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Item 1. Business

2021-03-31 compared with 2020-05-14 · 855 added, 868 removed, 29 unchanged (98% of the section changed)

We design, manufacture and sell

direct current, or 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.

Within the telecommunications

market, 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) or have critical power needs and cannot be without power in the event of utility grid failure

(i.e., back-up power applications).

Within this market, we offer the following three configurations of our DC power systems, with

output power ranging from 5 kW to 32 kW:

DC base power systems .

These systems integrate a DC generator and automated controls with remote monitoring, which are typically contained within an environmentally regulated enclosure.

DC hybrid power systems .

These systems incorporate lithium-ion batteries (or other advanced battery chemistries) with our proprietary BMS into our standard DC power systems.

DC solar hybrid power systems .

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

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.

The current transition of telecommunications

cellular network technology from 3G and 4G to 5G and to “edge computing at the cell tower”

(i.e., allowing data produced

by IoT devices to be processed closer to where the data is created rather than transmitting the data across long routes to the

cloud or to data centers) requires an increase in power and reliability.

In that regard, our telecommunications customers have

expressed a desire for us to develop new products to addresses this need for increased power while reducing or keeping the same

volume of space of our products to be located at the cell site.

An increase in the size of our products would result in the need

for more space at cell sites which, in turn, would result in many of our customers being subjected to increased rent and permitting

We believe that our customers’

tight space requirements provide us with a competitive advantage over our competitors.

During 2019, most Tier-1 telecommunications

companies began deployment of 5G networks in densely populated urban centers, resulting in a significant increase in the number

of small cells being installed.

The majority of Tier-1 telecom providers plan to connect small cells to macro cell sites for both

power and data needs, In 2019, we developed a 35% higher power output generator that is configured in the same format and footprint

as our previous model, to meet the growing power needs of 5G cell sites.

In the fourth quarter of 2019, we commenced shipments

of our 20 kW generators to two Tier-1 telecommunications customers and we anticipate a gradual shift towards higher power output

generators in the telecommunications industry.

Our business from domestic Tier-1 telecommunications

customers is driven primarily by the need for higher network reliability, which in turn, drives the need for backup generators.

Globally, major telecom companies are racing towards implementing 5G networks which requires densification of the current infrastructure

in both urban and rural environments.

Many expect that 5G networks will revolutionize how we consume data, video and voice, combined

with streaming and IoT applications.

We believe that as a result of this expansion, network reliability will become a key differentiator

amongst the various telecommunications providers.

In that regard, we believe our line of backup power generator products, designed

to be 40% more compact than an equivalent alternating current, or AC, generator and available in various fuel types provides us

competitive advantage within the global telecommunications markets.

Impact of COVID-19

In March 2020, the World Health Organization

declared the outbreak of COVID-19 a global pandemic, and, in the following weeks, many U.S.

states and foreign countries issued

lockdown orders negatively impacting the operations of our manufacturing facilities and customer demand for our products.

then, the COVID-19 situation within the U.S.

and foreign countries has rapidly escalated.

In March 2020, we furloughed approximately

65% of our workforce.

We continue to monitor the situation closely and it is possible that we may be required to implement further measures.

We were incorporated in 1979 in the State

of Washington as Polar Products, Inc., and in 1991 we reincorporated in the State of California under the name Polar Power, Inc.

design, manufacture and sell direct current, or 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 and

residential and commercial power.

the telecommunications market, 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) or have critical power needs and cannot be without power in the

event of utility grid failure (i.e., back-up power applications).

Within this market, we offer the following three configurations

of our DC power systems, with output power ranging from 5 kW to 30 kW:

base power systems .

Our basic system which is centered around a DC generator.

Applications include both prime power and

backup power.

hybrid power systems .

Our basic DC power system with added energy storage via lithium-ion or other battery chemistries.

Solar hybrid power systems .

Our DC hybrid power system with added renewable energy (i.e., solar panels).

DC power systems are available in diesel, natural gas, LPG, propane and renewable fuel formats, with diesel, natural gas and propane

gas being the predominant formats.

were incorporated in 1979 in the State of Washington as Polar Products, Inc., and in 1991 we reincorporated in the State of California

under the name Polar Power, Inc.

In December 2016, Polar Power, Inc.

reincorporated in the State of Delaware.

Our internet website address is https://polarpower.com/.

Recent Business Events

During the fourth quarter of 2019, and

extending into the first quarter of 2020, our U.S.

Tier-1 telecommunications customers postponed orders and shipments to the

latter part of 2020 which resulted in an 87% decline in net revenues during the fourth quarter of 2019 as compared to the

third quarter of 2019.

We believe that this slowdown in the sales of our backup generators is a result of, among other

things, the following:

a shift in the allocation of their capital expenditure budgets from backup power solutions to the transition of their 3G and 4G networks to 5G networks which we believe to be temporary given the ever increasing federal and state laws requiring backup power on cell sites;

● delays experienced by our customers in determining the future power requirements associated with new 5G networks where macro

cell sites are connected to numerous small cell sites;

● a trend by some of our customers of divesting tower assets to invest capital into the acquisition of wireless communication

We believe that what we experienced in the

fourth quarter of 2019 and the first quarter of 2020 is temporary in nature and that, subject to the overall effects of the COVID-19

pandemic on our customers’

businesses, our sales will improve in the upcoming quarters once our customers have made significant

inroads in the deployment of their 5G networks and have defined the power needs for these networks.

We offer a complete line of DC backup generators,

ranging in output from 6kW to 32 kW.

During 2019, we continued our efforts in international markets, through demonstrations

of our products to large telecommunications network providers.

We also developed a higher output power generator and an LPG/propane

powered generator for emerging growth markets.

We anticipate our regional expansion, combined with new products, can help us diversify

our sales during 2020.

We believe the long-term impact of COVID-19 demonstrates the need for telemedicine and contact tracing,

both of which require the IoT and 5G networks, thereby increasing the demand for our products.

However, the COVID-19 pandemic has

had a significant negative impact on our ability to market and sell our products, especially our ability to demonstrate our products

to current and potential customers, and to complete new product introductions.

During 2019, we also developed an environmentally

friendly solar hybrid power system based on a combination of solar with liquified petroleum gas, or LPG, and propane powered generators

which we believe lowers both capital expenditures and operating expenditures.

In the fourth quarter of 2019, we received our certificate

of conformity from the U.S.

Environmental Protection Agency, or EPA, on small spark-ignition Toyota engines which will be used

in our new LPG / propane generators.

These new generators, equipped with proprietary control systems, have been specifically designed

to run 24/7 for air-conditioning applications and will provide power outputs between 6kW to 15 kW with 30,000- to 90,000-hour lifecycle

runtime engines.

We plan to market these stationary generators within the telecommunications, commercial and residential markets

primarily through third party distributors.

During 2019, we increased our manufacturing

plant capacity by adding automation equipment to improve production efficiencies and product output.

We operate primarily within the telecommunications market

and, to a lesser extent, in other markets including military, electrical vehicle charging, cogeneration, distributed power and

uninterruptable power supply.

Our internet website

address is https://polarpower.com/.

Business Events

During 2020, as a result

of Covid-19, the telecommunications industry experienced a slowdown in construction activities due to disruptions in the global

supply chain of telecommunications related components, operational shutdowns and stay-at-home orders.

These disruptions

negatively affected our U.S.

Tier-1 telecommunications customers which, in turn, resulted in a significant reduction in our new

equipment orders and slow-down in shipments of existing orders.

As a result of these factors, we experienced a 64% decline

in net revenues in 2020 as compared to 2019.

During 2020, in response

to the decline in revenues from our Tier-1 telecommunications customers, we diversified our sales efforts to develop power

systems configured inside containers designed for installation in remote off-grid applications (i.e., in applications not involving

a connection to an electrical power grid).

During the fourth quarter of 2020, we began shipment of off-grid systems to

Tier-1 telecommunications providers.

We believe these systems can provide significant fuel efficiency for both backup and

prime power applications in remote areas in the U.S.

and globally.

Although our initial orders for these systems were from

U.S.-based Tier-1 telecommunications customers, we believe the market opportunity for these remote systems may be significant

in emerging markets such as Africa and Asia where over 60% of the telecommunications towers are connected to a bad-grid

or are completely off-grid.

The slowdown in sales

from our Tier-1 telecommunications customers during the first half of 2020 also led us to further diversify our sales efforts

to increase sales to the U.S.

military, international telecommunications customers and Tier-2 telecommunications customers in

During the second half of 2020, we experienced measurable success in our diversification strategy.

We anticipate

in 2021 our sales to new customers, combined with increased sales of new products introduced during 2020, will return

to pre-2020 historical sales levels.

The Covid-19 pandemic

has had a significant negative impact on our overall operations including revenues, productivity, gross margins and liquidity.

Management’s early focus on training, processes and procedures kept our infection rates to below 1% with no company-wide

COVID-19 spread.

Due to the slowdown in sales to our Tier-1 telecommunications customers, our sales mix changed to smaller

quantity custom orders.

Small custom orders with frequent line changeovers caused less process automation which,

in turn, led to higher labor costs and higher setup times.

Since 2016, we experienced high double-digit sales growth which

resulted in us making strategic investments to increase our production capacity to $50 million annual revenue through an increase

in plant space and the addition of automation equipment.

The unanticipated drop in sales during 2020 caused a disproportionate

distribution of fixed and semi-fixed overhead costs across much lower revenues.

During this period of lower sales, we invested

in cross training our direct labor force across diverse processes and equipment which will make our workforce more agile and

productive in the future.

In addition, during 2020, our sales force directed their efforts into additional markets

and regions to reduce customer and regional concentration.

During 2019, we developed

a lower emission solar hybrid power system which integrates solar energy storage with natural gas/LPG

(liquified-petroleum gas) powered generators that targets off-grid (i.e., areas where wireless towers are not connected to

an electrical grid) and bad-grid (i.e., areas where wireless towers are connected to an electrical grid that loses power more

than eight hours per day) DC power generation applications.

Our new product is equipped with a 90,000-hour lifecycle engine

which provides longer life, lower emissions and operating costs.

Certification of this product occurred in December

2019, when we received our certificate of conformity from the U.S.

Environmental Protection Agency, or the EPA, for our small

spark-ignition Toyota engines.

In the second half of 2020, we began shipments of our natural gas-powered DC power systems.

new product, equipped with our proprietary control systems, is designed for 24/7 prime power application providing

DC power outputs between 5 kW to 22 kW.

We expect that the bad-grid, off-grid markets, which include telecommunications

towers, commercial and residential backup, electric vehicle charging, “Mini-Grid”

and various others, will expand

the market for our natural gas/LPG product lines in both the U.S.

and in international markets.

We plan to develop new

configurations of DC power system, battery storage and solar to optimize the match between our solutions and various application

primarily operate within the telecommunications market and, to a lesser extent, in other markets, including military, electric

vehicle charging and residential and commercial power.

Telecommunications

We believe that investments in wireless

telecommunications infrastructure is on the rise globally due to rising data usage and increased pressure to reduce operating costs

requiring providers to improve operational efficiencies while expanding network coverages into remote or rural areas.

reliance on wireless networks is also resulting in increased demand for reliability of these systems resulting in higher demand

for power backup systems.

We believe that some of the key aspects fueling the growth of telecommunications operators include:

improved operational efficiency of telecommunications towers, with an emphasis on reducing power consumption and power generation costs;

increased need for communications during natural and manmade disasters has resulted in a strengthening of telecommunications infrastructure;

increased active user base through the expansion of networks in remote or rural areas in developing nations and the U.S.;

increased densification and data transfer speeds that increase the usage of additional services such as internet and video on smart mobile devices.

The electrical power requirement for cell

towers can be segmented into the following areas:

● Good Grid .

Currently, the majority of our sales are related to new installations in the U.S.

It is within this market

where we have the most competition from legacy AC generation technology.

The technological advantages of our DC power systems as

compared to legacy AC power systems includes smaller size, longer reserve (backup) time, lower acoustic noise, the ability to operate

on low gas pressures, ease of installation and site permitting.

Because backup generators are typically operated less than 100

hours a year, the higher fuel efficiency, reduced maintenance and longer service life of our products are oftentimes not considered

in the customer procurement process.

As a standalone component, AC generators are typically lower in cost than an equivalent DC

As in installed cost, in most instances, DC generators will have a lower cost.

Most wireless companies are highly compartmentalized

thereby making it difficult for them to validate the ownership advantages of DC generators over AC generators.

This is comprised primarily of the overseas market Within this market, it is not uncommon for an electrical

grid to operate other than on a 24-hour basis.

Oftentimes, these grids will operate for only 4 to 18 hours a day.

Typically, the

cost of bad grid electricity is lower than the cost of fuel, so the goal is to store as much energy from the grid in a battery

while its available and then use the battery while the grid is not operational.

For extended outages beyond the battery energy

storage, a generator is used.

Due to the higher number of generator run hours, fuel economy becomes an important factor.

where we believe our hybrid systems, that are combined with lithium ion batteries, are more cost competitive as compared to AC

generator systems.

This is comprised primarily of the overseas market and, to a lesser extent, the U.S.

servicing this wireless market since 1994 (and the microwave tower market since 1985).

AC generators compete in this market primarily

due to their legacy presence and the lack of knowledge on the part of the wireless operators of the advantages of a DC generator.

DC solar and non-solar hybrid applications represent our largest growth opportunities within the overseas markets.

In order to improve wireless tower efficiency

globally, service providers are divesting these fixed assets to more agile regional tower operators, while simultaneously upgrading

wireless technologies to maintain competitive services.

As electronics efficiencies have improved, the amount of electronics on

cell sites have increased thereby creating a greater demand for energy.

The improvement in electronics, including the ability to

operate at higher temperatures, has reduced the need for air conditioning.

We consider this to be the single most important factor

driving the use of DC generators within the telecommunications market.

The other trend is the elimination of walk-in shelters in

favor of housing electronics “outdoor”

in smaller cabinets.

Increased new construction of these outdoor tower facilities

has provided us with the ability to market our higher-efficiency DC power systems to these tower operators globally.

Food, communications, transportation and

weapon systems are the lifeblood of a military unit.

With few exceptions, military communications operate on 28 volts DC or 48

volts DC sources.

Almost everything on the battlefield uses batteries and they require charging including robotics that move materials

from one place to another and/ or provide weaponized platform.

We believe that military technologies based on DC generators and

battery energy storage will have a growing impact on reducing casualties and help counter the effects of IEDs.

We believe that

the demand for DC power with the military is increasing as the use of pulsed energy weapon systems are developed and implemented

on the battlefield.

Weapons that use high energy pulses to power laser, kinetic projectiles, particle beams, and high-powered microwaves

have DC power requirements that can climb as high as 6 megawatts.

The objectives of the creation of a new

generation of power generators are:

enhanced mobility, reliability and maintainability;

improved fuel efficiency;

reduced system size and weight;

reduced infrared and acoustic signatures;

increased survivability in rugged combat operations;

reduced total cost of ownership.

The Advanced Medium Mobile Power Sources,

or AMMPS, the U.S.

Department of Defense’s third generation of military power generators, is a program to provide 5-60kW

generators in either a skid, trailer mounted, or Microgrid configuration to replace legacy generators.

The new generation of mobile

electric power generators will also have the capability to connect together to form an efficient power distribution center to create

“power islands”

that serve both DC and AC loads.

In addition, solar and wind power is being added to AMMPS to create

hybrid systems that can function as self-sustaining power sources in remote areas.

The next generation of power systems are required

to provide 21% higher fuel efficiency, reduce noise and weight, increased system reliability by 90% and be capable of performing

in extreme environments.

Our DC hybrid power systems, with integrated controls that manage energy produced by solar and lithium

battery solutions, provide higher fuel efficiency than traditional powered power systems currently used by the military.

our complete line of commercialized DC hybrid power systems in use for the past decade provides us with a competitive advantage

in meeting stated power system goals outlined by Department of Defense.

Improvements in sensors, navigation and

communication technologies have led to increased integration of situational awareness systems that allow all combat assets to communicate

and coordinate both defensive and offensive efforts in combat.

Reliance on these systems has led to an effort to integrate DC auxiliary

power units ranging in size from 3 kW to 20 kW onboard combat vehicles independent of engine driven alternators.

Integration of

auxiliary power units to run climate control and on-board electronics while idling saves a significant amount of fuel and maintenance,

a critical asset during combat operations.

We believe that the integration of smaller horsepower auxiliary power units to operate

climate control and on-board electronics systems, rather than large horsepower vehicle engines while idling, may save a significant

amount of fuel and maintenance, both of which are critical assets during combat operations.

During the past three decades, we have shipped

2 kW to 30 kW advanced power units, comprised of hybrid vehicle power systems, auxiliary power systems and prime power systems,

Department of Defense and to its prime contractors for a wide variety of missions covering the land, sea and air.

the years ended December 31, 2019 and 2018, sales of auxiliary power systems designed for use in military combat vehicles represented

2.4% and 6.1%, respectively, of our net sales.

We began our military business as a sub-contractor

to major defense contractors and as prime contractor providing DC generators and battery charging systems to the U.S.

Over the years, we have observed that engaging in direct sales programs sponsored by the Department of Defense oftentimes

results in higher than normal proposal costs and increased volatility in our ability to be awarded contracts awards.

Over the next

several years we plan to focus our military business on sales of our products to the major prime contractors who will, in turn,

integrate our products into their products.

Currently, we are working on the development of DC generators for two separate robotic

programs and one communications program as a sub-contractor to major defense contractors.

We believe this shift in focus away from

the Department of Defense to defense sub-contractors may result in stronger military sales during 2021 and beyond.

As a result of a current military contract we

are also in the process of developing a higher-voltage DC alternator which is capable of producing a power output of up to 50 kW.

In addition to numerous military applications, we plan to target this product for powering mini-grids and for edge computing data

We believe the compact size and high efficiency and reliability of our generator will be attractive to this market sector.

Residential and Commercial Power

Extreme weather and man-made and natural

disasters are increasing thereby expanding the need for backup generators and micro-grids.

The grids are experiencing increased

demand for energy as a result of increased air-conditioning and charging electric vehicles.

We believe these events are also expanding

our opportunity to market combined heat and power, or CHP, and micro-cogeneration systems (i.e., heat, air-conditioning, and power).

Many AC backup generators that are under 30

kW are typically designed for low cost and as a result have limited service life.

We intend to market and sell a multipurpose generator

with low operating and higher reliability into a smaller segment of this growing market.

In addition, we believe that there will

be increase in demand for DC generators for micro-grid applications.

We are in the process of marketing 30 kW to 200 kW generators

for these applications.

We believe that low-cost, under 30 kW output,

AC generators marketed to residential markets may not meet the current market needs of homeowners.

Over the past decades typical

backup needs were less than 100 hours of use per year and AC generators were optimized to meet these limited performance requirements

enabling a lower sale price.

With growing climate change, we are now experiencing more severe storms, natural disasters and fires

resulting in loss of grid power for several days and, in many cases, weeks.

These lower cost AC generators require higher maintenance

with a shorter operational life.

We have designed long-life, fuel efficient,

multi-purpose, low maintenance generators that give the owner greater versatility on selecting the energy sources to meet his power

The owner can choose from grid, natural gas, propane, and solar energy sources to power the owner’s home, office,

or charge the owner’s vehicle.

Our generators can be operated 24/7 with once a year maintenance.

Our research demonstrates

that our products require less maintenance and cost than fuel cells.

A typical home in the U.S.

is designed to operate

on 120/240 Volts AC at a frequency of 60 cycles.

An AC generator can accomplish this directly only after the home is disconnected

from the grid using a transfer switch.

This direct connection creates a potential for damage to household appliances and electronics

due to generator failure caused by an engine or controls malfunction.

Using a typical low-cost AC generator, even from the major

brands, exacerbates this potential problem.

Our DC generators use an inverter to

convert DC power to AC power to supply the home or office.

The inverter is solid state without moving parts and can supply

the exact required voltage and frequency thereby helping to protect the appliances.

The solar PV has a DC output and can be

connected in parallel with the DC generator and feed the combined power to the inverter.

This reduces the need for batteries

which is an expensive component of a solar system.

Most utilities demand that macro cogeneration and CHP systems that want to

connect to the grid use an inverter interface.

During 2019, we developed an environmentally

friendly solar hybrid power system based on a combination of solar with LPG and propane power sources

which we believe lowers both capital expenditures and operating expenditures.

In the fourth quarter of 2019, we received our certificate

of conformity from the U.S.

Environmental Protection Agency, or EPA, on small spark-ignition Toyota engines which will be used

in our new LPG / propane generators.

These new generators have been specifically designed to run 24/7 for air-conditioning applications

and will provide power outputs between 6kW to 15 kW and which incorporate a 30,000- to 90,000-hour life engine with our proprietary

control system.

We plan to market these stationary generators within the telecom, commercial and residential markets primarily

through third party distributors.

We believe that by using a natural gas powered

DC generator, integrated with a solar PV array, will be instrumental in providing electric utilities additional power generation

capacity while offering the capacity to backup homes and offices needs during natural catastrophes and man-made disasters.

the summer months many States lack adequate electric production capacity to power homes and businesses during peak hours resulting

in black-outs or brown-outs.

In addition, many homes and commercial business lack sufficient power to charge an electric vehicle,

or fleet of electric vehicles.

Most electric utilities penalize peak power

usage to reduce consumption, which increases the cost to charge electric vehicles, which reduces the adoption of electric vehicles.

We believe producing energy using our natural gas generator at point-of-use reduces transmission losses, improves efficiencies

thereby reducing charging costs and carbon emissions.

We also believe that energy requirements

associated with EV charging could drive the use of CHP systems.

We believe that the use of DC generators

with inverters in a CHP application could replace oil-fueled and natural gas heaters in the Eastern U.S.

Our CHP or cogen products

can produce space heating and electricity at the same time.

An advantage of CHP over current oil and natural fueled heating is

that grid power is not required to operate the heaters blowers, fuel pumps, or controls.

Our technology allows continued heating

and provides electricity in the worst of storms.

Our Competitive Strengths

We have over a 30-year history and have

developed a reputation as a proven supplier of reliable and advanced proprietary technology products to customers within the telecommunications,

military, industrial and marine markets.

We have invested significant capital and engineering expertise to develop products that

capitalize on the growing trend towards environmentally friendly and fuel-efficient power generation systems.

We further believe

our success will be based on the following key competitive strengths:

Proprietary Technologies.

Our decades of research and development efforts has led to the integration of high-efficiency DC alternator technology with conventional engines to provide highly reliable backup power solutions for telecommunications towers.

During the last decade, we invested significant capital in the development of charge control algorithms that allow our DC power generators to safely charge various types of battery chemistries.

We believe this feature gives our customers higher field reliability and uptime when compared to conventional AC generators.

Engineering Expertise.

During the last few years, we invested significant capital in expanding our field sales staff globally.

Our direct sales model, where our engineers and sales personnel jointly assess customer needs and design customized solutions, has resulted in success with the top three Tier-1 wireless providers in the U.S.

We design and manufacture our DC alternators, controls and enclosures in-house.

We believe this allows us to customize designs to applications reducing system weight and size.

In addition, DC alternators are inherently more efficient than AC systems, thereby more fuel efficient.

Our proprietary battery charging algorithms reduce generator run time thereby reducing maintenance cost and increasing life.

Manufacturing Competitiveness.

We believe that our vertical integration approach to manufacturing lowers our production costs and improves our overall operational efficiency.

In addition, vertically integrated manufacturing of our proprietary technologies such as DC alternators, charge controls and battery management systems, provides us with a greater control and protection over our intellectual property.

We believe our modular approach to manufacturing provides us with the lowest manufacturing costs for our proprietary technologies while giving us the ability to deliver customized solutions to our Tier-1 wireless provider customers.

Strong Customer Base.

A significant percentage of our sales are comprised of direct sales to our customers.

Currently, a significant percentage of our U.S.

provide power generation equipment for the telecommunications markets.

Our equipment provides backup power to grid connected mobile

tower sites during power outages resulting from severe weather like hurricanes, wildfires and floods.

Most telecommunications

towers are equipped with battery backup for short term power outages.

Our DC power generators are installed to address longer-term

disruptions in power.

We also deliver products that provide prime power for off-grid telecommunications tower sites installed

in remote and rural areas where reliability of the power grid is suspect.

Since 2012, the telecommunications market is our largest

market segment and has contributed over 95% of our annual revenues.

Since 2012, we developed

products and configurations that target telecommunications applications with key features like high fuel efficiency, light weight

and compact design when compared to our competitors’

These features allow our telecommunications customers to

install equipment requiring a smaller footprint on building roof tops and compact commercial sites while also requiring

less fuel storage due to the fuel efficiency of our products.

In the past five years, we have gained approval and certifications

from four top Tier-1 telecommunications operators in the U.S.

With over 90% of the world’s telecommunication towers

located in non-U.S.

territories, we decided to establish international sales offices in Poland, Romania, Australia, Namibia, U.A.E.,

Australia and South Africa to provide long term growth.

In 2017, we began investments into international markets and have

recorded a steady increase in sales every year since.

In 2020, we delivered over hundred natural gas-powered DC power systems

to a leading Japanese telecommunications tower operator while delivering production quantities to a Tier-1 telecommunications

tower operator in Papua New Guinea.

95% of the telecommunications towers are connected to a power grid, thereby only requiring backup power generation in equipment

in case of an emergency loss of power, while in the emerging markets of Africa and Asia, a significant percentage of telecommunications

towers are not connected to the grid thereby requiring fuel-efficient prime power equipment to provide power by charging

the batteries.

Most prime power sites also require integration with solar and storage batteries to utilize renewable energy

during the day while generators and batteries provide power during nights and/or on cloudy days.

In the U.S., telecommunications

companies have focused their efforts on adding generators to provide backup power at existing sites, while in the international

market telecommunications companies are in expansion phase of adding new sites to the infrastructure to provide coverage in rural

and remote areas.

2019, the telecommunications infrastructure in the U.S.

and other developed nations was known to have sufficient capacity to satisfy

the needs of average smart phone users.

However, the advent of 5G technology has resulted in a digital revolution within both

the commercial and consumer sectors leading to an exponential increase in data usage.

We believe that the need for backup power

equipment in the telecommunications services industry which consists of digital infrastructure (e.g., fiber, telecommunications

towers, active networks and data centers), operators (e.g., mobile and fixed broadband, data centers and cloud computing) and

applications (e.g., broadband connections, telephones, video streaming and e-commerce), holds promising growth opportunities as

5G use expands in the near and long term.

The next generation of

wireless network capabilities offer potential revolutionary applications far beyond smart phones and mobile devices.

The 5G mobile

network is intended to converge connectivity, intelligent edge and Internet of Things (IoT) technologies which is expected to

result in an increase in telecommunications tower sites in both the U.S.

In the near term, 5G will deliver

broadband-like services such as high-definition streaming video to a cell phone.

Businesses will benefit from using 5G for data

monitoring and cloud-native 5G networks to compute and store data locally.

All of these applications dramatically scale up data

usage which requires an increase in infrastructure and an increase in power and backup generators.

pervasiveness of 5G, including reliance by users on, among other things, local weather, traffic conditions, self-driving vehicles,

wearable health monitoring devices that automatically informs doctors, stores automatically ordering items sold on virtual carts,

farmers automated irrigation system with tracking sensors, will require robust backup equipment at telecommunications sites.

believe higher data usage will require higher reliability backup systems that are fuel efficient and are located in proximity

to the point of use.

In urban environments, roof-top space, weight of the equipment and the amount of fuel storage are critical

factors in the selection of backup equipment.

As one of the leading providers of DC power generation equipment, we have

demonstrated these benefits to telecommunications providers for decades and we are therefore encouraged with the prospect of infrastructure

expansion in this space that requires fuel efficient and lower emission power generation equipment.

1979, we have been developing and marketing products to the U.S.

military and large defense contractors in the U.S.

and international

The need for low voltage DC power generation systems are vital for military operations and commonly used to charge storage

batteries, provide backup emergency power, or provide startup power for aircrafts or weapon systems.

During the past decade, digitization

of the military accelerated exponentially to support modern information, communication, and weapon systems.

The need to process

information rapidly has led to digitization of command, control, communications, computers and intelligence across both combat

support and service support.

This expansion in data transfer and storage has led to an increase in energy needs, which requires

efficient power generation equipment that can charge batteries or directly power these systems.

digitized battlefield includes sensors, information processing, data distribution, electronic countermeasures, all requiring with

few exceptions, 28 volts DC or 48 volts energy at point of use.

Our DC generators designed for military applications provide:

mobility, reliability and maintainability;

fuel efficiency;

system size and weight;

infrared and acoustic signatures;

survivability in rugged combat operations;

total cost of ownership.

2016, the military began the Advanced Medium Mobile Power Sources, or AMMPS, a U.S.

Department of Defense program to develop and

deliver 5 kW-60 kW output ranging generators in either a skid, trailer mounted, or microgrid configurations to replace legacy

standalone AC generators.

The new generation of mobile power generators combined with solar and wind power can function as sustainable

sources of DC and AC power in remote areas.

The new generation of AMMPS power systems are required to provide 21% higher fuel

efficiency, lower noise, weight, 90% reliability and be capable of performing in extreme environments.

During 2020, we directly

and jointly partnered with defense contractors, provided DC hybrid power systems, with integrated controls providing higher fuel

efficiency than legacy AC generators currently in use.

in sensors, navigation and communication technologies have led to increased integration of situational awareness systems that

allow all combat assets to communicate and coordinate both defensive and offensive efforts during combat.

In earlier combat vehicle

designs, these surveillance systems were powered by the main auxiliary vehicle battery, which required the vehicle’s main

engine to continue operating to power auxiliary battery systems.

A decade ago, we began delivering compact 3 kW –

DC auxiliary batteries to power these communication and reconnaissance systems thereby improving fuel efficiency of the combat

and vehicles when deployed.

During the decade we have delivered several configurations of these auxiliary power units to the military,

which vary in function from battery charging to supplying power to weapon systems.

During 2020, we were contacted

by a defense contractor to develop and deliver 50 kW high voltage power systems for auxiliary power use in military vehicles.

We are currently in the process of development of next-generation higher output power DC power system.

After conclusion of the

testing of this higher power DC power system, we plan to introduce a configuration of this product to the residential and commercial

microgrid market in emerging markets.

We believe 50 kW standalone DC power system, powered by natural gas or LPG would be

ideal for rural communities in emerging markets such as Africa and Asia.

The capacity of 50 kW is sufficiently large enough to

power a small rural hospital, dairy farm and a cluster of houses in a small village.

The ease of connecting our DC power system

with solar, battery packs or any other source of energy like wind can introduce a sustainable cost-effective solution in emerging

Vehicle Charging

to Frost & Sullivan, a leading market consulting firm, the electric vehicle market in the U.S.

will flourish over the next

The firm anticipates that due to upcoming incentives for electric vehicles the number of electric vehicles in the

will grow from 1.4 million in 2020 to 7.0 million in 2025.

This increase will require approximately 5.0 million additional

charging stations nationwide to support the cumulative growth of electric vehicles.

A 2018 article by McKinsey

& Company entitled “

The potential impact of electric vehicles on global energy systems ”

stated that although

a modest increase in electric vehicle sales of 5% will not lead to a shortage in electricity since most new capacity can be delivered

by renewables like solar, wind, and gas powered generation.

This modest increase in sales may have a significant impact on peak

loads, especially in concentration points of electric vehicle charging and during the evening peak times when most electric

vehicle users connect their vehicles for charging.

The report claims unmanaged peak load increases due to electric vehicle

charging will require increases in costly sub-station upgrades.

We believe that the more cost effective option

will be investing into battery storage at the utility level to manage the peak loads or flexible electricity costs for electric

vehicle charging in an effort to discourage peak load charging.

Regardless of how

the peak charging issue is resolved, most homes have not been designed to allow for fast charging of electric vehicles.

to address this issue, in 2020 we completed the design of our natural gas-powered electric vehicle charger and backup generator.

Our electric vehicle chargers, being independent of the grid, are designed to automatically fast charge connected electric vehicles

at home on a daily basis while providing backup power during power outages.

In addition, the heat generated while charging

is captured and delivered to heat the home, heat water for laundry, or heat the pool.

Our electric vehicle charger

was initially designed in 2009 as a diesel-powered charger for roadside assistance and emergency services for most major automotive

manufacturers.

Our chargers were initially used by “AAA”

for roadside assistance to rapid charge stranded out

of charge vehicles.

In 2020, we improved this product by replacing the diesel engine with a heavy duty 90,000-hour lifetime

Toyota natural gas engine.

This product targets residential customers that own or are expected to own electric vehicles during

the next five years.

With the anticipated stress

on utility grids due to an increase in the number of electric vehicles that require charging, combined with the fact that

most homes are unable to provide fast charging, we believe that an independent natural gas-powered electric vehicle charger would

be ideal and cost effective.

Currently, many electric vehicle owners exceed the base power usage at home resulting in peak hour

usage penalties which diminishes anticipated cost savings of using electric vehicles.

Our residential natural gas-powered EV

charger eliminates these costs while also providing backup power in case of emergencies.

benefits of fast charging with a natural gas generator, as opposed to using the electric grid, includes avoids peak rate charges,

a reduced carbon footprint and the opportunity to provide heating and air conditioning, through combined heat and power or CHP

systems that utilize waste heat from the generator/charger which we believe is a compelling market opportunity for our new product.

and Commercial Power –

Increased use of electricity

worldwide is directly related to humanity’s improvement in the quality of life.

Increased global urbanization has resulted

in many governments investing in power plants and providing infrastructure to satisfy the growing demand for electricity.

Similar needs of the rural populations have been largely ignored worldwide due to the isolation, low density and population spread

over vast areas resulting in an increased cost of infrastructure.

Even in rural areas where the infrastructure was built to deliver

electricity, frequent blackout and infrastructure failures are commonplace and often not repaired for long periods.

According to recent World

Bank data, 13% of the world’s population, approximately 950 million, still lack electricity compared to 25% in 1994.

47% of the world’s population still lives in rural areas, about 25% of those living in rural areas lack electricity.

954 million people live without electricity of which 547 million are located in Sub-Saharan Africa, 254 million

are located in South Asia, 71 million are located in East Asia, and 82 million in other areas.

the past decade, developments in renewable energy and battery storage have provided an alternate method to resolve this energy

inequity between rural and urban populations worldwide.

However, due to weather and costs of such systems and technologies are

still at an early stage of mass adoption.

We envision a hybrid system with natural gas or LPG integrated with a solar and battery

system to generate power during peaks and valleys of demand that we believe would be more cost effective and reliable than the

current systems in place.

These “Mini-Grid”

hybrid systems would generate between 5kW –

25kW of power on 24/7

basis and provide electricity for a small housing unit, commercial facility or a school building.

Mini-Grid system uses natural gas or LPG as primary fuel source, the same fuel as cooking fuel in rural and remote regions worldwide.

For decades, many governments have been allocating resources to eliminate solid fuels like wood, solid waste as cooking fuels

from rural and remote communities.

Significant progress has been made by providing economic subsidies for use of natural gas or

LPG as cooking fuel to reduce pollution.

In 2017, we established sales offices near the emerging growth countries of Namibia,

Australia and U.A.E.

setup to develop strategic alliances with distributors to promote our residential solutions to communities

living in bad-grid and off-grid areas.

Competitive Strengths

have over a 30-year history and have developed a reputation as a proven supplier of reliable and advanced proprietary technology

products to customers within the telecommunications, military, commercial, industrial and marine markets.

We have invested significant

capital and engineering expertise to develop power generation systems that are environmentally friendly and fuel-efficient.

further believe our success will be based on the following key competitive strengths:

Technologies.

Our decades of research and development has led to the development of DC power systems with output ranging

from 5 kW –

Our DC power systems integrates our proprietary DC alternator with electronic controls to monitor

and control the power being outputted to the equipment, which is then coupled to an engine assembly and cooling systems.

DC power system output voltage can be configured between 12 V –

600 VDC to match the precise application needs (e.g.,

telecom equipment, electric vehicle charger, etc.).

Over the past decades we have developed proprietary charge algorithms

for most commercially available batteries and match charge algorithms to battery model or chemistry prior to initiating a

charge cycle.

Unlike AC power systems, our DC power systems are directly connected to the battery source and therefore optimized

for safely charging a particular battery chemistry.

AC power systems are indirectly connected to a commercially available

unknown battery charger that converts the AC output to DC voltage.

The presence of inefficient or low-quality charger can

significantly lower charge efficiency of AC systems and may reduce battery life in some cases.

Over the past three decades we have strategically constructed a product portfolio that focuses on improving

energy efficiency by developing DC power output-based equipment where all major components and technologies are developed

in-house, and proprietary manufacturing processes created in-house to ensure product reliability and long life.

competitors approached the need for DC equipment in the telecom, military, and industrial markets by modifying legacy AC generators

with conversion equipment resulting in significantly lower efficiency when compared to DC power systems.

Being one of the

first companies to develop DC power systems, we developed proprietary components ranging from alternators, control systems

and charging algorithms for various battery chemistries.

We have focused on providing the lowest cost of ownership with demonstrated

long life of our equipment during the past thirty years.

Lowest cost of ownership is complemented with the best fuel economy,

best in class weather resistance provided by aluminum enclosures and customized algorithms matching battery chemistries and

operational profiles.

Manufacturing

Competitiveness.

We believe that our vertical integration approach to manufacturing lowers our production costs and

improves our overall operational efficiency.

In addition, vertically integrated manufacturing of our proprietary technologies

such as DC alternators, charge controls and battery management systems, provides us with a greater control and protection

over our intellectual property.

We believe our modular approach to manufacturing provides us with the lowest manufacturing

costs for our proprietary technologies while giving us the ability to deliver customized solutions to our Tier-1 wireless

telecommunications customers.

Customer Base.

Our customer base consists of large telecommunications companies,

military sub-contractors and industrial companies.

Tier-1 telecommunications customers

have represented over 90% of our aggregated sales for the past five years.

demand of our products by telecommunications customers was primarily based on the need

to provide backup power during electricity outages.

While our competitors provided and

continue to provide legacy AC generators with DC conversion devices, we elected to invest

significant time and capital in the research and development of products with a lowest

cost of ownership.

Certification of our products by Tier-1 telecommunications customers

is time intensive and takes upwards of three years of field trials to receive final product

This thorough approach to vendor selection reduces the number of vendors

selected by our telecommunications customers and has dramatically reduced the

number of competitors in the U.S.

Currently, a significant percentage of our

sales are to national Tier-1 telecommunications providers with multiple facilities.

Since 2017, we substantially expanded our global sales and service network to market directly to Tier-1 telecommunications providers.

In the international markets, our customers are regional Tier-1 telecommunications providers.

We have established sales offices in Namibia, Dubai, Singapore, Australia, Poland and the Dominican Republic.

Our sales team directly markets to Tier-1 companies in their regions.

Experienced Management Team.

Our Chief Executive Officer and key engineers combined have over 40 years of engineering and production experience in the design and manufacturing of power systems.

Our engineers have equipment design experience, as well as hands-on skills to build prototypes.

A key factor demonstrating management’s abilities and our engineering aptitude can be found in our successful track record over the last 25 years of executing fixed-cost research, design and engineering contracts, with an average of eight projects per year.

Business Strategy

We believe the growth in wireless telecommunications

infrastructure in the U.S.

and international markets has led to a rapid rise in the need for DC backup power systems.

30 years of experience and reputation within the DC power systems market, we are working to increase awareness, availability and

affordability of more efficient DC-based products as a backup power and charging source within the telecommunications industry.

Because of the increased reliance on wireless networks during emergencies and natural disasters, existing and new wireless installations

are being upgraded to provide reliable operations during time of emergency.

In 2020, we diversified our sales efforts to include Tier-2 telecommunications customers,

off-grid remote area products and residential charging.

In the international markets,

our customers are regional Tier-1 telecommunications providers.

We have established sales

offices in emerging markets like Namibia, U.A.E., Australia, Poland and the Dominican

Our sales team directly markets to Tier-1 telecommunications companies in their

Management Team.

Our Chief Executive Officer and key engineers combined have over 100 years of engineering

and production experience in the design and manufacturing of power systems.

Our engineers have equipment design experience,

as well as hands-on skills to build prototypes.

A key factor demonstrating our management’s abilities and our engineering

aptitude can be found in our successful track record over the last 25 years of executing fixed-cost research, design and engineering

contracts, with an average of eight projects per year.

the past three decades we have been promoting the use of DC power systems where DC power is the primary power in use.

The telecommunications

tower application is the largest user of DC power, in both grid and off-grid connected sites.

Furthermore, we believe that the

growth in wireless telecommunications infrastructure in the U.S.

and international markets has led to a rapid rise in the need

for DC backup power systems.

over 30 years of experience and reputation within the DC power systems market, we are working to increase awareness, availability

and affordability of more efficient DC-based products as a backup power and charging sources within the telecommunications industry.

Because of the increased power outages during emergencies and natural disasters, existing and new wireless installations need

to be upgraded to provide reliable operations during times of emergency.

The primary elements of our business strategy include:

Further develop U.S.

mobile telecommunications market.

We continue to invest significant capital into our

sales and marketing efforts to demonstrate our DC power systems to the top Tier-1 wireless providers and more than 500 small

wireless and cable operators in the U.S.

We believe small telecommunications companies that service rural areas have more

off-the-grid sites than the Tier 1 wireless telecommunications companies.

We continue to invest capital into our sales and marketing efforts

to demonstrate our DC power systems to the top Tier-1 wireless telecommunications providers and more than 500 small wireless

and cable operators in the U.S.

Our goal is to further diversify our customer base.

We believe the rapid transition towards 5G, resulting in an increased demand to equip cellular tower sites with backup

equipment, will expand our market size.

Our ability to compete on an economic basis with AC power systems at large volumes,

will result in a significant transition of the marketplace from AC power systems to DC power systems.

Expand global sales to bad-grid or off-grid markets:

The increase in subscriber base in rural and remote areas in developing countries has increased the deployment of telecommunication sites in off-grid and bad-grid areas.

Approximately 99% of our DC power systems sales are to U.S.

customers, which we believe represents only 4.7% of the total global telecommunications market.

Due to frequent power outages and lack of electric infrastructure in rural areas in developing nations, we believe a significant opportunity exists for sales of our backup DC power systems to customers located in regions, such as South East Asia, Australia and Africa.

We have established regional direct sales offices in South Africa, U.A.E., Singapore, Australia, Romania, Poland and Dominican Republic to promote and sell product to local regional telecommunication providers.

Develop LPG and natural gas DC power systems.

Increases in natural disasters and emergencies during the

past decade has resulted in increased demand for backup power systems for residential and commercial applications.

addition, we believe that the rise in use of electric vehicles and trucks will strain the electrical grid creating the

need to use renewables and microgrids to supplement the grid.

During 2018, we developed a supply relationship with Toyota Engines in Japan

and Bosch in Germany to develop a new series of long-life, low-maintenance, fuel-efficient engines that we believe will

increase our competitiveness in both telecommunications and solar hybrid applications.

We also believe the ease of access to

natural gas and propane during natural emergencies in residential and commercial areas is a key advantage for our new product

In 2019, we completed the development of our natural gas powered DC system for the telecommunications and residential

We successfully obtained EPA certification for the Toyota engine used in this product and we plan to demonstrate

this product to a commercial and residential customer base.

In 2020, we received initial orders from our key customers in

and internationally.

Expand renewable solar energy product offerings.

believe that increased environmental regulations, combined with the declining cost of solar and advanced storage batteries,

has accelerated the shift of the telecommunications tower operators towards solar hybrid systems in both off-grid and

bad-grid applications worldwide.

In the developing regions like Africa, South East Asia and Latin America significant regions

lack electric infrastructure which is being addressed by developing micro-grids and point-of-use locations.

global studies have now concluded that telecommunication towers in many emerging nations generate a greater amount of

pollution than automobiles.

This conclusion has led a number of governments to subsidize the adoption of solar and energy

storage in off-grid telecommunication towers.

In some nations, subsidizing is also accompanied with mandates to install lower

emission backup power systems.

We believe our DC power systems are inherently more energy efficient and less polluting than

equivalent AC power systems and therefore we view these mandates as assisting us to enter into these large telecom

Our Technologies

In 1991, we began introducing DC power systems

to provide backup and prime power for off-grid and bad-grid applications.

Our initial products were predominantly designed for

military applications and used as auxiliary power for vehicles, tanks and radar sites.

In the late 1990s, we introduced our DC

power systems for commercial applications like mobile telecommunications towers, solar refrigerators and oil field applications.

In 1992, we developed our own proprietary

DC alternator to improve system efficiency, reduce costs and lower weight.

Our design replaced a conventional 4-pole, three-phase

designs with a light weight, low cost 12-pole and 32-pole designs (i.e., designs containing 12 or 36 magnetic poles) incorporating

either 6 or 3 phases (i.e., containing 6 or 3 power circuits).

Another unique aspect of the design of our DC alternators is the

elimination of bearings, internal wiring connections, and an exciter (i.e., a device which supplies the magnetizing current to

generate working flux) to provide a longer life cycle than conventional motor designs in the marketplace.

In 2002, we introduced our 6200 PMHH alternator,

which combines the attributes of homopolar alternator technology with a permanent magnet.

When mounted on an engine and operated

at either a fixed or variable speed, the model 6200 PMHH generates a precise amount of regulated voltage and current.

The DC output

can then be used to power electronics or charge batteries.

In 2006, we introduced our next generation

8000 Series alternators designed for higher power and voltage applications, which features our proprietary 32-pole permanent magnet

alternator technology.

The 8000 Series offers high efficiency at a lower cost while integrating our proprietary digital control

system, Supra Controller™, that manages and optimizes alternator output.

Our Supra Controller™

networks all components

via CAN bus communications and software and has the ability to control, analyze, monitor, record and communicate all key system

parameters to ensure efficiency, safety and reliability of the overall system.

The ability to remotely monitor and calibrate each

system parameter, receive system alarms and auto-reset the system when a fault is corrected are the key differentiating factors

of our DC power systems.

In telecommunications tower backup applications,

backup generators are used to provide power during grid outages or to charge batteries to provide longer run times during emergencies.

Due to battery costs and availability issues, many telecommunications providers are known to use various types of chemistries or

capacities as storage sources.

During the past decade, we have successfully integrated various battery chemistry charge algorithms

into our Supra Controller™

In 2011, we added charge algorithms for

various lithium battery chemistries and integrated our proprietary BMS with our Supra Controller™

In 2013, we further

expanded the integration of storage and renewable energy such as solar and wind into our Supra Controller™

software resulting

in the shipment of twenty off-grid telecommunications tower power systems to Australia.

In 2017 and 2018, we demonstrated our DC

hybrid power systems to telecommunications providers in South East Asia and Africa.

We believe that the integration of renewable

energy and storage batteries are ideal for off-grid remote locations in rural areas worldwide.

During 2019, we plan to continue

our research and development efforts to further enhance these integrations for remote telecommunications towers in South East Asia

In 2018, we developed our next generation

BMS that enhances our current technology to more accurately measure, monitor, control and integrate battery performance data with

We believe the rapid transition towards

5G will result in an increase in demand for back-up power generators and that our new LPG / natural gas DC power systems will

allow us to better compete on an economic basis with our competitors that provide AC power systems.

global sales to bad-grid or off-grid markets.

The increase in telecommunications subscriber base in rural and

remote areas in emerging countries has increased the deployment of telecommunications sites in off-grid and bad-grid areas.

During 2020, approximately 83% of our DC power systems sales were to U.S.

telecommunications customers, which

we believe represents only 4.7% of the total global telecommunications market.

We believe that the lack of a stable electric

infrastructure in rural regions of many developing nations provides significant opportunity for our products in both off-grid

and bad-grid location.

During 2020, we demonstrated our products to several prospects in need of off-grid and/or bad-grid

solutions which resulted in several initial orders.

develop our new LPG and natural gas DC power systems.

With the increased growth in off-grid and bad-grid telecommunications

sites, emissions generated by telecommunications towers is beginning to be a major contributor of pollution and greenhouse

In 2019, we began the development of a lower emission LPG and natural gas DC power generator for use in rural off-grid

and bad-grid sites.

We initiated this development by partnering with world’s largest natural gas engine manufacturer,

Toyota Engines, located in Japan.

Subsequently, we integrated engine control systems utilizing control technology from Bosch,

located in Germany, and concluded by receiving certification from the EPA in December 2019 to sell our new product in all

50 states in the U.S.

Upon certification, we began marketing this low emission natural gas solution to telecommunications

customers worldwide and in the midst of the COVID-19 pandemic we secured several orders for natural gas configured backup

and prime power applications.

During 2020, we began shipments of our DC natural gas generators to several domestic and international

Tier-1 telecommunications customers.

In 2021, we plan to expand our sales and service network for our natural gas generators,

targeting residential and telecommunications customers in the U.S.

while also targeting Tier-1 telecommunications customers

in emerging nations with solar hybrid natural gas generators for off-grid markets.

renewable solar energy product offerings .

Developing regions like Africa, South East Asia and Latin America

lack an electric utility infrastructure to support the installation of grid connected telecommunications towers in remote areas.

Due to these challenges, telecommunications companies are installing hybrid power generation systems that consist of solar panels,

batteries and fossil fuel powered generators.

Installing fuel inefficient generators combined with solar and batteries without

any integration is proving to be cost prohibitive.

Several local government programs to subsidize the adoption of solar and battery

storage along with generators in off-grid telecommunications towers have failed due to lack of quality components and integration.

In 2020, we began demonstrating our hybrid systems using natural gas fuel powered generators integrated with solar and battery

We plan to conclude our testing in the first half of 2021, which we believe can then provide us the required credentials

to receive subsidies for our customers, thereby making us competitive in this marketplace.

1991, we began introducing DC power systems to provide backup and prime power for off-grid and bad-grid applications.

products were predominantly designed for military applications and used as auxiliary power for vehicles, tanks and radar sites.

In the late 1990s, we introduced our DC power systems for commercial applications like mobile telecommunications towers, solar

refrigerators and oil field applications.

1992, we developed our own proprietary DC alternator to improve system efficiency, reduce costs and lower weight.

Our design replaced

a conventional 4-pole, three-phase designs with a light weight, low cost 12-pole and 32-pole designs (i.e., designs containing

12 or 36 magnetic poles) incorporating either 6 or 3 phases (i.e., containing 6 or 3 power circuits).

Another unique aspect of

the design of our DC alternators is the elimination of bearings, internal wiring connections, and an exciter (i.e., a device which

supplies the magnetizing current to generate working flux) to provide a longer life cycle than conventional motor designs in the

2002, we introduced our 6200 PMHH alternator, which combines the attributes of homopolar alternator technology with a permanent

When mounted on an engine and operated at either a fixed or variable speed, the model 6200 PMHH generates a precise amount

of regulated voltage and current.

The DC output can then be used to power electronics or charge batteries.

2006, we introduced our next generation 8000 Series alternators designed for higher power and voltage applications, which features

our proprietary 32-pole permanent magnet alternator technology.

The 8000 Series offers high efficiency at a lower cost while integrating

our proprietary digital control system, Supra Controller™, that manages and optimizes alternator output.

Our Supra Controller™

In addition, we enhanced the user interface to allow us the ability to update or develop new charging

algorithms in the field which can be remotely programmed or uploaded.

We believe these enhancements will increase our penetration

into the storage market during 2019 and beyond.

In 2019, we developed a low-cost DC

generator that runs on either natural gas or LPG.

In the fourth quarter of 2019, we received our certificate of conformity

from the EPA on small spark-ignition Toyota engines which will be used in our new LPG / propane generators.

generators will provide power outputs between 6 kW to 15 kW and which incorporate a 30,000- to 90,000-hour life engine with

our proprietary control system.

We plan to market these stationary generators within the telecom, commercial and residential

networks all components via CAN bus communications and software and has the ability to control, analyze, monitor, record and communicate

all key system parameters to ensure efficiency, safety and reliability of the overall system.

The ability to remotely monitor

and calibrate each system parameter, receive system alarms and auto-reset the system when a fault is corrected are the key differentiating

factors of our DC power systems.

telecommunications tower backup applications, backup generators are used to provide power during grid outages or to charge batteries

to provide longer run times during emergencies.

Due to battery costs and availability issues, many telecommunications providers

are known to use various types of chemistries or capacities as storage sources.

During the past decade, we have successfully integrated

various battery chemistry charge algorithms into our Supra Controller™

2011, we added charge algorithms for various lithium battery chemistries and integrated our proprietary battery management system,

or BMS, with our Supra Controller™

In 2013, we further expanded the integration of storage and renewable energy

such as solar and wind into our Supra Controller™

software resulting in the shipment of twenty off-grid telecommunications

tower power systems to Australia.

2017 and 2018, we demonstrated our DC hybrid power systems to telecommunications providers in South East Asia and Africa.

that the integration of renewable energy and storage batteries are ideal for off-grid remote locations in rural areas worldwide.

During 2021, we plan to continue our research and development efforts to further enhance these integrations for remote telecommunications

towers in South East Asia and Africa.

2018, we developed our next generation BMS that enhances our current technology to more accurately measure, monitor, control and

integrate battery performance data with our Supra Controller™.

In addition, we enhanced the user interface to allow us the

ability to update or develop new charging algorithms in the field which can be remotely programmed or uploaded.

We believe these

enhancements will increase our penetration into the storage market during 2021 and beyond.

2019, we developed a low-cost DC generator that runs on either natural gas or LPG.

In December 2019, we received our certificate

of conformity from the EPA on our small spark-ignition Toyota engines which are used in our new LPG / natural gas generators.

These new generators provide power outputs between 5 kW to 15 kW and incorporate a 30,000- to 90,000-hour life engine with our

proprietary control system.

We plan to market these stationary generators within the telecommunications, commercial and residential

markets primarily through third party distributors.

Products and Services

We broadly classify our power systems into

three categories:

DC base power systems .

broadly classify our power systems into three categories:

base power systems .

Our basic system which is centered around a DC generator.

Applications include both prime power and backup power.

DC hybrid power systems .

Applications include both prime power

and backup power.

hybrid power systems .

Our basic DC power system with added energy storage via lithium-ion or other battery chemistries.

DC Solar hybrid power systems .

Solar hybrid power systems .

Our DC hybrid power system with added renewable energy (i.e., solar panels).

DC power systems are available in diesel, natural gas, LPG / propane, and renewable fuel formats, with diesel, natural gas and

propane gas being the predominant formats.

DC Base Power Systems

Our DC base power systems are designed for

use in prime power and backup power applications.

All of our DC power systems are designed to last 20 years or more in backup applications

and meet all UL2200 standards.

To maximize operational life, we incorporate (over and above our competition) the following:

all aluminum, powder coated, enclosure with stainless hardware, which is lightweight and corrosion resistant;

DC power systems are available in diesel, natural gas, LPG, propane and renewable fuel formats, with diesel, natural gas and propane

gas being the predominant formats.

Base Power Systems

DC base power systems are designed for use in prime power and backup power applications.

All of our DC power systems are designed

to last 20 years or more in backup applications and meet all UL2200 standards.

To maximize operational life, we incorporate (over

and above our competition) the following:

aluminum, powder coated, enclosure with stainless hardware, which is lightweight and corrosion resistant;

C rated signal wire, tinned copper strands;

stainless steel braided covering hoses for fuel and coolant lines;

Class 220 C magnet wire for alternator windings;

watertight connectors in place of terminal strips and other non-sealed connectors;

our proprietary Supra Controller™

steel braided covering hoses for fuel and coolant lines;

220 C magnet wire for alternator windings;

connectors in place of terminal strips and other non-sealed connectors;

proprietary Supra Controller™

modules that are environmentally sealed.

We believe that the number one reliability

issue with a generator set is the failure to start.

To improve the reliability of our generators, we remove the engine’s

starting battery and replace it with a super capacitor.

The super capacitor has a 15- to 20-year service life, greater cold cranking

amps and withstands greater temperature extremes than conventional starting batteries.

To reduce maintenance and help ensure that

there is always adequate oil, we increase the engine’s oil capacity to provide for a 3,000-hour (natural gas / propane) or

1,500-hour (diesel) maintenance interval.

Standard oil intervals for typical generators range from 200 to 500 hours.

DC Hybrid Power Systems

In most off-grid or bad-grid outdoor applications

where DC loads are required, such as telecommunications towers in rural or remote areas, fuel costs of operating a generator can

account for more than 60% of the total operating costs.

In most backup applications, such as

telecommunications and uninterruptable power supply systems, lead acid batteries are used for providing transitional

power while the generator starts up.

In most of our prime power applications (including telecommunications) the goal is to

reduce maintenance and fuel costs.

believe that the number one reliability issue with a generator set is the failure to start.

To improve the reliability of our

generators, we remove the engine’s starting battery and replace it with a super capacitor.

The super capacitor has a 15-

to 20-year service life, greater cold cranking amps and withstands greater temperature extremes than conventional starting batteries.

reduce maintenance and help ensure that there is always adequate oil, we increase the engine’s oil capacity to provide for

a 3,000-hour (natural gas / propane) or 1,500-hour (diesel) maintenance interval.

Standard oil intervals for typical generators

range from 200 to 500 hours.

Hybrid Power Systems

most off-grid or bad-grid outdoor applications where DC loads are required, such as telecommunications towers in rural or remote

areas, fuel costs of operating a generator can account for more than 60% of the total operating costs.

most backup applications, such as telecommunications and uninterruptable power supply systems, lead acid batteries are used for

providing transitional power while the generator starts up.

In most of our prime power applications (including telecommunications)

the goal is to reduce maintenance and fuel costs.

Our Supra Controller™

automatically cycles the generator off when the loads are

small and cycles it on again when the load increases or the battery charge is depleted.

automatically cycles the generator off when the

loads are small and cycles it on again when the load increases or the battery charge is depleted.

This cycling reduces engine

maintenance and saves significant quantities of fuel.

Additional fuel savings are realized by

using lithium-ion batteries in place of lead acid batteries.

Lead acid batteries, when compared with lithium-ion batteries, have

high internal resistance, are inherently inefficient during charging or discharging in cyclic load applications and therefore

require longer to charge, resulting in higher fuel costs.

In 2011, we completed the design and testing of a hybrid power system,

where our DC power system was integrated with lithium-ion batteries to provide a longer life and higher fuel efficiency to cyclic

DC power applications such as telecommunications towers.

In 2019, we implemented our next generation BMS for our lithium battery

storage system.

This next generation BMS enhances battery charging accuracy, integrates with engine controls and provides additional

protection for the lithium batteries.

Our DC hybrid power systems can monitor the charge/discharge

cycle of various battery chemistries, including lithium-ion and lead acid batteries.

fuel savings are realized by using lithium-ion batteries in place of lead acid batteries.

Lead acid batteries, when compared with

lithium-ion batteries, have high internal resistance, are inherently inefficient during charging or discharging in cyclic load

applications and therefore require longer to charge, resulting in higher fuel costs.

In 2011, we completed the design and testing

of a hybrid power system, where our DC power system was integrated with lithium-ion batteries to provide a longer life and higher

fuel efficiency to cyclic DC power applications such as telecommunications towers.

In 2019, we implemented our next generation

BMS for our lithium battery storage system.

This next generation BMS enhances battery charging accuracy, integrates with engine

controls and provides additional protection for the lithium batteries.

DC hybrid power systems can monitor the charge/discharge cycle of various battery chemistries, including lithium-ion and lead

acid batteries.

Our Supra Controller™

system incorporates a CAN bus communications capability that provides communication and control

between the battery and the DC hybrid power system.

Each cell in the battery pack is individually monitored for voltage and temperature,

ensuring the safety and longevity of the battery bank.

These power systems include enclosures, a lithium-ion battery pack, our

proprietary BMS and our proprietary Supra Controller™

system that controls engine output, battery charging algorithms, cooling

system and power control circuits that optimize DC load outputs.

DC Solar Hybrid Power Systems

Our DC solar hybrid power system combines

our DC hybrid power system with solar photovoltaic modules and a custom engineered multi power point tracking charge controller.

In most off-grid or bad-grid outdoor applications, such as telecommunications towers in rural or suburban areas, the fuel costs

of operating a generator can account for more than half of the total operating costs.

We believe that incorporating renewable energy

sources, such as solar, with our DC hybrid power systems is ideal solution for numerous off-grid and bad-grid applications worldwide.

system incorporates a CAN bus communications capability that provides communication

and control between the battery and the DC hybrid power system.

Each cell in the battery pack is individually monitored for voltage

and temperature, ensuring the safety and longevity of the battery bank.

These power systems include enclosures, a lithium-ion

battery pack, our proprietary BMS and our proprietary Supra Controller™

system that controls engine output, battery charging

algorithms, cooling system and power control circuits that optimize DC load outputs.

Solar Hybrid Power Systems

DC solar hybrid power system combines our DC hybrid power system with solar photovoltaic modules and a custom engineered multi

power point tracking charge controller.

In most off-grid or bad-grid outdoor applications, such as telecommunications towers in

rural or suburban areas, the fuel costs of operating a generator can account for more than half of the total operating costs.

We believe that incorporating renewable energy sources, such as solar, with our DC hybrid power systems is ideal solution for

numerous off-grid and bad-grid applications worldwide.

Our DC solar hybrid power systems incorporate the following features:

Hybrid power panel .

We produce distribution panel assemblies that make use of punched and plated buss bars to make the heavy current connections between appliances.

The industry standard is using labor intensive hand crimped wires and lugs which are accomplished in the field.

Photovoltaic Arrays .

Our telecommunications customers request photovoltaic array structures to withstand winds of 150 mph and 200 mph exceeding the industry standard of 120 mph.

power panel .

We produce distribution panel assemblies that make use of punched and plated buss bars to make the heavy

current connections between appliances.

The industry standard is using labor intensive hand crimped wires and lugs which are

accomplished in the field.

Our telecommunications customers request photovoltaic array structures to withstand winds of 150 mph and 200 mph

exceeding the industry standard of 120 mph.

We provide an all-weather light-weight aluminum walk-in shelter that is easy to transport by truck or helicopter.

Lightning protection .

We provide the highest degree of lightning protection through the use of air-coil type inductors designed by us.

We provide the highest degree of lightning protection through the use of air-coil type inductors designed

Air-Conditioning .

We provide DC air-conditioning if required in very hot weather environments.

We also provide cooling systems using ambient air.

During 2019, we developed an environmentally

friendly solar hybrid power system based on a combination of solar with LPG and propane power sources which we believe lowers both

capital expenditures and operating expenditures.

These new generators have been specifically designed to run 24/7 for air-conditioning

applications and will provide power outputs between 6kW to 15 kW and which incorporate a 30,000- to 90,000-hour life engine with

our proprietary control system.

Service and Support

Global Network Management Tools

We offer global network management services

through our telematics tool, which consists of our Supra Controller™

technology integrated with monitoring software.

hardware is integrated into each DC power system and collects critical data from the equipment and transmits this data back to

the customer and our service department.

This capability allows us and our customers to monitor system performance remotely and

to remotely update the equipment with new revision software in the field.

Our telematics capabilities and services

automated and continuous remote monitoring with auto alerts and notifications that can be transmitted via email or text messaging;

maintenance management, which provides ability to schedule preventative maintenance based on actual equipment usage;

real-time, bi-directional communication capability for remote upgrades, testing and troubleshooting.

Our telematics tools also provide information

to our customers on specific equipment utilization that provides the abilities to determine the functional status of the equipment

and proactively schedule maintenance.

We believe these tools assist in reducing equipment downtime, thereby reducing the overall

cost of ownership.

In addition, we plan to use these tools to monitor and provide accurate billing for our rental equipment deployed

at customer facilities.

Aftermarket and Service Parts

We offer extensive aftermarket and service

parts programs.

We maintain an extensive inventory of aftermarket parts and sell parts directly to customers or through our qualified

network of service providers.

In addition, we require our regional service providers to maintain sufficient quantities of aftermarket

parts in their inventory to ensure minimum downtime upon product failure.

We maintain accurate records of bill of

materials for each serial number shipped and service our products well beyond their recommended lives.

In the marketplace, our

products are known for their long life and durability.

Product and Warranty Support

We offer product commissioning as an added

service to all our customers and require the purchase of such services as a condition for acceptance of any warranty claims in

We offer installation of the equipment, preliminary testing, integration of equipment with other assets located at

the site and introductory maintenance and safety training.

We offer various levels of fee-based services to support our products

in the field.

In addition, we have trained product and application engineers that deliver high quality, responsive lifetime technical

support to all our customers worldwide.

We further support our customers by using

qualified regional independent service providers to perform warranty and aftermarket service and repair on our products.

service providers are factory trained and certified prior to being authorized to repair or service our equipment.

reimburse regional service providers for the warranty services they perform on our systems.

Sales and Marketing

Our sales strategy focuses on using our

direct sales force to market our DC backup power products to telecommunications providers in the U.S.

Since 2017, we have made

significant investments in hiring additional sales personnel in the U.S.

market to demonstrate our products to Tier-1 telecommunications

Our products are purchased by regional centers operated by our telecommunications customers, thereby expanding our overall

market into regions we may not have covered previously.

Since 2017, have we expanded our sales and

service infrastructure in the international markets.

We established regional sales offices in South Africa, U.A.E., Singapore,

Poland and Dominican Republic and established sales and aftermarket service locations in Australia and Romania to locally manage

South East Asia and EMEA regions, respectively.

Due to a general lack of a reliable power grid, many emerging markets continue

to expand their telecommunications infrastructures at a high rate.

We believe that this lack of a reliable power grid, together

with our knowledge of integrating renewables with generators, provides us with an opportunity to enter these emerging markets with

our hybrid storage and renewable energy solutions.

We also market our products through our

web site and by exhibiting our products at trade shows globally.

Our primary sales are generated through product demonstrations

and short-term rentals to demonstrate the capabilities of our products and value proposition to large mobile network providers

We believe this strategy of demonstrating our products and technologies to prospective customers expedites the sales

process for our DC power systems.

The COVID-19 pandemic has taken a toll on

the global economy and has disrupted business operations globally.

We market our products to a large global customer base through

actual product demonstrations.

We have sales offices in Australia, Singapore, U.A.E., Namibia, Poland and Dominican Republic.

to varied government policies in each region, our sales team is unable to meet with existing or new customers to demonstrate our

products and we are unsure as to when we may be able to commence these practices in the future.

In addition, our service staff

and engineers are unable to travel to customer locations to setup demonstrations and assist in integration and optimization of

our products to customer application needs.

Since March 2020, all of our sales executives have been working from home and have

not traveled to visit current and/or potential customers.

In addition, most of our customers have experienced similar business

We are actively monitoring the global situation and how it affects our financial condition, operations, suppliers,

industry, and workforce.

Given the daily developments of the pandemic and the global responses to curb its spread, we are not able

to estimate all of the effects of the COVID-19 pandemic at this time.

If the pandemic continues, it may have a significant adverse

effect on our ability to source components, suppliers, and qualified labor during the remainder of 2020 and perhaps beyond.

Distribution and Service

We market our products through various distribution

channels that promote our products and brand and provide effective aftermarket support and service.

While the majority of our sales

are achieved through our direct sales force, we also utilize independent service providers and dealers to complement our global

sales strategy.

We plan to market and sell our new LPG / propane and natural gas line of generators and solar hybrid power systems

through independent dealers.

We utilize a combination of factory trained

technicians and independent service providers to provide installation, maintenance, service and training at customer locations

throughout the U.S.

In the international markets, we utilize

local service partners to perform installation and service on our equipment.

We have hired trained personnel in Namibia, Australia

and Romania to assist in regional training of technicians and also in product demonstrations.

Within the telecommunications power generation

market, we compete with a number of manufacturers of AC and DC generators that offer generators with an output power of 6 kW to

Our competitors range from large diversified global manufacturers of AC generator power systems designed primarily for use

as backup power and a smaller number of manufacturers of DC generators.

Most manufacturers of generators with an output power of

20 kW market these generators for non-continuous use.

We believe that we are the only manufacturer that provides the telecommunications

and other markets with under 32 kW prime power generators capable of continuous operation.

Below are our primary competitors across

these applications:

3Tech Corporate Limited,

Ascot Industrial srl, Ausonia srl, and Controllis.

Generac Power Systems,

Inc., Kohler Co., Onan, FG Wilson and many other companies.

Manufacturing and Assembly

A significant percentage of our business

comes from multinational global corporations seeking configured product solutions ready to be field deployed with a minimum installation

Our manufacturing process begins with our direct sales force and engineering team defining customer application needs and

concludes with the production of a custom configured product solution.

We believe our ability to have total control over the sales

and manufacturing process is a key competitive differentiator in the markets we serve.

By implementing vertical integration throughout

our manufacturing process, we believe that we reduce overall manufacturing costs, thereby increasing profitability and market competitiveness.

Our production processes encompass all aspects of production of our DC power systems, which includes alternators, aluminum enclosures,

engine configurations, control electronics, cooling systems, wiring harnesses, exhaust systems and final assembly.

We also provide cooling systems using ambient

2019, we developed an environmentally friendly solar hybrid power system based on a combination of solar with LPG and propane

power sources which we believe lowers both capital expenditures and operating expenditures.

These new generators have been specifically

designed to run in residential applications and will provide power outputs between 5 kW to 22 kW and which incorporate a 30,000-

to 90,000-hour life engine with our proprietary control system.

Our natural gas generators when integrated with battery storage

and solar are ideal microgrids for off-grid and bad grid residential and commercial applications.

Network Management Tools

offer global network management services through our telematics tool, which consists of our Supra Controller™

integrated with monitoring software.

This hardware is integrated into each DC power system and collects critical data from the

equipment and transmits this data back to the customer and our service department.

This capability allows us and our customers

to monitor system performance remotely and to remotely update the equipment with new revision software in the field.

telematics capabilities and services include:

and continuous remote monitoring with auto alerts and notifications that can be transmitted via email or text messaging;

management, which provides ability to schedule preventative maintenance based on actual equipment usage;

bi-directional communication capability for remote upgrades, testing and troubleshooting.

telematics tools also provide information to our customers on specific equipment utilization that provides the abilities to determine

the functional status of the equipment and proactively schedule maintenance.

We believe these tools assist in reducing equipment

downtime, thereby reducing the overall cost of ownership.

In addition, we plan to use these tools to monitor and provide accurate

billing for our rental equipment deployed at customer facilities.

and Service Parts

offer extensive aftermarket and service parts programs.

We maintain an extensive inventory of aftermarket parts and sell parts

directly to customers or through our qualified network of service providers.

In addition, we require our regional service providers

to maintain sufficient quantities of aftermarket parts in their inventory to ensure minimum downtime upon product failure.

maintain accurate records of bill of materials for each serial number shipped and service our products well beyond their recommended

In the marketplace, our products are known for their long life and durability.

and Warranty Support

utilize a nationwide network of dealers and service providers to perform installation and warranty services for our customers.

Through our dealers we offer product commissioning as an added service to all our customers and require the purchase of such services

as a condition for acceptance of any warranty claims in the future.

We offer installation of the equipment, preliminary testing,

integration of equipment with other assets located at the site and introductory maintenance and safety training.

We offer various

levels of fee-based services to support our products in the field.

In addition, we have trained product and application engineers

that deliver high quality, responsive lifetime technical support to all our customers worldwide.

further support our customers by using qualified regional independent service providers to perform warranty and aftermarket service

and repair on our products.

Our regional service providers are factory trained and certified prior to being authorized to repair

or service our equipment.

We generally reimburse regional service providers for the warranty services they perform on our systems.

and Marketing

sales strategy focuses on using our direct sales force to market our DC backup power products to telecommunications providers

We use local regional sales managers in the U.S.

market to demonstrate our products to Tier-1 telecommunications providers.

Our products are purchased by regional centers operated by our telecommunications customers, thereby expanding our overall market

into regions we may not have covered previously.

have established a sales and service infrastructure in international markets.

We established regional sales offices in South Africa,

U.A.E., Poland and Dominican Republic and established sales and aftermarket service locations in Australia and Romania to locally

manage the South East Asia and EMEA regions, respectively.

Due to a general lack of a reliable power grid, many emerging markets

continue to expand their telecommunications infrastructures at a high rate.

We believe that this lack of a reliable power grid,

together with our knowledge of integrating renewables with generators, provides us with an opportunity to enter these emerging

markets with our hybrid storage and renewable energy solutions.

also market our products through our web site and by exhibiting our products at trade shows globally.

Our primary sales are generated

through product demonstrations and short-term rentals to demonstrate the capabilities of our products and value proposition to

large mobile network providers worldwide.

We believe this strategy of demonstrating our products and technologies to prospective

customers expedites the sales process for our DC power systems.

COVID-19 pandemic has taken a toll on the global economy and has disrupted business operations globally.

We market our products

to a large global customer base through actual product demonstrations.

In 2020, the spread of COVID-19 led to various government

travel restrictions which resulted in the inability of our sales team to meet with existing or new customers to demonstrate our

In addition, our service staff and engineers have generally been unable to travel to customer locations to setup demonstrations

and assist in the integration and optimization of our products to specific customer application needs.

During the second half

of 2020 and early part of 2021,we have experienced a modest resumption of sales activity with our U.S.

Tier-1 telecommunications

customers as their construction activities resume.

Given the daily developments of the COVID-19 pandemic and the global responses

to curb its spread, we are not able to accurately estimate all of the long term effects of the COVID-19 pandemic on our business.

market our products through various distribution channels that promote our products and brand and provide effective aftermarket

support and service.

While most of our sales are achieved through our direct sales force, we also utilize independent service

providers and dealers to complement our global sales effort.

The promotion of our natural gas powered Mini-Grid product, targeting

off-grid and bad grid rural areas, will be undertaken by mainly certified independent dealers.

We believe expansion of our dealer

network will also provide additional opportunities for our DC power systems in the U.S.

and other countries.

utilize a combination of factory trained technicians and independent service providers to provide installation, maintenance, service

and training at customer locations throughout the U.S.

the international markets, we utilize local service partners to perform installation and service on our equipment.

We have hired

trained personnel in Namibia, Australia and Romania to assist in regional training of technicians and also in product demonstrations.

the telecommunications power generation market, we compete with a few manufacturers of AC and DC generators that offer generators

with an output power of 6 kW to 30 kW.

market, our competitors are global manufacturers of AC generators designed

primarily for the residential and industrial off-grid power markets.

Internationally, our competitors include regional manufacturers

of both AC and DC generators.

market, our competitors are large volume manufacturers of AC generators with a primary focus on emergency power backup

generation for the residential marketplace.

These AC generators are constructed using steel enclosures and are therefore heavier

and can rust more easily in outdoor applications as compared to our products which generally have a smaller footprint and are

constructed using aluminum enclosures.

Due to the inherent design of AC motors, their units are approximately 40% larger in size

than our DC generators.

In order to monetize on our positives, we targeted telecommunications markets where generators are used

to provide backup power during power outages.

Due to the lighter weight and smaller size of our products as compared to AC products,

we specifically target customers with the telecommunications towers located on roof-tops in urban areas.

We believe that the smaller

size, lighter weight and higher fuel efficiency of our products are performance parameters that offset the lower price alternative

of AC generators.

In addition, we believe that our recently introduced long-life (90,000 hours), natural gas-powered DC generator

product line significantly increases our competitive advantage in densely populated urban markets.

digitization of our lives has resulted in the need for more power usage in both residential and commercial applications.

telecommunications tower market, the majority of the outdoor power needs are DC power since most components are DC powered.

Historically,

AC generator companies have utilized conversion technologies to convert AC output to DC output.

This conversion results in an

approximately 40% loss in energy.

Meanwhile, our DC generators supply DC power directly to the telecommunications tower systems

increasing the system’s overall efficiency.

These efficiencies are further enhanced in off-grid and bad-grid applications

where more power is being used from the generators due to the lack of grid power.

are our primary competitors across these applications:

3Tech Corporate Limited, Ascot Industrial srl, Ausonia srl, and Controllis.

Generac Power Systems, Inc., Kohler Co., Onan, FG Wilson and many other companies.

Manufacturing

of our proprietary technologies requires proprietary automated equipment that ensures total control and agility in our production

Over the past decade, we have made significant investments in highly specialized manufacturing tooling, jigs and fixtures

that allow us to manufacture products at lower cost while maintaining the highest quality.

Our production assembly lines are designed

to be flexible, and we utilize advanced manufacturing planning software to predict, monitor and control demand levels and product

mix to provide the shortest delivery time to our customers.

We utilize 3-D CAD software to product design and document assembly

instructions throughout our production process.

All our products are 100% tested to customer specific application requirements

prior to shipment.

Throughout our operations we utilize computerized

ERP software that integrates all our processes from lead generation to product shipment and aftermarket support.

Our focus on safety,

quality and on-time delivery is supported by employee training and information systems that monitor process and product quality

and communicate trends and findings to senior management on a real-time basis.

March 2020, in response to the COVID-19 outbreak, the governor of California issued a state-wide “shelter-in-place”

We have implemented a Business Continuity Plan designed to keep employees safe, follow regulatory guidelines, and

continue essential business operations.

As of March 20, 2020, 79 employees of our U.S.

labor force is in furlough status while

the 42 employees continue to support essential business operations.

We are actively monitoring the global situation and how it

affects our financial condition, operations, suppliers, industry, and workforce.

Given the daily developments of the pandemic and

the global responses to curb its spread, we are unable to estimate the effects of the pandemic at this time.

If the pandemic continues,

it may have an adverse effect on our ability to continue our manufacturing and assembly operations during the remainder of 2020

and perhaps beyond.

Design Engineering/Research and Development

Our research and development efforts

are market driven and are focused on the development of new technologies and product improvements, as well as reducing costs

and improving product quality and reliability.

The primary focus of our research and development activities is the

development of lighter-weight, more compact and lower cost DC power generation systems for our Tier-1 wireless provider

significant percentage of our business comes from multinational global corporations seeking configured product solutions ready

to be field deployed with a minimum installation time.

Our manufacturing process begins with our direct sales force and engineering

team defining customer application needs and concludes with the production of a custom configured product solution.

our ability to have total control over the sales and manufacturing process is a key competitive differentiator in the markets

implementing vertical integration throughout our manufacturing process, we believe that we reduce overall manufacturing costs,

thereby increasing profitability and market competitiveness.

Our production processes encompass all aspects of production of our

DC power systems, which includes alternators, aluminum enclosures, engine configurations, control electronics, cooling systems,

wiring harnesses, exhaust systems and final assembly.

Manufacturing of our proprietary technologies requires proprietary automated

equipment that ensures total control and agility in our production processes.

Over the past decade, we have made significant investments

in highly specialized manufacturing tooling, jigs and fixtures that allow us to manufacture products at lower cost while maintaining

the highest quality.

production assembly lines are designed to be flexible, and we utilize advanced manufacturing planning software to predict, monitor

and control demand levels and product mix to provide the shortest delivery time to our customers.

We utilize 3-D CAD software

to product design and document assembly instructions throughout our production process.

All our products are 100% tested to customer

specific application requirements prior to shipment.

our operations we utilize computerized ERP software that integrates all our processes from lead generation to product shipment

and aftermarket support.

Our focus on safety, quality and on-time delivery is supported by employee training and information systems

that monitor process and product quality and communicate trends and findings to senior management on a real-time basis.

Engineering/Research and Development

research and development efforts are market driven and are focused on the development of new technologies and product improvements,

as well as reducing costs and improving product quality and reliability.

The primary focus of our research and development activities

is the development of lighter-weight, more compact and lower cost DC power generation systems for our Tier-1 wireless provider

customers in the U.S.

and international markets.

Over the years, we have expended significant resources in enhancing our

system controls like our Supra Controller™

In 2019, features such as remote monitoring and self-diagnostics

were enhanced to make our systems more robust and intelligent.

A significant part of our research and development

effort has focused on the development of control software that integrates engine controls, power management and battery algorithms

to fully optimize fuel consumption in both prime power and backup power generation applications.

We use a high level of integration

with a single control and communication module, our Supra Controller™, rather than competitive system designs with a number

of independent control modules controlling a single function.

Our integrated approach ensures software compatibility, reduces complexity

in wiring, increases reliability and reduces cost.

Our research and development expenditures

increased by $367,926 to $2,275,736 during 2019, as compared to $1,907,810 in 2018.

This growth in research and development expenditures

is attributable to an increase in new product development activities.

During 2019, we developed our new LPG / propane and natural

gas line of generators and solar hybrid power systems which we believe will provide us with the opportunity to expand into the

residential and commercial markets.

The costs related to these developments included an increase in engineering staff, and an increase

in direct labor costs to fabricate and assemble prototypes and production units.

We maintain an in-house design, prototyping, testing

and application engineering capabilities including expertise in 3-D solid modeling and finite element analysis, computer-based

modeling and testing, rapid prototyping, design verification testing and document publication, which includes manufacturing assembly

instructions, supplier drawings and product manuals.

In addition, we utilize third party testing laboratories to certify our products’

Over the years, we have expended significant resources in enhancing our system

controls like our Supra Controller™

significant part of our research and development effort has focused on the development of control software that integrates engine

controls, power management and battery algorithms to fully optimize fuel consumption in both prime power and backup power generation

applications.

We use a high level of integration with a single control and communication module, our Supra Controller™,

rather than competitive system designs with a number of independent control modules controlling a single function.

Our integrated

approach ensures software compatibility, reduces complexity in wiring, increases reliability and reduces cost.

We maintain an

in-house design, prototyping, testing and application engineering capabilities including expertise in 3-D solid modeling and finite

element analysis, computer-based modeling and testing, rapid prototyping, design verification testing and document publication,

which includes manufacturing assembly instructions, supplier drawings and product manuals.

In addition, we utilize third party

testing laboratories to certify our products’

compliance with current applicable UL standards.

to the governor of California’s “shelter-in-place”

order in March 2020, our key engineers and program managers

are now working from home to comply with the safety guidelines.

We have implemented systems to monitor project status and

utilize remote access and cloud-based systems to maintain engineering efficiencies.

We are actively monitoring the global situation

and how it affects our financial condition, operations, suppliers, industry, and workforce.

plan to implement required precautions and monitoring systems to reconstitute our engineering team at our corporate facilities

as soon as feasible.

The nature of our products and design methodologies require our design teams to be close to the engineering

lab facilities to facilitate use of advanced tools and equipment.

However, it is not possible for us to predict the duration or

magnitude of the adverse results of the outbreak and its effects on our ability to continue our design engineering and research

development projects during the remainder of 2020 and perhaps beyond.

Intellectual Property

We possess a broad intellectual

property portfolio comprised of electronics, software, engines, alternators, thermal systems and production techniques.

on trademark, copyright and trade secret laws to protect our intellectual property.

Currently, we rely on common law rights to

protect our “Polar Power, Inc.”

We protect our trade secrets and other proprietary information by requiring

confidentiality agreements from our employees, consultants and third parties that have access to such information.

Despite these

efforts, there can be no assurance that others will not gain access to our trade secrets, or that we can meaningfully protect our

In addition, effective trademark, copyright and trade secret protection may be unavailable or limited in certain foreign

We consider our manufacturing

process to be a trade secret and have non-disclosure agreements with our employees to protect the trade secrets held by us.

such methods may not afford complete protection, and there can be no assurance that others will not independently develop similar

know-how or obtain access to our know-how and manufacturing concepts.

We may register patents and trademarks in future to protect

our intellectual property rights and enhance our competitive position.

We attempt to mitigate the material adverse

effect of component shortages in our business through detail material planning and by qualifying multiple vendor sources for key

components and outside processes.

In order to meet our customer demands, we forecast the supply of our long lead time items such

as engines, castings and electronic components through strategic planning of inventory levels.

We conduct on- site supplier audits

of major suppliers to help ensure reliability, quality and sustainability of critical components.

The recent outbreak of (COVID-19) has taken a toll on the global

economy and has disrupted business supply chains all over the world.

We purchase certain key components from our international

suppliers including a number of suppliers located in China.

In the short term, we have experienced certain component shortages

resulting from shutdowns in China.

However, we believe these short-term issues will be resolved during the next few months.

are also actively sourcing alternate domestic suppliers for certain key components to ensure no future delays.

We are actively

monitoring the global situation and how it affects our financial condition, operations, suppliers, industry, and workforce.

the daily developments of the pandemic and the global responses to curb its spread, we are not able to estimate the effects of

the pandemic at this time.

If the pandemic continues it may have an adverse effect on our ability to source components, suppliers,

and qualified labor during the fiscal year 2020 and perhaps beyond.

Quality Control

We began concentrating on our quality control

in the early 1980s, much of which was required by our customers at the time, including NASA and Hughes Aircraft.

In the late 1980s,

we implemented the MIL-I-45208A quality control system monitored by U.S.

Department of Defense, to meet prime source requirements

for a contract we received from the U.S.

Army Picatinny Arsenal, to design and manufacture an advanced battery and monitoring system

for a security device used in nuclear munitions depots around the world.

We are currently in the process of obtaining an ISO 9000

certification.

research and development expenditures decreased by $553 to $1,723 during 2020, as compared to $2,276 in 2019.

This decrease in

research and development expenditures is primarily attributable to the negative impact of COVID-19 on resources such as labor

and materials.

We have implemented systems to monitor project status and utilize remote access and cloud-based systems to maintain

engineering efficiencies.

Our research and development efforts during 2020 primarily focused on launching our new LPG / natural

gas line of generators and hybrid power systems for off-grid and unreliable grid cell sites, and supporting existing sales activity

related to our DC back-up power systems.

During 2021, we expect research and development expenses to gradually increase as control

over COVID-19 improves and we continue investing into new products as part of our strategy to diversify our product lines.

it is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our ability

to continue our design engineering and research development projects during the remainder of 2021 and perhaps beyond.

possess a broad intellectual property portfolio comprised of electronics, software, engines, alternators, thermal systems and

production techniques.

We rely on trademark, copyright and trade secret laws to protect our intellectual property.

we rely on common law rights to protect our “Polar Power, Inc.”

We protect our trade secrets and other

proprietary information by requiring confidentiality agreements from our employees, consultants and third parties that have access

to such information.

Despite these efforts, there can be no assurance that others will not gain access to our trade secrets, or

that we can meaningfully protect our technology.

In addition, effective trademark, copyright and trade secret protection may be

unavailable or limited in certain foreign countries.

consider our manufacturing process to be a trade secret and have non-disclosure agreements with our employees to protect the trade

secrets held by us.

However, such methods may not afford complete protection, and there can be no assurance that others will not

independently develop similar know-how or obtain access to our know-how and manufacturing concepts.

We may register patents and

trademarks in future to protect our intellectual property rights and enhance our competitive position.

attempt to mitigate the adverse effect of component shortages in our business through detail material planning and by qualifying

multiple vendor sources for key components and outside processes.

We conduct supplier audits of all major suppliers for initial

qualification and to ensure reliability, quality, and sustainability of critical components.

To meet our customer demands, we

forecast the supply of our long lead time items such as engines, castings and electronic components through use of sales forecasting

tools and ERP system.

suppliers are extensively surveyed and audited;

and field or process generated non-conformities communicated with our Suppliers

to continuously improve quality.

To improve our costs and deliveries, our ERP system invites for all qualified suppliers to participate

in relevant bids to ensure best proposals are selected.

recent outbreak of COVID-19 has taken a toll on the global economy and has disrupted raw material supply chains all over the world.

During the first half of 2020, we experienced material shortages and delays while during the second half we experienced supplier

lead times returning to pre-COVID normal.

We are actively sourcing the domestic supply chain for key components to ensure no future

We anticipate modest price increases post pandemic, although we believe we can mitigate a portion of these anticipated

cost increases by passing through some cost increases to our customers while the other increases can be mitigated through increases

in efficiency.

began concentrating on our quality control in the early 1980s, much of which was required by our customers at the time, including

NASA and Hughes Aircraft.

In the late 1980s, we implemented the MIL-I-45208A quality control system monitored by U.S.

of Defense, to meet prime source requirements for a contract we received from the U.S.

Army Picatinny Arsenal, to design and manufacture

an advanced battery and monitoring system for a security device used in nuclear munitions depots around the world.

We are currently

in the process of obtaining an ISO 9000 certification.

Certifications

Our DC generator systems comply with UL2200

safety standards.

Our products also comply with applicable regulatory emission standards of the Environmental Protection Agency,

and the California Air Quality Management District.

Product Warranties

Our standard warranty on new products is

two years from the date of delivery to the customer.

We offer a limited extended warranty of up to five years on our certified

DC power systems based on application and usage.

The Company’s warranties are of an assurance-type and come standard with

all Company products to cover repair or replacement should product not perform as expected.

Under our standard warranty, provisions

for estimated expenses related to product warranties are made at the time products are sold.

These estimates are established using

historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing

and recovery from suppliers.

Historically, we have experienced warranty costs of below 1% of net sales which we believe is well

within industry norms.

Information Systems

We utilize integrated information systems

(i.e., ERP) that link our lead management, sales planning, order entry, purchasing, engineering, production control, manufacturing,

inventory and accounting systems.

During the past five years we have made significant investments to upgrade and customize our

information systems to improve productivity and our ability to accurately forecast inventory and manpower requirements.

to invest additional capital in software and information systems to integrate aftermarket sales and service with our ERP system

to improve post sales customer experience with our products and services.

Government Regulations and Environmental matters

Our products and their installations are

subject to oversight and regulations at federal, state and local levels in accordance with regional statutes and ordinances relating

to, building codes, fire codes, public safety, electrical and fuel connections, security protocols, and local and state licensing

requirements.

We are also regulated by federal, state and international environmental laws governing our use, transport and control

of emissions.

In addition to governing our manufacturing and other operations, these laws often impact the development of our products,

including, but not limited to required compliance with air emissions standards applicable to internal combustion engines.

integrate engines with our proprietary technologies to produce efficient DC power.

We rely on our engine suppliers to conform to

the regional regulations and statutes to meet regional emission requirements.

Additionally, we are subject to laws, regulations

and other governmental actions instituted in response to the COVID-19 outbreak.

As of May 14, 2020, we had 132 full time

Currently, 121 employees are employed at our facilities in Gardena, California and eleven employees are located outside

None of our employees are represented by labor unions.

We consider our relationships with our employees to be generally

satisfactory.

DC generator systems comply with UL2200 safety standards.

Our products also comply with applicable regulatory emission standards

of the Environmental Protection Agency, and the California Air Quality Management District.

The Company provides

limited warranties for parts and labor at no cost to its customers within a specified time period after the sale.

warranty on new products is two years from the date of delivery to the customer.

We offer a limited extended warranty of up to

five years on our certified DC power systems based on application and usage.

Our warranties are of an assurance-type and

come standard with all of our products to cover repair or replacement should a product not perform as expected.

Under our standard warranty, provisions for estimated expenses related to product warranties are made at the time products are

These estimates are established using historical information about the nature, frequency and average cost of warranty claim

settlements as well as product manufacturing and recovery from suppliers.

utilize integrated information systems (i.e., ERP) that link our lead management, sales planning, order entry, purchasing, engineering,

production control, manufacturing, inventory and accounting systems.

During the past five years we have made significant investments

to upgrade and customize our information systems to improve productivity and our ability to accurately forecast inventory and

manpower requirements.

We plan to invest additional capital in software and information systems to integrate aftermarket sales

and service with our ERP system to improve post sales customer experience with our products and services.

Regulations and Environmental Matters

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.

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.

Additionally,

we are subject to laws, regulations and other governmental actions instituted in response to the COVID-19 outbreak.

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.

of March 31, 2021, we had 106 full time employees, which includes 96 employees in the U.S.

and 10 employees outside the U.S.

of our employees are represented by labor unions.

We consider our relationships with our employees to be generally satisfactory.

In addition, from time to time, we utilize outside consultants or contractors for specific assignments.

As discussed above, in

March 2020, in response to the COVID-19 outbreak, the governor of California issued a state-wide “shelter-in-place”

We have implemented a Business Continuity Plan designed to keep employees safe, follow regulatory guidelines, and

continue essential business operations.

As of March 20, 2020, we furloughed 79 employees in the U.S.

and 42 employees continue

to support essential business operations.

We are actively monitoring the global situation and how it affects our financial condition,

operations, suppliers, industry, and workforce.

Given the daily developments of the pandemic and the global responses to curb its

spread, we are unable to estimate the effects of the pandemic at this time.

If the COVID-19 pandemic continues, it may have an

adverse effect on our ability to source qualified employees during the remainder of 2020 and perhaps beyond.

Our principal offices are located in Gardena,

California, where we lease a 40,000 square foot facility that includes our corporate staff offices, our manufacturing facility,

and our research and development center.

We also lease a 29,000 square foot facility as our second manufacturing facility and a

20,000 square foot warehouse facility across the street from our corporate offices.

We believe that our current facilities are

sufficient to accommodate our anticipated production volumes for the next twelve months.

If required, additional office and manufacturing

space is available within less than three miles from our present location.

order and placed 79 employees on furlough status.

We have implemented a Business

Continuity Plan designed to keep employees safe, follow regulatory guidelines, and continue essential business operations.

September 2020, the majority of our employees that were on furlough status returned to work.

We are actively monitoring the global

situation and how it affects our financial condition, operations, suppliers, industry, and workforce.

Given the daily developments

of the pandemic and the global responses to curb its spread, we are unable to estimate the effects of the pandemic at this time.

If the COVID-19 pandemic continues, it may have an adverse effect on our ability to source qualified employees during the remainder

of 2021 and perhaps beyond.

principal offices are located in Gardena, California, where we lease a 40,000 square foot facility that includes our corporate

staff offices, our manufacturing facility, and our research and development center.

We also lease a 29,000 square foot facility

as our second manufacturing facility and a 20,000 square foot warehouse facility across the street from our corporate offices.

We believe that our current facilities are sufficient to accommodate our anticipated production volumes for the next twelve months.

If required, additional office and manufacturing space is available within less than three miles from our present location.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business