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Item 1A. Risk Factors

2022-03-31 compared with 2021-03-31 · 717 added, 751 removed, 133 unchanged (92% of the section changed)

deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in addition to the

other information contained in this Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission,

or the SEC, including subsequent reports on Forms 10-Q and 8-K.

The risks and uncertainties described below are not the only ones

Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our

If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on Polar Power,

our business, financial condition, results of operations and/or liquidity could be seriously harmed.

In that event, the market

price for our common stock will likely decline, and you may lose all or part of your investment.

deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in addition to the other

information contained in this Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission, or the

SEC, including subsequent reports on Forms 10-Q and 8-K.

The risks and uncertainties described below are not the only ones we face.

risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business.

If any of these

known or unknown risks or uncertainties actually occurs with material adverse effects on Polar Power, our business, financial condition,

results of operations and/or liquidity could be seriously harmed.

In that event, the market price for our common stock will likely decline,

and you may lose all or part of your investment.

Related to Our Business and Industry

COVID-19 pandemic and ensuing governmental responses have materially negatively impacted, and could further materially adversely

affect, our business, financial condition, results of operations and cash flows.

COVID-19 pandemic has had a widespread and detrimental effect on the global economy as a result of the continued increase in the

number of cases, particularly in the United States, and actions by public health and governmental authorities, businesses, other

organizations and individuals to address the outbreak, including travel bans and restrictions, quarantines, shelter in place,

stay at home or total lock-down orders and business limitations and shutdowns.

The COVID-19 pandemic and ensuing governmental

responses have materially negatively impacted, and could further materially adversely affect, our business, financial condition,

COVID-19 pandemic has had, and will likely continue to have, a significant negative impact on our business, sales, results of operations

and financial condition.

COVID-19 pandemic has had a widespread and detrimental effect on the global economy, particularly in the U.S., and actions over the past

twelve months by public health and governmental authorities, businesses, other organizations and individuals to address the outbreak,

including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations

and shutdowns have materially negatively impacted, and could further materially adversely affect, our business, financial condition,

results of operations and cash flows.

The ultimate impact of the COVID-19 pandemic on our business and results of operations remains

unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including

the duration and severity of the COVID-19 pandemic, repeat or cyclical outbreaks and any additional preventative and protective

actions that governments, or we or our customers, may direct, which may result in an extended period of continued business disruption

and reduced operations.

For instance, some areas of the United States are experiencing new surges in COVID-19 cases, which has,

in some cases, led to the closure of recently re-opened businesses and further postponed opening other businesses.

Any resulting

financial impact cannot be reasonably estimated at this time, but we expect it will continue to have a material impact on our

business, financial condition and results of operations.

repercussions of the COVID-19 global pandemic has had and is likely to continue to have, a material and substantial adverse impact

on our results of operations, including a decrease in our sales and delays in sourcing of raw materials from suppliers which,

in turn, has raised liquidity concerns.

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 productivity, higher than normal inventory

levels, delay in receipt of raw materials, 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.

response to uncertainties associated with the COVID-19 pandemic, we have made certain modifications to our business, including

modifications to employee work locations, cancellation of certain marketing events and the implementation of a cost reduction

program to reduce overhead.

During portions of 2020 we also implemented limited remote work policies for many employees, and the

resources available to such employees may not enable them to maintain the same level of productivity and efficiency.

Our increased

reliance on remote access to our information systems also increases our exposures to potential cybersecurity breaches.

provide any assurance that these actions, or any other mitigating actions we may take, will help mitigate the impact of the COVID-19

pandemic on us.

we cannot provide any assurance that our assumptions used to estimate our liquidity requirements will remain accurate due to the

unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic.

As a consequence,

our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change

and have a material impact on our results of operations and financial condition.

In the event of a sustained market deterioration

and continued declines in net sales, we may need additional liquidity.

We cannot provide any assurance that we will be able to

obtain additional sources of financing or liquidity on acceptable terms, or at all.

ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows

is dependent on future developments, the duration of the pandemic, including repeat or cyclical outbreaks, additional “waves”

or the spread of “variant”

viruses and the related length of its impact on the global economy, which are uncertain

and cannot be predicted at this time due to the daily evolution of the COVID-19 pandemic and the global responses to curb its

unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration

and potential resurgence of the COVID-19 pandemic, repeat or cyclical outbreaks and any additional preventative and protective actions

that governments, or we or our customers, may direct, which may result in an extended period of continued business disruption and reduced

Any resulting financial impact cannot be reasonably estimated at this time, but we expect it will continue to have a material

impact on our business, financial condition and results of operations.

repercussions of the COVID-19 global pandemic has had and is likely to continue to have, a material and substantial adverse impact on

our results of operations, including a decrease in our sales and delays in sourcing raw materials from suppliers.

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 economic downturn caused by the COVID-19 pandemic, we will likely experience a 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

productivity, higher than normal inventory levels, delay in receipt of raw materials, a reduction in the availability of qualified labor

and increased price competition, all of which could substantially adversely affect our results of operations including our earnings and

response to uncertainties associated with the COVID-19 pandemic, we have made certain modifications to our business, including modifications

to employee work locations, cancellation of certain marketing events and the implementation of a cost reduction program to reduce overhead.

During portions of 2021 we also implemented limited remote work policies for many employees, and the resources available to such employees

may not enable them to maintain the same level of productivity and efficiency.

Our increased reliance on remote access to our information

systems also increases our exposures to potential cybersecurity breaches.

We cannot provide any assurance that these actions, or any

other mitigating actions we may take, will help mitigate the impact of the COVID-19 pandemic on us.

we cannot provide any assurance that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented

nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic.

As a consequence, our estimates

of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material

impact on our results of operations and financial condition.

In the event of a sustained market deterioration and continued declines

in net sales, we may need additional liquidity.

We cannot provide any assurance that we will be able to obtain additional sources of

financing or liquidity on acceptable terms, or at all.

ultimate duration and impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent

on future developments, the duration of the COVID-19 pandemic, including repeat or cyclical outbreaks, additional “waves”

or the spread of “variant” viruses and the related length of its impact on the global economy, which are uncertain and cannot

be predicted at this time.

Furthermore, the extent to which our mitigation efforts are successful, if at all, is not presently ascertainable.

we expect that our results of operations, including revenues, in future periods will continue to be adversely impacted by the

COVID-19 pandemic and its negative effects on global economic conditions, which include a global recession, and that, as a result

of such effects, we may continue to be adversely affected even after the COVID-19 pandemic has subsided.

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

value inventories at the lower of cost or net realizable value.

If the estimated net realizable value is determined to be less

than the recorded cost of the inventory, a provision is made to reduce the carrying amount of the inventory item to the lower

net realizable value determination.

Determination of the net realizable value may be complex, and therefore, requires management

to make assumptions and to apply a high degree of judgment.

In order for management to make the appropriate determination of net

realizable value, the following items are commonly considered:

inventory turnover statistics, inventory quantities on hand in

our facilities, unfilled customer order quantities, forecasted consumer demand, current prices, competitive pricing, seasonality

factors, consumer trends and performance of similar products or accessories.

Subsequent changes in facts or circumstances do not

result in the reversal of previously recorded write-downs.

example, we built substantial inventory of our products in anticipation of customer demands in 2020.

Due to a temporary slowdown

in construction of telecommunications towers in the U.S., we recorded lower than expected demand and sales of our products to

telecommunications customers, which resulted in a $3,400 inventory write-down to reduce the remaining inventory of our

products to its estimated net realizable value of $9,094 as of December 31, 2020.

our estimates regarding net realizable value are inaccurate, including our estimates regarding our inventory, or changes in customer

demand for our products in an unforeseen manner, we may experience additional write-downs of our inventory.

Although we have not

completed the preparation of our financial statements for the quarter ended March 31, 2021, we are in the process of undergoing

an evaluation of the net realizability of our assets, including the recoverability of our recorded inventory amounts.

completion of our analysis, there could be further adjustments to the carrying value of certain of our recorded assets, which

adjustments could be material.

have incurred significant losses in the past and we may incur losses in the future, which may hamper our operations and impede

us from expanding our business.

However, we expect that our results of operations, including revenues, in future periods will continue to be adversely impacted by the

COVID-19 pandemic and its negative effects on global economic conditions and that, as a result of such effects, we may continue to be

adversely affected even after the COVID-19 pandemic has materially subsided.

Terrorist attacks

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

recent special military actions of the Russian Federation and its invasion of Ukraine and the resulting geopolitical uncertainty are

likely to have a significant impact on the European Union, the United Kingdom and other countries, including the U.S.

that these military operations may expand beyond Ukraine may have a negative impact as well.

Significant increases in the price

of oil and natural gas have occurred and are likely to continue putting additional inflationary pressures on central banks, including

Federal Reserve System (the “FRB”).

It is expected that interest rate hikes already announced by the FRB will occur in

2022, but the amount, timing, and frequency of such increases are not fully known at this time.

The Russian Federation has also

threatened increased cyberattacks as part of its recent actions which could affect the Bank and its customers.

Additionally, the

United States and European nations have imposed very significant financial sanctions on the Russian Republic, including targeted sanctions

on Russian banks and wealthy individuals as well as halting certification of the Nord Stream 2 gas pipeline.

They have denied Russian

banks access the Society for Worldwide Interbank Financial Telecommunications or SWIFT which is expected to slow international trade

and make such transactions costlier to accomplish which could also negatively affect the Bank and its customers.

In response to

the Russian military actions, many businesses headquartered in the Eurozone and the United States have stopped doing business with Russia,

which may negatively affect the profitability of those companies.

The international turmoil has already had and may continue to

have a negative impact on the stock market generally and, in turn, on our stock price.

The full impact of the recent actions by the Russian

Federation regarding Ukraine are not known at this time, but they could have a material adverse impact on our business, financial condition,

results of operations, and stock price.

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

expanding our business.

have incurred significant losses in the past.

For the years ended December 31, 2020 and 2019, we incurred consolidated net losses

of approximately $10.8 million and $4.0 million, respectively.

For the year ended December 31, 2020, we incurred a gross loss

of approximately $5.6 million.

We may incur net and gross losses in the future.

We expect to rely on cash on hand, cash, if any,

generated from our operations, borrowing availability under our line of credit and proceeds from our future financing activities,

if any, to fund all of the cash requirements of our business.

Additional losses may hamper our operations and impede us from expanding

our business.

are dependent on, and derive substantially all of our revenue from, sales of our DC base power systems to three customers within

For the years ended December 31, 2021 and 2020, we incurred consolidated net losses of

approximately $1.4 million and $10.8 million, respectively.

For the year ended December 31, 2021, we incurred a gross profit of approximately

$3.4 million, and for the year ended December 31, 2020, we incurred a gross loss of approximately $5.6 million.

We may incur net and

gross losses in the future.

We expect to rely on cash on hand, cash, if any, generated from our operations, borrowing availability under

our line of credit and proceeds from our future financing activities, if any, to fund all of the cash requirements of our business.

losses may hamper our operations and impede us from expanding our business.

are dependent on, and derive substantially all of our revenue from, sales of our DC base power systems to one customer within the U.S.

telecommunications market.

Our efforts to expand our customer base, our product portfolio or markets within which we

operate may not succeed and may reduce our revenue growth rate.

derive substantially all our revenues from sales of our DC base power systems to three customers within the telecommunications

market, AT&T, T-Mobile and Verizon Wireless.

The volume of sales to anyone of them may vary significantly from year to year.

Any factor adversely affecting sales of these power systems to these customers or to other customers within this market, including

market acceptance, product competition, performance and reliability, reputation, price competition and economic and market conditions,

could adversely affect our business and results of operations.

For example, during the 2020, our U.S.

Tier-1 telecommunications

customers postponed orders and shipments due to factors that we believe were related to both the shift in the allocation capital

budgets from backup power solutions to 5G programs and the impact of COVID-19, which resulted in a 64% decline in net revenues

Tier-1 telecommunications customers during 2020 as compared to 2019.

addition, any unfavorable change in our business relationship with our Tier-1 telecommunications wireless carrier customers, or

delays in customer implementation and deployment of our products, could have a material adverse effect on our results of operation

and financial condition.

Our plans to invest in the development of electric vehicle chargers, residential and commercial power

products and higher capacity DC hybrid solar systems may not result in an anticipated growth in sales and may reduce our revenue

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

and financial performance.

design and sales cycle for our DC power systems, from initial contact with our potential customer to the shipments of our product,

may be lengthy.

Our efforts to expand our customer base, our product portfolio or markets within which we operate may not

succeed and may reduce our revenue growth rate.

derive substantially all our revenues from sales of our DC base power systems to one customer within the telecommunications market, AT&T.

The volume of sales to them may vary significantly from year to year.

Any factor adversely affecting sales of these power systems to

this customer or to other customers within this market, including market acceptance, product competition, performance and reliability,

reputation, price competition and economic and market conditions, could adversely affect our business and results of operations.

addition, any unfavorable change in our business relationship with our Tier-1 telecommunications wireless carrier customers, or delays

in customer implementation and deployment of our products, could have a material adverse effect on our results of operation and financial

Our plans to invest in the development of electric vehicle chargers, residential and commercial power products and higher

capacity DC hybrid solar systems may not result in an anticipated growth in sales and may reduce our revenue growth rate.

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

design and sales cycle for our DC power systems, from initial contact with our potential customer to the shipments of our product, may

Customers generally consider a wide range of factors before making a purchase decision.

Prior to purchasing our

products, our customers often require a significant technical review, tests and evaluations over long periods of time, assessments

of competitive products and approval at a number of management levels within their organization.

During the time our customers

are evaluating our products, we may incur substantial sales and service, engineering and research and development expenses to

customize our products to meet customer’s application needs.

We may also expend significant management efforts, increase

manufacturing capacity, order long-lead-time components or purchase significant amounts of components and other inventory prior

to receiving an order.

Prior to purchasing our products,

many of our customers often require a significant technical review, tests and evaluations over long periods of time (i.e., three to twenty-four

months), assessments of competitive products and approval at a number of management levels within their organization.

During the time

our customers are evaluating our products, we may incur substantial sales and service, engineering and research and development expenses

to customize our products to meet customer’s application needs.

We may also expend significant management efforts, increase manufacturing

capacity, order long-lead-time components or purchase significant amounts of components and other inventory prior to receiving an order.

Even after this evaluation process, a potential customer may not purchase our products.

product development time before a customer agrees to purchase our DC power systems can be considerable.

Our process for developing

an integrated solution may require use of significant engineering resources, including design, prototyping, modeling, testing

and application engineering.

The length of this cycle is influenced by many factors, including the difficulty of the technical

specification and complexity of the design and the customer’s procurement processes.

A significant period may elapse between

our investment of time and resources in designing and developing a product for a customer and receipt of revenue from sales of

that product .

The length of this process, combined with unanticipated delays in the

development cycles and the effects of COVID-19 on our ability to demonstrate our products to current and potential customers could

materially affect our results of operations and financial conditions.

Our process for developing an

integrated solution may require use of significant engineering resources, including design, prototyping, modeling, testing and application

The length of this cycle is influenced by many factors, including the difficulty of the technical specification and complexity

of the design and the customer’s procurement processes.

A significant period may elapse between our investment of time and resources

in designing and developing a product for a customer and receipt of revenue from sales of that product.

The length of this process, combined

with unanticipated delays in the development cycles and the effects of COVID-19 on our ability to demonstrate our products to current

and potential customers could materially affect our results of operations and financial conditions.

do not have long-term commitments for significant revenues with most of our customers and may be unable to retain existing customers,

attract new customers or replace departing customers with new customers that can provide comparable revenues and profit margins.

we generally do not obtain firm, long-term volume purchase commitments from our customers, most of our sales are derived from

individual purchase orders.

We remain dependent upon securing new purchase orders in the future in order to sustain and grow our

Accordingly, there is no assurance that our revenues and business will grow in the future.

Our failure to maintain and

expand our customer relationships could materially and adversely affect our business and results of operations.

high concentration of our sales within the telecommunications market could result in a significant reduction in sales and negatively

affect our results of operations if demand for our DC power systems declines within this market.

expect to be predominately focused on the manufacturing, marketing and sales of DC power systems to telecommunications companies

for the foreseeable future.

We may be unable to shift our business focus away from these activities.

attract new customers or replace departing customers with new customers that can provide comparable revenues and profits.

we generally do not obtain firm, long-term volume purchase commitments from our customers, most of our sales are derived from individual

purchase orders.

We remain dependent upon securing new purchase orders in the future in order to sustain and grow our revenues.

there is no assurance that our revenues and business will grow in the future.

Our failure to maintain and expand our customer relationships

could materially and adversely affect our business and results of operations.

current high concentration of our sales within the telecommunications market could result in a significant reduction in sales and negatively

affect our profitability if demand for our DC power systems declines within this market before we are able to make significant inroads

with our diversification of markets and customers.

we are predominately focused on the manufacturing, marketing and sales of DC power systems to telecommunications companies.

unable to shift our business focus away from these activities to other potential markets for our products.

Accordingly, the emergence

of new competing DC power products or lower-cost alternative technologies may reduce the demand for our products.

A downturn in

the demand for our DC power systems within the telecommunications market would likely materially and adversely affect our sales

of new competing DC power products or lower-cost alternative technologies within the telecommunications market may reduce the demand

for our products.

A downturn in the demand for our DC power systems within this market could materially and adversely affect our sales

and results of operations.

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

value inventories at the lower of cost or net realizable value.

If the estimated net realizable value is determined to be less than the

recorded cost of the inventory, a provision is made to reduce the carrying amount of the inventory item to the lower net realizable value

determination.

Determination of the net realizable value may be complex, and therefore, requires management to make assumptions and to

apply a high degree of judgment.

In order for management to make the appropriate determination of net realizable value, the following

items are commonly considered:

inventory turnover statistics, inventory quantities on hand in our facilities, unfilled customer order

quantities, forecasted consumer demand, current prices, competitive pricing, seasonality factors, consumer trends and performance of

similar products or accessories.

Subsequent changes in facts or circumstances do not result in the reversal of previously recorded write-downs.

our estimates regarding net realizable value are inaccurate, including our estimates regarding our inventory, or changes in customer

demand for our products in an unforeseen manner, we may experience additional write-downs of our inventory.

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

operations require raw materials, such as aluminum, copper, engines, electronics, and permanent magnets.

Commodities such as aluminum

and copper are known to have significant price volatility based on global economic conditions.

An increase in global economic outlook

may result in significant price increases in the cost of our raw materials.

In addition, we use Neodymium permanent magnets in our alternators,

for which there are a limited number of global suppliers that can meet our standards.

Increase in manufacturing of electric vehicles

worldwide can have an adverse effect on the cost or supply of these magnets.

At our current production volumes, we are unable to secure

large quantities of these commodities at fixed prices;

however, we do have multiple sources of supply for our raw materials to meet our

near term forecasted needs.

Various factors could reduce the availability of raw materials and components and shortages may occur from

time to time in the future.

An increase in lead times for the supply of raw materials due to a global increase in demand for commodities

or other reasons may significantly increase the timing of receipt of such materials and/or increase the material costs of our products.

For example, as a result of the COVID-19 pandemic, we are currently experiencing both delays in sourcing, and price increases of, certain

key components.

As a result of these delays, our standard eight-week delivery time has increased to fourteen weeks.

In addition, if production

was interrupted due to unavailability or shortage of raw materials and we were not able to find alternate third-party suppliers or re-engineer

our products to accommodate different components or materials, we could experience disruptions in manufacturing and operations including

product shortages, higher freight costs and re-engineering costs.

If our supply of raw materials or components continues to be disrupted

or our lead times extended, our business, results of operations or financial condition could be materially adversely affected.

markets within which we compete are highly competitive.

Many of our competitors have greater financial and other resources than

we do and one or more of these competitors could use their greater financial and other resources to gain market share at our expense.

Many of our competitors have greater financial and other resources than we do

and one or more of these competitors could use their greater financial and other resources to gain market share at our expense.

our business continues to develop as expected, we anticipate that we will grow our revenues in the near future.

If, due to capital

constraints or otherwise, we are unable to fulfill our existing backlog in a timely manner and/or procure and timely fulfill our

anticipated future backlog, our customers and potential customers may decide to use competing DC power systems or continue the

use of AC power systems.

If we are unable to fulfill the demand for products and services in a timely manner, our customers and

potential customers may choose to purchase products from our competitors.

Some of our larger competitors may be willing to reduce

prices and accept lower margins in order to compete with us.

In addition, we could face new competition from large international

or domestic companies with established industrial brands and distribution networks that enter our end markets.

Demand for our

products may also be affected by our ability to respond to changes in design and functionality, to respond to downward pricing

pressure, and to provide shorter lead times for our products than our competitors.

If we are unable to respond successfully to

these competitive pressures, we could lose market share, which could have an adverse impact on our results.

We cannot assure that

we will be able to compete successfully in our markets or compete effectively against current and new competitors as our industry

continues to evolve.

technological changes may prevent us from remaining current with our technological resources and maintaining competitive product

and service offerings.

If, due to capital constraints

or otherwise, we are unable to fulfill our existing backlog in a timely manner and/or procure and timely fulfill our anticipated future

backlog, our customers and potential customers may decide to use competing DC power systems or continue the use of AC power systems.

If we are unable to fulfill the demand for products and services in a timely manner, our customers and potential customers may choose

to purchase products from our competitors.

Some of our larger competitors may be willing to reduce prices and accept lower margins in

order to compete with us.

In addition, we could face new competition from large international or domestic companies with established

industrial brands and distribution networks that enter our end markets.

Demand for our products may also be affected by our ability to

respond to changes in design and functionality, to respond to downward pricing pressure, and to provide shorter lead times for our products

than our competitors.

If we are unable to respond successfully to these competitive pressures, we could lose market share, which could

have an adverse impact on our results.

We cannot assure that we will be able to compete successfully in our markets or compete effectively

against current and new competitors as our industry continues to evolve.

technological changes may prevent us from remaining current with our technological resources and maintaining competitive product and

service offerings.

markets in which we and our customers operate are characterized by rapid technological change, especially within the telecommunications

Significant technological changes could render our existing and potential new products, services and technology obsolete.

Our future success will depend, in large part, upon our ability to:

future success will depend, in large part, upon our ability to:

identify and develop leading energy efficient technologies;

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

we are unable to successfully respond to technological change or if we do not respond to it in a cost-effective and timely manner,

then our business will be materially and adversely affected.

We cannot assure you that we will be successful in responding to

changing technology.

In addition, technologies developed by others may render our products, services and technology uncompetitive

Even if we do successfully respond to technological advances, the integration of new technology may require substantial

time and expense, and we cannot assure you that we will succeed in adapting our products, services and technology in a timely

and cost-effective manner.

we are unable to continue to develop new and enhanced products and services that achieve market acceptance in a timely manner,

our competitive position and operating results could be harmed.

we are unable to successfully respond to technological change or if we do not respond to it in a cost-effective and timely manner, then

our business will be materially and adversely affected.

We cannot assure you that we will be successful in responding to changing technology.

In addition, technologies developed by others may render our products, services and technology uncompetitive or obsolete.

do successfully respond to technological advances, the integration of new technology may require substantial time and expense, and we

cannot assure you that we will succeed in adapting our products, services and technology in a timely and cost-effective manner.

we are unable to continue to develop new and enhanced products and services that achieve market acceptance in a timely manner, our competitive

position and operating results could be harmed.

future success will depend on our ability to continue to develop new and enhanced DC power systems and related products and services

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The markets in which we and our customers operate are characterized

by frequent introductions of new and enhanced products and services, evolving industry standards and regulatory requirements,

government incentives and changes in customer needs.

The successful development and market acceptance of our products and services,

including our new LPG / natural gas line of generators and solar hybrid power systems, depends on a number of factors, including:

by frequent introductions of new and enhanced products and services, evolving industry standards and regulatory requirements, government

incentives and changes in customer needs.

The successful development and market acceptance of our products and services depends on a

number of factors, including:

impact of the COVID-19 pandemic on the global markets;

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in industry standards.

may experience financial or technical difficulties or limitations that could prevent us from introducing new or enhanced products

Furthermore, any of these new or enhanced products and services could contain problems that are discovered after

they are introduced.

may experience financial or technical difficulties or limitations that could prevent us from introducing new or enhanced products or

Furthermore, any of these new or enhanced products and services could contain problems that are discovered after they are introduced.

We may need to significantly modify the design of these products and services to correct problems.

changing industry standards and customer preferences and requirements may impede market acceptance of our products and services.

Rapidly changing industry standards

and customer preferences and requirements may impede market acceptance of our products and services.

and enhancement of our products and services will require significant additional investment and could strain our management, financial

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from this development or enhancement to offset their development costs could have a material adverse effect on our business.

addition, we may experience delays or other problems in releasing new products and services and enhancements, and any such delays

or problems may cause customers to forego purchases of our products and services and to purchase those of our competitors.

cannot provide assurance that products and services that we have recently developed or that we develop in the future will achieve

market acceptance.

If our new products and services fail to achieve market acceptance, or if we fail to develop new or enhanced

products and services s that achieve market acceptance, our growth prospects, operating results and competitive position could

be adversely affected.

we may experience delays or other problems in releasing new products and services and enhancements, and any such delays or problems may

cause customers to forego purchases of our products and services and to purchase those of our competitors.

cannot provide assurance that products and services that we have recently developed or that we develop in the future will achieve market

If our new products and services fail to achieve market acceptance, or if we fail to develop new or enhanced products and

services s that achieve market acceptance, our growth prospects, operating results and competitive position could be adversely affected.

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

3 unchanged sentences

by natural disasters, fire, power shortages, pandemics and other events beyond our control.

Although we maintain crisis management

and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers

and could decrease demand for our services.

are dependent on relationships with our key material suppliers, and the partial or complete loss of one of these key suppliers,

or the failure to find replacement suppliers or manufacturers in a timely manner, could adversely affect our business.

have established relationships with third party engine suppliers and other key suppliers from which we source components for our

power systems.

We purchase standard configurations of engines for our DC power systems and are substantially dependent on timely

supply from our key engine suppliers, Yanmar Engines Company, and Toyota Corporation.

Engines from Yanmar and Toyota represented

approximately 66%, and 18% of our total engines sold as a component of our DC power systems during 2020, respectively, and represented

approximately 70%, 0% of our total engines sold as components of our DC power systems during 2019, respectively.

Although we maintain crisis management and

disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers and could

decrease demand for our services.

are dependent on relationships with our key material suppliers, and the partial or complete loss of one of these key suppliers, or the

failure to find replacement suppliers or manufacturers in a timely manner, could adversely affect our business.

have established relationships with third-party engine suppliers and other key suppliers from which we source components for our power

We purchase standard configurations of engines for our DC power systems and are substantially dependent on timely supply from

our key engine suppliers, Yanmar Engines Company and Toyota Corporation.

Engines from Yanmar and Toyota represented approximately 84%

and 6% of our total engines sold as a component of our DC power systems during 2021, respectively, and represented approximately 66%

and 18% of our total engines sold as components of our DC power systems during the same period in 2020, respectively.

We also use engines

from Isuzu, Perkins, Kubota and, to a lesser extent, Volvo Penta.

In December 2019, we received our certificate of conformity

from the EPA with respect to our small spark-ignition Toyota engines which will be used in our new LPG / natural gas generators.

The new Toyota engine serves as our primary engine in our new LPG products which were launched in 2020.

We do not have any long-term

contracts or commitments with any of these suppliers.

If any of these engine suppliers were to fail to provide emissions certified

engines in a timely manner or fail to supply engines that meet our quality, quantity or cost requirements, or were to discontinue

manufacturing any engines we source from them or discontinue providing any of these engines to us, or the supply chain is interrupted

or delayed as a result of the COVID-19 pandemic or unprecedented event, and we were unable to obtain substitute sources in a timely

manner or on terms acceptable to us, our ability to manufacture our products could be materially adversely affected.

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

prices of some of the key components of our DC power systems are subject to fluctuation due to market forces beyond our control,

including changes in the costs of raw materials incorporated into these components.

Such price increases occur from time to time

due to spot shortages of commodities, increases in labor costs or longer-term shortages due to market forces.

In particular, the

prices of engines can fluctuate frequently and often significantly.

We do not have any long-term contracts or commitments with

our two key engine suppliers.

Substantial increases in the prices of raw materials used in components which we source from our

suppliers may result in increased prices charged by our suppliers.

If we incur price increases from our suppliers for key components

in our DC power systems, our production costs will increase.

Given competitive market conditions, we may not be able to pass all

or any of those cost increases on to our customers in the form of higher sales prices.

To the extent our competitors do not suffer

comparable component cost increases, we may have even greater difficulty passing along price increases and our competitive position

may be harmed.

As a result, increases in costs of key components may adversely affect our margins and otherwise adversely affect

our operating results and cash flows.

In December 2019, we received our certificate of conformity from the

EPA with respect to our small spark-ignition Toyota engines which will be used in our new LPG / natural gas generators.

The new Toyota

engine serves as our primary engine in our new LPG products which were launched in 2020.

In January 2022, we applied for EPA certification

on our 4Y Toyota engine, which is a larger engine model for used on our 20 to 30 kW DC power systems.

We do not have any long-term contracts

or commitments with any of these suppliers.

If any of these engine suppliers were to fail to provide emissions certified engines in a

timely manner or fail to supply engines that meet our quality, quantity or cost requirements, or were to discontinue manufacturing any

engines we source from them or discontinue providing any of these engines to us, or the supply chain is interrupted or delayed as a result

of the COVID-19 pandemic or unprecedented event, and we were unable to obtain substitute sources in a timely manner or on terms acceptable

to us, our ability to manufacture our products could be materially adversely affected.

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

prices of some of the key components of our DC power systems are subject to fluctuation due to market forces beyond our control, including

changes in the costs of raw materials incorporated into these components.

Such price increases occur from time to time due to spot shortages

of commodities, increases in labor costs or longer-term shortages due to market forces.

In particular, the prices of engines can fluctuate

frequently and often significantly.

We do not have any long-term contracts or commitments with our two key engine suppliers.

increases in the prices of raw materials used in components which we source from our suppliers may result in increased prices charged

by our suppliers.

If we incur price increases from our suppliers for key components in our DC power systems, our production costs will

Given competitive market conditions, we may not be able to pass all or any of those cost increases on to our customers in the

form of higher sales prices.

To the extent our competitors do not suffer comparable component cost increases, we may have even greater

difficulty passing along price increases and our competitive position may be harmed.

As a result, increases in costs of key components

may adversely affect our margins and otherwise adversely affect our operating results and cash flows.

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

portion of our key components, such as engines, magnets and cooling systems, are purchased from suppliers located overseas, primarily

Our international sourcing subjects us to a number of potential risks in addition to the risks associated with third-party

sourcing generally.

Our international sourcing subjects us to a number of potential risks in addition to the risks associated with third-party sourcing

These risks include:

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In particular, if the U.S.

were to depreciate significantly against the currencies in which we purchase raw materials from foreign suppliers, our cost of

goods sold could increase materially, which would adversely affect our results of operations.

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

and profitability.

to depreciate significantly against the currencies in which we purchase raw materials from foreign suppliers, our cost of goods sold

could increase materially, which would adversely affect our results of operations.

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

operations require raw materials, such as aluminum, copper and permanent magnets.

Commodities such as aluminum and copper are

known to have significant price volatility based on global economic conditions.

An increase in global economic outlook may result

in significant price increases in the cost of our raw materials.

In addition, we use Neodymium permanent magnets in our alternators,

for which there are a limited number of global suppliers that can meet our standards.

Increase in manufacturing of electric vehicles

worldwide can have an adverse effect on the cost or supply of these magnets.

At our current production volumes, we are unable

to secure large quantities of these commodities at fixed prices;

however, we do have multiple sources of supply for our raw materials

to meet our near term forecasted needs.

Various factors could reduce the availability of raw materials and components and shortages

may occur from time to time in the future.

An increase in lead times for the supply of raw materials due to a global increase

in demand for commodities outlined may significantly increase material costs of our products.

If production was interrupted due

to unavailability or shortage of raw materials and we were not able to find alternate third-party suppliers or re-engineer our

products to accommodate different components or materials, we could experience disruptions in manufacturing and operations including

product shortages, higher freight costs and re-engineering costs.

If our supply of raw materials or components is disrupted or

our lead times extended, our business, results of operations or financial condition could be materially adversely affected.

Commodities such as aluminum and copper are known to

have significant price volatility based on global economic conditions.

An increase in global economic outlook may result in significant

price increases in the cost of our raw materials.

In addition, we use Neodymium permanent magnets in our alternators, for which there

are a limited number of global suppliers that can meet our standards.

Increase in manufacturing of electric vehicles worldwide can have

an adverse effect on the cost or supply of these magnets.

At our current production volumes, we are unable to secure large quantities

of these commodities at fixed prices;

however, we do have multiple sources of supply for our raw materials to meet our near term forecasted

Various factors could reduce the availability of raw materials and components and shortages may occur from time to time in the

An increase in lead times for the supply of raw materials due to a global increase in demand for commodities outlined may significantly

increase material costs of our products.

If production was interrupted due to unavailability or shortage of raw materials and we were

not able to find alternate third-party suppliers or re-engineer our products to accommodate different components or materials, we could

experience disruptions in manufacturing and operations including product shortages, higher freight costs and re-engineering costs.

our supply of raw materials or components is disrupted or our lead times extended, our business, results of operations or financial condition

could be materially adversely affected.

manufacture and assemble a majority of our products at two facilities.

Any prolonged disruption in the operations of these facilities

would result in a decline in our sales and profitability.

Any prolonged disruption in the operations of this facility would

result in a decline in our sales and profitability.

manufacture and assemble our DC power systems at our two production facilities located in Gardena, California.

Any prolonged disruption

in the operations of our manufacturing and assembly facilities, whether due to the COVID-19 pandemic, equipment or information

technology infrastructure failure, labor difficulties, destruction of or damage to one or both of these facilities as a result

of an earthquake, fire, flood, other catastrophes, and other operational problems would result in a decline in our sales and profitability.

In the event of a business interruption at our facilities, we may be unable to shift manufacturing and assembly capabilities to

alternate locations, accept materials from suppliers or meet customer shipment needs, among other severe consequences.

event could have a material and adverse impact on our financial condition and results of our operations.

in the operations of our manufacturing and assembly facilities, whether due to the COVID-19 pandemic, equipment or information technology

infrastructure failure, labor difficulties, destruction of or damage to one or both of these facilities as a result of an earthquake,

fire, flood, other catastrophes, and other operational problems would result in a decline in our sales and profitability.

of a business interruption at our facilities, we may be unable to shift manufacturing and assembly capabilities to alternate locations,

accept materials from suppliers or meet customer shipment needs, among other severe consequences.

Such an event could have a material

and adverse impact on our financial condition and results of our operations.

business operations are subject to substantial government regulation.

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.

For example, our products, services

and technologies are subject to regulations relating to building codes, public safety, electrical connections, security protocols, and

local and state licensing requirements.

The regulations to which we are subject may change, additional regulations may be imposed, or

existing regulations may be applied in a manner that creates special requirements for the implementation and operation of our products

or services that may significantly impact or even eliminate some of our revenues or markets.

In addition, we may incur material costs

or liabilities in complying with any such regulations.

Furthermore, some of our customers must comply with numerous laws and regulations,

which may affect their willingness and ability to purchase our products, services and technologies.

Additionally, we are subject to laws,

regulations and other governmental actions instituted in response to the COVID-19 pandemic.

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

certain of our products for customers in the telecommunications industry are used in critical communications networks, we may

be subject to significant liability claims if our products do not work properly.

We warrant to our customers that our products

will operate in accordance with our product specifications.

If our products fail to conform to these specifications, our customers

could require us to remedy the failure or could assert claims for damages.

The provisions in our agreements with customers that

are intended to limit our exposure to liability claims may not preclude all potential claims.

In addition, any insurance policies

we have may not adequately limit our exposure with respect to such claims.

Liability claims could require us to spend significant

time and money in litigation or to pay significant damages.

Any such claims, whether or not successful, would be costly and time-consuming

to defend, and could divert management’s attention and seriously damage our reputation and our business.

certain of our products for customers in the telecommunications industry are used in critical communications networks, we may be subject

to significant liability claims if our products do not work properly.

We warrant to our customers that our products will operate in accordance

with our product specifications.

If our products fail to conform to these specifications, our customers could require us to remedy the

failure or could assert claims for damages.

The provisions in our agreements with customers that are intended to limit our exposure to

liability claims may not preclude all potential claims.

In addition, any insurance policies we have may not adequately limit our exposure

with respect to such claims.

Liability claims could require us to spend significant time and money in litigation or to pay significant

Any such claims, whether or not successful, would be costly and time-consuming to defend, and could divert management’s

attention and seriously damage our reputation and our business.

could be adversely affected by our failure to comply with the laws applicable to our foreign activities, including the U.S.

Corrupt Practices Act and other similar worldwide anti-bribery laws.

Foreign Corrupt Practices Act, or the FCPA, and similar anti-bribery laws in other jurisdictions prohibit U.S.-based companies

and their intermediaries from making improper payments to non-U.S.

Foreign Corrupt

Practices Act and other similar worldwide anti-bribery laws.

Foreign Corrupt Practices Act, or the FCPA, and similar anti-bribery laws in other jurisdictions prohibit U.S.-based companies and

their intermediaries from making improper payments to non-U.S.

officials for the purpose of obtaining or retaining business.

We may pursue opportunities in certain parts of the world that experience government corruption, and in certain circumstances,

compliance with anti-bribery laws may conflict with local customs and practices.

Our policies mandate compliance with all applicable

anti-bribery laws.

Further, we require our partners, subcontractors, agents and others who work for us or on our behalf to comply

with the FCPA and other anti-bribery laws.

Although we have policies and procedures, and have conducted training, designed to

ensure that we, our employees, our agents and others who work with us in foreign countries comply with the FCPA and other anti-bribery

laws, there is no assurance that such policies, procedures or training will protect us against liability under the FCPA or other

laws for actions taken by our agents, employees and intermediaries.

If we are found to be liable for FCPA violations (either due

to our own acts or inadvertence, or due to the acts or inadvertence of others), we could suffer from severe criminal or civil

penalties or other sanctions, which could have a material adverse effect on our reputation, business, results of operations or

In addition, detecting, investigating and resolving actual or alleged FCPA violations is expensive and could consume

significant time and attention of our senior management.

We may pursue

opportunities in certain parts of the world that experience government corruption, and in certain circumstances, compliance with anti-bribery

laws may conflict with local customs and practices.

Our policies mandate compliance with all applicable anti-bribery laws.

require our partners, subcontractors, agents and others who work for us or on our behalf to comply with the FCPA and other anti-bribery

Although we have policies and procedures, and have conducted training, designed to ensure that we, our employees, our agents and

others who work with us in foreign countries comply with the FCPA and other anti-bribery laws, there is no assurance that such policies,

procedures or training will protect us against liability under the FCPA or other laws for actions taken by our agents, employees and

intermediaries.

If we are found to be liable for FCPA violations (either due to our own acts or inadvertence, or due to the acts or inadvertence

of others), we could suffer from severe criminal or civil penalties or other sanctions, which could have a material adverse effect on

our reputation, business, results of operations or cash flows.

In addition, detecting, investigating and resolving actual or alleged

FCPA violations is expensive and could consume significant time and attention of our senior management.

are exposed to risks related to our international sales, and the failure to manage these risks could harm our business.

fail to expand our business into international markets, our revenues and results of operations may be adversely affected .

If we fail to

expand our business into international markets, our revenues and results of operations may be adversely affected .

addition to our sales to customers within the U.S., we may become increasingly dependent on sales to customers outside the U.S.

as we pursue expanding our business with customers worldwide.

In 2020 and 2019, our sales to international customers accounted

for 17% and 1%, respectively, of total revenue.

We continue to expect that a significant portion of our future revenues will be

from international sales to customers in less developed or developing countries.

As a result, the occurrence of any international,

political, economic, or geographic event could result in a significant decline in revenue.

There are significant risks associated

with conducting operations internationally, requiring significant financial commitments to support such operations.

These operations

present a number of challenges including oversight of daily operating practices in each location, handling employee benefits and

employee behavior.

In addition, compliance with complex foreign and U.S.

laws and regulations that apply to our international

operations increases our cost of doing business in international jurisdictions.

These numerous and sometimes conflicting laws

and regulations include internal control and disclosure rules, data privacy and filtering requirements, anti-corruption laws,

such as the FCPA, and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations,

among others.

of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers, or our employees,

prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and

could also materially affect our brand, our international expansion efforts, our ability to attract and retain employees, our

business, and our operating results.

Although we have implemented policies and procedures designed to ensure compliance with these

laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies.

pursue expanding our business with customers worldwide.

During 2021, and 2020, our sales to international customers accounted for 8%

and 17%, respectively, of total revenue.

We continue to expect that a significant portion of our future revenues will be from international

sales to customers in less developed or developing countries.

As a result, the occurrence of any international, political, economic,

or geographic event could result in a significant decline in revenue.

There are significant risks associated with conducting operations

internationally, requiring significant financial commitments to support such operations.

These operations present a number of challenges

including oversight of daily operating practices in each location, handling employee benefits and employee behavior.

In addition, compliance

with complex foreign and U.S.

laws and regulations that apply to our international operations increases our cost of doing business in

international jurisdictions.

These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules,

data privacy and filtering requirements, anti-corruption laws, such as the FCPA, and other local laws prohibiting corrupt payments to

governmental officials, and anti-competition regulations, among others.

of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions

on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially

affect our brand, our international expansion efforts, our ability to attract and retain employees, our business, and our operating results.

Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance

that our employees, contractors, or agents will not violate our policies.

of the risks and challenges of conducting business internationally include:

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risk of a failure of foreign employees to comply with both U.S.

and foreign laws, including export and antitrust regulations,

the FCPA and any trade regulations ensuring fair trade practices;

risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that

may impact financial results and result in restatements of, or irregularities in, financial statements;

and foreign laws, including export and antitrust regulations, the

FCPA and any trade regulations ensuring fair trade practices;

risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact

financial results and result in restatements of, or irregularities in, financial statements;

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

4 unchanged sentences

financial condition and results of operations in the future.

through security vulnerabilities could lead to disruption of business, reduced revenue, increased costs, liability claims, or

harm to our reputation or competitive position.

vulnerabilities may arise from our hardware, software, employees, contractors or policies we have deployed, which may result in

external parties gaining access to our networks, data centers, cloud data centers, corporate computers, manufacturing systems,

and/or access to accounts we have at our suppliers, vendors, and customers.

External parties may gain access to our data or our

customers’

data, or attack the networks causing denial of service or attempt to hold our data or systems in ransom.

vulnerability could be caused by inadequate account security practices such as failure to timely remove employee access when terminated.

To mitigate these security issues, we have implemented measures throughout our organization, including firewalls, backups, encryption,

employee information technology policies and user account policies.

However, there can be no assurance these measures will be

sufficient to avoid cyberattacks.

If any of these types of security breaches were to occur and we were unable to protect sensitive

data, our relationships with our business partners and customers could be materially damaged, our reputation could be materially

harmed, and we could be exposed to a risk of litigation and possible significant liability.

through security vulnerabilities could lead to disruption of business, reduced revenue, increased costs, liability claims, or harm to

our reputation or competitive position.

vulnerabilities may arise from our hardware, software, employees, contractors or policies we have deployed, which may result in external

parties gaining access to our networks, data centers, cloud data centers, corporate computers, manufacturing systems, and/or access to

accounts we have at our suppliers, vendors, and customers.

External parties may gain access to our data or our customers’ data,

or attack the networks causing denial of service or attempt to hold our data or systems in ransom.

The vulnerability could be caused

by inadequate account security practices such as failure to timely remove employee access when terminated.

To mitigate these security

issues, we have implemented measures throughout our organization, including firewalls, backups, encryption, employee information technology

policies and user account policies.

However, there can be no assurance these measures will be sufficient to avoid cyberattacks.

of these types of security breaches were to occur and we were unable to protect sensitive data, our relationships with our business partners

and customers could be materially damaged, our reputation could be materially harmed, and we could be exposed to a risk of litigation

and possible significant liability.

if we fail to adequately maintain our information technology infrastructure, we may have outages and data loss.

Excessive outages

may affect our ability to timely and efficiently deliver products to customers or develop new products.

Such disruptions and data

loss may adversely impact our ability to fulfill orders and interrupt other processes.

Delayed sales or lost customers resulting

from these disruptions could adversely affect our financial results, stock price and reputation.

Excessive outages may

affect our ability to timely and efficiently deliver products to customers or develop new products.

Such disruptions and data loss may

adversely impact our ability to fulfill orders and interrupt other processes.

Delayed sales or lost customers resulting from these disruptions

could adversely affect our financial results, stock price and reputation.

State of California enacted the California Consumer Privacy Act of 2018, or CCPA, effective on January 1, 2020.

Our and our business

partners’

or contractors’

failure to fully comply with the CCPA and other laws could lead to significant fines and

require onerous corrective action.

In addition, data security breaches experienced by us or our business partners or contractors

could result in the loss of trade secrets or other intellectual property, public disclosure of sensitive commercial data, and

the exposure of personally identifiable information (including sensitive personal information) of our employees, customers, suppliers,

contractors and others.

use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our

systems, breach of the systems of our suppliers or vendors by an unauthorized party, or through employee or contractor error,

theft or misuse, or otherwise, could harm our business.

If any such unauthorized use or disclosure of, or access to, such personal

information was to occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation

by private parties, and investigations, related actions, and penalties by regulatory authorities.

In addition, we could incur

significant costs in notifying affected persons and entities and otherwise complying with the multitude of foreign, federal, state

and local laws and regulations relating to the unauthorized access to, or use or disclosure of, personal information.

any perceived or actual unauthorized access to, or use or disclosure of, such information could harm our reputation, substantially

impair our ability to attract and retain customers and have an adverse impact on our business, financial condition and results

of operations.

partners’ or contractors’ failure to fully comply with the CCPA and other laws could lead to significant fines and require

onerous corrective action.

In addition, data security breaches experienced by us or our business partners or contractors could result

in the loss of trade secrets or other intellectual property, public disclosure of sensitive commercial data, and the exposure of personally

identifiable information (including sensitive personal information) of our employees, customers, suppliers, contractors and others.

use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our systems,

breach of the systems of our suppliers or vendors by an unauthorized party, or through employee or contractor error, theft or misuse,

or otherwise, could harm our business.

If any such unauthorized use or disclosure of, or access to, such personal information was to

occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and

investigations, related actions, and penalties by regulatory authorities.

In addition, we could incur significant costs in notifying

affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating

to the unauthorized access to, or use or disclosure of, personal information.

Finally, any perceived or actual unauthorized access to,

or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain customers

and have an adverse impact on our business, financial condition and results of operations.

Related to Our Intellectual Property

1 unchanged sentence

and adversely affect our business.

success and ability to compete depends, in substantial part, upon our ability to develop and protect our proprietary technology

and intellectual property rights to distinguish our products, services and technology from those of our competitors.

The unauthorized

use of our intellectual property rights and proprietary technology by others could materially harm our business.

success and ability to compete depends, in substantial part, upon our ability to develop and protect our proprietary technology and intellectual

property rights to distinguish our products, services and technology from those of our competitors.

The unauthorized use of our intellectual

property rights and proprietary technology by others could materially harm our business.

Historically,

we have relied primarily on a combination of trademark, copyright and trade secret laws, along with non-competition and confidentiality

agreements, contractual provisions, licensing arrangements and proprietary software and manufacturing processes, to establish

and protect our intellectual property rights.

Although we hold several unregistered copyrights in our business, we believe that

the success of our business depends more upon our proprietary technology, information, processes and know-how than on patents

or trademark registrations.

agreements, contractual provisions, licensing arrangements and proprietary software and manufacturing processes, to establish and protect

our intellectual property rights.

Although we hold several unregistered copyrights in our business, we believe that the success of our

business depends more upon our proprietary technology, information, processes and know-how than on patents or trademark registrations.

In addition, much of our proprietary information and technology may not be patentable;

if we decided

to apply for patents and/or trademarks in the future, we might not be successful in obtaining any such future patents or in registering

our efforts to protect our intellectual property rights, existing laws afford only limited protection, and our actions may be

inadequate to protect our rights or to prevent others from claiming violations of their proprietary rights.

Unauthorized third

parties may attempt to copy, reverse engineer or otherwise obtain, use or exploit aspects of our products and services, develop

similar technology independently, or otherwise obtain and use information that we regard as proprietary.

We cannot assure you

that our competitors will not independently develop technology similar or superior to our technology or design around our intellectual

In addition, the laws of some foreign countries may not protect our proprietary rights as fully or in the same manner

as the laws of the U.S.

may need to resort to litigation to enforce our intellectual property rights, to protect our trade secrets, and to determine the

validity and scope of other companies’

proprietary rights in the future.

However, litigation could result in significant

costs and in the diversion of management and financial resources.

We cannot assure you that any such litigation will be successful

or that we will prevail over counterclaims against us.

Our failure to protect any of our important intellectual property rights

or any litigation that we resort to in order to enforce those rights could materially and adversely affect our business.

we face claims of intellectual property infringement by third parties, we could encounter expensive litigation, be liable for

significant damages or incur restrictions on our ability to sell our products and services.

we are not aware of any present infringement of our products, services or technology on the intellectual property rights of others,

we cannot be certain that our products, services and technologies do not or in the future will not infringe on the valid intellectual

property rights held by third parties.

In addition, we cannot assure you that third parties will not claim that we have infringed

their intellectual property rights.

if we decided to apply for patents and/or trademarks

in the future, we might not be successful in obtaining any such future patents or in registering any marks.

our efforts to protect our intellectual property rights, existing laws afford only limited protection, and our actions may be inadequate

to protect our rights or to prevent others from claiming violations of their proprietary rights.

Unauthorized third parties may attempt

to copy, reverse engineer or otherwise obtain, use or exploit aspects of our products and services, develop similar technology independently,

or otherwise obtain and use information that we regard as proprietary.

We cannot assure you that our competitors will not independently

develop technology similar or superior to our technology or design around our intellectual property.

In addition, the laws of some foreign

countries may not protect our proprietary rights as fully or in the same manner as the laws of the U.S.

may need to resort to litigation to enforce our intellectual property rights, to protect our trade secrets, and to determine the validity

and scope of other companies’ proprietary rights in the future.

However, litigation could result in significant costs and in the

diversion of management and financial resources.

We cannot assure you that any such litigation will be successful or that we will prevail

over counterclaims against us.

Our failure to protect any of our important intellectual property rights or any litigation that we resort

to in order to enforce those rights could materially and adversely affect our business.

we face claims of intellectual property infringement by third parties, we could encounter expensive litigation, be liable for significant

damages or incur restrictions on our ability to sell our products and services.

we are not aware of any present infringement of our products, services or technology on the intellectual property rights of others, we

cannot be certain that our products, services and technologies do not or in the future will not infringe on the valid intellectual property

rights held by third parties.

In addition, we cannot assure you that third parties will not claim that we have infringed their intellectual

property rights.

recent years, there has been a significant amount of litigation in the U.S.

involving patents and other intellectual property

In the future, we may be a party to litigation as a result of an alleged infringement of others’

intellectual property.

Successful infringement claims against us could result in substantial monetary liability, require us to enter into royalty or

licensing arrangements, or otherwise materially disrupt the conduct of our business.

In addition, even if we prevail on these

claims, this litigation could be time-consuming and expensive to defend or settle, and could result in the diversion of our time

and attention and of operational resources, which could materially and adversely affect our business.

Any potential intellectual

property litigation also could force us to do one or more of the following:

involving patents and other intellectual property rights.

In the future, we may be a party to litigation as a result of an alleged infringement of others’ intellectual property.

infringement claims against us could result in substantial monetary liability, require us to enter into royalty or licensing arrangements,

or otherwise materially disrupt the conduct of our business.

In addition, even if we prevail on these claims, this litigation could be

time-consuming and expensive to defend or settle and could result in the diversion of our time and attention and of operational resources,

which could materially and adversely affect our business.

Any potential intellectual property litigation also could force us to do one

or more of the following:

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

from the owner of the infringed intellectual property right a license to sell or use the relevant technology, which license

may not be available on commercially reasonable terms, or at all;

from the owner of the infringed intellectual property right a license to sell or use the relevant technology, which license may not

be available on commercially reasonable terms, or at all;

the products and services that use the technology.

we are forced to take any of these actions, our business may be seriously harmed.

Although we carry general liability insurance,

our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be

Although we carry general liability insurance, our

insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed.

Related to Our Common Stock

operating results can fluctuate significantly from period to period, which makes our operating results difficult to predict and

can cause our operating results in any particular period to be less than comparable periods and expectations from time to time.

operating results have fluctuated significantly from quarter-to-quarter, period-to-period and year-to-year during our operating

history and are likely to continue to fluctuate in the future due to a variety of factors, many of which are outside of our control.

Certain factors that may affect our operating results include, without limitation, those set forth under “Management’s

Discussion and Analysis of Financial Condition and Results of Operations —Critical Accounting Policies”

in this Annual

Report on Form 10-K.

operating results can fluctuate significantly from period to period, which makes our operating results difficult to predict and can cause

our operating results in any particular period to be less than comparable periods and expectations from time to time.

operating results have fluctuated significantly from quarter-to-quarter, period-to-period and year-to-year during our operating history

and are likely to continue to fluctuate in the future due to a variety of factors, many of which are outside of our control.

factors that may affect our operating results include, without limitation, those set forth under “Management’s Discussion

and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in this Annual Report on Form

we have little or no control over many of these factors, our operating results are difficult to predict.

Any adverse change in

any of these factors could negatively affect our business and results of operations.

revenues, net income (loss) and other operating results are heavily dependent upon the size and timing of customer orders and

projects, and the timing of the completion of those projects.

The timing of our receipt of large individual orders, and of project

completion, is difficult for us to predict.

Because our operating expenses are based on anticipated revenues over the mid- and

long-term and because a high percentage of our operating expenses are relatively fixed, a shortfall or delay in recognizing revenues

can cause our operating results to vary significantly from quarter-to-quarter and can result in significant operating losses or

declines in profit margins in any particular quarter.

If our revenues fall below our expectations in any particular quarter, we

may not be able, or it may not be prudent for us, to reduce our expenses rapidly in response to the revenue shortfall, which can

result in us suffering significant operating losses or declines in profit margins in that quarter.

to these factors and the other risks discussed in this Annual Report on Form 10-K, you should not rely on quarter-to-quarter,

period-to-period or year-to-year comparisons of our results of operations as an indication of our future performance.

period and annual comparisons of our operating results are not necessarily meaningful or indicative of future performance.

a result, it is likely that, from time to time, our results of operations or our revenue backlog could fall below historical levels

or the expectations of public market analysts and investors, which could cause the trading price of our common stock to decline

significantly.

Chairman, President and Chief Executive Officer owns a significant amount of our common stock and will exercise significant influence

Any adverse change in any of

these factors could negatively affect our business and results of operations.

revenues, net income and other operating results are heavily dependent upon the size and timing of customer orders and projects, and

the timing of the completion of those projects.

The timing of our receipt of large individual orders, and of project completion, is difficult

for us to predict.

Because our operating expenses are based on anticipated revenues over the mid- and long-term and because a high percentage

of our operating expenses are relatively fixed, a shortfall or delay in recognizing revenues can cause our operating results to vary

significantly from quarter-to-quarter and can result in significant operating losses or declines in profit margins in any particular

If our revenues fall below our expectations in any particular quarter, we may not be able, or it may not be prudent for us,

to reduce our expenses rapidly in response to the revenue shortfall, which can result in us suffering significant operating losses or

declines in profit margins in that quarter.

to these factors and the other risks discussed in this Annual Report on Form 10-K, you should not rely on quarter-to-quarter, period-to-period

or year-to-year comparisons of our results of operations as an indication of our future performance.

Quarterly, period and annual comparisons

of our operating results are not necessarily meaningful or indicative of future performance.

As a result, it is likely that, from time

to time, our results of operations or our revenue backlog could fall below historical levels or the expectations of public market analysts

and investors, which could cause the trading price of our common stock to decline significantly.

Chairman, President and Chief Executive Officer owns a significant percentage of our common stock and will exercise significant influence

over matters requiring stockholder approval, regardless of the wishes of other stockholders.

Chairman, President, Chief Executive Officer and Secretary, Arthur D.

Sams, beneficially owns approximately 44% of our outstanding

shares of common stock.

Sams therefore has significant influence over management and significant control over matters requiring

stockholder approval, including the annual election of directors and significant corporate transactions, such as a merger or other

sale of our company or our assets, for the foreseeable future.

This concentrated control may limit stockholders’

to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial.

the market price of our common stock could be adversely affected.

Sams, beneficially owns approximately 44% of our outstanding shares

of common stock.

Sams therefore has significant influence over management and significant control over matters requiring stockholder

approval, including the annual election of directors and significant corporate transactions, such as a merger or other sale of our company

or our assets, for the foreseeable future.

This concentrated control may limit stockholders’ ability to influence corporate matters

and, as a result, we may take actions that our stockholders do not view as beneficial.

As a result, the market price of our common stock

could be adversely affected.

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

trading price of our shares of common stock is volatile and could be subject to wide fluctuations in response to various factors,

some of which are beyond our control, including limited trading volume.

In addition to the factors discussed in the “Risk

Factors”

trading price of our shares of common stock is volatile and could be subject to wide fluctuations in response to various factors, some

of which are beyond our control, including limited trading volume.

In addition to the factors discussed in the “Risk Factors”

section and elsewhere in this Annual Report on Form 10-K, these factors include, without limitation:

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

loss of significant customers, including AT&T, T-Mobile and Verizon Wireless;

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

or anticipated variations in our quarterly operating results;

4 unchanged sentences

inability to successfully enter new markets or develop additional products;

or anticipated fluctuations in our competitors’

operating results or changes in their respective growth rates;

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

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

4 unchanged sentences

or departures of key management, scientific or other personnel;

of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by

securities or industry analysts;

of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities

or industry analysts;

in the market valuation of similar companies;

3 unchanged sentences

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

the public equity markets have experienced extreme price and volume fluctuations that have affected and continue to affect the

market prices of equity securities of many companies.

These fluctuations often have been unrelated or disproportionate to the

operating performance of those companies.

These broad market and industry fluctuations, as well as general economic, political

and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact

the market price of our shares of common stock.

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

our ability to continue operations.

prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction

in our ability to raise capital.

We may attempt to acquire a significant portion of the funds we need in order to conduct our

planned operations through the sale of equity securities;

thus, a decline in the price of our common stock could be detrimental

to our liquidity and our operations because the decline may adversely affect investors’

desire to invest in our securities.

If we are unable to raise the funds we require for all of our planned operations, we may be forced to reallocate funds from other

planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop

new products or services and continue our current operations.

As a result, our business may suffer, and we may be forced to reduce

the public equity markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market

prices of equity securities of many companies.

These fluctuations often have been unrelated or disproportionate to the operating performance

of those companies.

These broad market and industry fluctuations, as well as general economic, political and market conditions such as

recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our shares of common

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

ability to continue operations.

prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in

our ability to raise capital.

We may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations

through the sale of equity securities;

thus, a decline in the price of our common stock could be detrimental to our liquidity and our

operations because the decline may adversely affect investors’ desire to invest in our securities.

If we are unable to raise the

funds we require for all of our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant

negative effect on our business plan and operations, including our ability to develop new products or services and continue our current

As a result, our business may suffer, and we may be forced to reduce or discontinue operations.

We also might not be able

to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to reduce

or discontinue operations.

We also might not be able to meet our financial obligations if we cannot raise enough funds through

the sale of our common stock and we may be forced to reduce or discontinue operations.

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

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

have never declared or paid cash dividends on our capital stock.

We intend to retain a significant portion of our future earnings,

if any, to finance the operations, development and growth of our business.

Any future determination to declare dividends will

be made at the discretion of our board of directors, subject to applicable laws, and will depend on number of factors, including

our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and

other factors that our board of directors may deem relevant.

As a result, only appreciation of the price of our common stock,

which may never occur, will provide a return to stockholders.

securities or industry analysts do not publish research or reports, or publish inaccurate or unfavorable research or reports about

our business, our share price and trading volume could decline.

trading market for our shares of common stock depends, in part, on the research and reports that securities or industry analysts

publish about us or our business.

We intend to retain a significant portion of our future earnings, if

any, to finance the operations, development and growth of our business.

Any future determination to declare dividends will be made at

the discretion of our board of directors, subject to applicable laws, and will depend on number of factors, including our financial condition,

results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of

directors may deem relevant.

As a result, only appreciation of the price of our common stock, which may never occur, will provide a return

to stockholders.

securities or industry analysts do not publish research or reports or publish inaccurate or unfavorable research or reports about our

business, our share price and trading volume could decline.

trading market for our shares of common stock depends, in part, on the research and reports that securities or industry analysts publish

about us or our business.

We do not have any control over these analysts.

If no securities or industry analysts undertake

coverage of our company, the trading price for our shares of common stock may be negatively impacted.

If we obtain securities

or industry analyst coverage and if one or more of the analysts who covers us downgrades our shares of common stock, changes their

opinion of our shares or publishes inaccurate or unfavorable research about our business, our share price would likely decline.

If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares of common

stock could decrease and we could lose visibility in the financial markets, which could cause our share price and trading volume

If no securities or industry analysts undertake coverage of

our company, the trading price for our shares of common stock may be negatively impacted.

If we obtain securities or industry analyst

coverage and if one or more of the analysts who covers us downgrades our shares of common stock, changes their opinion of our shares

or publishes inaccurate or unfavorable research about our business, our share price would likely decline.

If one or more of these analysts

ceases coverage of us or fails to publish reports on us regularly, demand for our shares of common stock could decrease and we could

lose visibility in the financial markets, which could cause our share price and trading volume to decline.

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

elected in our certificate of incorporation to not be subject to the provisions of Section 203 of the Delaware General Corporation

Law, or Section 203.

In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business

combination”

with an “interested stockholder”

for a period of three years after the date of the transaction

in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

A “business

combination”

includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder.

An “interested stockholder”

is a person who, together with affiliates and associates, owns (or, in certain cases,

within three years prior, did own) 15% or more of the corporation’s voting stock.

Our decision not to be subject to Section

203 will allow, for example, Arthur D.

Sams, our Chairman, President, Chief Executive Officer and Secretary (who beneficially

owns approximately 44% of our common stock) to transfer shares in excess of 15% of our voting stock to a third-party free of the

restrictions imposed by Section 203.

This may make us more vulnerable to takeovers that are completed without the approval of

our board of directors and/or without giving us the ability to prohibit or delay such takeovers as effectively.

provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us

by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace

or remove our current management.

in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third

party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders.

elected in our certificate of incorporation to not be subject to the provisions of Section 203 of the Delaware General Corporation Law,

or Section 203.

In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination”

with an “interested stockholder” for a period of three years after the date of the transaction in which the person became

an interested stockholder, unless the business combination is approved in a prescribed manner.

A “business combination” includes

a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder.

An “interested stockholder”

is a person who, together with affiliates and associates, owns (or, in certain cases, within three years prior, did own) 15% or more

of the corporation’s voting stock.

Our decision not to be subject to Section 203 will allow, for example, Arthur D.

Sams, our Chairman,

President, Chief Executive Officer and Secretary (who beneficially owns approximately 44% of our common stock) to transfer shares in

excess of 15% of our voting stock to a third-party free of the restrictions imposed by Section 203.

This may make us more vulnerable

to takeovers that are completed without the approval of our board of directors and/or without giving us the ability to prohibit or delay

such takeovers as effectively.

provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others,

even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our

current management.

in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party

to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders.

These provisions include:

1 unchanged sentence

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

authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder

approval and which preferred stock may include rights superior to the rights of the holders of common stock.

anti-takeover provisions and other provisions in our certificate of incorporation and bylaws could make it more difficult for

stockholders or potential acquirors to obtain control of our board of directors or initiate actions that are opposed by the then-current

board of directors and could also delay or impede a merger, tender offer or proxy contest involving our Company.

These provisions

could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing

or cause us to take other corporate actions you desire.

Any delay or prevention of a change of control transaction or changes

in our board of directors could cause the market price of our common stock to decline.

certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain

types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’

to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of

Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on

our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees

to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation

Law, our certificate of incorporation or our bylaws, or (iv) any action asserting a claim against us governed by the internal

affairs doctrine.

the avoidance of doubt, the exclusive forum provision described above does not apply to any claims arising under the Securities

Act of 1933, as amended, or the Securities Act, or the Securities Exchange Act of 1934, as amended, or the Exchange Act.

27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created

by the Exchange Act or the rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction

for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules

and regulations thereunder.

choice of forum provision in our bylaws may limit our stockholders’

ability to bring a claim in a judicial forum that they

find favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against

us and our directors, officers, employees and agents even though an action, if successful, might benefit our stockholders.

applicable courts may also reach different judgments or results than would other courts, including courts where a stockholder

considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more

favorable to us than to our stockholders.

With respect to the provision making the Delaware Court of Chancery the sole and exclusive

forum for certain types of actions, stockholders who do bring a claim in the Delaware Court of Chancery could face additional

litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware.

Finally, if a court were

to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions

or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have

a material adverse effect on us.

are an “emerging growth company,”

and we cannot be certain if the reduced reporting requirements applicable to emerging

growth companies will make our shares of common stock less attractive to investors.

are an “emerging growth company,”

as defined in the JOBS Act.

For as long as we continue to be an emerging growth

company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies

that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section

404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation

in this report, our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory

vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

an emerging growth company until December 31, 2021, although circumstances could cause us to lose that status earlier.

predict if investors will find our shares of common stock less attractive because we may rely on these exemptions.

If some investors

find our shares of common stock less attractive as a result, there may be a less active trading market for our shares of common

stock and our share price may be more volatile.

the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards

apply to private companies.

We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting

standards and, therefore, are subject to the same new or revised accounting standards as other public companies that are not emerging

growth companies.

we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report

our financial results or prevent fraud.

As a result, stockholders could lose confidence in our financial and other public reporting,

which would harm our business and the trading price of our common stock.

internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate

disclosure controls and procedures, are designed to prevent fraud.

Any failure to implement required new or improved controls,

or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations.

In addition, any

testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or any subsequent testing by our independent

registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to

be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas

for further attention or improvement.

Inferior internal controls could also cause investors to lose confidence in our reported

financial information, which could have a negative effect on the trading price of our common stock.

are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required

to assess the effectiveness of these controls annually.

However, for as long as we are an “emerging growth company”

under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our

internal controls over financial reporting pursuant to Section 404.

We could be an “emerging growth company”

December 31, 2021.

An independent assessment of the effectiveness of our internal controls could detect problems that our management’s

assessment might not.

Undetected material weaknesses in our internal controls could lead to financial statement restatements and

require us to incur the expense of remediation.

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

public company compliance programs.

a public company, we incur significant legal, accounting and other expenses due to our compliance with regulations and disclosure

obligations applicable to us, including compliance with the Sarbanes-Oxley Act as well as rules implemented by the SEC and Nasdaq.

The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations

that require our compliance.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act,

There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that

have required the SEC to adopt additional rules and regulations in these areas.

Stockholder activism, the current political environment,

and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure

obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which

we operate our business.

Our management and other personnel devote a substantial amount of time to these compliance programs and

monitoring of public company reporting obligations and, as a result of the new corporate governance and executive compensation

related rules, regulations, and guidelines prompted by the Dodd-Frank Act and further regulations and disclosure obligations expected

in the future, we will likely need to devote additional time and costs to comply with such compliance programs and rules.

rules and regulations cause us to incur significant legal and financial compliance costs and make some activities more time-consuming

comply with the requirements of being a public company, we may need to undertake various activities, including implementing new

internal controls and procedures and hiring new accounting or internal audit staff.

The Sarbanes-Oxley Act requires that we maintain

effective disclosure controls and procedures and internal control over financial reporting.

We are continuing to develop and refine

our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the

reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules

and forms, and that information required to be disclosed in reports under the Exchange Act, is accumulated and communicated to

our principal executive and financial officers.

Our current controls and any new controls that we develop may become inadequate

and weaknesses in our internal control over financial reporting may be discovered in the future.

failure to develop or maintain effective controls could adversely affect the results of periodic management evaluations and annual

independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial

reporting which we may be required to include in our periodic reports we will file with the SEC under Section 404 of the Sarbanes-Oxley

Act, harm our operating results, cause us to fail to meet our reporting obligations, or result in a restatement of our prior period

financial statements.

In the event that we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal

control over financial reporting is perceived as inadequate or that we are unable to produce timely or accurate financial statements,

investors may lose confidence in our operating results and the price of our common stock could decline.

In addition, if we are

unable to continue to meet these requirements, we may not be able to remain listed on The Nasdaq Capital Market.

are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore

not yet required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose.

However, we are required to comply with certain of these rules, which require management to certify financial and other information

in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over

financial reporting commencing with our next annual report.

This assessment will need to include the disclosure of any material

weaknesses in our internal control over financial reporting identified by our management or our independent registered public

accounting firm.

We are just beginning the costly and challenging process of compiling the system and processing documentation

needed to comply with such requirements.

We may not be able to complete our evaluation, testing and any required remediation in

a timely fashion.

During the evaluation and testing process, if we identify one or more material weaknesses in our internal control

over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.

additional capital, including through future sales and issuances of our common stock, the exercise of warrants or the exercise

of rights to purchase common stock pursuant to our equity incentive plan could result in additional dilution of the percentage

ownership of our stockholders, could cause our share price to fall and could restrict our operations.

expect that significant additional capital will be needed in the future to continue our planned operations, including any potential

acquisitions, purchasing of capital equipment, hiring new personnel, and continuing activities as an operating public company.

To the extent we seek additional capital through a combination of public and private equity offerings and debt financings, our

stockholders may experience substantial dilution.

To the extent that we raise additional capital through the sale of equity or

convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms may include liquidation

or other preferences that adversely affect the rights of our stockholders.

Debt and receivables financings may be coupled with

an equity component, such as warrants to purchase shares of our common stock, which could also result in dilution of our existing

stockholders’

The incurrence of indebtedness would result in increased fixed payment obligations and could also

result in certain restrictive covenants, such as limitations on our ability to incur additional debt and other operating restrictions

that could adversely impact our ability to conduct our business.

A failure to obtain adequate funds may cause us to curtail certain

operational activities, including sales and marketing, in order to reduce costs and sustain the business, and would have a material

adverse effect on our business and financial condition.

our 2016 Omnibus Stock Incentive Plan, as amended, or 2016 Plan, we may grant equity awards covering up to 1,754,385 shares of

our common stock.

As of December 31, 2020, we had granted options to purchase an aggregate of 140,000 shares of common stock under

the 2016 Plan.

authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval

and which preferred stock may include rights superior to the rights of the holders of common stock.

anti-takeover provisions and other provisions in our certificate of incorporation and bylaws could make it more difficult for stockholders

or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of

directors and could also delay or impede a merger, tender offer or proxy contest involving Polar Power, Inc.

These provisions could also

discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to

take other corporate actions you desire.

Any delay or prevention of a change of control transaction or changes in our board of directors

could cause the market price of our common stock to decline.

certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types

of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable

judicial forum for disputes with us or our directors, officers or other employees.

certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery

of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii)

any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders,

(iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation

or our bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine.

the avoidance of doubt, the exclusive forum provision described above does not apply to any claims arising under the Securities Act of

1933, as amended, or the Securities Act, or the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Section 27 of the Exchange

Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the

rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over

all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

choice of forum provision in our bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they find

favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our

directors, officers, employees and agents even though an action, if successful, might benefit our stockholders.

The applicable courts

may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may

be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders.

With respect to the provision making the Delaware Court of Chancery the sole and exclusive forum for certain types of actions, stockholders

who do bring a claim in the Delaware Court of Chancery could face additional litigation costs in pursuing any such claim, particularly

if they do not reside in or near Delaware.

Finally, if a court were to find this provision of our bylaws inapplicable to, or unenforceable

in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving

such matters in other jurisdictions, which could have a material adverse effect on us.

we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial

results or prevent fraud.

As a result, stockholders could lose confidence in our financial and other public reporting, which would harm

our business and the trading price of our common stock.

internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure

controls and procedures, are designed to prevent fraud.

Any failure to implement required new or improved controls, or difficulties encountered

in their implementation could cause us to fail to meet our reporting obligations.

In addition, any testing by us conducted in connection

with Section 404 of the Sarbanes-Oxley Act, or any subsequent testing by our independent registered public accounting firm, may reveal

deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective

or retroactive changes to our financial statements or identify other areas for further attention or improvement.

Inferior internal controls

could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading

price of our common stock.

are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to

assess the effectiveness of these controls annually.

However, for as long as we are a “non-accelerated filer” under SEC rules,

our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial

reporting pursuant to Section 404.

An independent assessment of the effectiveness of our internal controls could detect problems that

our management’s assessment might not.

Undetected material weaknesses in our internal controls could lead to financial statement

restatements and require us to incur the expense of remediation.

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

company compliance programs.

a public company, we incur significant legal, accounting and other expenses due to our compliance with regulations and disclosure obligations

applicable to us, including compliance with the Sarbanes-Oxley Act as well as rules implemented by the SEC and Nasdaq.

The SEC and other

regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted.

There are significant

corporate governance and executive compensation related provisions in the Dodd-Frank Act that have required the SEC to adopt additional

rules and regulations in these areas.

Stockholder activism, the current political environment, and the current high level of government

intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance

costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business.

Our management and other personnel

devote a substantial amount of time to these compliance programs and monitoring of public company reporting obligations and, as a result

of the new corporate governance and executive compensation related rules, regulations, and guidelines prompted by the Dodd-Frank Act

and further regulations and disclosure obligations expected in the future, we will likely need to devote additional time and costs to

comply with such compliance programs and rules.

These rules and regulations cause us to incur significant legal and financial compliance

costs and make some activities more time-consuming and costly.

comply with the requirements of being a public company, we may need to undertake various activities, including implementing new internal

controls and procedures and hiring new accounting or internal audit staff.

The Sarbanes-Oxley Act requires that we maintain effective

disclosure controls and procedures and internal control over financial reporting.

We are continuing to develop and refine our disclosure

controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file

with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information

required to be disclosed in reports under the Exchange Act, is accumulated and communicated to our principal executive and financial

Our current controls and any new controls that we develop may become inadequate and weaknesses in our internal control over

financial reporting may be discovered in the future.

failure to develop or maintain effective controls could adversely affect the results of periodic management evaluations and annual independent

registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting which

we may be required to include in our periodic reports we will file with the SEC under Section 404 of the Sarbanes-Oxley Act, harm our

operating results, cause us to fail to meet our reporting obligations, or result in a restatement of our prior period financial statements.

In the event that we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal control over financial reporting

is perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in

our operating results and the price of our common stock could decline.

In addition, if we are unable to continue to meet these requirements,

we may not be able to remain listed on the Nasdaq Capital Market.

are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore not yet

required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose.

we are required to comply with certain of these rules, which require management to certify financial and other information in our quarterly

and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing

with our next annual report.

This assessment will need to include the disclosure of any material weaknesses in our internal control over

financial reporting identified by our management or our independent registered public accounting firm.

We are just beginning the costly

and challenging process of compiling the system and processing documentation needed to comply with such requirements.

We may not be able

to complete our evaluation, testing and any required remediation in a timely fashion.

During the evaluation and testing process, if we

identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal

control over financial reporting is effective.

additional capital, including through future sales and issuances of our common stock, the exercise of warrants or the exercise of rights

to purchase common stock pursuant to our equity incentive plan could result in additional dilution of the percentage ownership of our

stockholders, could cause our share price to fall and could restrict our operations.

expect that significant additional capital will be needed in the future to continue our planned operations, including any potential acquisitions,

purchasing of capital equipment, hiring new personnel, and continuing activities as an operating public company.

To the extent we seek

additional capital through a combination of public and private equity offerings and debt financings, our stockholders may experience

substantial dilution.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership

interest of our existing stockholders may be diluted, and the terms may include liquidation or other preferences that adversely affect

the rights of our stockholders.

Debt and receivables financings may be coupled with an equity component, such as warrants to purchase

shares of our common stock, which could also result in dilution of our existing stockholders’ ownership.

The incurrence of indebtedness

would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our

ability to incur additional debt and other operating restrictions that could adversely impact our ability to conduct our business.

failure to obtain adequate funds may cause us to curtail certain operational activities, including sales and marketing, in order to reduce

costs and sustain the business, and would have a material adverse effect on our business and financial condition.

our 2016 Omnibus Stock Incentive Plan, as amended, or 2016 Plan, we may grant equity awards covering up to 1,754,385 shares of our common

As of December 31, 2021, we had granted options to purchase an aggregate of 140,000 shares of common stock under the 2016 Plan.

We have registered 1,754,385 shares of common stock available for issuance under our 2016 Plan.

Sales of shares

issued upon exercise of options or granted under our 2016 Plan may result in material dilution to our existing stockholders, which

could cause our share price to fall.

issuance of shares of preferred stock could adversely affect the market value of our common stock, dilute the voting power of

common stockholders and delay or prevent a change of control.

board of directors has the authority to cause us to issue, without any further vote or action by the stockholders, up to 5,000,000

shares of preferred stock in one or more series, to designate the number of shares constituting any series, and to fix the rights,

preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption

price or prices and liquidation preferences of such series.

issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable

to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the

common stock less attractive.

For example, investors in the common stock may not wish to purchase common stock at a price above

the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be

entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.

the issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of our other

classes of voting stock either by diluting the voting power of our other classes of voting stock if they vote together as a single

class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote

even if the action were approved by the holders of our other classes of voting stock.

The issuance of shares of preferred stock

may also have the effect of delaying, deferring or preventing a change in control of our company without further action by the

stockholders, even where stockholders are offered a premium for their shares.

Sales of shares issued upon exercise

of options or granted under our 2016 Plan may result in material dilution to our existing stockholders, which could cause our share price

issuance of shares of preferred stock could adversely affect the market value of our common stock, dilute the voting power of common

stockholders and delay or prevent a change of control.

board of directors has the authority to cause us to issue, without any further vote or action by the stockholders, up to 5,000,000 shares

of preferred stock in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences,

privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices

and liquidation preferences of such series.

issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to

the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock

less attractive.

For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price

of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common

stock at the lower conversion price causing economic dilution to the holders of common stock.

the issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of our other classes

of voting stock either by diluting the voting power of our other classes of voting stock if they vote together as a single class, or

by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote even if the action

were approved by the holders of our other classes of voting stock.

The issuance of shares of preferred stock may also have the effect

of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders

are offered a premium for their shares.

Staff Comments.

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 1A. Risk Factors