What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2022-03-31 compared with 2021-03-31 · 353 added, 421 removed, 60 unchanged (93% of the section changed)

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

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

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

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

of March 31, 2022, we had 12,788,203 shares of common stock outstanding held of record by approximately 10 stockholders.

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

numerous beneficial owners.

These holders

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

Sales of Unregistered Securities

of Equity Securities by the Issuer and Affiliated Purchasers

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

our common stock.

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

As of December 31, 2020, we had purchased

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

Total number of shares (or units) purchased

Average price paid per share (or unit)

Total number of shares (or units) purchased as part of publicly announced plans or programs

Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs

November 14, 2019 to November 22, 2019

Selected Financial Data.

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

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

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

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

and assumptions.

Our actual results may differ materially from those discussed below.

Factors that could cause or contribute to

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

Factors”

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

Our historical results are not necessarily indicative of the

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

to be expected for the full year.

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

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

In addition to historical

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

actual results may differ materially from those discussed below.

Factors that could cause or contribute to such differences include,

but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” and elsewhere in

this Annual Report on Form 10-K.

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

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

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

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

the telecommunications market, our DC power systems provide reliable and low-cost DC power to service applications that do not

have access to the utility grid (i.e., prime power applications) or have critical power needs and cannot be without power in the

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

Within this market, we offer the following three configurations

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

We are continuously

diversifying our customer base.

We are selling our products into non-telecommunication markets and applications at an increasing rate.

the telecommunications market, our DC power systems provide reliable and low-cost DC power to service applications that do not have access

to the utility grid (i.e., prime power applications) or have critical power needs and cannot be without power in the event of utility

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

the years ended December 31, 2021 and 2020, 89% and 96%, respectively, of our total net sales were within the telecommunications market.

In 2021, we had 67% of our total net sales derived from our largest customer, which is a Tier-1 telecommunications customer in the U.S.

In 2020, our three largest customers represented 52%, 15%, and 14% of our total net sales, respectively, two being telecommunications

customers in the U.S.

and one being a telecommunications customer outside the U.S.

There was no other revenue from customers in excess

of 10% of total net sales in either period.

During those periods, the majority of our sales were of our DC base powers systems.

2021 and 2020, sales to international customers accounted for 8% and 17% of total revenue, respectively.

sales are growing and adding to our customer diversification.

During the years ended December 31, 2021 and 2020, military customers accounted

for 6% and 1% of total net sales, respectively.

The military’s increasing use of robotics, drones, and digitization in the field

is driving the demand for battery charging with DC generators.

We believe increased sales to military customers provides us long-term

visibility on product demand while helping us understand future commercial uses of our technologies.

Historically we have always worked

closely with military to jointly develop next generation of technologies and product configurations which later result in commercial

Military sales are advantageous because of their long-term contracts, and they provide funding to cover the cost of product development.

Mobility applications require power to charge batteries and appliances within a vehicle.

Our DC power systems are smaller in size, lighter

in weight, and operate with greater efficiency than AC power systems, making our product ideal for these applications.

Our advance mobility

sales for 2021 and 2020, represented 7% and 2% of total net sales, of which 66% and 79% are included in net sales to military customers,

respectively.

Our backlog as of December 31, 2021 includes $3.2 million in orders for DC power systems from a single customer in United

States for use to charge stored batteries within a commercial vehicle while providing energy to operate appliances installed in the vehicle.

have supplied our DC generators to many automotive manufactures in support of their remote field testing of electric vehicles.

presently in development of natural gas CHP home chargers as a solution to many homes that are not able to support fast charging using

the electric grid.

We believe we can compete with the electric utility rates for home and office charging by using natural gas and making

use of surplus heat from the generator in certain bad grid and remote area applications.

Our DC mobile EV charging systems can operate

with diesel or propane and are ideal for emergency road service to rapid charge EV’s stranded without a charge.

Our DC mobile EV

charging systems offer convenience, faster charging, and lower cost than towing an EV on a flatbed to a charging station.

We have shipped

DC mobile EV charging systems used to extend range for specialty vehicles used in applications requiring low emissions.

Our DC mobile

EV charging systems provide direct charging to an electric vehicle’s battery.

also developed DC power systems for medium to large solar PV applications to provide energy service for irrigation, refrigerated storage

of meat and produce, and micro grid.

By combining the energy of solar PV and propane or natural gas, our DC power systems can provide

constant energy 24 hours a day without using expensive energy storage.

Propane or natural gas fueled DC power systems are connected in

parallel with the solar array (also a DC energy source) greatly simplifying the means of combining multiple energy sources.

is more efficient and lowers both the CAPEX and OPEX of the Solar systems by eliminating battery storage and / or connection to the grid.

Currently, the most popular technologies used in these applications are either grid power, diesel only, or a combination of grid and

solar with a large battery bank.

Our proposed technology is more environmentally friendly and lowers the cost of food processing.

we have sold a limited number of our DC power systems that are undergoing field trials.

expect that opportunities in the bad-grid (i.e., areas where wireless towers are connected to an electrical grid that loses power more

than eight hours), and off-grid (i.e., areas where wireless towers are not connected to an electrical grid) applications, which include

telecommunications towers, commercial and residential backup power, electric vehicle charging, “mini-grid” and various other

power applications, will help to expand the market for our natural gas/LPG (propane) product lines domestically and internationally.

We plan to develop new configurations of DC power system, battery storage and solar products to optimize the match between our solutions

and various application needs.

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

base power systems .

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

typically contained within an environmentally regulated enclosure.

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

contained within an environmentally regulated enclosure.

hybrid power systems .

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

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

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

battery management system into our standard DC power systems.

solar hybrid power systems .

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

DC hybrid power system.

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

gas being the predominate formats.

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

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

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

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

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

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

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

customer demand for our products.

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

and foreign countries has rapidly escalated.

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

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

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

provide a safe work environment for our employees.

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

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

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

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

our existing customers and suppliers.

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

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

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

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

revenues and our ability to remain a going concern.

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

Although there are

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

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

global economy and to our business.

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

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

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

At this point, we are uncertain

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

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

power system.

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

being the predominate formats.

Accounting Policies

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

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

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

On an ongoing basis, management reviews

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

Significant estimates include those related to assumptions

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

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

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

used in the determination of the Company’s liquidity.

Actual results may differ from those estimates.

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

in the preparation of our financial statements:

We recognize revenue in accordance with Financial Accounting Standards Board

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

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

identification

of the contract;

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

preparation of our financial statements:

We recognize revenue in accordance with Financial Accounting Standards Board Accounting Standards Codification 606,

Revenue from Contracts with Customers (“ASC 606”).

ASC 606 requires entities to recognize revenue through the application

of a five-step model, which includes:

identification of the contract;

identification of the performance obligations;

determination of the transaction price;

allocation of the transaction

price to the performance obligations;

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

Substantially all of

the Company’s revenue is derived from product sales.

Product revenue is recognized when performance obligations under the terms

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

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

Revenue is measured as the amount of consideration the Company

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

The Company determines whether delivery

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

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

The Company regularly reviews its customers’

financial positions to ensure that collectability is reasonably assured.

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

specified time period after the sale.

Our standard warranty on new products is two years from the date

of delivery to the customer.

We offer a limited extended warranty of up to five years on our certified DC power systems based on

application and usage.

The Company’s warranties

are of an assurance-type and come standard with all Company products to cover repair or replacement should product not

perform as expected.

Provisions for estimated expenses related to product warranties are made at the time products are sold.

These estimates are established using historical information about the nature, frequency and average cost of warranty claim

settlements as well as product manufacturing and recovery from suppliers.

Management actively studies trends of warranty

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

The Company estimates the actual historical

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

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

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

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

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

If the estimated net realizable value is determined

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

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

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

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

accordance with ASC 718, Compensation-Stock Compensation .

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

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

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

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

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

and future dividends.

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

recorded in future periods.

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

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

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

Deferred tax assets

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

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

is uncertain.

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

of Recent Accounting Pronouncements

See “Note 1 –

Organization and Summary of Significant Accounting Policies –

Recent Accounting Pronouncements”

of the Notes to Financial

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

accounting pronouncements.

Our Business Startups Act of 2012

April 5, 2012, the JOBS Act was enacted.

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

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

revised accounting standards.

In other words, an “emerging growth company”

can delay the adoption of certain accounting

standards until those standards would otherwise apply to private companies.

We have irrevocably elected not to avail ourselves

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

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

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

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

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

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

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

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

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

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

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

determination of

the transaction price;

allocation of the transaction price to the performance obligations;

and recognition of revenue as the entity satisfies

the performance obligations.

Substantially

all of our revenue is derived from product sales.

Product revenue is recognized when performance obligations under the terms of a contract

are satisfied, which occurs for us upon shipment or delivery of products or services to our customers based on written sales terms, which

is also when control is transferred.

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

the products or services to a customer.

We determine whether delivery has occurred based on when title transfers and the risks and rewards

of ownership have transferred to the customer, which usually occurs when we place the product with the customer’s carrier or deliver

the product to a customer’s location.

We regularly review our customers’ financial positions to ensure that collectability

is reasonably assured.

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

Our standard warranty on new products is two years from the date of delivery to the customer.

We offer a limited extended warranty of

up to five years on our certified DC power systems based on application and usage.

Our warranties are of an assurance-type and come standard

with all of our products to cover repair or replacement should product not perform as expected.

Provisions for estimated expenses related

to product warranties are made at the time products are sold.

These estimates are established using historical information about the

nature, frequency and average cost of warranty claim settlements as well as product manufacturing and recovery from suppliers.

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

We estimate the actual

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

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

We record adjustments to our inventory based on an estimated forecast of the inventory demand, taking into consideration, among

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

pricing, and trends and performance of similar products.

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

cost of the inventory, the difference is recognized as a loss in the period in which it occurs.

Once inventory has been written down,

it creates a new cost basis for inventory that may not subsequently written up.

Compensation.

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

We will remain an “emerging growth company”

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

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

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

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

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

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

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

filer under the rules of the SEC.

Performance Summary –

Year Ended December 31, 2020

We periodically issue stock-based compensation to officers, directors, and consultants for services rendered.

issuances vest and expire according to terms established at the issuance date.

Stock-based payments to employees, directors, and for

acquiring goods and services from nonemployees, which include grants of employee stock options, are recognized in the financial statements

based on their grant date fair values in accordance with ASC 718, Compensation-Stock Compensation .

Stock option grants to employees,

which are generally time vested, are measured at the grant date fair value and depending on the conditions associated with the vesting

of the award, compensation cost is recognized on a straight-line or graded basis over the vesting period.

Recognition of compensation

expense for non-employees is in the same period and manner as if we had paid cash for the services.

The fair value of stock options granted

is estimated using the Black-Scholes option-pricing model, which uses certain assumptions related to risk-free interest rates, expected

volatility, expected life, and future dividends.

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

compensation expense recorded in future periods.

impact of inflation and changing prices during 2021 has not been significant on the financial condition or results of operations of our

Recent geopolitical factors and rapid changes in the global economy may cause significant

spikes in inflation which may have an impact in our financial condition during 2022 and beyond.

Because some of our contracts are at

a fixed price, we face the risk that cost overruns or inflation may exceed, erode or eliminate our expected profit margin, or cause us

to record a loss on certain projects.

We are taking actions to manage the potential impacts of these matters and we will continue to

assess the actual and expected impacts and the need for further action.

of Recent Accounting Pronouncements

“Note 1 – Organization and Summary of Significant Accounting Policies – Recent Accounting Pronouncements” of

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

impact of recent accounting pronouncements.

Performance Summary – Year Ended December 31, 2021

net sales for the year ended December 31, 2021, were $16,896, as compared to $9,031 for the year ended December 31, 2020.

a net loss of $1,414 for 2021, as compared to net loss of $10,871 for 2020.

We believe this decline in revenues is primarily due

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

investments in back-up power generators.

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

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

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

to our Tier-1 telecommunications customers.

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

The increase was due primarily to shipments

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

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

telecommunications customers,

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

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

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

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

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

In December 2020, our backlog increased

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

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

allowing us to expand our sales and marketing initiatives.

We are also working on expanding our research and development capacity

to enhance our sales support and new product development programs.

We are focused on diversifying our customer base within the

telecom market while seeking new opportunities in other markets.

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

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

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

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

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

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

section “Risk Factors”

in this Annual Report for additional considerations.

We believe this increase in revenues is primarily due to

our Tier-1 telecommunications customers increasing their investments in back-up power generators primarily to support expansion of their

5G network infrastructure.

We also believe a reduction of COVID-19 safety restrictions and increasing vaccinations have improved our

customers’ ability to deploy new systems.

2021, our international sales were $1,278, as compared to $1,522 during 2020.

sales backlog as of December 31, 2021, was $11,807, with 72% of that amount being attributable to our largest U.S.

telecommunications

customer, 27 % represented purchase orders for advanced mobility applications, and 1 % represented

purchase orders to customer in other markets.

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

Tier-1 wireless carriers increasing

their orders of our DC backup power systems.

September 2021, we received notice from Citibank that our request for forgiveness of the Paycheck Protection Program (PPP) loan was approved.

Our PPP loan was forgiven and we recognized a non-cash gain of $1.7 million within Other income (expense) on the statement of operations

for the year ended December 31, 2021.

plan to continue to expand our customer base in all market segments.

We also anticipate that our sales will increase as the global economy

recovers from the impact of the COVID-19 pandemic.

However, the full impact on our financial and operating performance of the COVID-19

pandemic along with recent geopolitical factors and increasing inflation concerns will depend significantly on the duration and severity

of these factors, the actions taken to mitigate their impact, disruption to our supply chain, and the pace with which our clients return

to more normalized purchasing behavior, among others factors beyond our knowledge or control.

See “Risk Factors” commencing

on page 16 of this Annual Report on Form 10-K for additional considerations.

of Operations

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

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

as a percentage of net revenues.

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

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

of net revenues.

The columns present the following:

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

columns entitled “Dollar Variance”

and “Percentage Variance”

shows the change in results, both in

dollars and percentages.

columns entitled “Dollar Variance” and “Percentage Variance” shows the change in results, both in dollars

and percentages.

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

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

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

For example, when our

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

Conversely, when expenses

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

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

of the Years Ended December 31, 2020 and 2019

of the Years Ended December 31, 2021 and 2020 (in thousands)

Year Ended December 31,

of Net Revenues for

of Net Revenues

(Unfavorable)

8 unchanged sentences

Interest and finance costs

Gain from PPP loan forgiveness

Other income (expense), net

1 unchanged sentence

Income tax benefit

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

the year ended December 31, 2019.

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

telecommunications customers.

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

to 95% of total net sales in 2019.

Net sales increased by $7,865, or 87%, to $16,896 for the year ended December 31, 2021, as compared to $9,031 for the year

ended December 31, 2020.

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

Tier-1 telecommunications

Tier-1 telecommunications customers accounted for 70% of our total net sales during 2021, as compared to 62% of total

net sales in 2020.

revenue from telecommunications customers, U.S.

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

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

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

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

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

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

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

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

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

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

to have, a negative impact on our customers’

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

at slowing down the spread of COVID-19.

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

telecommunications

customers compared to the fourth quarter of 2019.

We believe telecommunications customers have made substantial progress in launching

their 5G networks during 2020.

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

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

backup power support to enhance network reliability.

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

to help control COVID-19 in December 2020.

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

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

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

and international, accounted for 89% of total net sales during 2021 and 96% of total

net sales during 2020.

Our largest customer during 2021 is in the telecommunications industry and accounted for 67% of total net sales

for 2021, as compared to our three largest customers in 2020, also customers in the telecommunications industry, each accounting for

52%, 15%, and 14 of total net sales.

There was no other revenue from customers in excess of 10% of total net sales in either period.

Net sales to international customers in 2021 and 2020, represented 8% and 17% of total net sales, respectively.

believe the increase in revenues during 2021 is primarily due to our Tier-1 telecommunications customers increasing their investments

in back-up power generators primarily to support expansion of their 5G network infrastructure.

We also believe a reduction of COVID-19

safety restrictions and increasing vaccinations have improved our customers’ ability to deploy new systems.

Cost of sales decreased by $1,203, or 8%, to $13,451 during 2021, compared to $14,654 during 2020.

Cost of sales

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

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

The increase in factory overhead absorption during 2020 is primarily attributed

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

sections of this report.

Cost of sales as a percentage

of net sales decreased from 162.2% in 2020 to 79.6% in 2021 as a result of improved labor efficiencies and increased absorption of manufacturing

overhead resulting from higher volume in net sales in 2021.

We were able to capitalize on inherent manufacturing efficiencies resulting

from larger production volumes to meet delivery commitments.

In 2020, an inventory reserve of $3,400 has been recorded in cost of

cost of sales for 2021 includes a $1,300 credit to salaries and benefits expense related to the Employee Retention Credit (“ERC”),

a refundable tax credit recorded in accounts receivable.

The ERC assisted business owners and their employees by providing an incentive

to keep workers on the payroll and eligible businesses received a tax credit for a percentage of each eligible employee’s wage.

Profit (Loss) .

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

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

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

as compared to 19.8% in 2019.

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

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

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

We recognized a gross profit of $3,445 during 2021, as compared to a gross loss of $5,623 during 2020, which represents

an increase in gross profit of $9,068 or 161%.

Gross profit as a percentage of net sales increased to 20.4% in 2021, as compared to (62.2)%

The increase in gross profit as a percentage of net sales during 2021 was primarily due an 87% increase in net sales in 2021

while keeping cost of sales relatively flat to 2020 levels resulting from improved labor efficiencies and increased absorption of manufacturing

In addition, gross profit includes a $1,300 credit to salaries and benefits expense related to the ERC as explained

in cost of sales.

and Marketing Expenses.

Sales and marketing expenses decreased $68 to $1,488 during 2021, as compared to $1,556 during 2020.

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

and international

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

As part of our ongoing strategy

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

and similar events become available.

decrease was attributable to a slight decrease in fringe benefits expense during 2021 as compared the same period in 2020.

The reduction

in fringe benefits provided for an increase in marketing and tradeshow activities for our DC power systems as part of our ongoing strategy

to expand our customer base.

and Development Expenses.

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

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

Our research and development efforts during 2020 primarily focused on launching our new LPG / natural gas line of generators and

hybrid power systems for off-grid and unreliable grid cell sites, and supporting existing sales activity related to our DC back-up

power systems.

During 2021, we expect research and development expenses to gradually increase as control over COVID-19 improves

and we continue investing into new products as part of our strategy to diversify our product lines.

During 2021, research and development expenses increased by $263 to $1,986, as compared to $1,723 during

The increase in 2021 is attributed to an increase in engineering staff and increased investments in several research and development

projects, including customized designs for advanced mobility power applications and for our natural gas/LPG product lines of generators

and hybrid power systems which included our new 20 to 30 kW generator based on a larger Toyota engine.

and Administrative Expenses .

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

to $4,004 during 2019.

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

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

Our general and administrative expenses decreased by $993 to $3,069 during 2021, as compared to $4,062

The decrease was primarily due to a decrease in in legal and consulting fees in 2021 when compared to 2020.

incurred $248 in legal and brokerage fees related to a private placement equity raise and $77 in loan origination expenses related to

our credit facility with Pinnacle Bank.

general and administrative expenses for 2021 includes a $700 credit to salaries and benefits expense related to the ERC, a refundable

tax credit recorded in accounts receivable.

The ERC assisted business owners and their employees by providing an incentive to keep workers

on the payroll and eligible businesses received a tax credit for a percentage of each eligible employee’s wage.

and Finance Costs.

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

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

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

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

Our interest expense was $60 in 2021, as compared to $60 in 2020.

In 2021, our equipment financing expense decreased

by $14, bank fees related to our line of credit with Pinnacle Bank increased by $25, and bank fees from the Citibank Supplier Agreement

decreased by $11 in 2021 as a result of closing this account mid-year.

from PPP Loan Forgiveness .

In September 2021, we recognized a non-cash gain of $1,715

within Other income (expense) on the consolidated statement of operations on the forgiveness of our PPP loan.

Income (Expense), Net.

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

income included a $10 Economic Injury Disaster Grant.

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

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

During 2021, other income was $29, as compared to $14 during 2020, an increase of $15.

The increase was primarily

attributable to refunds of general liability insurance paid during 2020.

Tax Benefit .

During 2021, we did not recognize any benefit from income taxes.

In 2020, we recognized a benefit from income taxes

of $2,139 attributable to refundable federal and state income taxes.

As a result of the factors identified above, we generated a net loss of $1,414 for 2021, as compared to net loss of $10,871

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

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

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

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

for 2020, a decrease loss of $9,457.

The decrease in net loss is primarily attributed to an increase in net sales of our of DC power

systems to US telecommunications customers and lower cost of sales as a percentage of total net sales resulting from improved labor efficiencies

and increased absorption of manufacturing overhead in 2021.

and Capital Resources

During the year ended

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

with Citibank.

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

our new line of LPG / natural gas generators.

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

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

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

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

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

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

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

certain of these warrants.

the year ended December 31, 2021, we funded our operations primarily from cash on hand.

These funds were also used to increase our engineering

staff and inventory to support research and development projects and the launch of our new line of LPG / natural gas generators.

December 31, 2021, we had working capital of $21,760, as compared to working capital of $10,123 at December 31, 2020.

This $11,637 increase

in working capital is primarily attributable to a $3,455 increase in cash and cash equivalents resulting from net cash of $9,380 used

in operating activities, net cash used in investing activities of $71 from the acquisition of new property and equipment, and net cash

from financing activities of $12,906 which includes net proceeds of $12,466 from closing an underwritten public offering of 750,000

shares of common stock in February 2021.

In addition, we received net proceeds of $707 from the exercise of certain of our common stock

December 31, 2021, and December 31, 2020, our net trade receivables totaled $4,243 and $1,190, respectively.

On December 31, 2021, $3,131

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

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

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

as of December 31, 2019.

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

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

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

Department of the Treasury enacted

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

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

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

with Citibank, N.A.

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

On July 2, 2020,

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

of $1,174 from warrants exercised.

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

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

(74%) and $624 (15%) represented the two largest open customer account balances, while $1,041 (87%) and $53 (5%) represented the two

largest open customer account balances on December 31, 2020.

December 31, 2021, we recognized $2,000 related to the ERC for salaries and benefits expenses incurred during 2021 resulting

in a refundable tax credit.

The ERC assist business owners and their employees by providing an incentive to keep workers on the payroll

and eligible businesses received a tax credit for a percentage of each eligible employee’s wage.

available capital resources on December 31, 2021, consisted primarily of $5,101 in cash and cash equivalents, as compared to $1,646 as

of December 31, 2020.

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

any, drawdowns on our credit facility with Pinnacle Bank and future debt or equity financings, if any.

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

The Loan Agreement provides

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

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

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

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

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

facility be greater than $4,000.

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

Interest Rate be less than 3.75% per annum.

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

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

The Loan Agreement provides for

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

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

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

In no event will the aggregate amount of the outstanding advances under the revolving credit facility be greater than $4,000.

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

Interest Rate be less than 3.75% per annum.

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

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

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

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

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

As such, the balance outstanding

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

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

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

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

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

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

The sale price was equal to the face amount of the

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

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

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

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

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

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

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

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

Rate be less than 4.75% per annum.

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

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

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

of the end of each fiscal quarter.

did not have an outstanding balance under the Loan Agreement at December 31, 2021, and 2020.

As of December 31, 2021, we had availability

under the Loan Agreement of $2,943 and we believe that we are in compliance with the terms and conditions of the Loan Agreement.

Protection Program Loan

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

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

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

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

Paycheck Protection Program, or the PPP, under the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act.

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

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

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

Principal and interest are payable monthly

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

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

under the PPP.

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

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

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

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

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

However, no assurance can be given that we

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

Capital Requirements

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

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

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

The public offering closed on February 10, 2021.

We received net proceeds

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

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

for at least the next twelve months.

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

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

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

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

at a rate of 1% per annum.

We filed our application for a full loan forgiveness to Citibank on July 30, 2021 and the application is under

the bank’s review.

Interest accrues during the time between the disbursement of the PPP Loan and SBA remittance of the forgiveness

We are responsible for paying the accrued interest on any amount of the loan that is not forgiven.

Principal and interest are

payable monthly commencing on loan amounts not forgiven and may be prepaid by us at any time prior to maturity with no prepayment penalties.

We applied ASC 470, Debt , to account for the PPP Loan.

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

The Company filed its application for a full loan forgiveness to Citibank in July 2021.

On September 28, 2021, the Company received

noticed from Citibank indicating that the SBA rendered final decision approving loan forgiveness in the amount of $1,715.

we recognized a non-cash gain of $1,715 within Other income (expense) on the statement

of operations.

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

Net Cash Provided By (Used In):

2 unchanged sentences

Financing Activities

Net decrease in cash

Net increase (decrease) in cash

cash used in operating activities for 2021 was $9,380, as compared to $6,458 for the same period in 2020.

This increase in net

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

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

which had been prepaid in 2019.

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

The net cash used in

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

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

This increase in net cash

used in 2021 was primarily due to a net loss of $1,414, an increase in accounts receivable of $3,053, recognition of employee

retention credit receivable of $2,000, an increase in prepaid expenses of $3,648 primarily for Toyota engines, a gain on the

forgiveness of PPP loan payable of $1,715, offset with a decrease in income tax receivable of $1,570.

December 31, 2021, we recognized $2.0 million related to the ERC for salaries and benefits expenses incurred during 2021

resulting in a refundable tax credit.

Of this amount, cost of sales was reduced by $1.3 million as a result of the ERC, and general &

administrative expenses was reduced by $0.7 million as a result of the ERC.

The ERC assist business owners and their employees by providing

an incentive to keep workers on the payroll and eligible businesses received a tax credit for a percentage of each eligible employee’s

cash used in investing activities for 2021 totaled $71, as compared to $19 for 2020, an increase of $52.

The net cash used in investing

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

cash provided by financing activities totaled $12,906 for 2021, as compared to $5,373 provided by financing activities during 2020, an

increase of $7,533.

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

pursuant to the PPP under

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

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

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

The amount of backlog represents revenue that we anticipate recognizing

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

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

Backlog at December 31, 2020 was comprised of the following

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

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

and 12% from other markets.

We believe the majority

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

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

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

This increase was primarily due to the issuance and sale of 750,000 shares of our common stock in a firm commitment

underwritten public offering on February 10, 2021.

We received net proceeds of approximately $12,466 from the sale of the shares

after deducting underwriting discounts and commissions and other offering expenses payable by us.

In addition, we received net proceeds

of $707 from the exercise of common stock warrants issued in our July 2020 private placement.

of December 31, 2021, we had a backlog of $11,800.

The amount of backlog represents revenue that we anticipate recognizing in

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

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

Backlog at December 31, 2021, was comprised of the following elements:

72% in purchases of DC power systems by telecommunications customers in the U.S., 27% in purchases by our advanced mobility customer

for commercial vehicles, and 1% in purchases customers in other markets.

Due to overall shortage of commodities worldwide caused by COVID,

our largest customers have placed orders with delivery dates up to nine months in the future.

We believe this provides us better control

on operational efficiencies and inventory management.

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

However, there can be no assurance that we will be successful in fulfilling such orders and commitments in a timely manner or that we

will ultimately recognize as revenue the amounts reflected in our backlog.

Quantitative and Qualitative Disclosures About Market Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity