What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-04-01 compared with 2023-03-31 · 172 added, 146 removed, 716 unchanged (31% of the section changed)

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

more efficient to build power systems around the DC generator because it’s simpler to integrate with battery storage and solar

photovoltaics which also operate on DC.

Many applications in communications, water pumping, lighting, vehicle and vessel propulsion,

security systems operate on DC power only.

Many micro-grids and energy storage are DC based and use inverters to convert the DC to AC.

believe it’s more efficient to build power systems around the DC generator because it’s simpler to integrate with battery

storage and solar photovoltaics which also operate on DC.

Many applications in communications, water pumping, lighting, vehicle and vessel

propulsion, security systems operate on DC power only.

Many micro-grids and energy storage are DC based and use inverters to convert

the DC to AC.

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

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is https://polarpower.com/ .

November 24, 2023, the Company received a deficiency letter from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”)

indicating that the Company’s common stock is subject to potential delisting from the Nasdaq because for a period of 30 consecutive

business days, the bid price of the Company’s common stock has closed below the minimum $1.00 per share requirement for continued

inclusion under Nasdaq Marketplace Rule 5550(a)(2) (the “Bid Price Rule”).

The Nasdaq deficiency letter has no immediate

effect on the listing of the Company’s common stock, and its common stock continues to trade on The Nasdaq Capital Market under

the symbol “POLA” at this time.

The Nasdaq notice indicated that, in accordance with Nasdaq Marketplace Rule 5810(c)(3)(A),

the Company will be provided 180 calendar days, or until May 22, 2024, to regain compliance.

If, at any time before May 22, 2024, the

bid price of the Company’s common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq

staff will provide written notification that it has achieved compliance with the Bid Price Rule.

If the Company fails to regain compliance

with the Bid Price Rule before May 22, 2024 but meets all of the other applicable standards for initial listing on The Nasdaq Capital

Market with the exception of the minimum bid price, then the Company may be eligible to have an additional 180 calendar days, or until

November 18, 2024, to regain compliance with the Bid Price Rule.

If the Company does not regain compliance with the Bid Price Rule by

the end of the compliance period (or the second compliance period, if applicable), the Company’s common stock will become subject

to delisting.

In the event that the Company receives notice that its common stock is being delisted, the Nasdaq listing rules permit

the Company to appeal a delisting determination by Nasdaq to a hearings panel.

November 30, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity LLC,

as the representative (the “Representative”) of the several underwriters named therein (collectively, the “Underwriters”),

pursuant to which the Company sold to the Underwriters an aggregate of 4,000,000 shares (the “Shares”) of the Company’s

common stock, $0.0001 par value per share, at a price to the public of $0.40 per share, in a firm commitment underwritten public offering

(the “Offering”).

The Company also granted the Underwriters an option exercisable for 45 days from the date of the Underwriting

Agreement to purchase up to an additional 600,000 shares of common stock (or pre-funded warrants in lieu thereof) solely for the purpose

of covering over-allotments.

The Representative exercised the over-allotment option in full on December 4, 2023, to purchase an additional

600,000 shares of common stock (the “Over-Allotment Exercise’).

The Offering and closing on the Over-Allotment Exercise closed

concurrently on December 5, 2023.

The Offering was made pursuant to an effective registration statement on Form S-3 (Registration No.

333-252196) and a related prospectus and prospectus supplement, in each case filed with the

Securities and Exchange Commission.

December 18, 2023, Peter Gross, a member of the Board of Directors of the Company, resigned as a member of the Board of Directors of

the Company (the “Board”).

Gross, an independent director, served as a member of the audit committee,

chair of the compensation committee and chair of the nominating and corporate governance committee of the Board at the time of his resignation.

January 5, 2024, the Company received a notification letter from Nasdaq that due to Mr.

Gross’ resignation, the Company is no longer

in compliance with Nasdaq Listing Rule 5605.

Pursuant to Nasdaq Listing Rule 5605(c)(4), the Company is entitled to a cure period to

regain compliance (i) until the earlier of the Company’s next annual shareholders’ meeting or December 18, 2024;

if the next annual shareholders’ meeting is held before June 17, 2024, then the Company must evidence compliance no later than

June 17, 2024.

The Company intends to appoint an additional independent director to the Board and the committees prior to the end of

the cure periods.

Business Events

COVID-19 pandemic has negatively impacted business and industries all over the world since March 2020.

The pandemic has had a significant

negative impact on our overall operations including revenues, productivity, gross margins and liquidity.

The pandemic has resulted in

labor shortages, disruptions in the chain of supply, and higher material costs.

During 2022, supply chain constraints that affected timely

delivery of raw materials required to complete our DC power systems and labor shortages resulted in approximately $3,500 of expected

shipments to be postponed to the first half of 2023.

We believe that Covid-19 will be an ongoing challenge for years to come and to adapt

will require us to further globalize our vendors, engineering, and customers.

April and May of 2022, we received purchase orders totaling $6.2 million from a telecommunications customer in the South Pacific Islands

for our DC power generators for off-grid applications.

This order is part of a growing program to develop broadband services in the South

Pacific region.

During 2022, 59% of the order was shipped and included in net sales in the statements of operation in this Annual Report

on Form 10-K.

The remaining 41% is expected to ship in the first half of 2023.

September 2022, we renewed our master service agreement with our largest customer.

The agreement included price adjustments to our products

which we believe will help offset the effects of inflation and improve our gross margins.

During 2022, 66% of our total net sales were

derived from our largest customer, compared to 67% in 2021.

November 2022, we received purchase orders from another customer in the South Pacific region totaling $1.1 million for our solar hybrid

power systems.

Our solar hybrid power systems, which integrate solar energy storage with natural gas/LPG (propane) powered generators,

are ideal for off-grid (i.e., areas where wireless towers are not connected to an electrical grid) and bad-grid (i.e., areas where wireless

towers are connected to an electrical grid that loses power for more than eight hours) applications.

also continue to work on diversifying our customer base and are selling into non-telecommunication markets and applications at an increasing

In March 2022, we received EPA certification on our 4Y Toyota engine project aimed at expanding the power range to 35 kW on natural

Polar’s EPA certification of 1KS and 4Y Toyota engines brings to the market (non-diesel) engines with very low maintenance

and high fuel efficiency.

In addition to meeting the telecommunications need for larger and more compact generators our larger models

have high interest from micro-grids, peak power shaving, and EV charging.

believe military actions of the Russian Federation and its invasion of Ukraine have added considerable to our shipping costs due to diesel

COVID-19 pandemic, inflation, the impacts of war and other recent geopolitical events have negatively impacted business and industries

all over the world.

These events have had a significant negative impact on our overall operations including revenues, productivity, gross

margins, and liquidity.

They have resulted in labor shortages, disruptions in the chain of supply, and higher material costs.

resulted in unexpected challenges related to customer product or delivery requirements.

the second half of 2023, our largest telecommunications customer asked us to postpone deliveries towards the end of the year.

December 31, 2023, approximately $2.0 million in DC power generators that were scheduled to ship in 2023 remained in our sales

During 2022 and to a lesser extent in 2023, supply chain constraints affected timely delivery of raw materials required to

complete our DC power systems.

We believe that the aftermath of the pandemic, inflation, the impacts of war and other recent

geopolitical events will be an ongoing challenge for years to come and to adapt will require us to further globalize our vendors,

engineering, and customers.

continue to focus on expanding our market share into international markets as part of our diversification strategy.

During 2023 and 2022,

sales to customers in international markets represented 21% and 25% of our total net sales, respectively, as compared to 8% and 17% in

2021 and 2020, respectively.

During 2022, we received purchase orders totaling $6.2 million from a telecommunications customer in the

South Pacific Islands for our DC power generators for off-grid applications.

We completed shipping this order to the South Pacific in

This order is part of a growing program to develop broadband services in the South Pacific region.

2023, 50% of our total net sales were derived from our largest customer, compared to 66% in 2022.

During 2023, 3% of our total net sales

were derived from customers in the military market, as compared to 1% in 2022.

We believe military actions of the Russian Federation

and its invasion of Ukraine and conflicts between Israel and Hamas have added considerable to our shipping costs due to diesel fuel costs.

However, we believe the resulting geopolitical uncertainty should increase our military contracts.

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Approximately 75% of our net sales during 2023 were of our DC power systems to support 5G networks and 60% of

our backlog as of December 31, 2022 are purchase orders of our of DC power systems to support 5G networks.

growing backlog and shipments have demonstrated that our customers are viable and moving forward with orders.

The headwind to a more

rapid sales growth is a labor and supply chain issue.

We anticipate that our component suppliers will normalize their backlogs sometime

during the 4 th quarter in 2023.

In the meantime, our strategy will be to maintain large inventories of engines and electronic

components to offset disruptions.

our sales backlog as of December 31, 2023 are purchase orders of our of DC power systems to support 5G networks in the U.S.

sales backlog as of December 31, 2023, was $3,862, with 56% of that amount being attributable to our largest U.S.

telecommunications

customer, 16% represented purchases from other telecommunications customers in the U.S., 32 % represented

purchases from telecommunications customers outside the U.S., 1 % represented purchase from customers in the marine industry, 1%

represented purchases from customers in the military markets, and 3% represented purchases from customer in other markets.

the three-year period prior to the pandemic, we experienced high double-digit sales growth which resulted in us making strategic investments

to increase our production capacity to $50 million annual revenue through an increase in plant space and the addition of automation equipment.

The unanticipated drop in sales during in the first three years after the pandemic caused a disproportionate distribution of fixed and

semi-fixed overhead costs across much lower revenues.

During 2022, labor shortages and supply chain constrains caused a decrease in product

shipments resulting in an increase in our cost of sales as a percentage of total net sales.

This was primarily because of decreased labor

efficiencies and decreased absorption of manufacturing overhead resulting from lower volume in net sales.

We believe our investments

in state-of the-art equipment, additions to manufacturing plant space, and employee training will yield improvements in our gross margins

as sales volumes increase and as the economy normalizes from the impact of the pandemic and other known and unknown factors affecting

the global economy.

customer, 4% represented purchases from other telecommunications customers in the U.S., 31% represented purchases from telecommunications

customers outside the U.S., 6% represented purchases from customers in the military markets, and 3% from marine and other markets.

the three-year period prior to the pandemic, we experienced high double-digit sales growth which resulted in us making strategic

investments to increase our production capacity to $50 million annual revenue through an increase in plant space and the addition of

automation equipment.

The unanticipated drop in sales during in the first three years after the pandemic caused a disproportionate

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

During 2023, our largest customer asked us to

postpone deliveries of our DC power generators to 2024 resulting in a decrease in revenue and higher overhead cost.

These delays in

shipments, amongst others we have experienced since the pandemic, along with our addition of inventory to mitigate parts shortages

on long-lead items, have resulted in elevated inventory levels.

As of December 31, 2023, we have $16.5 million in inventory.

believe this inventory and our investments in state-of the-art equipment, additions to manufacturing plant space, and employee

training will yield improvements in our gross margins and liquidity as sales volumes increase and as the economy normalizes from the

impact of the pandemic and other known and unknown factors affecting the global economy.

Company’s financial statements have been prepared under the assumption that the Company will continue as a going concern.

year ended December 31, 2023, the Company recorded a net loss of $6,548 and used cash in operations of $3,430.

These factors raise substantial

doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are

In addition, the Company’s independent registered public accounting firm, in their report on the Company’s December

31, 2023, audited financial statements, raised substantial doubt about the Company’s ability to continue as a going concern.

ability to continue as a going concern is dependent upon our ability to obtain additional financing, drive further operating efficiencies,

reduce expenditures, and ultimately, create profitable operations Our ability to obtain additional financing in the debt and equity capital

markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect

to us and our industry.

The Company has taken action to improve its margins, and is continuing to build a strong back log, and expects

to continue investing in product development and sales and marketing activities.

In the event that the Company does not generate sufficient

cash flows from operations and is unable to obtain funding, the Company will be forced to delay, reduce, or eliminate some or all of

its discretionary spending, which could adversely affect the Company’s business prospects, ability to meet long-term liquidity

needs or ability to continue operations.

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

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expansion phase of adding new sites to the infrastructure to provide coverage in rural and remote areas.

2019, the telecommunications infrastructure in the U.S.

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

the needs of average smart phone users.

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

The advent of 5G technology has resulted in a digital revolution within both the commercial

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

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video streaming and e-commerce), holds promising growth opportunities as 5G use expands in the near and long term.

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

The 5G mobile network is intended to converge connectivity, intelligent edge and Internet of Things (IoT) technologies which is expected

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

In the near term, 5G will deliver broadband-like

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

Businesses will benefit from using 5G for data monitoring and cloud-native

5G networks to compute and store data locally.

All of these applications dramatically scale up data usage which requires an increase

in infrastructure and an increase in power and backup generators.

network capabilities continue to expand far beyond smart phones and mobile devices.

The 5G mobile network is converging

connectivity, intelligent edge and Internet of Things (IoT) technologies resulting in an increase in

telecommunications tower sites in both the U.S.

The 5G network delivers broadband-like services such as

high-definition streaming video to a cell phone.

Businesses benefit from using 5G for data monitoring and cloud-native 5G

networks to compute and store data locally.

All of these applications dramatically scale up data usage which requires an increase in

infrastructure and an increase in power and backup generators.

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

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military and large defense contractors in the U.S.

and international

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

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

During the past decade, digitization of the

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

The need to process information

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

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

equipment that can charge batteries or directly power these systems.

international markets.

The need for light weight and compact DC power generation systems are vital for military operations and

commonly used to charge storage batteries, provide backup emergency power, or provide startup power for aircrafts or weapon systems.

During the past decade, digitization of the military accelerated exponentially to support modern information, communication, and

weapon systems.

The need to process information rapidly has led to digitization of command, control, communications, computers and

intelligence across both combat support and service support.

This expansion in data transfer and storage has led to an increase in

energy needs, which requires efficient power generation equipment that can charge batteries or directly power these

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

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

exceptions, DC power.

Our DC generators designed for military applications provide:

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provided DC hybrid power systems, with integrated controls providing higher fuel efficiency than legacy AC generators currently in use.

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

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

In earlier combat vehicle designs, these

surveillance systems were powered by the main auxiliary vehicle battery, which required the vehicle’s main engine to continue operating

to power auxiliary battery systems.

A decade ago, we began delivering compact 3 kW – 15 kW DC auxiliary batteries to power these

communication and reconnaissance systems thereby improving fuel efficiency of the combat and vehicles when deployed.

During the decade

we have delivered several configurations of these auxiliary power units to the military, which vary in function from battery charging

to supplying power to weapon systems.

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

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

In earlier combat vehicle

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

engine to continue operating to power auxiliary battery systems.

A decade ago, we began delivering compact 3 kW – 15 kW DC

power systems for communication and reconnaissance systems thereby improving fuel efficiency of the combat and vehicles when

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

function from battery charging to supplying power to weapon systems.

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

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Vehicle Charging

to Precedence Research, a market research company, the global electric vehicle market size accounted for USD 205.58 billion in 2022 and

is expected to reach USD 1,716.83 billion by 2032, growing at a compound annual growth rate (CAGR) of 23.1% during the forecast period

2023 to 2032.

The primary growth factors driven by significant number of government incentives such as tax rebates, subsidies, and grants.

This increase will require more than 29 million additional charging stations globally to support the cumulative growth of electric vehicles.

The global electric vehicle charging station market is poised to grow at a CAGR of 31.5% from 2022 to 2030.

to Precedence Research, a market research company, the global electric vehicle market size accounted for USD 255.54 billion in 2023

and is expected to reach USD 2,108.80 billion by 2033, growing at a compound annual growth rate (CAGR) of 23.4% during the forecast

period 2024 to 2033.

The primary growth factors driven by significant number of government incentives such as tax rebates,

subsidies, and grants.

This increase will require a significant increase in charging stations globally to support the cumulative

growth of electric vehicles.

During 2023, the global electric vehicle charging station market size reached USD 34.59 billion and has a forecasted CAGR of 29.1% for the period of 2023 to 2032.

2018 article by McKinsey & Company entitled “ The potential impact of electric vehicles on global energy systems ”

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

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

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

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

In addition, the heat generated while charging is captured and delivered

to heat the home, heat water for laundry, or heat the pool.

electric vehicle charger was initially designed in 2009 as a diesel-fueled mobile charger for EV manufacturers to aid in testing their

vehicles in the field.

order to address this issue, we are in the process of upgrading our CHAdeMO chargers to CCS natural gas-powered electric vehicle

charger and combined heat and power generators.

Our electric vehicle chargers, being independent of the grid, are designed to fast charge connected electric vehicles at home while providing backup power during power outages.

addition, the heat generated while charging is captured and delivered to heat the home, heat water for laundry, or heat the

CHAdeMO style electric vehicle charger was initially designed in 2009 as a diesel-fueled mobile charger for EV manufacturers to aid

in testing their vehicles in the field.

We have supplied these mobile chargers to five of the leading automakers in the USA.

We are presently improving

this product by replacing the diesel engine with a heavy duty 60,000-hour plus lifetime Toyota natural gas or propane engine.

targets residential customers that own or are expected to own electric vehicles.

presently improving this product using heavy duty 60,000-hour Toyota natural gas or

propane engine.

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

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

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A key factor demonstrating our management’s abilities and our engineering aptitude can be found

in our successful track record over the last 25 years of executing research, design and engineering contracts, with an average of

four projects per year.

in our successful track record over the last 40 years of executing research, design and engineering contracts.

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

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We also provide cooling systems using ambient air.

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

which we believe lowers both capital expenditures and operating expenditures.

These new generators have been specifically designed to

run in residential applications and will provide power outputs between 5 kW to 22 kW and which incorporate a 30,000- to 90,000-hour life

engine with our proprietary control system.

Our natural gas generators when integrated with battery storage and solar are ideal microgrids

for off-grid and bad grid residential and commercial applications.

environmentally friendly solar hybrid power systems based on a combination of solar with LPG and propane power sources offer

significant cost savings in capital expenditures and operating expenditures when compared to similar products offered by our

Our solar hybrid power systems have been specifically designed to run in residential applications and provide

power outputs between 5 kW to 22 kW and incorporate a 30,000- to 90,000-hour life engine with our proprietary control system.

Our natural gas generators when integrated with battery storage and solar are ideal microgrids for off-grid and bad grid residential

and commercial applications.

Network Management Tools

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expedites the sales process for our DC power systems.

market our products to a large global customer base through actual product demonstrations.

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

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

our products.

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

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

During 2021 and 2022, we experienced

a modest resumption of sales activity with our U.S.

Tier-1 telecommunications customers as their construction activities resume.

the daily developments of the COVID-19 pandemic and the global responses to curb its spread, we are not able to accurately estimate all

of the long-term effects of the COVID-19 pandemic on our business.

service our products through various service partners that provide initial product installation and maintenance services.

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increase our team of engineers and continue investing into new product development as part of our strategy to diversify our product lines.

However, it is not possible for us to predict the duration or magnitude of the adverse results

of the outbreak and its effects on our ability to continue our design engineering and research development projects during the remainder

of 2023 and perhaps beyond.

possess a broad intellectual property portfolio comprised of electronics, software, engines, alternators, thermal systems and production

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to ensure best proposals are selected.

outbreak of COVID-19 has taken a toll on the global economy and has disrupted raw material supply chains all over the world.

experienced material shortages and delays due to the pandemic;

have experienced material shortages and delays due to the pandemic;

What changed 10-K

Item 1. Business