What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2025-03-31 compared with 2024-04-01 · 383 added, 385 removed, 35 unchanged (96% of the section changed)

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 April 1, 2024, we had 17,561,612 shares of common stock outstanding held of record by approximately 21 stockholders.

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.”

of March 31, 2025, we had 2,511,532 shares of common stock outstanding held of record by approximately 22 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

Sales of Unregistered Securities

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.

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

We are continuously diversifying our customer base and are selling our products into non-telecommunication markets and

applications at an increasing rate.

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).

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 stationary 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 into our standard DC power systems.

solar hybrid power systems .

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

our DC hybrid power system.

power systems .

These stationary 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.

the years ended December 31, 2023 and 2022, 95% and 96%, respectively, of our total net sales were within the telecommunications market.

In 2023, our two largest customers represented 50% and 18% of our total net sales, respectively, one being a Tier-1 telecommunications

customer in the U.S.

Recent Sales of Unregistered Securities

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

You should read the following

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

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

In addition to historical information, this discussion

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

Our actual results may differ materially

from those discussed below.

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

below, and those discussed in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Our historical

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

necessarily indicative of the results to be expected for the full year.

We design, manufacture, and sell

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

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

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.

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, 2024 and 2023, 88% and 95%, respectively, of our total net sales were within the telecommunications market.

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.

one being a telecommunications customer outside the U.S.

In 2023, our two largest customers represented 50% and 18% of our total net sales,

respectively, one being a Tier-1 telecommunications customer in the U.S.

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

In 2022, our two largest customers represented 66%

and 23% of our total net sales, respectively, one being a Tier-1 telecommunications customer 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.

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

During 2023 and 2022, sales to international customers accounted

for 21% and 25% of total revenue, respectively.

Sales to military customers during 2023 and 2022 accounted for 3% and 1% of total revenues,

respectively.

During 2023 and 2022, sales to the marine and other markets accounted for 2% and 3% of total revenue, respectively.

launched our prime power DC generators incorporating the Toyota 1KS engines optimized for propane, natural gas, and extremely long operational

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.

also started deliveries of our Summit Series, 27 kW diesel fuel DC generators to the U.S.

5G telecommunications market.

Our US Tier-1

telecommunications customers are in the process of upgrading 15 kW and 20 kW generators to the 27 kW to meet the increased power requirements

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.

May 2023, we announced plans to expand our mobile offerings by 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.

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.

Marine sales interest have increased significantly both domestically and overseas due to

the increased performance in comfort and fuel economy.

Also, there are increasing restrictions on the use of diesel and gasoline engines

in many lakes and waterways making way for our natural gas and propane operated generators.

Using natural gas and propane for home and

office charging for electric vehicle and forklifts is still a market under development.

Same is true for diesel mobile chargers for emergency

roadside assistance.

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.

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.

Accounting Policies

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:

During those periods, the majority of

our sales were of our DC base powers systems.

During 2024 and 2023, sales to international customers accounted for 13% and 21% of total

revenue, respectively.

Sales to military customers during 2024 and 2023 accounted for 8% and 3% of total revenues, respectively.

2024 and 2023, sales to the marine and other markets accounted for 4% and 2% of total revenue, respectively.

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.

In May 2023, we announced plans

to expand our mobile offerings by 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.

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.

We demonstrated a microgrid product that can provide 24/7 electric power to a commercial facility.

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.

believe this product in its current configuration can serve mid-level micro grid needs in residential and commercial areas.

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

various application needs.

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

Revenue Recognition.

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;

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.

also recognize revenue from the rental of equipment.

Our rental revenues have not been significant to date and have accounted for less

than one percent of total revenues for the years ended December 31, 2023 and 2022.

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.

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

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

payments to officers, directors, employees, 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 officers, directors, employees, and consultants, 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 2023 has not been significant on the financial condition or results of operations of our

Rapid changes in the global economy may cause significant spikes in inflation which may have an impact in our financial condition

during 2024 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, 2023

net sales for the year ended December 31, 2023, were $15,293, as compared to $16,056 for the year ended December 31, 2022.

a net loss of $6,548 for 2023, as compared to net loss of $5,584 for 2022.

Our revenues during these periods are primarily due to our

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

infrastructure.

the second half of 2023, we experienced a decrease in revenue due to unanticipated rescheduling of approximately $2.0 million in deliveries

to our largest telecommunications customers.

These orders remain part of our backlog as of December 31, 2023, and are expected to be

delivered to customers within the following two quarters.

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

2023, our international sales were $3,216, or 21% of total net sales, as compared to $3,983, or 25%, during 2022.

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

telecommunications

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% represented purchases from customer

in the marine industry.

During the first quarter of 2024, the Company received $5,400 in new purchase orders from customers for

its DC power systems.

Combined with open orders as of April 1, 2024, the Company has a total sales backlog of $7,700, which 40% of the

orders are from its largest telecommunications customer in the U.S., 50% from other telecommunications customers, 8% from customers in

military markets, and 2% from Marine, EV and other markets.

Of the $7,700 in the sales backlog, 36% of the orders are from customers

in international markets.

The Company expects to complete shipment of these orders within the next six to twelve months.

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

We also anticipate that our sales will increase as we overcome supply

chain and labor issues.

We plan to continue to take proactive steps to manage our operations and mitigate the financial impacts of higher

costs and supply chain issues.

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

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.

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.

and recognition of revenue as the entity satisfies the performance

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

We also recognize revenue from

the rental of equipment.

Our rental revenues have not been significant to date and have accounted for less than one percent of total revenues

for the years ended December 31, 2024 and 2023.

Warranty Costs .

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.

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

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.

Effects of Inflation

The impact of inflation and changing

prices during 2024 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.

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, 2024

Our net sales for the year ended

December 31, 2024, were $13,970, as compared to $15,293 for the year ended December 31, 2023.

We reported a net loss of $4,677 for 2024,

as compared to net loss of $6,548 for 2023.

Cost of sales includes inventory write-downs of $900 in 2024, and $450 in 2023, to adjust inventory to net realizable value.

During 2024, we saw

significant volatility in revenue primarily from our largest customer which greatly affected overall performance.

We believe the drop in sales is attributed to excess inventory at customer warehouse collected during COVID-19 and

customer concerted effort to reduce inventory.

We believe the excess inventory has largely been reduced and anticipate normalization in

purchases during second half of 2025.

profitability in the second and third quarters of the year with gross margins at 39% and 29%, respectively.

We experienced net

losses and negative margins in the first and fourth quarter.

We believe economic and geopolitical factors continue to influence our

customers’ buying patterns.

During 2024, sales to our

customers in the U.S.

were $12,108, or 87% of total net sales, as compared to 79% in 2023.

During 2024, our largest customer

represented 48% of our total net sales, as compared to 50% in 2023.

Our international sales were $1,862, or 13% of total net sales

in 2024, as compared to $3,216, or 21%, during 2023.

Our sales backlog as of December

31, 2024, was $1,306, with 53% of that amount being attributable to our largest U.S.

telecommunications customer, 3% attributed to other

telecommunications customers, 36% to customers in the military markets, and 9% to customers in marine and 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.

During 2024, we successfully reduced overhead expenses by $996 to improve cash generated

through operations.

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.

We have $12.9 million in inventory and completed updating our manufacturing facilities to accommodate three to four

times the annual revenue of 2024.

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.

Factors” commencing on page 17 of this Annual Report on Form 10-K for additional considerations.

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.

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.

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

of the Years Ended December 31, 2023 and 2022 (in thousands)

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, 2024 and 2023 (in thousands)

Year Ended December 31,

4 unchanged sentences

(Unfavorable)

Cost of sales (includes inventory write-downs of $450 and $nil, respectively)

Cost of sales (includes inventory write-downs of $900 and $450, respectively)

Sales and marketing expenses

6 unchanged sentences

Loss before income taxes

Net sales decreased by $763, or 5%, to $15,293 for the year ended December 31, 2023, as compared to $16,056 for the year ended

December 31, 2022.

The decrease in net sales is attributable to a decrease in deliveries of our DC power generator to our largest telecommunications

customer in the U.S.

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

the end of the year.

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

in our sales backlog.

During 2023, revenue from

telecommunications customers accounted for 95% of total net sales, as compared to 96% of total net sales during 2022.

largest customers represented 50% and 18% of our total net sales in 2023, as compared to 66% and 23% in 2022.

Our largest customer

in each year was a Tier-1 telecommunications customer in the U.S., and our second largest customer in each year was a

telecommunications customer outside the U.S.

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

2023 and 2022, sales to international customers accounted for 21% and 25% of total revenue, respectively.

Sales to military customers

during 2023 and 2022 accounted for 3% and 1% of total revenues, respectively.

Sales to marine and other markets during 2023 and 2022

accounted for 2% and 3% of total revenue, respectively.

Net sales decreased

by $1,323, or 9%, to $13,970 for the year ended December 31, 2024, as compared to $15,293 for the year ended December 31, 2023.

in net sales is primarily due to a decrease in deliveries of our DC power generators to our largest telecommunications customer in the

During 2024, revenue from telecommunications

customers accounted for 88% of total net sales, as compared to 95% of total net sales during 2023.

Our two largest customers represented

48% and 14% of our total net sales in 2024, as compared to 50% and 18% in 2023.

Our largest customer in each year was a Tier-1 telecommunications

customer in the U.S., and our second largest customer in each year was 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 2024 and 2023, sales to

international customers accounted for 13% and 21% of total revenue, respectively.

Sales to military customers during 2024 and 2023 accounted

for 8% and 3% of total revenues, respectively.

Sales to marine and other markets during 2024 and 2023 accounted for 4% and 2% of total

revenue, respectively.

Most of our sales were of our DC base powers systems during the two years.

Cost of sales increased by $667, or 5%, to $14,598 during 2023, compared to $13,931 during 2022.

Cost of sales as a

percentage of net sales increased from 86.8% in 2022 to 95.5% in 2023.

During the second half of 2023, our largest

telecommunications customer requested that we postpone shipments of our DC power generators.

This resulted in under-utilization of

our production capacity and an increase in factory overhead absorption.

Cost of sales during 2023 includes an inventory write-down

of $450 to adjust inventory to net realizable value.

We believe we will achieve significant reductions in the cost of sales as a

percentage of net sales in the upcoming quarters as we ship orders accumulated in our sales backlog.

We recognized a gross profit of $695 during 2023, as compared to a gross profit of $2,125 during 2022, which represents a

decrease in gross profit of $1,430 or 67%.

Gross profit as a percentage of net sales decreased to 4.5% in 2023, as compared to 13.2%

The decrease in gross profit during 2023 was primarily attributable to a decrease in factory overhead absorption resulting from

lower sales primarily during the second half of 2023 and an inventory write-down of $450 included

in the cost of sales during 2023.

and Marketing Expenses.

Cost of Sales .

of sales decreased by $1,942 or 13%, to $12,656 during 2024, compared to $14,598 during 2023.

Cost of sales as a percentage of net

sales decreased from 95.5% in 2023 to 90.6% in 2024 primarily as a result of a decrease in factory overhead absorption as compared

to the same period in 2023.

We believe we can achieve significant reductions in the cost of sales in 2025 as a percentage of net

sales as volumes in production increase.

Cost of sales includes inventory write-downs of $900 in 2024, and $450

in 2023, to adjust inventory to net realizable value.

Gross Profit .

We recognized

a gross profit of $1,314 during 2024, as compared to a gross profit of $695 during 2023, which represents an increase in gross profit

of $619 or 89%.

Gross profit as a percentage of net sales increased to 9.4% in 2024, as compared to 4.5% in 2023.

The increase in

gross profit during 2024 was primarily because of improved labor efficiencies in manufacturing resulting from higher production volumes

primarily during the second and third quarters of 2024.

Sales and Marketing Expenses.

Sales and marketing expenses decreased $162 to $1,010 during 2024, as compared to $1,172 during 2023.

decrease was attributable to a slight decrease in sales support staff during 2023 as compared the same period in 2022.

We plan to increase

our sales force and increase our marketing and tradeshow activities in 2024 to support our diversification strategy and expand our customer

base in all market segments.

and Development Expenses.

During 2023, research and development expenses decreased by $238 to $1,222, as compared to $1,460

The decrease in 2023 is attributed to a decrease in engineering staff during 2023 as compared to 2022.

Our research and

development efforts during 2023 primarily focused on developing our new 27 kW power system, new software for our new 4Y Toyota

engine control system, 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.

and Administrative Expenses .

Our general and administrative expenses decreased by $436 to $4,291 during 2023, as compared to $4,727

The decrease in general and administrative expenses during 2023 was primarily due to not having stock-based compensation

during 2023, as compared to stock-based compensation expense of $515 during 2022, coupled with a slight increase in consulting services,

rent, and bank fees during 2023.

and Finance Costs.

The decrease was attributable to

a slight decrease in sales support staff during 2024 as compared the same period in 2023.

We plan to increase our sales force and increase

our marketing and tradeshow activities in 2025 to support our diversification strategy and expand our customer base in all market segments.

Research and Development Expenses.

During 2024, research and development expenses decreased by $451 to $771, as compared to $1,222 during 2023.

The decrease in 2024

is attributed to a decrease in engineering staff during 2024 as compared to 2023.

Our research and development efforts during 2024 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

Our general and administrative expenses decreased by $383 to $3,908 during 2024, as compared to $4,291 during 2023.

decrease in general and administrative expenses during 2024 was primarily due a decrease in the number of general and administrative staff

during 2024, as compared to 2023.

Interest and Finance Costs.

Our interest expense was $649 in 2024, as compared to $559 in 2023.

In 2023, our equipment financing expense decreased

by $10, bank fees related to our line of credit with Pinnacle Bank increased by $508.

As a result of the factors identified above, we generated a net loss of $6,548, or ($0.49) per basic and diluted share, for

2023, as compared to net loss of $5,584, or ($0.43) per basic and diluted share, for 2022, an increase loss of $964.

The increase in

net loss is primarily attributed to a decrease in net sales of $763 due postponement of shipments of our DC power generators during the

second half of 2023 as requested by our largest telecommunications customer, an increase in interest expense primarily related to

our line of credit with Pinnacle Bank of $508, and an inventory write-down of $450 recorded in the cost of sales during 2023 to adjust inventory to net realizable

Capital Resources and Going Concern

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.

the year ended December 31, 2023, we funded our operations primarily from cash on hand.

Our interest expense is primarily from borrowings from our credit

of the factors identified above, we generated a net loss of $4,677, or ($1.86) per basic and diluted share, for 2024, as compared to net

loss of $6,548, or ($3.45) per basic and diluted share, for 2023, a decrease loss of $1,871.

Liquidity, Capital Resources and Going Concern

Going Concern

The Company’s financial

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

For the year ended December 31,

2024, the Company recorded a net loss of $4,677 and used cash in operations of $536.

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.

In addition, the Company’s

independent registered public accounting firm, in their report on the Company’s December 31, 2024, audited financial statements,

raised substantial doubt about the Company’s ability to continue as a going concern.

Our 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.

Sources of Liquidity

During the year ended December

31, 2024, we funded our operations primarily from cash on hand.

As of December 31, 2024, we had working capital of $7,037, as compared

to working capital of $11,775 at December 31, 2023.

This $5,592 decrease in working capital is primarily attributable to a $338 increase

This $4,738 decrease in working capital is primarily attributable to a $51 decrease

in cash and cash equivalents resulting from net cash of $536 used in operating activities, net cash used in investing activities of $19

$194 for the acquisition of new property and equipment, and net cash from financing activities of $3,962 which includes net proceeds

of $1,556 from sales of 4,600,000 shares of common stock in December 2023 and net proceeds of $2,354 from our credit facility.

December 31, 2023, and December 31, 2022, our net trade receivables totaled $1,676 and $2,230, respectively.

On December 31, 2023, $1,156

(69%) and $264 (16%) represented the two largest open customer account balances, while $2,006 (90%) represented the largest open customer

account balance on December 31, 2022.

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

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.

As of December 31, 2023, the ERC is still being

processed by the IRS.

available capital resources on December 31, 2023, consisted primarily of $549 in cash and cash equivalents, as compared to $211 as of

December 31, 2022.

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, funds from the ERC, 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 was amended by

the First Modification to Loan and Security Agreement on October 7, 2020.

for the acquisition of new property and equipment, and net cash from financing activities of $504 which includes net proceeds of $559

from our credit facility.

On December 31, 2024, and December

31, 2023, our net trade receivables totaled $2,153 and $1,676, respectively.

On December 31, 2024, $1,771 (82%) represented the largest

open customer account balance, while $1,156 (69%) and $264 (16%) represented the two largest open customer account balances on December

At 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.

In May 2024, the Company received $2,000 of the ERC receivable.

Our available capital resources

on December 31, 2024, consisted primarily of $498 in cash and cash equivalents, as compared to $549 as of December 31, 2023.

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 financings, if any.

Credit Facility

Effective September 30, 2020,

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

The Loan Agreement was amended by the First Modification

to Loan and Security Agreement on October 7, 2020.

The Loan Agreement’s initial term ended on September 30, 2022.

On November 3, 2022, we executed the Second Modification to Loan and Security Agreement with Pinnacle for a two-year term with

an expiration date of September 30, 2024.

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.

The aggregate amount of the outstanding advances under the revolving credit facility were initially

limited to $4,000.

On May 25, 2023, we executed the Fourth Modification to the Loan Agreement to amend the amount of available advances

under the Loan Agreement such that the aggregate amount of the outstanding advances under the revolving credit facility may not be greater

than $6,000 and raised the concentration percentage applicable to certain Tier-1 telecommunication customers from 50% to 75% in the definition

of eligible accounts.

September 5, 2023, the Company entered into a Fifth Modification to the Loan Agreement under which the parties (a) agreed to amend the

amount of available advances under the Loan Agreement such that the aggregate amount of the outstanding advances under the revolving

credit facility may not be greater than seven and a half million dollars ($7.5 million), (b) extended the standard of eligibility applicable

to certain Tier-1 telecommunication customers from ninety (90) days to one hundred twenty (120) days of invoice date in the definition

of eligible accounts, (c) increased the inventory advance rate from 35% to 40% of the aggregate eligible inventory value of eligible

inventory, and (d) raised the inventory advance limit from two million dollars ($2.0 million) to four million dollars ($4.0 million).

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.

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.

have an outstanding balance of $4,238 under the Loan Agreement at December 31, 2023.

As of December 31, 2023, we had availability under

the Loan Agreement of $376 and we believe that we are in compliance with the terms and conditions of the Loan Agreement.

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

On November 3,

2022, we executed the Second Modification to Loan and Security Agreement with Pinnacle for a two-year term with an expiration date of

September 30, 2024.

On September 23, 2024, the Loan and Security Agreement with Pinnacle was renewed for two years and expires September

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)

The aggregate amount of the outstanding advances under the revolving credit facility were initially limited to $4,000.

25, 2023, we executed the Fourth Modification to the Loan Agreement to amend the amount of available advances under the Loan Agreement

such that the aggregate amount of the outstanding advances under the revolving credit facility may not be greater than $6,000 and raised

the concentration percentage applicable to certain Tier-1 telecommunication customers from 50% to 75% in the definition of eligible accounts.

On September 5, 2023, the Company

entered into a Fifth Modification to the Loan Agreement under which the parties (a) agreed to amend the amount of available advances under

the Loan Agreement such that the aggregate amount of the outstanding advances under the revolving credit facility may not be greater than

seven and a half million dollars ($7.5 million), (b) extended the standard of eligibility applicable to certain Tier-1 telecommunication

customers from ninety (90) days to one hundred twenty (120) days of invoice date in the definition of eligible accounts, (c) increased

the inventory advance rate from 35% to 40% of the aggregate eligible inventory value of eligible inventory, and (d) raised the inventory

advance limit from two million dollars ($2.0 million) to four million dollars ($4.0 million).

Interest 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.

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

We have an outstanding

balance of $4,797 under the Loan Agreement at December 31, 2024.

During 2024, we advanced a net of $559 under the Loan Agreement.

of December 31, 2024, we had availability under the Loan Agreement of $654 and we believe that we are in compliance with the terms

and conditions of the Loan Agreement.

The 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):

3 unchanged sentences

Net increase (decrease) in cash

cash used in operating activities for 2023 was $3,430, as compared to $6,507 for the same period in 2022.

This increase in net cash used

in 2023 was primarily due to a net loss of $6,548, a decrease in accounts receivable of $554, a decrease in prepaid expenses of $2,174,

a decrease in customer deposits of $508, and an increase in inventories of $1,062.

cash used in investing activities for 2023 totaled $194, as compared to $25 for 2022, an increase of $169.

The net cash used in investing

activities in 2023 was attributable to the purchase of two robotic welders to help improve efficiencies in manufacturing.

cash provided by financing activities totaled $3,962 for 2023, as compared to $1,642 provided by financing activities during 2022, an

increase of $2,320.

This increase was primarily due to the issuance and sale of 4,60,000 shares of our common stock in a firm commitment

underwritten public offering on December 5, 2023.

We received net proceeds of approximately $1,556 from the sale of the shares after

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

During 2023, we received $2,354 in net proceeds

from advances from our credit facility at Pinnacle Bank and repaid $205 on our equipment financing notes payable.

of December 31, 2023, we had a backlog of $3,862.

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.

Operating Activities

Net cash used in operating activities

for 2024 was $536, as compared to $3,430 for the same period in 2023.

This decrease in net cash used in 2024 was primarily due to a net

loss of $4,677, a decrease in ERC receivable of $2,000, a decrease in refundable income taxes of $787, and a decrease in accounts payable

Investing Activities

Net cash used in investing activities

for 2024 totaled $19, as compared to $194 for 2023, a decrease of $175.

Net cash used in investing activities was primarily due to acquisitions

of property and equipment.

Financing Activities

Net cash provided by financing

activities totaled $504 for 2024, as compared to $3,962 provided by financing activities during 2023, an decrease of $2,894.

provided was primarily borrowings from the line of credit with Pinnacle.

As of December 31, 2024, we had

a backlog of $1,306.

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, 2024 was comprised of the following elements:

purchases of DC power systems by telecommunications customers in the U.S., 31% in purchases by telecommunications customers outside the

U.S., 6% in purchases in military markets, and 3% in purchases by customers in the marine industry.

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.

the first quarter of 2024, the Company received $5,400 in new purchase orders from customers for its DC power systems.

Combined with

open orders as of April 1, 2024, the Company has a total sales backlog of $7,700, which 40% of the orders are from its largest telecommunications

customer in the U.S., 50% from other telecommunications customers, 8% from customers in military markets, and 2% from Marine, EV and

other markets.

Of the $7,700 in the sales backlog, 36% of the orders are from customers in international markets.

The Company expects

to complete shipment of these orders within the next six to twelve months.

and Qualitative Disclosures About Market Risk.

Statements and Supplementary Data.

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

in and Disagreements with Accountants on Accounting and Finance Disclosure.

56% in purchases of DC power systems by telecommunications

customers in the U.S., 35% in purchases in military markets, and 9% in purchases by customers in the marine and other markets.

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

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Financial Statements and Supplementary Data.

Reference is made to the financial

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

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

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity