Polar Power, Inc. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Shares of our common stock trade on The Nasdaq Capital Market under the symbol “POLA.” As of April 15, 2026, we had 3,640,159 shares of common stock outstanding held of record by 23 stockholders. These holders of record include depositories that hold shares of stock for brokerage firms which, in turn, hold shares of stock for numerous beneficial owners. Recent Sales of Unregistered Securities None. Item 6. [RESERVED]. Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results to be expected for any future period, and results for any interim period are not necessarily indicative of the results to be expected for the full year. Overview We design, manufacture, and sell DC power generators, renewable energy and cooling systems for applications primarily in the telecommunications market and, to a lesser extent, in other markets, including military, electric vehicle charging, marine and industrial. We are continuously diversifying our customer base and are selling our products into non-telecommunication markets and applications at an increasing rate. Within the various markets we service, 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). Serving these various markets, we offer the following three configurations of our DC power systems, with output power ranging from 5 kW to 50 kW: ● DC base power systems . These stationary systems integrate a DC generator and automated controls with remote monitoring, which are typically contained within an environmentally regulated enclosure. ● DC hybrid power systems . These systems incorporate lithium-ion batteries (or other advanced battery chemistries) with our proprietary battery management system into our standard DC power systems. ● DC solar hybrid power systems . These stationary systems incorporate photovoltaic and other sources of renewable energy into our DC hybrid power system. ● Mobile power systems . These stationary systems incorporate photovoltaic and other sources of renewable energy into our DC hybrid power system. 39 Our DC power systems are available in diesel, natural gas, LPG / propane and renewable formats, with diesel, natural gas and propane gas being the predominate formats. During the years ended December 31, 2025 and 2024, 88% and 88%, respectively, of our total net sales were within the telecommunications market. In 2025, our largest customer, being a Tier-1 telecommunications in the U.S., represented 65% of our total net sales. In 2024, our two largest customers represented 48% and 14% of our total net sales, respectively, one being a Tier-1 telecommunications customer in the U.S. and one being a telecommunications customer in Puerto Rico. 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. During 2025 and 2024, sales to international customers accounted for 7% and 13% of total revenue, respectively. Sales to military customers during 2025 and 2024 accounted for 8% and 8% of total revenues, respectively. Sales to customers in the marine market accounted for 1% of total net sales during 2025, and 3% in 2024. Sales to customers in other markets represented 3% of total net sales in 2025, and 1% in 2024. We launched our prime power DC generators incorporating the Toyota 1KS engines optimized for propane, natural gas, and extremely long operational life. We believe that with the increasing installation restrictions on small diesel engines along with their limited availability due to stringent EPA regulations will force a change to natural gas and propane (LPG) generators. LPG and natural gas are lower in cost than diesel fuel in many areas throughout the world. Our new LPG and natural gas generators will provide strong opportunities for growth and diversification in line with our long-term plan. At the international level, we have several telecommunications customers in the south pacific region purchasing our DC generators to develop the telecommunications infrastructure in this region. We believe the implementation and ongoing development of 5G networks along with programs to develop the telecommunications infrastructure in rural and underdeveloped countries will continue to fuel our growth in the telecommunications market over the next five to ten years. During 2024 and 2025, we worked on upgrading our mobile CHAdeMO EV chargers to the universal combined charging system standard to reach the mobile EV charging market. Mobile EV chargers are used for emergency roadside service providing a fast-charging solution for EVs that have run out of charge before reaching a stationary charging facility. During second half of 2024, we have successfully tested our demonstrator model on several platforms and made appropriate improvements and changes. We believe this configuration of remote mobile electric vehicle charger is just an initial model and based on power and fuel needs will result in various additional configurations. We also continue to market our DC generators for the military, advanced mobility and marine markets as part of our ongoing customer diversification strategy. The military’s increasing use of robotics, drones, and computerization in the field is driving the demand for battery charging with DC generators. Military sales are advantageous because of their long-term contracts and they tend to cover the cost of product development. We expect that opportunities in the bad-grid (i.e., areas where wireless towers are connected to an electrical grid that loses power for 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. In 2024, we developed a microgrid product that can provide 24/7 electric power to a commercial facility. This project was funded by UNHCR a United Nations organization. The product included DC generator, battery storage, AC inverter, solar charge controller and remote monitoring in a single container which can be delivered to any remote location to provide power. We believe this product in its current configuration can serve mid-level micro grid needs in residential and commercial areas. 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. 40 Critical Accounting Policies We believe that the following critical accounting policies, among others, affect our more significant judgment and estimates used in the preparation of our financial statements: Revenue Recognition. 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 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 also recognize revenue from the rental of equipment. Our rental revenues have not been significant to date and have accounted for $nil of total revenues for the years ended December 31, 2025 and 2024. Warranty Costs . 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. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty costs. We estimate the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. Inventory . Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. 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. 41 Effects of Inflation The impact of inflation and changing prices during 2025 has not been significant on the financial condition or results of operations of our company. Rapid changes in the global economy may cause significant spikes in inflation which may have an impact in our financial condition during 2025 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. Impact 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. Financial Performance Summary – Year Ended December 31, 2025 Our net sales for the year ended December 31, 2025, were $6,304, as compared to $13,970 for the year ended December 31, 2024. We reported a net loss of $9,133 for 2025, as compared to net loss of $4,677 for 2024. Cost of sales includes inventory write-downs of $1,967 in 2025, and $900 in 2024, to adjust inventory to net realizable value. During 2025, sales to our customers in the U.S. were $6,219, or 93% of total net sales, as compared to $12,108, or 87% in 2024. During 2025, sales to our international customer were $415, or 7% of our total net sales, as compared to $1,862, or 13% of total net sales in 2024. We believe economic and geopolitical factors have influenced our customers’ buying decisions, particularly international customers, delaying pushing orders to 2026. Our sales backlog as of December 31, 2025, was $4,306, with 82% of that amount being attributable to our telecommunications customers, 17% attributed to customers in military markets, 1% to customers in marine market, and 1% in other markets. The Company expects to complete shipment of these orders within the next six to twelve months. We plan to continue to market our products globally and expand our customer base in all market segments. We plan to continually improve our inventory turns to generate cash flow from operations combined with austerity measures on non-essentials overhead to manage cash flow while sales improves. We plan to continue take proactive steps to manage our operations and mitigate the financial impacts of higher costs, supply chain issues, and geopolitical factors. However, the full impact on our financial and operating performance of these factors 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 18 of this Annual Report on Form 10-K for additional considerations. 42 Results of Operations The tables presented below, which compare our results of operations from one period to another, present the results for each period, the change in those results from one period to another in both dollars and percentage change, and the results for each period as a percentage of net revenues. The columns present the following: ● The first two data columns in each table show the absolute results for each period presented. ● The columns entitled “Dollar Variance” 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. For example, when our net revenues increase from one period to the next, that change is shown as a positive number in both columns. Conversely, when expenses increase from one period to the next, that change is shown as a negative in both columns. ● The last two columns in each table show the results for each period as a percentage of net revenues. Comparison of the Years Ended December 31, 2025 and 2024 (in thousands) Year Ended December 31, Dollar Variance Percentage Variance Results as a Percentage of Net Revenues for the Year Ended December 31, Favorable Favorable 2025 2024 (Unfavorable) (Unfavorable) 2025 2024 Net sales $ 6,304 $ 13,970 $ (7,666 ) (55 )% 100.0 % 100.0 % Cost of sales (includes inventory write-downs of $1,967 and $900, respectively) 9,460 12,656 3,196 25 % 150.1 % 90.6 % Gross profit (loss) (3,156 ) 1,314 (4,470 ) (340 )% (50.1 )% 9.4 % Sales and marketing expenses 807 1,010 203 20 % 12.8 % 7.2 % Research and development expenses 646 771 125 16 % 10.2 % 5.5 % General and administrative expenses 3,359 3,908 549 14 % 53.3 % 28.0 % Impairment of right-of-use assets and lease deposits 455 — (455 ) — 7.2 % 0.0 % Total operating expenses 5,267 5,689 422 7 % 83.6 % 40.7 % Loss from operations (8,423 ) (4,375 ) (4,048 ) (93 )% (133.6 )% (31.3 )% Interest and finance costs (720 ) (649 ) (71 ) (11 )% (11.4 )% (4.6 )% Other income (expense), net 10 347 (337 ) (97 )% 0.2 % 2.5 % Loss before income taxes (9,133 ) (4,677 ) (4,456 ) (95 )% (144.9 )% (33.5 )% Income tax — — — — — — Net loss $ (9,133 ) $ (4,677 ) $ (4,456 ) (95 )% (144.9 )% (33.5 )% 43 Net Sales. Net sales decreased by $7,666, or 55%, to $6,304 for the year ended December 31, 2025, as compared to $13,970 for the year ended December 31, 2024. Net sales to our largest customer decreased approximately 40% from 2024 sales, and international net sales decreased approximately 78% from 2024 sales. We believe customers delayed projects due to geopolitical factors and economic uncertainties. At December 31, 2025, we had accumulated $3,212 in new purchase orders from our U.S. Tier-1telecommunications customers for delivery in 2026 and $1,093 in new purchase orders from other customers. During 2025, revenue from telecommunications customers accounted for 88% of total net sales, as compared to 88% of total net sales during 2024. Our largest customer represented 65% of our total net sales in 2025, as compared to our two largest customers that accounted for 48% and 14% in 2024, respectively. Our largest customer in each year was a Tier-1 telecommunications customer in the U.S., and our second largest customer in 2024 was a telecommunications customer in Puerto Rico. There was no other revenue from customers in excess of 10% of total net sales in either period. During 2025 and 2024, sales to international customers accounted for 7% and 13% of total revenue, respectively. Sales to military customers during 2025 and 2024 accounted for 8% and 8% of total revenues, respectively. Sales to customers in the marine market accounted for 1% of total revenues in 2025, and 3% in 2024. Customers in other markets during 2025 and 2024 accounted for 2% and 1% of total revenue, respectively. Most of our sales were of our DC base powers systems during the two years. Cost of Sales . Cost of sales decreased by $3,196 or 25%, to $9,460 during 2025, compared to $12,656 during 2024. Cost of sales as a percentage of net sales increased from 90.6% in 2024 to 150.1% in 2025 primarily as a result of an increase in factory overhead absorption as compared to the same period in 2024. Cost of sales includes inventory write-downs of $1,967 in 2025, and $900 in 2024, to adjust inventory to net realizable value. Gross Profit (Loss) . We recognized a gross loss of $3,156 during 2025, as compared to a gross profit of $1,314 during 2024, which represents a decrease in gross profit of $4,470 or 340%. Gross loss as a percentage of net sales was (50.1)% in 2025, as compared to gross profit as a percentage of net sales of 9.4% in 2024. The gross loss during 2025 was primarily a result of an increase in factory overhead absorption and underutilization of the factory, as well adjustments to inventory net realizable value. Sales and Marketing Expenses. Sales and marketing expenses decreased $203 to $807 during 2025, as compared to $1,010 during 2024. The decrease was attributable to a slight decrease in sales support staff during 2025 as compared the same period in 2024. We plan to increase our sales force and increase our marketing and tradeshow activities in 2026 to support our diversification strategy and expand our customer base in all market segments. Research and Development Expenses. During 2025, research and development expenses decreased by $125 to $646, as compared to $771 during 2024. The decrease in 2025 is attributed to a decrease in engineering staff during 2025 as compared to 2024. Our research and development efforts during 2025 primarily focused on product customization on new customers orders, our mobile EV chargers, and solar hybrid power systems. We continue to search for qualified engineers to join our engineering team and to support our customer diversification efforts. General and Administrative Expenses . Our general and administrative expenses decreased by $549 to $3,359 during 2025, as compared to $3,908 during 2024. The decrease in general and administrative expenses during 2025 was primarily due a decrease in the number of general and administrative staff during 2025, as compared to 2024. Impairment of right-to-use assets and lease deposits. During 2025, we recorded an impairment charge of $455 of which $347 was related to our right-of-use asset and $108 was related to deposits for leases. Interest and Finance Costs. Our interest expense was $720 in 2025, as compared to $649 in 2024. Our interest expense is primarily from borrowings from our credit facility. 44 Net Loss. As a result of the factors identified above, we generated a net loss of $9,133, or ($3.59) per basic and diluted share, for 2025, as compared to net loss of $4,677, or ($1.86) per basic and diluted share, for 2024, representing an increased loss of $4,456. Liquidity, Capital Resources and Going Concern Going Concern The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern , the Company’s management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying financial statements were issued. For the year ended December 31, 2025, the Company recorded a net loss of $9,133 and used cash in operating activities of $1,061. 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 issued. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company manufactures and assembles its DC power systems at two production facilities located in Gardena, California. It is currently delinquent in rent payments to its landlords for office and warehouse facilities. The landlord for its headquarters and manufacturing facility at 249 E. Gardena Blvd., Gardena, California filed a summons for eviction on October 24, 2025. On February 23, 2026, the landlord stopped the actions for eviction and continued discussions with the Company to resolve the delinquent rents and expired lease agreement. The Company expects to be in the position to make significant payment towards the delinquent rents in the near term and/or provide a payment plan mutually agreeable to both parties. The landlord for the other facility for which the Company is delinquent on rent, has not served the Company any legal documents or assessed late fees for the delinquent rent. However, they may do so in the future. The Company is also negotiating with this landlord on a payment plan for the delinquent rent. While the Company is negotiating with both landlords in good faith on payment plans, there is no guarantee that it and the landlords could reach an agreement on a payment plan, or that even if they reached an agreement, they could raise sufficient capital to pay the delinquent rent. It is possible that we will be forced to vacate from any or all facilities, and if that happens, we might have difficulty locating a new headquarters, or new manufacturing or warehouse facilities that are adequate, in a timely manner. Our production could be significantly delayed, access to our inventory could be impaired, and our operations could halt for a significant period of time. Effective September 30, 2020, the Company entered into an Agreement with Pinnacle which will expire on September 30, 2026. The Loan Agreement, as amended, provides for a revolving credit facility under which Pinnacle may, in its sole discretion upon the Company’s request, make advances to us up to $7,500, subject to certain limitations and adjustments. The Loan Agreement contains certain affirmative and negative covenants. At December 31, the Company was not in compliance with the affirmative covenant requiring the Company to attain a minimum Effective Tangible Net Worth greater than $6,000, as the Company attained an Effective Tangible Net Worth of approximately $755 after recording an inventory write-down of $1,967 to adjust the book value of its inventory to its net realizable value, and $455 impairment of right-of-use asset and deposits. On March 10, 2026, the Company and Pinnacle executed a Notice of Additional Defaults and Forbearance Agreement, in which Pinnacle agrees to forbear from exercising certain rights and remedies under the Loan Documents arising from the Specified Existing Defaults for the period commencing March 10, 2026, the Effective Date, to July 31, 2026, the Forbearance Termination Date, considering the Company 1) on or prior to the Effective Date, pays Pinnacle the amount of $250, 2) on or prior to the Effective Date, assigns to Pinnacle new Eligible Accounts in the aggregate amount of at least $185, with 85% of the Net Face Amount of such new Eligible Accounts to be applied to reduce the loan obligations, 3) within forty-five (45) days of the Effective Date, reduce the loan obligations by the aggregate amount of $225, which reduction can result from a cash payment or the assignment of sufficient new Eligible Accounts, with 85% of the Net Face Amount of such new Eligible Accounts to be applied towards such reduction amount, 4) does not create any new events of default, 5) pays in full all obligations to Pinnacle by the Termination Date. If the Company timely complies with all terms listed above, and so long as the Forbearance Termination Date has not occurred, Pinnacle agrees that it will re-commence making Advances to the Company in the amount equal to 42.5% of the Net Face Amount of the thereafter arising Eligible Accounts, with the remaining 42.5% of the Net Face Amount of such Eligible Accounts to be applied to reduce the then outstanding obligations. In March 2026, the Company paid $250 to Pinnacle Bank and timely complied with the requirements under the Forbearance Agreement and commenced taking advances at 42.5% of the Net Face Amount of Eligible Accounts on March 12, 2026. While the Company expects to stay in compliance and pay the full obligation to Pinnacle by July 31, 2026, there is no guarantee that the Company will be able to do so. If the Company is unable to comply with the Loan Agreement, or pay the full obligation to Pinnacle by the July 31, 2026, Pinnacle may immediately enforce its claims, rights, liens, and security interests under the Forbearance Agreement, and the Loan Documents, including, but not limited to, taking possession of its collateral, or any portion thereof, and foreclosing upon its collateral, or any portion thereof, in accordance with the Loan Documents and applicable law. 45 On October 6, 2025, the Company entered into an ATM sales agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time (the “Offering”) through the Sales Agent, shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), up to a maximum amount as set forth in the Sales Agreement, subject to the terms and conditions of the Sales Agreement. The Company filed a prospectus supplement to its registration statement on Form S-3 (File No. 333-276705) offering the Shares up to an aggregate offering price of up to $2,382. Under the Sales Agreement, the Sales Agent may sell the Shares in sales deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on or through The Nasdaq Capital Market or any other existing trading market for the Common Stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law. The Company may instruct the Sales Agent not to sell the Shares if the sales cannot be effected at or above the price designated by the Company from time to time. The Company is not obligated to make any sales of the Shares under the Sales Agreement. The offering pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement as permitted therein. The Company may terminate the Sales Agreement in its sole discretion at any time by giving ten days’ prior notice to the Sales Agent. The Sales Agent may terminate the Sales Agreement under the circumstances specified in the Sales Agreement and in its sole discretion at any time by giving ten days’ prior notice to the Company. The Company will pay the Sales Agent a fixed commission rate of 3.0% of the aggregate gross proceeds of the sales price of the Shares sold through the Sales Agent pursuant to the Sales Agreement and has agreed to provide the Sales Agent with customary indemnification and contribution rights. The Company also agreed to reimburse the Sales Agent the fees and expenses of the Sales Agent, including but not limited to the fees and expenses of the counsel to the Sales Agent, in an amount not to exceed $30,000. In addition, the Company will reimburse the Sales Agent for such fees and expenses incurred in connection with the Sales Agreement in an amount not to exceed (I) $10,000 per fiscal year, provided, however, that at such time as the Company files an additional prospectus or prospectus supplement to increase the aggregate amount of Shares which may be sold under the Sales Agreement in excess of the amount included in the initial prospectus supplement relating to the offering of the Shares, the annual reimbursement for costs, fees and expenses shall be revised from $10,000 to an amount not to exceed $5,000 on a quarterly basis for the first three quarters of each year, $7,500 for the fourth quarter of each year, and (II) $10,000 (on up to two occasions per calendar year in connection with any filing of any additional prospectus or prospectus supplement which relates to the Shares to be issued from time to time by the Company). 46 As of December 31, 2025, the Company has sold 166,127 shares of Common Stock in the ATM Offering at a weighted-average price of $4.70 per share, for net proceeds of $757, after deducting commissions to the sales agent and other ATM Offering related expenses of $23. On December 12, 2025, the Company filed a prospectus supplement to its registration statement on Form S-3 (File No. 333-276705) to increase the amount of shares of Common Stock that the Company may offer and sell under the Sales Agreement and applicable registration statement to an aggregate offering price of up to $2,500, which amount does not include the shares of Common Stock having an aggregate gross sales price of approximately $780 that were sold under the ATM Offering through December 11, 2025, in accordance with the limitations set forth in Instruction I.B.6 of Form S-3. During 2026 and as of April 15, 2026, the Company has sold 962,500 shares of Common Stock in the ATM Offering at a weighted-average price of $2.60 per share, for net proceeds of $2,425, after deducting commissions to the sales agent and other ATM Offering related expenses of $75. On December 23 2025, the Company entered into a business loan and security agreement (the WWCM loan agreement) with World Wide Capital Management (WWCM), pursuant to which the Company borrowed net proceeds of $399, after deducting fees as outlined in the WWCM loan agreement. The loan amount is $500, with a loan origination fee of $20, providing for an advance amount of $480. The loan is to be paid in 48 weekly payments of $13 with the first six payments paid in advance and deducted from the initial funding. Net proceeds of $399 were received by the Company on December 26, 2025. The total repayment obligation to the Company is $640. Furthermore, the Company’s ability to secure other financing is uncertain. The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing, grow and diversify our revenue, improve operational efficiency, reduce overhead and fixed costs, and to create a profitable operation. Its ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, its performance and investor sentiment with respect to the Company and its industry. The Company has taken action to diversify sales to consume existing inventory, increase higher margin aftermarket parts revenue, to fund operations. 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. Sources of Liquidity During the year ended December 31, 2025, we funded our operations primarily from cash on hand. As of December 31, 2025, we had working capital of $(262), as compared to working capital of $7,037 at December 31, 2024. This $7,299 decrease in working capital is primarily attributable to a $298 decrease in cash and cash equivalents resulting from net cash of $1,061 used in operating activities, net cash used in investing activities of $nil, and net cash from financing activities of $763 which includes net proceeds of $757 from sale of the Company’s common shares, net proceeds of $437 from a commercial loan, and proceeds of $330 from borrowings from a related party. On December 31, 2025, and December 31, 2024, our net trade receivables totaled $330 and $2,153, respectively. On December 31, 2025, $196 (59%) represented the largest open customer account balance, while $1,771 (82%) represented the largest open customer account balances on December 31, 2024. Our available capital resources on December 31, 2025, consisted primarily of $200 in cash and cash equivalents, as compared to $498 as of December 31, 2024. We expect our future capital resources will consist primarily of cash on hand, cash generated by operations, drawdowns on our credit facility with Pinnacle Bank and future debt or equity financing, if any. 47 Credit Facility Effective September 30, 2020, the Company entered into an Loan Agreement with Pinnacle which will expire on September 30, 2026. The Loan Agreement, as amended, provides for a revolving credit facility under which Pinnacle may, in its sole discretion upon the Company’s request, make advances to us up to $7,500, subject to certain limitations and adjustments. The Loan Agreement contains certain affirmative and negative covenants. Borrowings based on receivables bears an interest on the daily balance at a rate of 1.25% above the prime rate, but in no event less than 3.75% per annum (8.0% at December 31, 2025 and 8.75% at December 31, 2024). 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, but in no event less than 4.75% per annum (9.0% at December 31, 2025 and 9.75% at December 31, 2024). Pursuant to the Loan Agreement, as amended, the standards of eligible accounts receivable include AT&T accounts receivable up to 120 days of invoice date, and eligible accounts receivable with other customers have up to 90 days of invoice date. Customer accounts with eligible accounts receivable cannot exceed a concentration percentage which is a customer’s total obligations to the Company as a percentage of eligible accounts receivable from all customers. The concentration percentage applicable to certain Tier-1 telecommunications customers is 75% of all eligible accounts receivable, and the concentration percentage applicable to all other customer is 25% of all eligible accounts. Pinnacle may terminate the Loan Agreement at any time upon ninety days prior written notice and immediately upon the occurrence of an event of default. Under the Loan Agreement, the Company granted Pinnacle a security interest in all presently existing and thereafter acquired or arising assets of the Company. At December 31 2025, the Company was not in compliance with the affirmative covenant requiring the Company to attain a minimum Effective Tangible Net Worth greater than $6,000, as the Company attained an Effective Tangible Net Worth of approximately $755 after recording an inventory write-down of $1,967 to adjust the book value of its inventory to its net realizable value, and $455 impairment of right-of-use asset and deposits. On March 10, 2026, the Company and Pinnacle executed a Notice of Additional Defaults and Forbearance Agreement, in which Pinnacle agrees to forbear from exercising certain rights and remedies under the Loan Documents arising from the Specified Existing Defaults for the period commencing March 10, 2026, the Effective Date, to July 31, 2026, the Forbearance Termination Date, considering the Company 1) on or prior to the Effective Date, pays Pinnacle the amount of $250, 2) on or prior to the Effective Date, assigns to Pinnacle new Eligible Accounts in the aggregate amount of at least $185, with 85% of the Net Face Amount of such new Eligible Accounts to be applied to reduce the loan obligations, 3) within forty-five (45) days of the Effective Date, reduce the loan obligations by the aggregate amount of $225, which reduction can result from a cash payment or the assignment of sufficient new Eligible Accounts, with 85% of the Net Face Amount of such new Eligible Accounts to be applied towards such reduction amount, 4) does not create any new events of default, 5) pays in full all obligations to Pinnacle by the Termination Date. If the Company timely complies with all terms listed above by the Forbearance Termination Date, Pinnacle agrees that it will re-commence making advances to the Company in the amount equal to 42.5% of the Net Face Amount of the thereafter arising Eligible Accounts, with the remaining 42.5% of the Net Face Amount of such Eligible Accounts to be applied to reduce the then outstanding obligations. In March 2026, the Company paid $250 to Pinnacle Bank and timely complied with the requirements under the Forbearance Agreement and commenced taking advances at 42.5% of the Net Face Amount of Eligible Accounts on March 12, 2026. While the Company expects to stay in compliance and pay the full obligation to Pinnacle by July 31, 2026, there is no guarantee that the Company will be able to do so. If the Company is unable to comply with the Forbearance Agreement, or pay the full obligation to Pinnacle by the July 31, 2026, Pinnacle may immediately enforce its claims, rights, liens, and security interests under the Forbearance Agreement, and the Loan Documents, including, but not limited to, taking possession of its collateral, or any portion thereof, and foreclosing upon its collateral, or any portion thereof, in accordance with the Loan Documents and applicable law. During 2025, the Company repaid a net of $761 to the Loan Agreement. At December 31, 2025, the outstanding balance under the line of credit was $4,036, which includes interest, fees and financing costs (see below), and the Company had an over advance balance under the line of credit in the amount of $495. The total interest expense, fees, and financing costs incurred under the Loan Agreement during 2025 and 2024 were $746 and $733, respectively. Of these amounts, $106 in 2025 and $99 in 2024 were recorded under general and administrative expenses, while $640 in 2025 and $634 in 2024 were recorded under interest expense and finance costs in the accompanying statements of operations. 48 Cash Flow The following table sets forth the significant sources and uses of cash for the periods set forth below (in thousands): Year Ended December 31, 2025 2024 Net Cash Provided By (Used In): Operating Activities $ (1,061 ) $ (536 ) Investing Activities $ - $ (19 ) Financing Activities $ 763 $ 504 Decrease in cash $ (298 ) $ (51 ) Operating Activities Net cash used in operating activities for 2025 was $1,061, as compared to $536 for the same period in 2024. This decrease in net cash used in 2025 was primarily due to a net loss of $9,133, a decrease in proceeds from ERC receivable of $2,000, and a decrease in refundable income taxes of $787. Investing Activities Net cash used in investing activities for 2025 totaled $nil as compared to $19 for 2024, a decrease of $19. Net cash used in investing activities in 2024 was primarily due to acquisitions of property and equipment. Financing Activities Net cash provided by financing activities totaled $763 for 2025, as compared to $504 provided by financing activities during 2024, an increase of $259. This cash provided was primarily proceeds from notes payable and shares sold under the ATM facility. Backlog As of December 31, 2025, we had a backlog of $4,306. 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, 2025 was comprised of the following elements: 82% in purchases of DC power systems by telecommunications customers, 17% in purchases in military markets, and 2% in purchases by customers in the marine and other markets. We believe the majority of our backlog will be shipped within the next six to 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. 49 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 8. Financial Statements and Supplementary Data. Reference is made to the financial statements, which begin at page F-1 of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Finance Disclosure. None.