses to customize our products to meet customer’s application needs. We may also expend significant management efforts, increase manufacturing capacity, order long-lead-time components or purchase significant amounts of components and other inventory prior to receiving an order. Even after this evaluation process, a potential customer may not purchase our products.

The product development time before a customer agrees to purchase our DC power systems can be considerable. Our process for developing an integrated solution may require use of significant engineering resources, including design, prototyping, modeling, testing and application engineering. The length of this cycle is influenced by many factors, including the difficulty of the technical specification and complexity of the design and the customer’s procurement processes. A significant period may elapse between our investment of time and resources in designing and developing a product for a customer and receipt of revenue from sales of that product. The length of this process, combined with unanticipated delays in the development cycles and the effects of the COVID-19 pandemic and recovery on our ability to demonstrate our products to current and potential customers could materially affect our results of operations and financial conditions.

We do not have long-term commitments for significant revenues with most of our customers and may be unable to retain existing customers, attract new customers or replace departing customers with new customers that can provide comparable revenues and profits.

Because we generally do not obtain firm, long-term volume purchase commitments from our customers, most of our sales are derived from individual purchase orders. We remain dependent upon securing new purchase orders in the future in order to sustain and grow our revenues. Accordingly, there is no assurance that our revenues and business will grow in the future. Our failure to maintain and expand our customer relationships could materially and adversely affect our business and results of operations.

The current high concentration of our sales within the telecommunications market could result in a significant reduction in sales and negatively affect our profitability if demand for our DC power systems declines within this market before we are able to make significant inroads with our diversification of markets and customers.

Currently, we are predominately focused on the manufacturing, marketing and sales of DC power systems to telecommunications companies. We may be unable to shift our business focus away from these activities to other potential markets for our products. Accordingly, the emergence of new competing DC power products or lower-cost alternative technologies within the telecommunications market may reduce the demand for our products. A downturn in the demand for our DC power systems within this market could materially and adversely affect our sales and results of operations.

We face inventory risk and may be required to write-off additional inventory in the future.

We value inventories at the lower of cost or net realizable value. If the estimated net realizable value is determined to be less than the recorded cost of the inventory, a provision is made to reduce the carrying amount of the inventory item to the lower net realizable value determination. Determination of the net realizable value may be complex, and therefore, requires management to make assumptions and to apply a high degree of judgment. In order for management to make the appropriate determination of net realizable value, the following items are commonly considered: inventory turnover statistics, inventory quantities on hand in our facilities, unfilled customer order quantities, forecasted consumer demand, current prices, competitive pricing, seasonality factors, consumer trends and performance of similar products or accessories. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded write-downs.

If our estimates regarding net realizable value are inaccurate, including our estimates regarding our inventory, or changes in customer demand for our products in an unforeseen manner, we may experience additional write-downs of our inventory.

The unavailability or shortage, or increase in the cost, of raw materials and components could have an adverse effect on our sales and profitability.

Our operations require raw materials, such as aluminum, copper, engines, electronics, and permanent magnets. Commodities such as aluminum and copper are known to have significant price volatility based on global economic conditions. An increase in global economic outlook may result in significant price increases in the cost of our raw materials. In addition, we use Neodymium permanent magnets in our alternators, for which there are a limited number of global suppliers that can meet our standards. Increase in manufacturing of electric vehicles worldwide can have an adverse effect on the cost or supply of these magnets. At our current production volumes, we are unable to secure large quantities of these commodities at fixed prices; however, we do have multiple sources of supply for our raw materials to meet our near term forecasted needs. Various factors could reduce the availability of raw materials and components and shortages may occur from time to time in the future. An increase in lead times for the supply of raw materials due to a global increase in demand for commodities or other reasons may significantly increase the timing of receipt of such materials and/or increase the material costs of our products. For example, if production was interrupted due to unavailability or shortage of raw materials and we were not able to find alternate third-party suppliers or re-engineer our products to accommodate different components or materials, we could experience disruptions in manufacturing and operations including product shortages, higher freight costs and re-engineering costs. If our supply of raw materials or components are disrupted or our lead times extended, our business, results of operations or financial condition could be materially adversely affected.

The markets within which we compete are highly competitive. Many of our competitors have greater financial and other resources than we do and one or more of these competitors could use their greater financial and other resources to gain market share at our expense.

If our business continues to develop as expected, we anticipate that we will grow our revenues in the near future. If, due to capital constraints or otherwise, we are unable to fulfill our existing backlog in a timely manner and/or procure and timely fulfill our anticipated future backlog, our customers and potential customers may decide to use competing DC power systems or continue the use of AC power systems. If we are unable to fulfill the demand for products and services in a timely manner, our customers and potential customers may choose to purchase products from our competitors. Some of our larger competitors may be willing to reduce prices and accept lower margins in order to compete with us. In addition, we could face new competition from large international or domestic companies with established industrial brands and distribution networks that enter our end markets. Demand for our products may also be affected by our ability to respond to changes in design and functionality, to respond to downward pricing pressure, and to provide shorter lead times for our products than our competitors. If we are unable to respond successfully to these competitive pressures, we could lose market share, which could have an adverse impact on our results. We cannot assure that we will be able to compete successfully in our markets or compete effectively against current and new competitors as our industry continues to evolve.

Rapid technological changes may prevent us from remaining current with our technological resources and maintaining competitive product and service offerings.

The markets in which we and our customers operate are characterized by rapid technological change, especially within the telecommunications market. Significant technological changes could render our existing and potential new products, services and technology obsolete. Our future success will depend, in large part, upon our ability to:

	●	effectively identify and develop leading energy efficient technologies;

	●	continue to develop our technical expertise;

	●	enhance our current products and services with new, improved and competitive technology; and

	●	respond to technological changes in a cost-effective and timely manner.

If we are unable to successfully respond to technological change or if we do not respond to it in a cost-effective and timely manner, then our business will be materially and adversely affected. We cannot assure you that we will be successful in responding to changing technology. In addition, technologies developed by others may render our products, services and technology uncompetitive or obsolete. Even if we do successfully respond to technological advances, the integration of new technology may require substantial time and expense, and we cannot assure you that we will succeed in adapting our products, services and technology in a timely and cost-effective manner.

If we are unable to continue to develop new and enhanced products and services that achieve market acceptance in a timely manner, our competitive position and operating results could be harmed.

Our future success will depend on our ability to continue to develop new and enhanced DC power systems and related products and services that achieve market acceptance in a timely and cost-effective manner. The markets in which we and our customers operate are characterized by frequent introductions of new and enhanced products and services, evolving industry standards and regulatory requirements, government incentives and changes in customer needs. The successful development and market acceptance of our products and services depends on a number of factors, including:

	●	the impact of a global crisis such as the COVID-19 pandemic on the global markets;

	●	the changing requirements and preferences of the potential customers in our markets;

	●	the accurate prediction of market requirements, including regulatory issues;

	●	the timely completion and introduction of new products and services to avoid obsolescence;

	●	the quality, price and performance of new products and services;

	●	the availability, quality, price and performance of competing products and services;

	●	our customer service and support capabilities and responsiveness;

	●	the successful development of our relationships with existing and potential customers; and

	●	changes in industry standards.

We may experience financial or technical difficulties or limitations that could prevent us from introducing new or enhanced products or services. Furthermore, any of these new or enhanced products and services could contain problems that are discovered after they are introduced. We may need to significantly modify the design of these products and services to correct problems. Rapidly changing industry standards and customer preferences and requirements may impede market acceptance of our products and services.

Development and enhancement of our products and services will require significant additional investment and could strain our management, financial and operational resources. The lack of market acceptance of our products or services or our inability to generate sufficient revenues from this development or enhancement to offset their development costs could have a material adverse effect on our business. In addition, we may experience delays or other problems in releasing new products and services and enhancements, and any such delays or problems may cause customers to forego purchases of our products and services and to purchase those of our competitors.

We cannot provide assurance that products and services that we have recently developed or that we develop in the future will achieve market acceptance. If our new products and services fail to achieve market acceptance, or if we fail to develop new or enhanced products and services that achieve market acceptance, our growth prospects, operating results and competitive position could be adversely affected.

Natural disasters and other events beyond our control could materially adversely affect us.

Natural disasters or other catastrophic events, including the COVID-19 pandemic and recovery, may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers and could decrease demand for our services.

We are dependent on relationships with our key material suppliers, and the partial or complete loss of one of these key suppliers, or the failure to find replacement suppliers or manufacturers in a timely manner, could adversely affect our business.

We have established relationships with third-party engine suppliers and other key suppliers from which we source components for our power systems. We purchase standard configurations of engines for our DC power systems and are substantially dependent on timely supply from our key engine suppliers, Yanmar Engines Company, Toyota Corporation, and Engine Distributors Inc. (for Ford engines). Engines from Yanmar Engines Company, Toyota Corporation, and Engine Distributors Inc. (for Ford engines) represented approximately 74%, 2%, and 21% of our total engines sold as a component of our DC power systems during the three months ended March 31, 2026, respectively, and represented approximately 88%, nil%, and 13% of our total engines sold as components of our DC power systems during the three months ended March 31, 2025, respectively. We also use engines from Perkins, Isuzu, Kubota and, to a lesser extent, Volvo Penta. We do not have any long-term contracts or commitments with any of these suppliers or other key suppliers from which we source components for our power systems. We currently have past due accounts with many of our key suppliers. If any of these engine suppliers or key component suppliers were to fail to provide qualified engines or components in a timely manner or fail to supply engines or components that meet our quality, quantity or cost requirements, or were to discontinue manufacturing any engines or components we source from them or discontinue providing any of these engines or components to us, or the supply chain is interrupted or delayed as a result of a pandemic or unprecedented event, or if suppliers decide stop supplying engines or components due to past due accounts if we do not bring these accounts current or negotiate a payment plan in a timely manner, and we were unable to obtain substitute sources in a timely manner or on terms acceptable to us, our ability to manufacture our products could be materially adversely affected.

Price increases in some of the key components in our DC power systems could materially and adversely affect our operating results and cash flows.

The prices of some of the key components of our DC power systems are subject to fluctuation due to market forces beyond our control, including changes in the costs of raw materials incorporated into these components. Such price increases occur from time to time due to spot shortages of commodities, increases in labor costs or longer-term shortages due to market forces. In particular, the prices of engines can fluctuate frequently and often significantly. We do not have any long-term contracts or commitments with our two key engine suppliers. Substantial increases in the prices of raw materials used in components which we source from our suppliers may result in increased prices charged by our suppliers. If we incur price increases from our suppliers for key components in our DC power systems, our production costs will increase. Given competitive market conditions, we may not be able to pass all or any of those cost increases on to our customers in the form of higher sales prices. To the extent our competitors do not suffer comparable component cost increases, we may have even greater difficulty passing along price increases and our competitive position may be harmed. As a result, increases in costs of key components may adversely affect our margins and otherwise adversely affect our operating results and cash flows.

A portion of our key components are sourced in foreign countries, exposing us to additional risks that may not exist in the U.S.

A portion of our key components, such as engines, magnets and cooling systems, are purchased from suppliers located overseas, primarily in Asia. Our international sourcing subjects us to a number of potential risks in addition to the risks associated with third-party sourcing generally. These risks include:

	●	inflation or changes in political and economic conditions;

	●	unstable regulatory environments;

	●	changes in import and export duties;

	●	currency rate fluctuations;

	●	trade restrictions;

	●	labor unrest;

	●	logistical and communications challenges; and

	●	other restraints and burdensome taxes.

These factors may have an adverse effect on our ability to source our purchased components overseas. In particular, if the U.S. dollar were to depreciate significantly against the currencies in which we purchase raw materials from foreign suppliers, our cost of goods sold could increase materially, which would adversely affect our results of operations.

The unavailability or shortage, or increase in the cost, of raw materials and components could have an adverse effect on our sales and profitability.

Our operations require raw materials, such as aluminum, copper and permanent magnets. Commodities such as aluminum and copper are known to have significant price volatility based on global economic conditions. An increase in global economic outlook may result in significant price increases in the cost of our raw materials. In addition, we use Neodymium permanent magnets in our alternators, for which there are a limited number of global suppliers that can meet our standards. Increase in manufacturing of electric vehicles worldwide can have an adverse effect on the cost or supply of these magnets. At our current production volumes, we are unable to secure large quantities of these commodities at fixed prices; however, we do have multiple sources of supply for our raw materials to meet our near term forecasted needs. Various factors could reduce the availability of raw materials and components and shortages may occur from time to time in the future. An increase in lead times for the supply of raw materials due to a global increase in demand for commodities outlined may significantly increase material costs of our products. If production was interrupted due to unavailability or shortage of raw materials and we were not able to find alternate third-party suppliers or re-engineer our products to accommodate different components or materials, we could experience disruptions in manufacturing and operations including product shortages, higher freight costs and re-engineering costs. If our supply of raw materials or components is disrupted or our lead times extended, our business, results of operations or financial condition could be materially adversely affected.

We manufacture and assemble a majority of our products at two facilities. Any prolonged disruption in the operations of this facility would result in a decline in our sales and profitability.

We manufacture and assemble our DC power systems at our two production facilities located in Gardena, California. Any prolonged disruption in the operations of our manufacturing and assembly facilities, whether due to the COVID-19 pandemic and recovery, equipment or information technology infrastructure failure, labor difficulties, destruction of or damage to one or both of these facilities as a result of an earthquake, fire, flood, other catastrophes, and other operational problems would result in a decline in our sales and profitability. In the event of a business interruption at our facilities, we may be unable to shift manufacturing and assembly capabilities to alternate locations, accept materials from suppliers or meet customer shipment needs, among other severe consequences. Such an event could have a material and adverse impact on our financial condition and results of our operations.

Our business operations are subject to substantial government regulation.

Our business operations are subject to certain federal, state, local and foreign laws and regulations. For example, our products, services and technologies are subject to regulations relating to building codes, public safety, electrical connections, security protocols, and local and state licensing requirements. The regulations to which we are subject may change, additional regulations may be imposed, or existing regulations may be applied in a manner that creates special requirements for the implementation and operation of our products or services that may significantly impact or even eliminate some of our revenues or markets. In addition, we may incur material costs or liabilities in complying with any such regulations. Furthermore, some of our customers must comply with numerous laws and regulations, which may affect their willingness and ability to purchase our products, services and technologies.

The modification of existing laws and regulations or interpretations thereof or the adoption of future laws and regulations could adversely affect our business, cause us to modify or alter our methods of operations and increase our costs and the price of our products, services and technology. In addition, we cannot provide any assurance that we will be able, for financial or other reasons, to comply with all applicable laws and regulations. If we fail to comply with these laws and regulations, we could become subject to substantial penalties or restrictions that could materially and adversely affect our business.

Certain of our products are used in critical communications networks which may subject us to significant liability claims.

Because certain of our products for customers in the telecommunications industry are used in critical communications networks, we may be subject to significant liability claims if our products do not work properly. We warrant to our customers that our products will operate in accordance with our product specifications. If our products fail to conform to these specifications, our customers could require us to remedy the failure or could assert claims for damages. The provisions in our agreements with customers that are intended to limit our exposure to liability claims may not preclude all potential claims. In addition, any insurance policies we have may not adequately limit our exposure with respect to such claims. Liability claims could require us to spend significant time and money in litigation or to pay significant damages. Any such claims, whether or not successful, would be costly and time-consuming to defend, and could divert management’s attention and seriously damage our reputation and our business.

We could be adversely affected by our failure to comply with the laws applicable to our foreign activities, including the U.S. Foreign Corrupt Practices Act and other similar worldwide anti-bribery laws.

The U.S. Foreign Corrupt Practices Act, or the FCPA, and similar anti-bribery laws in other jurisdictions prohibit U.S.-based companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. We may pursue opportunities in certain parts of the world that experience government corruption, and in certain circumstances, compliance with anti-bribery laws may conflict with local customs and practices. Our policies mandate compliance with all applicable anti-bribery laws. Further, we require our partners, subcontractors, agents and others who work for us or on our behalf to comply with the FCPA and other anti-bribery laws. Although we have policies and procedures, and have conducted training, designed to ensure that we, our employees, our agents and others who work with us in foreign countries comply with the FCPA and other anti-bribery laws, there is no assurance that such policies, procedures or training will protect us against liability under the FCPA or other laws for actions taken by our agents, employees and intermediaries. If we are found to be liable for FCPA violations (either due to our own acts or inadvertence, or due to the acts or inadvertence of others), we could suffer from severe criminal or civil penalties or other sanctions, which could have a material adverse effect on our reputation, business, results of operations or cash flows. In addition, detecting, investigating and resolving actual or alleged FCPA violations is expensive and could consume significant time and attention of our senior management.

We are exposed to risks related to our international sales, and the failure to manage these risks could harm our business. If we fail to expand our business into international markets, our revenues and results of operations may be adversely affected.

In addition to our sales to customers within the U.S., we may become increasingly dependent on sales to customers outside the U.S. as we pursue expanding our business with customers worldwide. During the three months ended March 31, 2026 and 2025, our sales to international customers accounted for 5% and 18%, respectively, of total revenue. We continue to expect that a significant portion of our future revenues will be from international sales to customers in less developed or developing countries. As a result, the occurrence of any international, political, economic, or geographic event including changes in trade policy, tariffs, and/or export/import laws and regulations could result in a significant increase in the cost of materials used in our production and/or a significant decline in revenue.

During 2025, the U.S. government imposed tariffs on many products imported from many countries, which many of these countries have imposed retaliatory tariffs or threatened to impose tariffs on goods they import from the U.S. While we obtain most of our raw materials from domestic sources, many of our suppliers source materials from various countries and may pass tariffs they pay on to us. As of the date of this report, we have not been materially affected by tariffs, but it is difficult to determine the impact of these tariffs on our business for the rest of 2026 and beyond.

There are significant risks associated with conducting operations internationally, requiring significant financial commitments to support such operations. These operations present a number of challenges including oversight of daily operating practices in each location, handling employee benefits and employee behavior. In addition, compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy and filtering requirements, anti-corruption laws, such as the FCPA, and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations, among others.

Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our brand, our international expansion efforts, our ability to attract and retain employees, our business, and our operating results. Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies.

Some of the risks and challenges of conducting business internationally include:

	●	the impact of a global crisis such as the COVID-19 pandemic on the global markets and the power generation market within the international telecommunications markets;

	●	requirements or preferences for domestic products or solutions, which could reduce demand for our products;

	●	unexpected changes in regulatory requirements;

	●	imposition of tariffs and other barriers and restrictions;

	●	restrictions on the import or export of critical technology;

	●	management communication and integration problems resulting from cultural and geographic dispersion;

	●	the burden of complying with a variety of laws and regulations in various countries;

	●	difficulties in enforcing contracts;

	●	the uncertainty of protection for intellectual property rights in some countries;

	●	application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and uncertainty;

	●	tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell products;

	●	greater risk of a failure of foreign employees to comply with both U.S. and foreign laws, including export and antitrust regulations, the FCPA and any trade regulations ensuring fair trade practices;

	●	heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;

	●	potentially adverse tax consequences, including multiple and possibly overlapping tax structures;

	●	general economic and geopolitical conditions, including war and acts of terrorism;

	●	lack of the availability of qualified third-party financing; and

	●	currency exchange controls.

While these factors and the impacts of these factors are difficult to predict, any one or more of them could adversely affect our business, financial condition and results of operations in the future.

Cyberattacks through security vulnerabilities could lead to disruption of business, reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position.

Security vulnerabilities may arise from our hardware, software, employees, contractors or policies we have deployed, which may result in external parties gaining access to our networks, data centers, cloud data centers, corporate computers, manufacturing systems, and/or access to accounts we have at our suppliers, vendors, and customers. External parties may gain access to our data or our customers’ data, or attack the networks causing denial of service or attempt to hold our data or systems in ransom. The vulnerability could be caused by inadequate account security practices such as failure to timely remove employee access when terminated. To mitigate these security issues, we have implemented measures throughout our organization, including firewalls, backups, encryption, employee information technology policies and user account policies. However, there can be no assurance these measures will be sufficient to avoid cyberattacks. If any of these types of security breaches were to occur and we were unable to protect sensitive data, our relationships with our business partners and customers could be materially damaged, our reputation could be materially harmed, and we could be exposed to a risk of litigation and possible significant liability.

Further, if we fail to adequately maintain our information technology infrastructure, we may have outages and data loss. Excessive outages may affect our ability to timely and efficiently deliver products to customers or develop new products. Such disruptions and data loss may adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.

The State of California enacted the California Consumer Privacy Act of 2018, or CCPA, effective on January 1, 2020. Our and our business partners’ or contractors’ failure to fully comply with the CCPA and other laws could lead to significant fines and require onerous corrective action. In addition, data security breaches experienced by us or our business partners or contractors could result in the loss of trade secrets or other intellectual property, public disclosure of sensitive commercial data, and the exposure of personally identifiable information (including sensitive personal information) of our employees, customers, suppliers, contractors and others.

Unauthorized use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our systems, breach of the systems of our suppliers or vendors by an unauthorized party, or through employee or contractor error, theft or misuse, or otherwise, could harm our business. If any such unauthorized use or disclosure of, or access to, such personal information was to occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and investigations, related actions, and penalties by regulatory authorities. In addition, we could incur significant costs in notifying affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating to the unauthorized access to, or use or disclosure of, personal information. Finally, any perceived or actual unauthorized access to, or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business, financial condition and results of operations.

Risks Related to Our Intellectual Property

If we fail to adequately protect our intellectual property rights, we could lose important proprietary technology, which could materially and adversely affect our business.

Our success and ability to compete depends, in substantial part, upon our ability to develop and protect our proprietary technology and intellectual property rights to distinguish our products, services and technology from those of our competitors. The unauthorized use of our intellectual property rights and proprietary technology by others could materially harm our business.

Historically, we have relied primarily on a combination of trademark, copyright and trade secret laws, along with non-competition and confidentiality agreements, contractual provisions, licensing arrangements and proprietary software and manufacturing processes, to establish and protect our intellectual property rights. Although we hold several unregistered copyrights in our business, we believe that the success of our business depends more upon our proprietary technology, information, processes and know-how than on patents or trademark registrations. In addition, much of our proprietary information and technology may not be patentable; if we decided to apply for patents and/or trademarks in the future, we might not be successful in obtaining any such future patents or in registering any marks.

Despite our efforts to protect our intellectual property rights, existing laws afford only limited protection, and our actions may be inadequate to protect our rights or to prevent others from claiming violations of their proprietary rights. Unauthorized third parties may attempt to copy, reverse engineer or otherwise obtain, use or exploit aspects of our products and services, develop similar technology independently, or otherwise obtain and use information that we regard as proprietary. We cannot assure you that our competitors will not independently develop technology similar or superior to our technology or design around our intellectual property. In addition, the laws of some foreign countries may not protect our proprietary rights as fully or in the same manner as the laws of the U.S.

We may need to resort to litigation to enforce our intellectual property rights, to protect our trade secrets, and to determine the validity and scope of other companies’ proprietary rights in the future. However, litigation could result in significant costs and in the diversion of management and financial resources. We cannot assure you that any such litigation will be successful or that we will prevail over counterclaims against us. Our failure to protect any of our important intellectual property rights or any litigation that we resort to in order to enforce those rights could materially and adversely affect our business.

If we face claims of intellectual property infringement by third parties, we could encounter expensive litigation, be liable for significant damages or incur restrictions on our ability to sell our products and services.

Although we are not aware of any present infringement of our products, services or technology on the intellectual property rights of others, we cannot be certain that our products, services and technologies do not or in the future will not infringe on the valid intellectual property rights held by third parties. In addition, we cannot assure you that third parties will not claim that we have infringed their intellectual property rights.

In recent years, there has been a significant amount of litigation in the U.S. involving patents and other intellectual property rights. In the future, we may be a party to litigation as a result of an alleged infringement of others’ intellectual property. Successful infringement claims against us could result in substantial monetary liability, require us to enter into royalty or licensing arrangements, or otherwise materially disrupt the conduct of our business. In addition, even if we prevail on these claims, this litigation could be time-consuming and expensive to defend or settle and could result in the diversion of our time and attention and of operational resources, which could materially and adversely affect our business. Any potential intellectual property litigation also could force us to do one or more of the following:

	●	stop selling, incorporating or using our products and services that use the infringed intellectual property;

	●	obtain from the owner of the infringed intellectual property right a license to sell or use the relevant technology, which license may not be available on commercially reasonable terms, or at all; or

	●	redesign the products and services that use the technology.

If we are forced to take any of these actions, our business may be seriously harmed. Although we carry general liability insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed.

Risks Related to Our Common Stock

Our operating results can fluctuate significantly from period to period, which makes our operating results difficult to predict and can cause our operating results in any particular period to be less than comparable periods and expectations from time to time.

Our operating results have fluctuated significantly from quarter-to-quarter, period-to-period and year-to-year during our operating history and are likely to continue to fluctuate in the future due to a variety of factors, many of which are outside of our control. Certain factors that may affect our operating results include, without limitation, those set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our most recently filed Annual Report on Form 10-K.

Because we have little or no control over many of these factors, our operating results are difficult to predict. Any adverse change in any of these factors could negatively affect our business and results of operations.

Our revenues, net income and other operating results are heavily dependent upon the size and timing of customer orders and projects, and the timing of the completion of those projects. The timing of our receipt of large individual orders, and of project completion, is difficult for us to predict. Because our operating expenses are based on anticipated revenues over the mid- and long-term and because a high percentage of our operating expenses are relatively fixed, a shortfall or delay in recognizing revenues can cause our operating results to vary significantly from quarter-to-quarter and can result in significant operating losses or declines in profit margins in any particular quarter. If our revenues fall below our expectations in any particular quarter, we may not be able, or it may not be prudent for us, to reduce our expenses rapidly in response to the revenue shortfall, which can result in us suffering significant operating losses or declines in profit margins in that quarter.

Due to these factors and the other risks discussed in our most recently filed Annual Report on Form 10-K, you should not rely on quarter-to-quarter, period-to-period or year-to-year comparisons of our results of operations as an indication of our future performance. Quarterly, period and annual comparisons of our operating results are not necessarily meaningful or indicative of future performance. As a result, it is likely that, from time to time, our results of operations or our revenue backlog could fall below historical levels or the expectations of public market analysts and investors, which could cause the trading price of our common stock to decline significantly.

Our Chairman, President and Chief Executive Officer owns a significant percentage of our common stock and will exercise significant influence over matters requiring stockholder approval, regardless of the wishes of other stockholders.

Our Chairman, President, Chief Executive Officer and Secretary, Arthur D. Sams, beneficially owns approximately 22% of our outstanding shares of common stock. Mr. Sams therefore has significant influence over management and significant control over matters requiring stockholder approval, including the annual election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. This concentrated control may limit stockholders’ ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our common stock could be adversely affected.

The price of our shares of common stock is volatile, and you could lose all or part of your investment.

The trading price of our shares of common stock is volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q and in our most recently filed Annual Report on Form 10-K, these factors include, without limitation:

	●	competition from existing technologies and products or new technologies and products that may emerge;

	●	the loss of significant customers, including AT&T and Verizon Wireless;

	●	actual or anticipated variations in our quarterly operating results;

	●	failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;

	●	our cash position;

	●	announcement or expectation of additional financing efforts;

	●	issuances of debt or equity securities;

	●	our inability to successfully enter new markets or develop additional products;

	●	actual or anticipated fluctuations in our competitors’ operating results or changes in their respective growth rates;

	●	sales of our shares of common stock by us, or our stockholders in the future;

	●	trading volume of our shares of common stock on The Nasdaq Capital Market;

	●	market conditions in our industry;

	●	overall performance of the equity markets and general political and economic conditions;

	●	introduction of new products or services by us or our competitors;

	●	additions or departures of key management, scientific or other personnel;

	●	publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities or industry analysts;

	●	changes in the market valuation of similar companies;

	●	disputes or other developments related to intellectual property and other proprietary rights;

	●	changes in accounting practices;

	●	significant lawsuits, including stockholder litigation; and

	●	other events or factors, many of which are beyond our control.

Furthermore, the public equity markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our shares of common stock.

A decline in the price of our common stock could affect our ability to raise further working capital, which could adversely impact our ability to continue operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. We may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities; thus, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may adversely affect investors’ desire to invest in our securities. If we are unable to raise the funds we require for all of our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products or services and continue our current operations. As a result, our business may suffer, and we may be forced to reduce or discontinue operations. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to reduce or discontinue operations.

We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment.

We have never declared or paid cash dividends on our capital stock. We intend to retain a significant portion of our future earnings, if any, to finance the operations, development and growth of our business. Any future determination to declare dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. As a result, only appreciation of the price of our common stock, which may never occur, will provide a return to stockholders.

Our failure to satisfy certain listing requirements may result in our common stock being delisted from the Nasdaq Capital Market, which may make it more difficult for our shareholders to sell shares of our common stock.

Our common stock is listed on Nasdaq. Nasdaq has several quantitative and qualitative requirements companies must comply with to maintain this listing, including a $1.00 minimum bid price per share (the “Bid Price Rule”). On November 24, 2023, we received a deficiency letter from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating that our common stock is subject to potential delisting from the Nasdaq because for a period of 30 consecutive business days, the bid price of our common stock has closed below the minimum $1.00 per share requirement for continued inclusion under Nasdaq Marketplace Rule 5550(a)(2) (the “Bid Price Rule”).

On November 18, 2024, the Company effected a 1:7 Reverse Stock Split of its shares of common stock. On December 23, 2024, the Company received a letter from Nasdaq informing the Company that the Company regained compliance with the Bid Price Rule and that the Company is therefore in compliance with the Nasdaq’s listing requirements. Our common stock continues to trade on The Nasdaq Capital Market under the symbol “POLA” at this time.

While we have been back in compliance with Nasdaq Listing Rules, there can be no assurance that we will continue to be in compliance with Nasdaq Listing Rules. If the stock is delisted, we may trade on the over-the-counter market, or even in the pink sheets, which would significantly decrease the liquidity of an investment in our common stock.

If securities or industry analysts do not publish research or reports or publish inaccurate or unfavorable research or reports about our business, our share price and trading volume could decline.

The trading market for our shares of common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If no securities or industry analysts undertake coverage of our company, the trading price for our shares of common stock may be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our shares of common stock, changes their opinion of our shares or publishes inaccurate or unfavorable research about our business, our share price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares of common stock could decrease and we could lose visibility in the financial markets, which could cause our share price and trading volume to decline.

We are not subject to the provisions of Section 203 of the Delaware General Corporation Law, which could negatively affect your investment.

We elected in our certificate of incorporation, as amended (the “certificate of incorporation”) to not be subject to the provisions of Section 203 of the Delaware General Corporation Law, or Section 203. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns (or, in certain cases, within three years prior, did own) 15% or more of the corporation’s voting stock. Our decision not to be subject to Section 203 will allow, for example, Arthur D. Sams, our Chairman, President, Chief Executive Officer and Secretary (who beneficially owns approximately 22% of our common stock) to transfer shares in excess of 15% of our voting stock to a third-party free of the restrictions imposed by Section 203. This may make us more vulnerable to takeovers that are completed without the approval of our board of directors and/or without giving us the ability to prohibit or delay such takeovers as effectively.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders. These provisions include:

	●	a requirement that special meetings of stockholders be called only by the board of directors, the president or the chief executive officer;

	●	advance notice requirements for stockholder proposals and nominations for election to our board of directors; and

	●	the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.

These anti-takeover provisions and other provisions in our certificate of incorporation and bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving us. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.

Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine.

For the avoidance of doubt, the exclusive forum provision described above does not apply to any claims arising under the Securities Act or the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

The choice of forum provision in our bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents even though an action, if successful, might benefit our stockholders. The applicable courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. With respect to the provision making the Delaware Court of Chancery the sole and exclusive forum for certain types of actions, stockholders who do bring a claim in the Delaware Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. Finally, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a material adverse effect on us.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually. However, for as long as we are a “non-accelerated filer” under SEC rules, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

We incur significant costs as a result of operating as a public company and our management expects to devote substantial time to public company compliance programs.

As a public company, we incur significant legal, accounting and other expenses due to our compliance with regulations and disclosure obligations applicable to us, including compliance with the Sarbanes-Oxley Act as well as rules implemented by the SEC and Nasdaq. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that have required the SEC to adopt additional rules and regulations in these areas. Stockholder activism, the current political environment, and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business. Our management and other personnel devote a substantial amount of time to these compliance programs and monitoring of public company reporting obligations and, as a result of the new corporate governance and executive compensation related rules, regulations, and guidelines prompted by the Dodd-Frank Act and further regulations and disclosure obligations expected in the future, we will likely need to devote additional time and costs to comply with such compliance programs and rules. These rules and regulations cause us to incur significant legal and financial compliance costs and make some activities more time-consuming and costly.

To comply with the requirements of being a public company, we may need to undertake various activities, including implementing new internal controls and procedures and hiring new accounting or internal audit staff. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act, is accumulated and communicated to our principal executive and financial officers. Our current controls and any new controls that we develop may become inadequate and weaknesses in our internal control over financial reporting may be discovered in the future.

Any failure to develop or maintain effective controls could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting which we may be required to include in our periodic reports we will file with the SEC under Section 404 of the Sarbanes-Oxley Act, harm our operating results, cause us to fail to meet our reporting obligations, or result in a restatement of our prior period financial statements. In the event that we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal control over financial reporting is perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the price of our common stock could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the Nasdaq Capital Market.

We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore not yet required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. However, we are required to comply with certain of these rules, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our next annual report. This assessment will need to include the disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. We are just beginning the costly and challenging process of compiling the system and processing documentation needed to comply with such requirements. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.

Raising additional capital, including through future sales and issuances of our common stock, the exercise of warrants or the exercise of rights to purchase common stock pursuant to our equity incentive plan could result in additional dilution of the percentage ownership of our stockholders, could cause our share price to fall and could restrict our operations.

We expect that significant additional capital will be needed in the future to continue our planned operations, including any potential acquisitions, purchasing of capital equipment, hiring new personnel, and continuing activities as an operating public company. To the extent we seek additional capital through a combination of public and private equity offerings and debt financings, our stockholders may experience substantial dilution. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt and receivables financings may be coupled with an equity component, such as warrants to purchase shares of our common stock, which could also result in dilution of our existing stockholders’ ownership. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt and other operating restrictions that could adversely impact our ability to conduct our business. A failure to obtain adequate funds may cause us to curtail certain operational activities, including sales and marketing, in order to reduce costs and sustain the business, and would have a material adverse effect on our business and financial condition.

Under our 2016 Omnibus Stock Incentive Plan, as amended, or 2016 Plan, we may grant equity awards covering up to 250,627 shares of our common stock. As of March 31, 2026, we had granted options to purchase an aggregate of 20,002 shares of common stock, among which 7,144 options had terminated, and issued 25,729 shares of common stock as stock-based compensation to officers, employees and consultants under the 2016 Plan. Sales of shares issued upon exercise of options or granted under our 2016 Plan may result in material dilution to our existing stockholders, which could cause our share price to fall.

Our issuance of shares of preferred stock could adversely affect the market value of our common stock, dilute the voting power of common stockholders and delay or prevent a change of control.

Our board of directors has the authority to cause us to issue, without any further vote or action by the stockholders, up to 5,000,000 shares of preferred stock in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series.

The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive. For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.

Further, the issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of our other classes of voting stock either by diluting the voting power of our other classes of voting stock if they vote together as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote even if the action were approved by the holders of our other classes of voting stock. The issuance of shares of preferred stock may also have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Mine Safety Disclosure.

Not applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

Reference is made to the exhibits listed on the Index to Exhibits.

INDEX TO EXHIBITS

Exhibit Number		Description
31.1		Certification Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 20, 2026	POLAR POWER, INC.

	By:	/s/ Arthur D. Sams
		Arthur D. Sams President, Chief Executive Officer and Secretary

Polar Power, Inc. 10-Q