What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-03-31 compared with 2020-05-14 · 437 added, 434 removed, 44 unchanged (95% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Shares of our common stock trade on The

Nasdaq Capital Market under the symbol “POLA.”

As of May 14, 2020, we had 10,125,681 shares of common stock

outstanding held of record by approximately 17 stockholders.

These holders of record include depositories that hold shares of stock

for brokerage firms which, in turn, hold shares of stock for numerous beneficial owners.

Recent Sales of Unregistered Securities

Purchases of Equity Securities by the Issuer and Affiliated

On November 6, 2019, we entered into a Rule

10b-18 Stock Repurchase Agreement authorizing ThinkEquity to repurchase up to $500,000 of our common stock.

On January 20, 2020,

we terminated the Stock Repurchase Agreement.

As of December 31, 2019, we had purchased 17,477 shares common stock and held them

as treasury stock at a cost of $39,942.

of our common stock trade on The Nasdaq Capital Market under the symbol “POLA.”

of March 31, 2021, we had 12,788,203 shares of common stock outstanding held of record by approximately 13 stockholders.

holders of record include depositories that hold shares of stock for brokerage firms which, in turn, hold shares of stock for

numerous beneficial owners.

Sales of Unregistered Securities

of Equity Securities by the Issuer and Affiliated Purchasers

November 6, 2019, we entered into a Rule 10b-18 Stock Repurchase Agreement authorizing ThinkEquity to repurchase up to $500 of

our common stock.

On January 20, 2020, we terminated the Stock Repurchase Agreement.

As of December 31, 2020, we had purchased

17,477 shares common stock and held them as treasury stock at a cost of $40.

Total number of shares (or units) purchased

4 unchanged sentences

Selected Financial Data.

Not applicable.

Management Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion

and analysis of our financial condition and results of operations together with our financial statements and the related notes

and other financial information included elsewhere in this Annual Report on Form 10-K.

In addition to historical information, this

discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

Our actual results

may differ materially from those discussed below.

Factors that could cause or contribute to such differences include, but are not

limited to, those identified below, and those discussed in the section titled “Risk Factors”

and elsewhere in this

Annual Report on Form 10-K.

Our historical results are not necessarily indicative of the results to be expected for any future

period, and results for any interim period are not necessarily indicative of the results to be expected for the full year.

We design, manufacture and sell

DC power generators, renewable energy and cooling systems for applications primarily in the telecommunications market and, to a

lesser extent, in other markets, including military, electric vehicle charging, marine and industrial.

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.

During the years ended December

31, 2019 and 2018, 96% and 90%, respectively, of our total net sales were within the telecommunications market.

In 2019, 91% of

our total net sales were derived from our three largest customers, of which 68% were derived from AT&T, 17% from T-Mobile,

and 6% from Verizon Wireless.

In 2018, we had 85% of our total net sales derived from our three largest customers, of which 53%

were derived from AT&T, 22% from T-Mobile, and 10% from Verizon Wireless.

During those periods, the majority of our sales were

of our DC base powers systems.

In March 2020, the World

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

foreign countries issued lockdown orders negatively impacting the operations of our manufacturing facilities and customer

demand for our products.

should read the following discussion and analysis of our financial condition and results of operations together with our financial

statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K.

to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties

and assumptions.

Our actual results may differ materially from those discussed below.

Factors that could cause or contribute to

such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk

Factors”

and elsewhere in this Annual Report on Form 10-K.

Our historical results are not necessarily indicative of the

results to be expected for any future period, and results for any interim period are not necessarily indicative of the results

to be expected for the full year.

design, manufacture and sell DC power generators, renewable energy and cooling systems for applications primarily in the telecommunications

market and, to a lesser extent, in other markets, including military, electric vehicle charging, marine and industrial

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 .

These systems integrate a DC generator and automated controls with remote monitoring, which are

typically contained within an environmentally regulated enclosure.

hybrid power systems .

These systems incorporate lithium-ion batteries (or other advanced battery chemistries) with

our proprietary battery management system, or BMS, into our standard DC power systems.

solar hybrid power systems .

These systems incorporate photovoltaic and other sources of renewable energy into our

DC hybrid power system.

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

gas being the predominate formats.

the years ended December 31, 2020 and 2019, 96% and 96%, respectively, of our total net sales were within the telecommunications

In 2020, 81% of our total net sales were derived primarily from three customers which are in the telecommunications industry

and each accounted for 52%, 15% and 14% of total net sales for 2020.

In 2019, we had 91% of our total net sales derived from our

three largest customers which are in the telecommunications industry and each accounted for 68%, 17% and 6% of our total net sales

March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic, and, in the following weeks, many

states and foreign countries issued lockdown orders negatively impacting the operations of our manufacturing facilities and

customer demand for our products.

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

and foreign countries has rapidly escalated.

extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including

the duration and spread of the outbreak, the impact on our customers and our sales cycles, the impact on our customer,

employee or industry events, and the effect on our vendors, all of which are uncertain and cannot be predicted.

point, we are uncertain of the full magnitude that the pandemic may have on our financial condition, liquidity and future

results of operations.

Critical Accounting Policies

Our financial statements have

been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of these

financial statements requires us to make estimates and judgments that may have a significant impact on the portrayal of our financial

condition and results of operations.

We base our estimates on historical experience and on various other assumptions that are believed

to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of

assets and liabilities that are not readily apparent from other sources.

Actual results could differ materially from these estimates.

We believe that the following

critical accounting policies, among others, affect our more significant judgment and estimates used in the preparation of our financial

Revenue Recognition.

The Company recognizes revenue in accordance with ASC 2014-09, Revenue from Contracts with Customers (Topic 606), (ASC 606).

The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount

expected to be collected.

ASC 606 creates a five-step model that requires entities to exercise judgment when

considering the terms of contract(s), which includes (i) identifying the contract(s) or agreement(s) with a customer, (ii) identifying

our performance obligations in the contract or agreement, (iii) determining the transaction price, (iv) allocating the transaction

price to the separate performance obligations, and (v) recognizing revenue as each performance obligation is satisfied.

ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for us upon

shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to

We determine whether delivery has occurred

based on when title transfers and the risks and rewards of ownership have transferred to the customer, which usually occurs when

we place the product with the customer’s carrier or deliver the product to a customer’s location.

We regularly review

our customers’

We have implemented new procedures to support the health and safety of our employees and we are following all guidelines issued

Centers for Disease Control and Prevention, as well as federal, state and regional public health authorities.

manufacturing facilities have remained opened with certain limitations and restrictions to comply COVID-19 safety guidelines and

provide a safe work environment for our employees.

has had and is likely to continue to have, a material and substantial adverse impact on our results of operations including, among

others, a decrease in our sales, delays in sourcing of raw materials from suppliers which, in turn, has raised liquidity concerns.

In addition, our inventory write-off increased during 2020 due to current uncertainties regarding specific product shipments.

Our business is directly dependent upon, and correlates closely with, the marketing levels and ongoing business activities of

our existing customers and suppliers.

In the event of a continued widespread economic downturn caused by COVID-19, we will likely

experience a further reduction in current projects, longer sales and collection cycles, deferral or delay of purchase commitments

for our DC power systems, a reduction in our manufacturing functionality, higher than normal inventory levels, a reduction in

the availability of qualified labor, and increased price competition, all of which could substantially adversely affect our net

revenues and our ability to remain a going concern.

December 2020, the Food and Drug Administration authorized the release of vaccines to help control COVID-19.

Although there are

many unknown factors of its success to control COVID-19 and the timeline of making the vaccine available to a great majority of

people around the world, we believe these are significant events aimed to control COVID-19 that may lead to improvements to the

global economy and to our business.

extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the

duration and spread of the outbreak, the impact on our customers and our sales cycles, the impact on our customer, employee or

industry events, and the effect on our vendors, all of which are uncertain and cannot be predicted.

At this point, we are uncertain

of the full magnitude that the pandemic may have on our financial condition, liquidity and future results of operations.

Accounting Policies

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America

(“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets,

liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities.

On an ongoing basis, management reviews

its estimates and if deemed appropriate, those estimates are adjusted.

Significant estimates include those related to assumptions

used in determining reserves for uncollectible receivables, assumptions used in valuing inventories at net realizable value, impairment

analysis of long term assets, estimates of useful lives of property and equipment, assumptions used in valuing stock-based compensation,

the valuation allowance for deferred tax assets, accruals for product warranties, accruals for potential liabilities, and assumptions

used in the determination of the Company’s liquidity.

Actual results may differ from those estimates.

believe that the following critical accounting policies, among others, affect our more significant judgment and estimates used

in the preparation of our financial statements:

We recognize revenue in accordance with Financial Accounting Standards Board

Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC

ASC 606 requires entities to recognize revenue through the application of a five-step model, which includes:

identification

of the contract;

identification of the performance obligations;

determination of the transaction price;

allocation of the transaction

price to the performance obligations;

and recognition of revenue as the entity satisfies the performance obligations.

Substantially all of

the Company’s revenue is derived from product sales.

Product revenue is recognized when performance obligations under the terms

of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to its customers based

on written sales terms, which is also when control is transferred.

Revenue is measured as the amount of consideration the Company

expects to receive in exchange for transferring the products or services to a customer.

The Company determines whether delivery

has occurred based on when title transfers and the risks and rewards of ownership have transferred to the customer, which usually

occurs when the Company places the product with the customer’s carrier or deliver the product to a customer’s location.

The Company regularly reviews its customers’

financial positions to ensure that collectability is reasonably assured.

Under ASC 606, revenue is recognized when

performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of

products or services to our customers based on written sales terms, which is also when control is transferred.

Revenue is measured

as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

We provide limited warranties for parts and labor at no cost to our customers within a specified time period after the

The warranty terms are typically from one to five years.

The Company’s warranties are of an assurance-type and come

standard with all Company product to cover repair or replacement should a product not perform as expected.

The Company’s

warranties are not a separate performance obligation and no transaction price is allocated to it.

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.

Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty costs.

We estimate the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific

warranty purposes.

Our product warranty obligations are included in other accrued liabilities in the balance sheets.

As of December

31, 2019, and December 31, 2018, we had accrued a liability for warranty reserve of $375,000 and $175,000, respectively.

believes that the warranty accrual is appropriate;

however, actual claims incurred could differ from original estimates, requiring

adjustments to the accrual.

The Company does not provide any service warranties to its customers that require to be accounted for

as a separate performance obligation.

We write down our inventory

for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market

value-based upon assumptions about future demand, future pricing and market conditions.

If actual future demand, future pricing

or market conditions are less favorable than those projected by management, additional inventory write-downs may be required and

the differences could be material.

Once established, write-downs are considered permanent adjustments to the cost basis of the

obsolete or unmarketable inventories .

Stock-Based Compensation.

The Company accounts for share-based awards to employees and nonemployees directors and consultants in accordance with the

provisions of ASC 718, Compensation—Stock Compensation.

, and under the recently issued guidance following FASB’s

pronouncement, ASU 2018-07, Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment

Under ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant

and that fair value is recognized over the requisite service, or vesting, period.

The Company values its equity awards using the

Black-Scholes option pricing model, and accounts for forfeitures when they occur.

Use of the Black-Scholes option pricing

model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate.

The Company estimates volatility using a blend of its own historical stock price volatility as well as that of market comparable

entities since the Company’s common stock has limited trading history and limited observable volatility of its own.

term of the options is estimated by using the Securities and Exchange Commission Staff Bulletin No.

107’s Simplified Method

for Estimate Expected Term .

The risk-free interest rate is estimated using comparable published federal funds rates.

Income Taxes.

Our estimate of income

taxes payable, deferred income taxes and the effective tax rate is based on an analysis of many factors including interpretations

of federal and state income tax laws, the difference between tax and financial reporting bases of assets and liabilities, estimates

of amounts currently due or owed in various jurisdictions, and current accounting standards.

We review and update our estimates

on a quarterly basis as facts and circumstances change and actual results are known.

We recognize income taxes for the amount of

taxes payable or refundable for the current year and deferred tax liabilities and assets are recognized for the future tax consequences

of transactions that have been recognized in our financial statements or tax returns.

A valuation allowance is provided when it

is more likely than not that some portion or the entire deferred tax asset will not be realized.

Effects of Inflation

The impact of inflation and changing

prices has not been significant on the financial condition or results of operations of our company.

Impact of Recent Accounting

Pronouncements

The Company provides limited warranties for parts and labor at no cost to its customers within a

specified time period after the sale.

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.

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.

Management actively studies trends of warranty

claims and takes action to improve product quality and minimize warranty costs.

The Company estimates the actual historical

warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes.

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”)

The Company records adjustments to its inventory based on an estimated forecast of the inventory demand, taking into consideration,

among others, inventory turnover, inventory quantities on hand, unfilled customer order quantities, forecasted demand, current

prices, competitive pricing, and trends and performance of similar products.

If the estimated net realizable value is determined

to be less than the recorded cost of the inventory, the difference is recognized as a loss in the period in which it occurs.

inventory has been written down, it creates a new cost basis for inventory that may not subsequently written up.

Stock-based payments to employees, directors, and for acquiring goods and services from nonemployees, which

include grants of employee stock options, are recognized in the financial statements based on their grant date fair values in

accordance with ASC 718, Compensation-Stock Compensation .

Stock option grants, which are generally time vested, are measured

at the grant date fair value and depending on the conditions associated with the vesting of the award, compensation cost is recognized

on a straight-line or graded basis over the vesting period.

The fair value of stock options granted is estimated using the Black-Scholes

option-pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life,

and future dividends.

The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense

recorded in future periods.

The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized

for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences.

differences are the differences between the reported amounts of assets and liabilities and their tax bases.

Deferred tax assets

are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of

the deferred tax assets will not be realized before the Company is able to realize their benefits, or that future deductibility

is uncertain.

impact of inflation and changing prices has not been significant on the financial condition or results of operations of our company.

of Recent Accounting Pronouncements

See “Note 1 –

Organization and

Summary of Significant Accounting Policies –

Organization and Summary of Significant Accounting Policies –

Recent Accounting Pronouncements”

of the Notes to Financial Statements

commencing on page F-7 of this Annual Report on Form 10-K for management’s discussion as to the impact of recent accounting

pronouncements.

Jumpstart Our Business Startups Act of 2012

On April 5, 2012, the JOBS Act was enacted.

of the Notes to Financial

Statements commencing on page F-7 of this Annual Report on Form 10-K for management’s discussion as to the impact of recent

accounting pronouncements.

Our Business Startups Act of 2012

April 5, 2012, the JOBS Act was enacted.

Section 107 of the JOBS Act provides that an “emerging growth company”

can take advantage of the extended transition

period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

In other words,

an “emerging growth company”

can delay the adoption of certain accounting standards until those standards would otherwise

apply to private companies.

We have irrevocably elected not to avail ourselves of this extended transition period and, as a result,

we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other

public companies.

We are in the process of evaluating

the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act.

Subject to certain conditions

set forth in the JOBS Act, if as an “emerging growth company”

we choose to rely on such exemptions, we may not be required

to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting

pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies

under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the

Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report

providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose

certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons

of the Chief Executive Officer’s compensation to median employee compensation.

These exemptions will apply until we no longer

meet the requirements of being an “emerging growth company.”

take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or

revised accounting standards.

In other words, an “emerging growth company”

can delay the adoption of certain accounting

standards until those standards would otherwise apply to private companies.

We have irrevocably elected not to avail ourselves

of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on

which adoption of such standards is required for other public companies.

are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the

Subject to certain conditions set forth in the JOBS Act, if as an “emerging growth company”

rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our

system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure

that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,

(iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit

firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial

statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation

between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee

compensation.

These exemptions will apply until we no longer meet the requirements of being an “emerging growth company.”

We will remain an “emerging growth company”

until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more;

the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering;

(iii) the date

on which we have issued more than $1.07 billion in nonconvertible debt during the previous three years;

or (iv) the date on which

we are deemed to be a large accelerated filer under the rules of the SEC.

Financial Performance Summary –

until the earliest of (i) the last day of the fiscal year in which we

have total annual gross revenues of $1 billion or more;

(ii) December 31, 2021 (the last day of our fiscal year following the

fifth anniversary of the date of the completion of our initial public offering);

(iii) the date on which we have issued more than

$1.07 billion in nonconvertible debt during the previous three years;

or (iv) the date on which we are deemed to be a large accelerated

filer under the rules of the SEC.

Performance Summary –

Year Ended December 31, 2020

During 2019, we experienced mixed

We had significant growth during the first three quarters of the year with 96% of our annual revenues derived from this

The overall increase in revenues during 2019 as compared to 2018 is a direct result of increased sales of our DC power

systems to U.S.

Tier-1 telecommunications customers during the first three quarters of the year.

Our revenues for the year ended

December 31, 2019 were $24,801,141, compared to $24,046,354 for the year ended December 31, 2018.

We reported a net loss of $4,044,751

for 2019, as compared to net loss of $848,252 for 2018.

During the fourth quarter of 2019, and continuing

into the first quarter of 2020, we experienced a decline in revenues, with product orders and shipments being postponed to the

latter part of 2020.

We believe these product order and shipment delays are temporary and are a result of a combination of factors

including, among others, the transition from 3G and 4G to 5G networks in the U.S.

markets by all major Tier-1 wireless providers

resulting in a slowdown in sales of our backup generators.

We believe that our wireless customers are focusing their financial

resources into deployment of their 5G networks rather than on back-up power solutions, especially because of delays experienced

by network providers in determining the future power requirements for macro cells sites connected to hundreds of small cells in

a 5G network.

In addition, we have observed a trend where Tier-1 network operators are divesting their tower assets to invest capital

into the acquisition of spectrum.

Our backlog as of December 31,

2019 was approximately $4.0 million, with 75% of that amount being attributable to U.S.

Tier-1 telecommunications customers, 16%

to telecommunications customers overseas, 2% to military customers, and 7% to other customers.

We anticipate that the majority

of our future sales during the next twelve months will be comprised of DC power systems for applications within the mobile telecommunications

tower market in the U.S.

and international markets as we continue to expand our sales infrastructure in these markets.

Results of Operations

The tables presented below, which

compare our results of operations from one period to another, present the results for each period, the change in those results

from one period to another in both dollars and percentage change, and the results for each period as a percentage of net revenues.

net sales for the year ended December 31, 2020, were $9,031, as compared to $24,801 for the year ended December 31, 2019.

a net loss of $10,871 for 2020, as compared to net loss of $4,045 for 2019.

We believe this decline in revenues is primarily due

to our Tier-1 telecommunications customers shifting their investments to the deployment of their new 5G networks rather than making

investments in back-up power generators.

We also believe that COVID-19 has had a negative impact on our customers’

to deploy new systems due to precautionary measures focused at slowing down the spread of COVID-19 within their employee base.

The focus on the deployment of new 5G networks has had a direct negative impact on our ability to increase sales of our products

to our Tier-1 telecommunications customers.

2020, our international sales increased to $1,522, as compared to $230 during 2019.

The increase was due primarily to shipments

of our new LPG DC power systems during the second half of 2020.

sales backlog as of December 31, 2020, was $4,239, with 65% of that amount being attributable to U.S.

telecommunications customers,

21% to telecommunications customers outside the U.S., 2% to military customers, and 12% to other customer in other markets.

recent increase in our backlog is as a result of U.S.

Tier-1 wireless carriers increasing their orders of our DC backup power

During the fourth quarter of 2020, we believe the major Tier-1 wireless providers reached a point in the implementation

of their 5G programs where they are starting to increase orders on backup power solutions.

In December 2020, our backlog increased

by $2.0 million primarily from sales orders from our largest Tier-1 telecommunications customer.

the release of COVID-19 vaccines in December 2020, we remain hopeful that the global economy will gradually return to normality

allowing us to expand our sales and marketing initiatives.

We are also working on expanding our research and development capacity

to enhance our sales support and new product development programs.

We are focused on diversifying our customer base within the

telecom market while seeking new opportunities in other markets.

anticipate that our future sales will improve as the U.S.

economy recovers from the impact of the COVID-19 pandemic, our U.S.

telecommunications customers return to their backup power programs, and we succeed in diversifying our customer base.

the full impact of the COVID-19 pandemic on our financial and operating performance will depend significantly on the duration

and severity of the outbreak, the actions taken to contain or mitigate its impact, disruption to our supply chain, and the pace

with which our clients return to more normalized purchasing behavior, among others factors beyond our knowledge or control.

section “Risk Factors”

in this Annual Report for additional considerations.

of Operations

tables presented below, which compare our results of operations from one period to another, present the results for each period,

the change in those results from one period to another in both dollars and percentage change, and the results for each period

as a percentage of net revenues.

The columns present the following:

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

The columns entitled “Dollar Variance”

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

columns entitled “Dollar Variance”

and “Percentage Variance”

shows the change in results, both in dollars and percentages.

shows the change in results, both in

dollars and percentages.

These two columns show favorable changes as a positive and unfavorable changes as negative.

For example, when our net revenues increase from one period to the next, that change is shown as a positive number in both columns.

Conversely, when expenses increase from one period to the next, that change is shown as a negative in both columns.

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

Comparison of the Years Ended December 31, 2019

when our net revenues increase from one period to the next, that change is shown as a positive number in both columns.

when expenses increase from one period to the next, that change is shown as a negative in both columns.

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

of the Years Ended December 31, 2020 and 2019

Year Ended December 31,

3 unchanged sentences

Cost of sales

Gross profit (loss)

Sales and marketing expenses

7 unchanged sentences

Income tax benefit

$ (4,044,751 )

$ (3,196,499 )

Net sales increased by

$754,787, or 3%, to $24,801,141 for the year ended December 31, 2019, as compared to $24,046,354 for the year ended December 31,

The increase was primarily due to an increase in sales of our DC power systems to U.S.

Tier-1 telecommunications customers.

telecommunications customers accounted for 95% of our total net sales during 2019, as compared to 90% of total net sales in

Although we experienced an overall increase

in net sales during 2019, net sales for the fourth quarter of 2019 were only $878,490.

This represents an 87% decrease in net sales

as compared to our third quarter of 2019.

In addition, we experienced a decline in revenues during the first quarter of 2020.

believe this recent decline in revenues is a result of a combination of factors including, among others, a temporary shift by our

Tier-1 telecommunications customers in budget allocation toward for mergers and acquisitions and the deployment of their 5G

networks rather than purchasing back-up power generators.

We also believe that many of our major customers have held off purchasing

our products as they continue to evaluate the impact of 5G on their future power requirements and attempt to define the correct

power output for future 5G sites.

Although we expect that sales will improve in the upcoming quarters once our customers define

their power needs for their 5G systems and the U.S.

economy recovers from the COVID-19 crises, we are not able to estimate the

full effects that the pandemic may have on our ability generate improved revenues during the remainder of 2019 and perhaps beyond.

Our revenue from telecommunications customers

accounted for 96% and 90% of total net sales during 2019, and 2018, respectively.

Our three largest customers are U.S.

Tier-1 telecommunications

AT&T represented 68% of total net sales for 2019, T-Mobile 17%, and Verizon Wireless 6%, as compared to 53%, 22%,

and 10%, respectively, of our total net sales for 2018.

Net sales decreased by $15,770, or 64%, to $9,031 for the year ended December 31, 2020, as compared to $24,801 for

the year ended December 31, 2019.

The decrease was primarily due to a decrease in sales of our DC power systems to U.S.

telecommunications customers.

telecommunications customers accounted for 83% of our total net sales during 2020, as compared

to 95% of total net sales in 2019.

revenue from telecommunications customers, U.S.

and international, accounted for 96% of total net sales during 2020 and also during

Our three largest customers are in the telecommunications industry and each customer accounted for 52%, 15%, and 14% of

total net sales for 2020, as compared to our three largest customers in 2019, also customers in the telecommunications industry,

each accounting for 68%, 17%, and 6% of total net sales.

Our revenues as a percentage of total net sales for the year to international

customers increased from 1% during 2019 to 17% during 2020.

believe the decline in revenues during 2020 is a result of a combination of factors including, among others, a temporary shift

Tier-1 telecommunications customers in budget allocation towards acquiring wireless communication spectrum and the

deployment of their 5G networks rather than purchasing back-up power generators.

We also believe that COVID-19 has had, and continues

to have, a negative impact on our customers’

ability to deploy new back-up power systems due to precautionary measures aimed

at slowing down the spread of COVID-19.

the fourth quarter of 2020, we began to see an increase in sales orders for our DC power systems from our U.S.

telecommunications

customers compared to the fourth quarter of 2019.

We believe telecommunications customers have made substantial progress in launching

their 5G networks during 2020.

Their 5G programs have many elements that will be deployed and enhanced at different times over

the upcoming years and we believe our DC back-up power systems are an ideal fit to their infrastructure buildout and provide needed

backup power support to enhance network reliability.

In addition, the Food and Drug Administration authorized the release of vaccines

to help control COVID-19 in December 2020.

Although there are many unknown factors of its success to control COVID-19 and the

timeline of making the vaccine available to a great majority of people around the world, we believe these are positive signs that

may lead to improved revenue numbers for Polar Power in upcoming quarters and beyond.

Cost of sales decreased by $5,228, or 26%, to $14,654 during 2020, compared to $19,882 during 2019.

Cost of sales

sales increased by $3,267,168, or 20%, to $19,881,742 during 2019, compared to $16,614,574 during 2018.

Cost of sales as a percentage

of net sales increased from 69.1% in 2018 to 80.2% in 2019 as a result of an increase in factory overhead absorption primarily

during the fourth quarter of 2019.

The increase in factory overhead absorption during 2019 is primarily attributed to additional

facilities and staff added during the ramp up period during the first half of 2019 to meet customer demand and improve plant capacity.

Gross Profit .

profit during 2019 decreased by $2,512,381 to $4,919,399, as compared to $7,431,780 during 2018.

Gross profit as a percentage of

net sales decreased to 19.8% in 2019, as compared to 30.9% in 2018.

The decrease in gross profit as a percentage of net sales during

2019 was primarily due a combination of sales discounts offered for large volume orders from Tier-1 customers and an increase in

factory overhead absorption primarily during the fourth quarter of 2019.

Sales and Marketing Expenses.

and marketing expenses increased $41,450 to $2,620,907 during 2019, as compared to $2,579,457 during 2018.

We continue to market

our DC power systems to key telecommunications customers globally.

Research and Development Expenses.

2019, research and development expenses increased by $367,926 to $2,275,736, as compared to $1,907,810 during 2018.

was primarily due to increased investments in several research and development projects, including our new LPG / propane and natural

gas line of generators and solar hybrid power systems.

The increase in costs also reflects direct labor costs associated with manufacturing

of prototypes, tooling and associated certification cost.

During 2020, we plan to continue investing in research and development,

as we introduce new products as part of our strategy to diversify our product lines.

General and Administrative Expenses .

Our general and administrative expenses decreased by $39,068, to $4,004,233 during 2019, as compared to $4,043,301 during 2018.

The decrease was primarily due to a reduction in employee recruiting cost coupled with a slight reduction of administrative support

personnel during the second half of 2019.

We anticipate our general and administrative costs to remain flat during 2020.

Interest and Finance Costs.

as a percentage of net sales increased from 80.2% in 2019 to 162.2% in 2020 as a result of an increase in factory overhead absorption

and an inventory reserve of $3,400 during 2020.

The increase in factory overhead absorption during 2020 is primarily attributed

to underutilization of manufacturing facilities and staff resulting primarily from COVID-19 related factors mentioned in previous

sections of this report.

Profit (Loss) .

We experienced a gross loss of $5,623 during 2020, as compared to a gross profit of $4,919 during 2019, which

represents a decrease in gross profit of $10,542 or 214%.

Gross profit as a percentage of net sales decreased to (62.2)% in 2020,

as compared to 19.8% in 2019.

The decrease in gross profit as a percentage of net sales during 2020 was primarily due a combination

of sales discounts offered for large volume orders from Tier-1 telecommunications customers, an increase in factory overhead absorption,

and an increase to inventory write-off of $3,400 recorded in cost of sales during 2020.

and Marketing Expenses.

Sales and marketing expenses decreased $1,065 to $1,556 during 2020, as compared to $2,621 during

The decrease was attributable to a decrease in marketing and promotions of our DC power systems in the U.S.

and international

markets due to travel restrictions and other measures aimed to reducing the spread of COVID-19.

As part of our ongoing strategy

to expand our customer base, we plan to increase our sales and marketing expenditures as travel restrictions are lifted and tradeshow

and similar events become available.

and Development Expenses.

During 2020, research and development expenses decreased by $553 to $1,723, as compared to $2,276

The decrease was primarily because of COVID-19 and its implications to safety measures and availability of personnel.

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.

and Administrative Expenses .

Our general and administrative expenses increased by $58, to $4,062 during 2020, as compared

to $4,004 during 2019.

The increase was primarily due to an increase of approximately $500 in legal, audit, and broker fees services

related to an equity raise that took place in July 2020 and consulting services for additional disclosures required as a result

and Finance Costs.

During 2020, our interest expense was $60, as compared to $103 during 2019, an increase of $43.

Our interest expense

included approximately $51,589 in fees in connection with selling $13,228,765 of receivables to Citibank under our Supplier Agreement.

Another $51,746 is primarily attributable to interest paid for financing of production equipment.

Other Income (Expense), Net.

expense during 2020 included approximately $12 in fees in connection with selling $2.6 million of receivables to Citibank under

our Supplier Agreement, $41 in interest paid for financing of production equipment, $4 in interest paid under our line of credit

with Pinnacle Bank, and $3 in interest paid for financing of insurance policies.

Income (Expense), Net.

During 2020, our interest income was $14, as compared to $40 during 2019, a decrease of $26.

Our interest income

is primarily derived from liquid interest-bearing bank accounts.

Income Tax Benefit .

2019, the Company did not recognize any benefit from income taxes as carry back claims of income taxes were applied.

we recognized a benefit from income taxes of $215,000 attributable to refundable federal and state income taxes.

of the factors identified above, we generated a net loss of $4,044,751 for 2019, as compared to net loss of $848,252 for 2018,

an increase loss of $3,196,499.

A significant portion of the increase in net loss can be attributed to the results of our fourth

quarter of 2019 which included a decrease in shipments of our DC power systems and an increase in factory overhead absorption.

Liquidity and Capital Resources

Sources of Liquidity

During the year ended December 31, 2019, we funded our operations

primarily from cash on hand and sales of receivables under our Supplier Agreement with Citibank.

These funds were also used to

make capital expenditures and to increase inventory to support higher levels of production.

As of December 31, 2019, we had working

capital of $16,432,898, as compared to working capital of $21,089,802 at December 31, 2018.

This $4,656,904 decrease in working

capital is primarily attributable to our ability to collect on accounts receivable in a shorter period of time as a result of our

Supplier Agreement with Citibank, N.A.

and using such funds to increase our inventory levels.

During the year ended December 31,

2019, we sold $13,228,765 of receivables to Citibank under our Supplier Agreement, and incurred fees of approximately $51,589 in

connection with such sales.

On December 31, 2019 and December 31, 2018, our trade receivables

totaled $933,830 and $7,726,919, respectively.

In 2019, $651,770 (70%) and $183,283 (20%) represented customer account balances

of our two largest customers, as compared to $3,457,433 (45%) and $3,220,907 (42%) represented customer account balances of our

two largest customers in 2018.

Our available capital resources

on December 31, 2019 consisted primarily of $2,840,117 in cash and cash equivalents.

We expect our future capital resources will

consist primarily of cash on hand, cash generated by operations, if any, and future debt or equity financings, if any.

of the COVID-19 crisis, the U.S.

Department of the Treasury enacted the Coronavirus Aid, Relief, and Economic Security Act, or

the CARES Act, to provide emergency assistance and health care response for individuals, families, and businesses affected by the

COVID-19 pandemic.

On May 4, 2020, we entered into a loan agreement with Citibank, N.A.

in the amount of $1,714,989 through the

Paycheck Protection Program, or PPP.

In April 2020, we also applied for a loan offered through the Economic Injury Disaster Loan,

or EIDL, program which, if approved, will offer up to $2.0 million dollars.

Loans through the EIDL

program have up to a 30-year term at an annual interest rate of 3.75%.

As of March 20, 2020, 65% of our U.S.

is in furlough status and the rest of our employees continue to support sales and essential business operations.

We believe these

programs will supplement our current and future available capital resources.

Credit Facility

On March 21, 2017, we entered into a Credit

Agreement and related documents with Citibank, N.A.

for a revolving credit facility for an aggregate amount of up to $1,000,000.

On March 20, 2019, we terminated the credit facility and transferred the $1,000,000 secured by a Certificate of Deposit to our

liquid cash account.

As of March 20, 2019, we had not borrowed any funds under the credit facility.

Supplier Agreement

Effective June 4, 2019, we entered into

a Supplier Agreement with Citibank, N.A.

Under the terms of the Supplier Agreement, we may from time to time offer to sell to Citibank,

without recourse, certain of our accounts receivable relating to invoiced sales made to AT&T.

Once AT&T approves the invoice,

AT&T sends payment instructions to Citibank.

The sale price is equal to the face amount of the receivable less the applicable

discount charge calculated by multiplying the face amount of the receivable by (i) the annual discount rate (which is equal to

the 90-day London Inter-bank Offered Rate plus 1.00%) and (ii) the discount acceptance period (which is equal the number of days

in the payment terms less the number of days necessary to approve the invoice) divided by 360.

Citibank may change the pricing terms at

any time in its sole discretion upon at least thirty days prior written notice to us.

In addition, either party may terminate the

Supplier Agreement upon thirty business days prior written notice to the other party, provided that either party may terminate

the agreement upon five business days prior written notice if the other party is in breach of, or fails to perform any of, its

material obligations under the Supplier Agreement.

During the year ended December 31, 2019, we sold $13,228,765 of receivables

to Citibank under our Supplier Agreement, and incurred fees of approximately $51,589 in connection with such sales.

Future Capital Requirements –

Our independent registered public accounting

firm indicated in its report on our audited consolidated financial statements as of and for the years ended December 31, 2019 and

2018 that there is substantial doubt about our ability to continue as a going concern.

A “going concern”

opinion indicates

that the financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments

to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of

liabilities that may result if we do not continue as a going concern.

We estimate that the current funds on hand will be sufficient

to continue operations through approximately September 30, 2020.

Our continuation as a going concern is dependent upon our ability

to obtain necessary debt or equity financing to continue operations until sales increase and we begin generating positive cash

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are

satisfactory to us.

Even if we are able to obtain additional financing, such financing may contain undue restrictions on our operations,

in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.

to review operations in order to identify additional strategies designed to generate cash flow, improve our financial position,

and enable the timely discharge of our obligations.

If we are unable to identify sources of additional cash flow in the short

term, we may be required to further reduce or limit operations.

The following table sets forth

the significant sources and uses of cash for the periods set forth below:

income included a $10 Economic Injury Disaster Grant.

In 2020, we recognized a benefit from income taxes of $2,139 attributable to refundable federal and state income

During 2019, we did not recognize any benefit from income taxes as carry back claims of income taxes were applied.

As a result of the factors identified above, we generated a net loss of $10,871 for 2020, as compared to net loss of

$4,045 for 2019, an increase loss of $6,826.

A significant portion of the increase in net loss can be attributed to the results

of a decrease our of DC back-up power systems to US telecommunications customers, and an increase in factory overhead absorption,

and $3,400 increase inventory reserve reported in our cost of sales during 2020.

and Capital Resources

During the year ended

December 31, 2020, we funded our operations primarily from cash on hand and sales of receivables under our Supplier Agreement

with Citibank.

These funds were also used to increase inventory to support research and development projects and the launch of

our new line of LPG / natural gas generators.

As of December 31, 2020, we had working capital of $10,123, as compared to working

capital of $16,433 at December 31, 2019.

This $6,310 decrease in working capital is primarily attributable to a $1,194

decrease in cash and cash equivalents resulting from net cash of $6,548 used in operating activities, net cash used in investing

activities of $19 from the acquisition of new property and equipment, and net cash from financing activities of $5,372

which included proceeds of $1,715 from a Paycheck Protection Program (“PPP”) Loan, proceeds of $2,812

from the issuance of common stock and warrants in our July 2020 private placement and proceeds of $1,174 from the exercise of

certain of these warrants.

December 31, 2020 and December 31, 2019, our net trade receivables totaled $1,190 and $934, respectively.

On December 31, 2020,

$1,041 (87%) and $53 (5%) represented the two largest open customer account balances, while $652 (70%) and $183 (20%) represented

the two largest open customer account balances on December 31, 2019.

available capital resources on December 31, 2020 consisted primarily of $1,646 in cash and cash equivalents, as compared to $2,840

as of December 31, 2019.

We expect our future capital resources will consist primarily of cash on hand, cash generated by operations,

if any, and future debt or equity financings, if any.

In light of the COVID-19 crisis, the U.S.

Department of the Treasury enacted

the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, to provide emergency assistance and health care response

for individuals, families, and businesses affected by the COVID-19 pandemic.

On May 4, 2020, we entered into a loan agreement

with Citibank, N.A.

in the amount of $1,715 through the PPP which we expect will be forgiven in whole or in part.

On July 2, 2020,

we received net proceeds of $2,812 from a private placement of securities and during the last four months of 2020, received proceeds

of $1,174 from warrants exercised.

We believe these programs, together with our credit facility with Pinnacle Bank, or Pinnacle,

described below, will supplement our current and future available capital resources.

September 30, 2020, we entered into a Loan and Security Agreement, or Loan Agreement, with Pinnacle.

The Loan Agreement provides

for a revolving credit facility under which Pinnacle may, in its sole discretion upon our request, make advances to us in an amount,

subject to certain limitations and adjustments, of up to (a) 85% of the aggregate net face amount of our accounts receivable and

other contract rights and receivables, plus (b) the lesser of (i) 35% of the lower of cost or wholesale market value of certain

of our inventory or (ii) $2,500.

In no event will the aggregate amount of the outstanding advances under the revolving credit

facility be greater than $4,000.

accrues on the daily balance at a rate of 1.25% above the prime rate, or Standard Interest Rate, but in no event will the Standard

Interest Rate be less than 3.75% per annum.

Interest on the portion of the daily balance consisting of advances against inventory

accrues interest at a rate of 2.25% above the prime rate per annum, or the Inventory Interest Rate, but in no event will the Inventory

Interest Rate be less than 4.75% per annum.

The Loan Agreement also contains a financial covenant requiring us to attain an effective

tangible net worth, defined as our total assets, excluding all intangible assets, less our total liabilities plus loans to us

from our officers, stockholders or employees that have been subordinated to our obligations to Pinnacle, greater than $6,000 as

determined by Pinnacle as of the end of each fiscal quarter.

2020, we advanced $2,500 from the revolving credit facility, which we also paid off during the year.

As such, the balance outstanding

under the Loan Agreement at December 31, 2020 was $0.

As of December 31, 2020, we had availability under the Loan Agreement of

June 4, 2019, we executed a Supplier Agreement with Citibank, N.A.

Under the terms of the Supplier Agreement, we could from time

to time offer to sell to Citibank certain of our accounts receivable relating to invoiced sales made to AT&T.

approved the invoice, AT&T would send payment instructions to Citibank.

The sale price was equal to the face amount of the

receivable less the applicable discount charge calculated by multiplying the face amount of the receivable by (i) the annual discount

rate (which is equal to the 90-day London Inter-bank Offered Rate plus 1.00%) and (ii) the discount acceptance period (which is

equal the number of days in the payment terms less the number of days necessary to approve the invoice) divided by 360.

8, 2020, we terminated the Supplier Agreement with Citibank, N.A.

During the year ended December 31, 2020, a total of $2,621 of

accounts receivables had been sold to Citibank by us, and we incurred fees of approximately $12 during the twelve-month period

Protection Program Loan

May 4, 2020, we entered into a loan with Citibank, N.A.

in an aggregate principal amount of $1,715, or the PPP Loan, pursuant

to the Paycheck Protection Program, or the PPP, under the CARES Act.

PPP Loan is evidenced by a promissory note dated May 4, 2020.

The PPP Loan matures two years from the disbursement date and bears

interest at a rate of 1% per annum, with the first nine months of interest deferred.

Principal and interest are payable monthly

commencing nine months after the disbursement date and may be prepaid by us at any time prior to maturity with no prepayment penalties.

the terms of the CARES Act, recipients of PPP loans can apply for and be granted forgiveness for all or a portion of loans granted

under the PPP.

The PPP Loan is subject to forgiveness to the extent proceeds are used for payroll costs, including payments required

to continue group health care benefits, and certain rent, utility, and mortgage interest expenses (collectively, “Qualifying

Expenses”), pursuant to the terms and limitations of the PPP.

We intend to use a significant majority of the PPP Loan amount

for Qualifying Expenses and expect the full amount of the PPP Loan to be forgiven.

However, no assurance can be given that we

will obtain forgiveness of the PPP Loan in whole or in part.

Capital Requirements

February 7, 2021, we entered into an underwriting agreement with ThinkEquity, a division of Fordham Financial Management, Inc.,

pursuant to which we agreed to sell an aggregate of 750,000 shares of our common stock in a firm commitment underwritten public

offering at a price per share to the public of $18.00.

The public offering closed on February 10, 2021.

We received net proceeds

of approximately $12.5 million and we plan to use the net proceeds for general corporate purposes.

believe that the current funds on hand will be sufficient to fund our operating expenses and capital expenditure requirements

for at least the next twelve months.

We continue to review operations in order to identify additional strategies designed to generate

cash flow, improve our financial position, and enable the timely discharge of our obligations.

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

Net Cash Provided By (Used In):

Operating Activities

$ (2,166,684 )

$ (7,847,693 )

Investing Activities

1 unchanged sentence

Net decrease in cash

$ (2,799,961 )

$ (8,561,085 )

Operating Activities

Net cash used in operating activities for 2019 was $2,166,684,

as compared to net cash used in operating activities of $7,847,693 for 2018.

This decreased use of net cash in 2019 was primarily

due to a net loss of $4,044,751, a decrease in accounts receivable of $6,793,089 as a result of selling the majority of our receivables

to Citibank under our Supplier Agreement, an increase in inventories of $5,710,431, and an increase in prepayments to suppliers

of $910,035 for engines for our new product line of LPG generators.

Investing Activities

Net cash used in investing activities for 2019 totaled $338,190,

as compared to $574,990 for 2018, a decrease of $236,800.

The net cash used in investing activities in 2019 was attributable to

acquisitions of new manufacturing equipment.

Financing Activities

Net cash used in financing activities totaled

$295,087 for 2019, as compared to net cash used in financing activities of $138,402 during 2018, an increase of $156,685.

increase was primarily due to additional monthly payments for the new equipment financing in 2019.

As of December 31, 2019, we had

a backlog of $4.0 million.

The amount of backlog represents revenue that we anticipate recognizing in the future, as evidenced

by purchase orders and other purchase commitments received from customers, but on which work has not yet been initiated or with

respect to which work is currently in progress.

Our backlog consists of 75% in purchases of our DC power systems by U.S.

telecommunications

customers, 16% in purchases by telecommunications customers overseas, 2% in purchases from military contractors, and 7% from miscellaneous

We believe the majority of the backlog will be shipped within the next six months.

However, there can be no assurance

that we will be successful in fulfilling such orders and commitments in a timely manner or that we will ultimately recognize as

revenue the amounts reflected in our backlog.

cash used in operating activities for 2020 was $6,548, as compared to $2,167 for the same period in 2019.

This increase in net

cash used in 2020 was primarily due to a net loss of $10,871, a write-down of $3,400 for excess and obsolete inventory, an increase

in income tax benefit of $2,139, coupled with a decrease of $907 in prepaid assets resulting from engines imported from Japan

which had been prepaid in 2019.

cash used in investing activities for 2020 totaled $19, as compared to $338 for 2019, a decrease of $319.

The net cash used in

investing activities in 2020 was attributable to a slight increase in new manufacturing equipment.

cash provided by financing activities totaled $5,373 for 2020, as compared to $295 used in financing activities during 2019, an

increase of $5,668.

This increase was primarily due to borrowing $1,715 in May 2020 from Citibank, N.A.

pursuant to the PPP under

the CARES Act., receiving an aggregate net proceeds of $2,812 from a private placement of common stock and warrants and proceeds

of $1,174 from the exercise of certain of these warrants during the last four months of 2020.

of December 31, 2020, we had a backlog of $4.2 million.

The amount of backlog represents revenue that we anticipate recognizing

in the future, as evidenced by purchase orders and other purchase commitments received from customers, but on which work has not

yet been initiated or with respect to which work is currently in progress.

Backlog at December 31, 2020 was comprised of the following

65% in purchases of DC power systems, parts and services by telecommunications customers in the U.S., 21% in purchases

from telecommunications customers outside the U.S., 2% by military contractors;

and 12% from other markets.

We believe the majority

of our backlog will be shipped within the next six months.

However, there can be no assurance that we will be successful in fulfilling

such orders and commitments in a timely manner or that we will ultimately recognize as revenue the amounts reflected in our backlog.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Financial Statements and Supplementary Data.

Reference is made to the financial statements,

which begin at page F-1 of this Annual Report on Form 10-K.

is made to the financial statements, which begin at page F-1 of this Annual Report on Form 10-K.

Changes in and Disagreements with Accountants on Accounting and Finance Disclosure.

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 5. Market for Registrant’s Common Equity