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What changed in Polar Power, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Polar Power, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+196 added−205 removedSource: 10-K (2025-03-31) vs 10-K (2024-04-01)

Top changes in Polar Power, Inc.'s 2024 10-K

196 paragraphs added · 205 removed · 141 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

59 edited+30 added−32 removed147 unchanged
Biggest changeOur 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% from marine and other markets. 2 For the three-year period prior to the pandemic, we experienced high double-digit sales growth which resulted in us making strategic investments to increase our production capacity to $50 million annual revenue through an increase in plant space and the addition of automation equipment.
Biggest changeOur 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% to other telecommunications customers in the U.S., 35% represented purchases from customers in the military markets, and 9% from marine and other markets.
In order to address this issue, we are in the process of upgrading our CHAdeMO chargers to CCS natural gas-powered electric vehicle charger and combined heat and power generators. Our electric vehicle chargers, being independent of the grid, are designed to fast charge connected electric vehicles at home while providing backup power during power outages.
To address this issue, we are in the process of upgrading our CHAdeMO chargers to CCS natural gas-powered electric vehicle charger and combined heat and power generators. Our electric vehicle chargers, being independent of the grid, are designed to fast charge connected electric vehicles at home while providing backup power during power outages.
In order to monetize on our positives, we targeted telecommunications markets where generators are used to provide backup power during power outages. Due to the lighter weight and smaller size of our products as compared to AC products, we specifically target customers with the telecommunications towers located on roof-tops in urban areas.
To monetize on our positives, we targeted telecommunications markets where generators are used to provide backup power during power outages. Due to the lighter weight and smaller size of our products as compared to AC products, we specifically target customers with the telecommunications towers located on roof-tops in urban areas.
Our equipment provides backup power to grid connected mobile tower sites during power outages resulting from severe weather like hurricanes, wildfires, and floods. Most telecommunications towers are equipped with battery backup for short term power outages. Our DC power generators are installed to address longer-term disruptions in power.
Our equipment provides backup power to grid connected tower sites during power outages resulting from severe weather like hurricanes, wildfires, and floods. Most telecommunications towers are equipped with battery backup for short term power outages. Our DC power generators are installed to address longer-term disruptions in power.
In addition, we utilize third party testing laboratories to certify our products’ compliance with current applicable UL standards. Our research and development efforts are key to meeting customer demand and ever-changing power requirements.
In addition, we utilize third party testing laboratories to certify our products’ compliance with current applicable UL standards. Our research and development efforts are key to meeting customer demand and changing power requirements.
The Nasdaq notice indicated that, in accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company will be provided 180 calendar days, or until May 22, 2024, to regain compliance.
The Nasdaq deficiency notice indicated that, in accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company will be provided 180 calendar days, or until May 22, 2024, to regain compliance.
We believe that the need for backup power equipment in the telecommunications services industry which consists of digital infrastructure (e.g., fiber, telecommunications towers, active networks and data centers), operators (e.g., mobile and fixed broadband, data centers and cloud computing) and applications (e.g., broadband connections, telephones, video streaming and e-commerce), holds promising growth opportunities as 5G use expands in the near and long term.
We believe that the need for backup power equipment in the telecommunications services industry which consists of digital infrastructure (such as fiber, telecommunications towers, active networks and data centers), operators (such as mobile and fixed broadband, data centers and cloud computing) and applications (such as broadband connections, telephones, video streaming and e-commerce), holds promising growth opportunities as 5G use expands in the near and long term.
Our telematics capabilities and services include: ● automated and continuous remote monitoring with auto alerts and notifications that can be transmitted via email or text messaging; ● maintenance management, which provides ability to schedule preventative maintenance based on actual equipment usage; and ● real-time, bi-directional communication capability for remote upgrades, testing and troubleshooting.
Our MCS2020 capabilities and services include: ● automated and continuous remote monitoring with auto alerts and notifications that can be transmitted via email or text messaging; ● maintenance management, which provides ability to schedule preventative maintenance based on actual equipment usage; and ● real-time, bi-directional communication capability for remote upgrades, testing and troubleshooting.
Service and Support Global Network Management Tools We offer global network management services through our telematics tool, which consists of our Supra Controller™ technology integrated with monitoring software. This hardware is integrated into each DC power system and collects critical data from the equipment and transmits this data back to the customer and our service department.
Service and Support Global Network Management Tools We offer global network management services through our telematics tool, which consists of our Supra Controller™ technology integrated with monitoring system MCS2020. This hardware is integrated into each DC power system and collects critical data from the equipment and transmits this data back to the customer and our service department.
We believe it’s more efficient to build power systems around the DC generator because it’s simpler to integrate with battery storage and solar photovoltaics which also operate on DC. Many applications in communications, water pumping, lighting, vehicle and vessel propulsion, security systems operate on DC power only.
We believe it’s more efficient to build power systems around the DC generator because it’s more efficient to integrate with battery storage and solar photovoltaics which also operate on DC. Many applications in communications, water pumping, lighting, electric vehicle and vessel propulsion, security systems operate on DC power only.
Developing regions like Africa, South East Asia and Latin America lack an electric utility infrastructure to support the installation of grid connected telecommunications towers in remote areas. Due to these challenges, telecommunications companies are installing hybrid power generation systems that consist of solar panels, batteries and fossil fuel powered generators.
Developing regions like Africa, Southeast Asia and Latin America lack an electric utility infrastructure to support the installation of grid connected telecommunications towers in remote areas. Due to these challenges, telecommunications companies are installing hybrid power generation systems that consist of solar panels, batteries and fossil fuel powered generators.
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.
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.
In 2013, we further expanded the integration of storage and renewable energy such as solar and wind into our Supra Controller™ software resulting in the shipment of twenty off-grid telecommunications tower power systems to Australia. 9 In 2017 and 2018, we demonstrated our DC hybrid power systems to telecommunications providers in South East Asia and Africa.
In 2013, we further expanded the integration of storage and renewable energy such as solar and wind into our Supra Controller™ software resulting in the shipment of twenty off-grid telecommunications tower power systems to Australia. 9 In 2017 and 2018, we demonstrated our DC hybrid power systems to telecommunications providers in Southeast Asia and Africa.
We believe that the integration of renewable energy and storage batteries are ideal for off-grid remote locations in rural areas worldwide. During 2024, we plan to continue our research and development efforts to further enhance these integrations for remote telecommunications towers in South East Asia and Africa.
We believe that the integration of renewable energy and storage batteries are ideal for off-grid remote locations in rural areas worldwide. During 2024, we plan to continue our research and development efforts to further enhance these integrations for remote telecommunications towers in Southeast Asia and Africa.
Many micro-grids and energy storage are DC based and use inverters to convert the DC to AC. Serving these various markets, we offer the following configurations of our DC power systems, with output power ranging from 5 kW to 50 kW: ● Base power systems .
Many micro-grids and renewable energy storage systems use battery storage and therefore are DC based and use inverters to convert the DC to AC. Serving these various markets, we offer the following configurations of our DC power systems, with output power ranging from 5 kW to 50 kW: ● Base power systems .
We believe the rapid transition towards 5G will result in an increase in demand for back-up power generators and that our new LPG / natural gas DC power systems will allow us to better compete on an economic basis with our competitors that provide AC power systems. ● Expand global sales to bad-grid or off-grid markets.
We believe the rapid expansion of 5G will result in an increase in demand for back-up power generators and that our new LPG / natural gas DC power systems will allow us to better compete on an economic basis with our competitors that provide AC power systems. ● Expand global sales to bad-grid or off-grid markets.
If the Company fails to regain compliance with the Bid Price Rule before May 22, 2024 but meets all of the other applicable standards for initial listing on The Nasdaq Capital Market with the exception of the minimum bid price, then the Company may be eligible to have an additional 180 calendar days, or until November 18, 2024, to regain compliance with the Bid Price Rule.
If the Company failed to regain compliance with the Bid Price Rule before May 22, 2024 but met all of the other applicable standards for initial listing on The Nasdaq Capital Market with the exception of the minimum bid price, then the Company may be eligible to have an additional 180 calendar days, or until November 18, 2024, to regain compliance with the Bid Price Rule.
Our DC power system output voltage can be configured between 12 V – 800 VDC to match the precise application needs (e.g., telecom equipment, robotic propulsion drives, electric drives for marine vessels, electric vehicle chargers, etc.).
Our DC power system output voltage can be configured between 12 V – 800 VDC to match the precise application needs (such as telecom equipment, robotic propulsion drives, electric drives for marine vessels, electric vehicle chargers, etc.).
Most prime power sites also require integration with solar and storage batteries to utilize renewable energy during the day while generators and batteries provide power during nights and/or on cloudy days.
Most prime power sites integrate with solar and storage batteries to utilize renewable solar energy during the day while generators and batteries provide power during nights and/or on cloudy days.
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 and mobile applications) or have critical power needs and cannot be without power in the event of utility grid failure (i.e., back-up power applications).
Within 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 and mobile applications) or have critical power needs and cannot be without power in the event of utility grid failure (i.e., back-up power applications) or charge batteries of various chemistries to be used in electric vehicle or renewable storage applications.
In 2024, we plan to expand our sales and service network for our natural gas generators, targeting residential and telecommunications customers in the U.S. while also targeting Tier-1 telecommunications customers in emerging nations with solar hybrid natural gas generators for off-grid markets. 8 ● Expand renewable solar energy product offerings .
In 2024, we began to expand our sales and service network for our natural gas generators, targeting Tier-1 telecommunications customers in emerging nations with solar hybrid natural gas generators for off-grid markets. 8 ● Expand renewable solar energy product offerings .
We have established sales offices in emerging markets like U.A.E., Australia, Poland and the Dominican Republic. Our sales team directly markets to Tier-1 telecommunications companies in their regions. 7 ● Experienced Management Team. Our Chief Executive Officer and key engineers combined have over 100 years of engineering and production experience in the design and manufacturing of power systems.
We have established offices in emerging markets and currently have presence in Australia, Poland, Romania, and South Africa. Our sales team directly markets to Tier-1 telecommunications companies in their regions. 7 ● Experienced Management Team. Our Chief Executive Officer and key engineers combined have over 100 years of engineering and production experience in the design and manufacturing of power systems.
In 2017, we established sales offices near the emerging growth countries of Australia and U.A.E. setup to develop strategic alliances with distributors to promote our residential solutions to communities living in bad-grid and off-grid areas. 6 Our Competitive Strengths We have over a 40-year history and have developed a reputation as a proven supplier of reliable and advanced proprietary technology products to customers within the telecommunications, military, commercial, industrial and marine markets.
In 2017, we established offices in emerging markets like Poland, Australia, Romania and South Africa to develop strategic alliances with distributors to promote our residential solutions to communities living in bad-grid and off-grid areas. 6 Our Competitive Strengths We have over a 45-year history and have developed a reputation as a proven supplier of reliable and advanced proprietary technology products to customers within the telecommunications, military, commercial, industrial and marine markets.
Standard oil intervals for typical generators range from 200 to 500 hours. 10 DC Hybrid Power Systems In most off-grid or bad-grid outdoor applications where DC loads are required, such as telecommunications towers in rural or remote areas, generator fuel cost can account for more than 60% of the total operating costs.
Standard oil intervals for typical generators range from 200 to 500 hours. 10 DC Hybrid Power Systems In most off-grid or bad-grid telecommunications tower outdoor applications where DC loads and battery charging is required, generator fuel cost can account for more than 60% of the total operating costs.
We believe that the lack of a stable electric infrastructure in rural regions of many developing nations provides significant opportunity for our products in both off-grid and bad-grid location.
We believe that the lack of a stable electric infrastructure in rural regions of many developing nations provides significant opportunity for our products in both off-grid and bad-grid location. ● Further develop our new LPG and natural gas DC power systems.
We strive to offer a work environment where employee unique characteristics and opinions are valued and one that provides our employees the opportunities to use and augment their professional skills.
We believe our success is directly related to the satisfaction, growth, and development of our employees. We strive to offer a work environment where employee unique characteristics and opinions are valued and one that provides our employees the opportunities to use and augment their professional skills.
In addition, we may incur material costs or liabilities in complying with any such regulations. Furthermore, some of our customers must comply with numerous laws and regulations, which may affect their willingness and ability to purchase our products, services and technologies. Additionally, we are subject to laws, regulations and other governmental actions instituted in response to the COVID-19 outbreak.
In addition, we may incur material costs or liabilities in complying with any such regulations. Furthermore, some of our customers must comply with numerous laws and regulations, which may affect their willingness and ability to purchase our products, services and technologies.
Human Capital Our experienced employees and management team are our most valuable resources, and we are committed to attracting, motivating, and retaining top professionals to service our customers. As of April 1, 2024, we had 87 full time employees, which includes 80 employees in the U.S. and 7 employees outside the U.S.
Human Capital Our experienced employees and management team are our most valuable resources, and we are committed to attracting, motivating, and retaining top professionals to service our customers. As of March 31, 2025, we had 82 full time employees, which included 75 employees in the U.S. and 5 employees outside the U.S.
We also deliver products that provide prime power for off-grid telecommunications tower sites installed in remote and rural areas where reliability of the power grid is suspect. Since 2012, the telecommunications market is our largest market segment and has contributed over 87% of our annual revenues.
We also deliver DC generators that provide prime power for off-grid telecommunications tower sites installed in remote and rural areas where reliability of the power grid is intermittent or not available. Since 2012, the telecommunications market is our largest market segment and contributed over 88% and 95% of our annual revenues in 2024 and 2023, respectively.
We believe being an approved supplier for the three largest Tier-1 telecommunication providers in the U.S. provides us with additional growth opportunities during the current rapid 5G expansion in the largest urban centers in the U.S. Products and Services DC Base Power Systems Our DC base power systems are designed for use in prime power and backup power applications.
We believe being an approved supplier for the three largest Tier-1 telecommunication providers in the U.S. provides us with additional growth opportunities during the current rapid 5G expansion in the largest urban centers in the U.S.
We have experienced material shortages and delays due to the pandemic; more in 2022 than in 2023. We actively sourcing the global supply chain for key components to avoid or reduce the risk of future delays or interruptions to our operations or our ability to service customers. We have also experienced price increases on certain materials and freight services.
We actively source the global supply chain for key components to avoid or reduce the risk of having parts shortages that may cause interruptions to our operations or our ability to service customers. We have also experienced price increases on certain materials and freight services.
During 2023 and 2022, sales to customers in international markets represented 21% and 25% of our total net sales, respectively, as compared to 8% and 17% in 2021 and 2020, respectively. During 2022, we received purchase orders totaling $6.2 million from a telecommunications customer in the South Pacific Islands for our DC power generators for off-grid applications.
During 2024 and 2023, sales to customers in international markets represented 13% and 21% of our total net sales, respectively. Between 2022 and 2024, we received purchase orders for DC power generators totaling $7.3 million from telecommunications customers in the South Pacific Islands for off-grid applications. We completed shipping these orders in 2024.
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. ● DC solar hybrid power systems .
These stationary systems integrate a DC generator with automated controls and remote monitoring, contained in an environmentally regulated enclosure. ● Hybrid power systems . These systems integrate lithium-ion batteries (or other advanced battery chemistries) storage and our standard DC power systems to provide power in both bad and off-grid applications. ● DC solar hybrid power systems .
We consider our manufacturing process to be a trade secret and have non-disclosure agreements with our employees to protect the trade secrets held by us. However, such methods may not afford complete protection, and there can be no assurance that others will not independently develop similar know-how or obtain access to our know-how and manufacturing concepts.
However, such methods may not afford complete protection, and there can be no assurance that others will not independently develop similar know-how or obtain access to our know-how and manufacturing concepts.
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.
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 2017, we began investments into international markets and have recorded a steady increase in sales every year since. 3 In the U.S. market, over 95% of the telecommunications towers are connected to a power grid, thereby only requiring backup power generation in equipment in case of an emergency loss of power, while in the emerging markets of Africa and Asia, a significant percentage of telecommunications towers are not connected to the grid thereby requiring fuel-efficient prime power equipment to provide power by charging the batteries.
With over 90% of the world’s telecommunication towers located in non-U.S. territories, we began to establish international offices in 2017 and currently have presence in Poland, Romania, Australia, and South Africa to provide long term growth. 3 In the U.S. market, over 95% of the telecommunications towers are connected to a power grid, thereby only requiring backup power generation in equipment in case of an emergency loss of power, while in the emerging markets of Africa and Asia, a significant percentage of telecommunications towers are off-grid and bad grid with frequent power interruptions requiring fuel-efficient prime power equipment to provide power by charging the batteries.
None of our employees are represented by labor unions. We consider our relationships with our employees to be generally satisfactory. In addition, from time to time, we utilize outside consultants or contractors for specific assignments. We believe our success is directly related to the satisfaction, growth, and development of our employees.
During 2024, we had a relatively low turnover rate, some of which is related to uncertain employment market and economic conditions. None of our employees are represented by labor unions. We consider our relationships with our employees to be generally satisfactory. In addition, from time to time, we utilize outside consultants or contractors for specific assignments.
We completed shipping this order to the South Pacific in 2023. This order is part of a growing program to develop broadband services in the South Pacific region. During 2023, 50% of our total net sales were derived from our largest customer, compared to 66% in 2022.
These orders are part of a growing program to develop broadband services in the South Pacific region. During 2024, 48% of our total net sales were derived from our largest customer, compared to 50% in 2023. During 2024, 8% of our total net sales were derived from customers in the military market, as compared to 3% in 2023.
Markets We primarily operate within 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. Telecommunications We provide power generation equipment for the telecommunications markets.
Markets Our sales are primarily within the telecommunications market and, to a lesser extent, in military, electric vehicle charging, marine and industrial markets. We are investing into international markets, non-telecom markets to diversify our sales globally. Telecommunications We provide power generation equipment for the telecommunications markets.
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.
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 diversify its sales and reduce inventory to fund operations.
The ease of connecting our DC power system with solar, battery packs or any other source of energy like wind can introduce a sustainable cost-effective solution in emerging markets. The 50 kW generator can also provide roadside emergency charging services for electric vehicles.
The capacity of 50 kW is sufficiently large enough to power a small rural hospital, dairy farm and a cluster of houses in a small village. The ease of connecting our DC power system with solar, battery packs or any other source of energy like wind can introduce a sustainable cost-effective solution in emerging markets.
We believe expansion of our dealer network will also provide additional opportunities for our DC power systems in the U.S. and other countries. We utilize a combination of factory trained technicians and independent service providers to provide installation, maintenance, service and training at customer locations throughout the U.S.
We utilize a combination of factory trained technicians and independent service providers to provide installation, maintenance, service and training at customer locations throughout the U.S. In the international markets, we utilize local service partners to perform installation and service on our equipment.
On December 18, 2023, Peter Gross, a member of the Board of Directors of the Company, resigned as a member of the Board of Directors of the Company (the “Board”). Mr.
On December 27, 2024, the Company issued a press release announcing that it regained compliance with the Bid Price Rule. On December 18, 2023, Peter Gross, a member of the Board of Directors of the Company, resigned as a member of the Board of Directors of the Company (the “Board”). Mr.
We believe 50 kW standalone DC power system, powered by natural gas or LPG would be ideal for rural communities in emerging markets such as Africa and Asia. The capacity of 50 kW is sufficiently large enough to power a small rural hospital, dairy farm and a cluster of houses in a small village.
We are working on our next-generation higher output power DC power system and plan to introduce a configuration of this product to the residential and commercial microgrid market in emerging markets. We believe a 50 kW standalone DC power system, powered by natural gas or LPG would be ideal for rural communities in emerging markets such as Africa and Asia.
The advent of 5G technology has resulted in a digital revolution within both the commercial and consumer sectors leading to an exponential increase in data usage.
In the U.S., telecommunications companies are requiring generators to provide backup power at existing sites, while in the international market telecommunications companies are adding new sites to provide coverage in rural and remote areas. The advent of 5G technology has resulted in a digital revolution within both the commercial and consumer sectors leading to an exponential increase in data usage.
Our primary sales are generated through product demonstrations and short-term rentals to demonstrate the capabilities of our products and value proposition to large mobile network providers worldwide. We believe this strategy of demonstrating our products and technologies to prospective customers expedites the sales process for our DC power systems.
Our DC Generators, Hybrid Generators are marketed directly to end customers, however the aftermarket parts in some regions are sold through dealers. Our primary sales are generated through product demonstrations and short-term rentals to demonstrate the capabilities of our products and value proposition to large mobile network providers worldwide.
These features allow our telecommunications customers to install equipment requiring a smaller footprint on building roof tops and compact commercial sites while also requiring less fuel storage due to the fuel efficiency of our products. In the past eight years, we have gained approval and certifications from four top Tier-1 telecommunications operators in the U.S. market.
Since 2012, we developed products with key features like high fuel efficiency, light weight and compact design when compared to our competitors’ products. These features allow our telecommunications customers to install equipment requiring a smaller footprint on building roof tops and compact commercial sites while also requiring less fuel storage due to the fuel efficiency of our products.
DC Solar Hybrid Power Systems Our DC solar hybrid power system combines our DC hybrid power system with solar photovoltaic modules and a custom engineered multi power point tracking charge controller.
The MCS2020 control system provides ability to remotely monitor efficiency of each system, diagnose failures, optimize output where multiple redundant systems are available. DC Solar Hybrid Power Systems Our DC solar hybrid power system combines our DC hybrid power system with solar photovoltaic modules and a custom engineered multi power point tracking charge controller.
Our products are purchased by regional centers operated by our telecommunications customers, thereby expanding our overall market into regions we may not have covered previously. We have established a sales and service infrastructure in international markets.
Our products are purchased by regional centers operated by our telecommunications customers, thereby expanding our overall market into regions we may not have covered previously. The telecommunication market is our largest market generating 88% of annual sales of which a significant portion represents U.S. Tier-1 telecom operator.
Distribution and Service We service our products through various service partners that provide initial product installation and maintenance services. The promotion of our natural gas powered Mini-Grid product, targeting off-grid and bad grid rural areas, will be undertaken by certified independent dealers.
The promotion of our natural gas powered Mini-Grid product, targeting off-grid and bad grid rural areas, will be undertaken by certified independent dealers. We believe expansion of our dealer network will also provide additional opportunities for our DC power systems in the U.S. and other countries.
The unanticipated drop in sales during in the first three years after the pandemic caused a disproportionate distribution of fixed and semi-fixed overhead costs across much lower revenues. During 2023, our largest customer asked us to postpone deliveries of our DC power generators to 2024 resulting in a decrease in revenue and higher overhead cost.
However, the unanticipated drop in sales in the years following the pandemic caused a disproportionate distribution of fixed and semi-fixed overhead costs across much lower revenues. In 2024, our net sales to our largest customer were $876 in the first quarter, $1,851 in the second quarter, $2,727 in the third quarter, and $1,769 in the fourth quarter.
Despite these efforts, there can be no assurance that others will not gain access to our trade secrets, or that we can meaningfully protect our technology. In addition, effective trademark, copyright and trade secret protection may be unavailable or limited in certain foreign countries.
We protect our trade secrets and other proprietary information by requiring confidentiality agreements from our employees, consultants and third parties that have access to such information. Despite these efforts, there can be no assurance that others will not gain access to our trade secrets, or that we can meaningfully protect our technology.
Approximately 75% of our net sales during 2023 were of our DC power systems to support 5G networks and 60% of our sales backlog as of December 31, 2023 are purchase orders of our of DC power systems to support 5G networks in the U.S.
The implementation of 5G networks by Tier-1 telecommunication customers in the U.S. has also resulted in approximately 50% of our net sales during 2024 for our DC power systems while 54% of our sales backlog as of December 31, 2024 are purchase orders of DC power systems which provide backup power for 5G networks for our largest telecom customers in the U.S.
The increase in telecommunications subscriber base in rural and remote areas in emerging countries has increased the deployment of telecommunications sites in off-grid and bad-grid areas. During 2023, approximately 75% of our DC power systems sales were to U.S. telecommunications customers, which we believe represents only 4.7% of the total global telecommunications market.
The increase in telecommunications subscriber base in rural and remote areas in emerging countries has increased the deployment of telecommunications sites in off-grid and bad-grid areas.
We rely on trademark, copyright and trade secret laws to protect our intellectual property. Currently, we rely on common law rights to protect our “Polar Power, Inc.” trade name. We protect our trade secrets and other proprietary information by requiring confidentiality agreements from our employees, consultants and third parties that have access to such information.
Intellectual Property We possess a broad intellectual property portfolio comprised of electronics, software, engines, alternators, thermal systems and production techniques. We rely on trademark, copyright and trade secret laws to protect our intellectual property. Currently, we rely on common law rights to protect our “Polar Power, Inc.” trade name.
During 2023, 3% of our total net sales were derived from customers in the military market, as compared to 1% in 2022. We believe military actions of the Russian Federation and its invasion of Ukraine and conflicts between Israel and Hamas have added considerable to our shipping costs due to diesel fuel costs.
We believe the increase in our military contracts resulted from geopolitical uncertainties primarily tied to the military actions of the Russian Federation and its invasion of Ukraine and conflicts between Israel and Hamas.
In 2024, we plan to gradually increase our team of engineers and continue investing into new product development as part of our strategy to diversify our product lines. Intellectual Property We possess a broad intellectual property portfolio comprised of electronics, software, engines, alternators, thermal systems and production techniques.
This system is in its final stage of development and upon completion will be marketed to regions that lack electric infrastructure. In 2025, we plan to gradually increase our team of engineers and continue investing into new product development as part of our strategy to diversify our product lines.
If the Company does not regain compliance with the Bid Price Rule by the end of the compliance period (or the second compliance period, if applicable), the Company’s common stock will become subject to delisting.
The Company did not regain compliance with the Bid Price Rule by the end of the initial compliance period but met all of the other applicable listing standards and requested an extension to regain compliance.
The Company intends to appoint an additional independent director to the Board and the committees prior to the end of the cure periods. 1 Recent Business Events The COVID-19 pandemic, inflation, the impacts of war and other recent geopolitical events have negatively impacted business and industries all over the world.
Recent Business Events The COVID-19 pandemic and recovery, inflation, the impacts of war and other recent geopolitical events have negatively impacted business and industries all over the world. Delays and slowdown in customer programs have had a significant negative impact on our overall operations including revenues, productivity, gross margins, and liquidity.
Removed
The Nasdaq deficiency letter has no immediate effect on the listing of the Company’s common stock, and its common stock continues to trade on The Nasdaq Capital Market under the symbol “POLA” at this time.
Added
On May 30, 2024, the Company received a letter from Nasdaq notifying the Company that, it had been granted an additional 180 days, or until November 18, 2024, to regain compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market.
Removed
If, at any time before May 22, 2024, the bid price of the Company’s common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq staff will provide written notification that it has achieved compliance with the Bid Price Rule.
Added
On November 18, 2024, the Company filed a Certificate of Amendment to Certificate of Incorporation with the Secretary of State of Delaware to effect a 1:7 Reverse Stock Split of its shares of common stock, either issued and outstanding or held by the Company as treasury stock, effective as of 4:05 p.m. (Delaware time) on November 18, 2024.
Removed
In the event that the Company receives notice that its common stock is being delisted, the Nasdaq listing rules permit the Company to appeal a delisting determination by Nasdaq to a hearings panel.
Added
The number of authorized shares of common stock under the certificate of incorporation remains unchanged at 50,000,000 shares. The common stock began trading on a reverse stock split-adjusted basis on The Nasdaq Capital Market November 19, 2024.
Removed
On November 30, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity LLC, as the representative (the “Representative”) of the several underwriters named therein (collectively, the “Underwriters”), pursuant to which the Company sold to the Underwriters an aggregate of 4,000,000 shares (the “Shares”) of the Company’s common stock, $0.0001 par value per share, at a price to the public of $0.40 per share, in a firm commitment underwritten public offering (the “Offering”).
Added
The trading symbol for the common stock remains “POLA.” The new CUSIP number for the common stock following the Reverse Stock Split is 73102V204. 1 On November 19, 2024, the Company received a new letter from Nasdaq notifying the Company that, as a result of the Company’s failure to regain compliance with the Bid Price Rule by November 18, 2024, Nasdaq determined to delist the Company’s common stock from the Nasdaq Capital Market.
Removed
The Company also granted the Underwriters an option exercisable for 45 days from the date of the Underwriting Agreement to purchase up to an additional 600,000 shares of common stock (or pre-funded warrants in lieu thereof) solely for the purpose of covering over-allotments.
Added
On November 26, 2024, the Company submitted a hearing request to a hearing panel to appeal Nasdaq’s determination, and the hearing request stayed the suspension of the Company’s common stock. The hearing was scheduled to occur on January 23, 2025.
Removed
The Representative exercised the over-allotment option in full on December 4, 2023, to purchase an additional 600,000 shares of common stock (the “Over-Allotment Exercise’). The Offering and closing on the Over-Allotment Exercise closed concurrently on December 5, 2023.
Added
On December 23, 2024, the Company received a letter from Nasdaq informing the Company that the Company regained compliance with the Bid Price Rule and that the Company was therefore in compliance with the Nasdaq’s listing requirements. Accordingly, the hearing was cancelled and the Company’s securities continue to be listed and traded on the Nasdaq Capital Market.
Removed
The Offering was made pursuant to an effective registration statement on Form S-3 (Registration No. 333-252196) and a related prospectus and prospectus supplement, in each case filed with the Securities and Exchange Commission.
Added
On July 25, 2024, the Company’s remaining members of the Board appointed and ratified Mr. Michael G. Field, to serve as a member of the Board, and to assume the position of Mr. Gross as a member of the audit committee, chair of the compensation committee and chair of the nominating and corporate governance committee of the Board.
Removed
These events have had a significant negative impact on our overall operations including revenues, productivity, gross margins, and liquidity. They have resulted in labor shortages, disruptions in the chain of supply, and higher material costs. They also resulted in unexpected challenges related to customer product or delivery requirements.
Added
On July 30, 2024, the Company issued a press release announcing the appointment of Mr. Field, filling the vacant board seat, and bringing the number of independent directors to three which brings the Company in compliance with Nasdaq Listing Rule 5605.
Removed
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.
Added
They have resulted in disruptions in the supply chain and higher material costs. Delays in international projects has impacted our export markets temporarily, however, we continue to focus on our diversification strategy to expand our market share in the long term.
Removed
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.
Added
The political turmoil during elections and the financial market losses of our largest customer caused a significant drop in purchases during the second half of the year.
Removed
We believe that the aftermath of the pandemic, inflation, the impacts of war and other recent geopolitical events will be an ongoing challenge for years to come and to adapt will require us to further globalize our vendors, engineering, and customers. We continue to focus on expanding our market share into international markets as part of our diversification strategy.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

37 edited+14 added−11 removed210 unchanged
Biggest changeIf securities or industry analysts do not publish research or reports or publish inaccurate or unfavorable research or reports about our business, our share price and trading volume could decline. The trading market for our shares of common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business.
Biggest changeThe trading market for our shares of common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts.
An increase in global economic outlook may result in significant price increases in the cost of our raw materials. In addition, we use Neodymium permanent magnets in our alternators, for which there are a limited number of global suppliers that can meet our standards.
An increase in global economic outlook may result in significant price increases in the cost of our raw materials. In addition, we use Neodymium permanent magnets in our alternators, for which there are a limited number of global suppliers that can meet our standards.
Increase in manufacturing of electric vehicles worldwide can have an adverse effect on the cost or supply of these magnets. At our current production volumes, we are unable to secure large quantities of these commodities at fixed prices; however, we do have multiple sources of supply for our raw materials to meet our near term forecasted needs.
Increase in manufacturing of electric vehicles worldwide can have an adverse effect on the cost or supply of these magnets. At our current production volumes, we are unable to secure large quantities of these commodities at fixed prices; however, we do have multiple sources of supply for our raw materials to meet our near term forecasted needs.
Some of the risks and challenges of conducting business internationally include: ● the impact of a global crisis such as a pandemic;/ on the global markets and the power generation market within the international telecommunications markets; ● requirements or preferences for domestic products or solutions, which could reduce demand for our products; ● unexpected changes in regulatory requirements; ● imposition of tariffs and other barriers and restrictions; ● restrictions on the import or export of critical technology; 24 ● management communication and integration problems resulting from cultural and geographic dispersion; ● the burden of complying with a variety of laws and regulations in various countries; ● difficulties in enforcing contracts; ● the uncertainty of protection for intellectual property rights in some countries; ● application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and uncertainty; ● tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell products; ● greater risk of a failure of foreign employees to comply with both U.S. and foreign laws, including export and antitrust regulations, the FCPA and any trade regulations ensuring fair trade practices; ● heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements; ● potentially adverse tax consequences, including multiple and possibly overlapping tax structures; ● general economic and geopolitical conditions, including war and acts of terrorism; ● lack of the availability of qualified third-party financing; and ● currency exchange controls.
Some of the risks and challenges of conducting business internationally include: ● the impact of a global crisis such as the COVID-19 pandemic on the global markets and the power generation market within the international telecommunications markets; ● requirements or preferences for domestic products or solutions, which could reduce demand for our products; ● unexpected changes in regulatory requirements; ● imposition of tariffs and other barriers and restrictions; ● restrictions on the import or export of critical technology; 24 ● management communication and integration problems resulting from cultural and geographic dispersion; ● the burden of complying with a variety of laws and regulations in various countries; ● difficulties in enforcing contracts; ● the uncertainty of protection for intellectual property rights in some countries; ● application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to our sales and other transactions, which results in additional complexity and uncertainty; ● tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell products; ● greater risk of a failure of foreign employees to comply with both U.S. and foreign laws, including export and antitrust regulations, the FCPA and any trade regulations ensuring fair trade practices; ● heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements; ● potentially adverse tax consequences, including multiple and possibly overlapping tax structures; ● general economic and geopolitical conditions, including war and acts of terrorism; ● lack of the availability of qualified third-party financing; and ● currency exchange controls.
The ultimate impact of the COVID-19 pandemic on our business and results of operations remains unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and potential resurgence of COVID-19, repeat or cyclical outbreaks and any additional preventative and protective actions that governments, or we, or our customers, or our suppliers may direct, which may result in an extended period of continued business disruption and reduced operations.
The ultimate impact of the COVID-19 pandemic and recovery on our business and results of operations remains unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and potential resurgence of COVID-19, repeat or cyclical outbreaks and any additional preventative and protective actions that governments, or we, or our customers, or our suppliers may direct, which may result in an extended period of continued business disruption and reduced operations.
Any prolonged disruption in the operations of our manufacturing and assembly facilities, whether due to the COVID-19 pandemic, equipment or information technology infrastructure failure, labor difficulties, destruction of or damage to one or both of these facilities as a result of an earthquake, fire, flood, other catastrophes, and other operational problems would result in a decline in our sales and profitability.
Any prolonged disruption in the operations of our manufacturing and assembly facilities, whether due to the COVID-19 pandemic and recovery, equipment or information technology infrastructure failure, labor difficulties, destruction of or damage to one or both of these facilities as a result of an earthquake, fire, flood, other catastrophes, and other operational problems would result in a decline in our sales and profitability.
Natural disasters or other catastrophic events, including the COVID-19 pandemic, may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control.
Natural disasters or other catastrophic events, including the COVID-19 pandemic and recovery, may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control.
If any of these engine suppliers were to fail to provide emissions certified engines in a timely manner or fail to supply engines that meet our quality, quantity or cost requirements, or were to discontinue manufacturing any engines we source from them or discontinue providing any of these engines to us, or the supply chain is interrupted or delayed as a result of the COVID-19 pandemic or unprecedented event, and we were unable to obtain substitute sources in a timely manner or on terms acceptable to us, our ability to manufacture our products could be materially adversely affected. 21 Price increases in some of the key components in our DC power systems could materially and adversely affect our operating results and cash flows.
If any of these engine suppliers were to fail to provide emissions certified engines in a timely manner or fail to supply engines that meet our quality, quantity or cost requirements, or were to discontinue manufacturing any engines we source from them or discontinue providing any of these engines to us, or the supply chain is interrupted or delayed as a result of a pandemic or unprecedented event, and we were unable to obtain substitute sources in a timely manner or on terms acceptable to us, our ability to manufacture our products could be materially adversely affected. 21 Price increases in some of the key components in our DC power systems could materially and adversely affect our operating results and cash flows.
The repercussions of COVID-19 is likely to continue to have, a material and substantial adverse impact on our results of operations, including a decrease in our sales and delays in sourcing raw materials from suppliers.
The repercussions of COVID-19 and recovery is likely to continue to have, a material and substantial adverse impact on our results of operations, including a decrease in our sales and delays in sourcing raw materials from suppliers.
It is possible that interest rate hikes by the FRB will continue to occur in 2024, but the amount, timing, and frequency of such increases are not fully known at this time. As a result of these conflicts, the threat of cyberattacks has increased which could affect banks in the U.S. and their customers.
It is possible that interest rate hikes by the FRB will continue to occur in 2025, but the amount, timing, and frequency of such increases are not fully known at this time. As a result of these conflicts, the threat of cyberattacks has increased which could affect banks in the U.S. and their customers.
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.
Our ability to continue as a going concern is dependent upon our ability to obtain additional financing, grow sales, 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.
In the event of a sustained market deterioration and continued declines in net sales, and other repercussions of COVID-19, we may need additional liquidity. The need for additional liquidity may also be affected by the federal government’s potential failure to raise the debt ceiling or correct a prolonged banking or financial crisis.
In the event of a sustained market deterioration and continued declines in net sales, and other repercussions of the COVID-19 pandemic and recovery, we may need additional liquidity. The need for additional liquidity may also be affected by the federal government’s potential failure to raise the debt ceiling or correct a prolonged banking or financial crisis.
In addition, COVID-19 adversely affected the economies and financial markets of many countries, which may affect our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.
In addition, the COVID-19 pandemic and recovery adversely affected the economies and financial markets of many countries, which may affect our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.
If our supply of raw materials or components continues to be disrupted or our lead times extended, our business, results of operations or financial condition could be materially adversely affected. The markets within which we compete are highly competitive.
If our supply of raw materials or components are disrupted or our lead times extended, our business, results of operations or financial condition could be materially adversely affected. The markets within which we compete are highly competitive.
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.
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.
In addition, if production was interrupted due to unavailability or shortage of raw materials and we were not able to find alternate third-party suppliers or re-engineer our products to accommodate different components or materials, we could experience disruptions in manufacturing and operations including product shortages, higher freight costs and re-engineering costs.
For example, if production was interrupted due to unavailability or shortage of raw materials and we were not able to find alternate third-party suppliers or re-engineer our products to accommodate different components or materials, we could experience disruptions in manufacturing and operations including product shortages, higher freight costs and re-engineering costs.
During 2023, and 2022, our sales to international customers accounted for 21% and 25%, respectively, of total revenue. We continue to expect that a significant portion of our future revenues will be from international sales to customers in less developed or developing countries.
During 2024, and 2023, our sales to international customers accounted for 13% and 21%, respectively, of total revenue. We continue to expect that a significant portion of our future revenues will be from international sales to customers in less developed or developing countries.
We derive substantially all our revenues from sales of our DC base power systems to one customer within the telecommunications market, AT&T. The volume of sales to them may vary significantly from year to year.
We derive substantially all our revenues from sales of our DC base power systems to one Tier-1 customer within the telecommunications market. The volume of sales to them may vary significantly from year to year.
We have incurred significant losses in the past. For the years ended December 31, 2023 and 2022, we incurred net losses of approximately $6.5 million and $5.6 million, respectively.
We have incurred significant losses in the past. For the years ended December 31, 2024 and 2023, we incurred net losses of approximately $4.1 million and $6.5 million, respectively.
For the avoidance of doubt, the exclusive forum provision described above does not apply to any claims arising under the Securities Act of 1933, as amended, or the Securities Act, or the Securities Exchange Act of 1934, as amended, or the Exchange Act.
For the avoidance of doubt, the exclusive forum provision described above does not apply to any claims arising under the Securities Act or the Exchange Act.
For the 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 issued.
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.
Under our 2016 Omnibus Stock Incentive Plan, as amended, or 2016 Plan, we may grant equity awards covering up to 1,754,385 shares of our common stock.
Under our 2016 Omnibus Stock Incentive Plan, as amended, or 2016 Plan, we may grant equity awards covering up to 250,627 shares of our common stock.
For the year ended December 31, 2023, we incurred a gross profit of approximately $0.7 million, and for the year ended December 31, 2022, we incurred a gross profit of approximately $2.1 million. We may incur net and gross losses in the future.
For the year ended December 31, 2024, we realized a gross profit of approximately $1.9 million, and for the year ended December 31, 2023, we realized a gross profit of approximately $0.7 million. We may incur net and gross losses in the future.
The length of this process, combined with unanticipated delays in the development cycles or delays in our ability to demonstrate our products to current and potential customers could materially affect our results of operations and financial conditions.
The length of this process, combined with unanticipated delays in the development cycles and the effects of the COVID-19 pandemic and recovery on our ability to demonstrate our products to current and potential customers could materially affect our results of operations and financial conditions.
Engines from Yanmar, Perkins, and Toyota represented approximately 62%,26%, less than 2% of our total engines sold as a component of our DC power systems during 2023, respectively, and represented approximately 54%, 37%, and 1% of our total engines sold as components of our DC power systems during the same period in 2022, respectively.
Engines from Yanmar, Perkins, and Toyota represented approximately 88%, 3%, and 1% of our total engines sold as a component of our DC power systems during 2024, respectively, and represented approximately 62%, 26%, and less than 2% of our total engines sold as components of our DC power systems during 2023, respectively.
We do not have any control over these analysts. If no securities or industry analysts undertake coverage of our company, the trading price for our shares of common stock may be negatively impacted.
If no securities or industry analysts undertake coverage of our company, the trading price for our shares of common stock may be negatively impacted.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares of common stock could decrease and we could lose visibility in the financial markets, which could cause our share price and trading volume to decline. 29 We are not subject to the provisions of Section 203 of the Delaware General Corporation Law, which could negatively affect your investment.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares of common stock could decrease and we could lose visibility in the financial markets, which could cause our share price and trading volume to decline.
As of December 31, 2023, we had granted options to purchase an aggregate of 140,000 shares of common stock and issued 161,347 shares of common stock as stock-based compensation to officers, employees and consultants under the 2016 Plan.
As of December 31, 2024, we had granted options to purchase an aggregate of 20,002 shares of common stock and issued 23,049 shares of common stock as stock-based compensation to officers, employees and consultants under the 2016 Plan.
It is possible that increases in interest rates may ultimately result in an economic recession, which could have a material adverse impact on our business. Adverse economic conditions resulting from inflationary pressures, U.S. Federal Reserve actions, geopolitical issues or otherwise are difficult to predict and may have a material adverse impact on our business, results of operations and financial condition.
Inflation could continue to pressure our margins in future periods. Adverse economic conditions resulting from inflationary pressures, U.S. Federal Reserve actions, geopolitical issues or otherwise are difficult to predict and may have a material adverse impact on our business, results of operations and financial condition.
We elected in our certificate of incorporation to not be subject to the provisions of Section 203 of the Delaware General Corporation Law, or Section 203.
We are not subject to the provisions of Section 203 of the Delaware General Corporation Law, which could negatively affect your investment. We elected in our certificate of incorporation, as amended (the “certificate of incorporation”) to not be subject to the provisions of Section 203 of the Delaware General Corporation Law, or Section 203.
The COVID-19 pandemic has had, and will likely continue to have, a significant negative impact on our business, sales, results of operations and financial condition. The COVID-19 pandemic has had a widespread and detrimental effect on the global economy, particularly in the U.S. since 2020, but to a lesser extent in 2023.
The COVID-19 pandemic and recovery had a significant negative impact on our business, sales, results of operations and financial condition in 2020 to 2022, but to a lesser extent in 2023 and 2024.
However, the current inflationary environment has, we believe, has impacted the Company’s business in 2022 and 2023 and may continue to impact its business in 2024, including as a result of increased energy costs, as well as increasing wages in the labor markets in which we compete. Inflation could continue to pressure our margins in future periods.
However, the current inflationary environment, we believe, has impacted the Company’s business in 2023, to a lesser extent in 2024, and may continue to impact its business in 2025, including as a result of increased energy costs, increase materials costs due to higher tariffs on key components which may not be able to pass to customers as well as increasing wages in the labor markets in which we compete.
In addition, compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions.
These operations present a number of challenges including oversight of daily operating practices in each location, handling employee benefits and employee behavior. In addition, compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions.
If the stock is delisted, we may trade on the over-the-counter market, or even in the pink sheets, which would significantly decrease the liquidity of an investment in our common stock.
If the stock is delisted, we may trade on the over-the-counter market, or even in the pink sheets, which would significantly decrease the liquidity of an investment in our common stock. 29 If securities or industry analysts do not publish research or reports or publish inaccurate or unfavorable research or reports about our business, our share price and trading volume could decline.
However, there can be no assurance that we will be able to regain compliance with the Bid Price Rule or will otherwise be in compliance with other Nasdaq listing rules. On December 18, 2023, Peter Gross, a member of the Board of Directors of the Company, resigned as a member of the Board of Directors of the Company. Mr.
On December 27, 2024, the Company issued a press release announcing that it regained compliance with the Bid Price Rule. On December 18, 2023, Peter Gross, a member of the Board of Directors of the Company, resigned as a member of the Board of Directors of the Company. Mr.
The Company intends to appoint an additional independent director to the Board and the committees prior to the end of the cure periods. However, there can be no assurance that we will be able to regain compliance with Nasdaq Listing Rule 5605 or will otherwise be in compliance with other Nasdaq listing rules.
While we have been back in compliance with Nasdaq Listing Rules 5550(a)(2) and 5605, there can be no assurance that we will continue to be in compliance with Nasdaq Listing Rule 5550(a)(2), Rule 5605 or other Nasdaq listing rules.
The new Toyota engine serves as our primary engine in our new LPG products which were launched in 2020. In January 2022, we applied for EPA certification on our 4Y Toyota engine, which is a larger engine model for used on our 20 to 30 kW DC power systems.
We also use engines from Isuzu, Kubota and, to a lesser extent, Volvo Penta. In March 2023, we received EPA certification on our 4Y Toyota engine, which is a larger engine model for used on our 20 to 30 kW DC power systems. We do not have any long-term contracts or commitments with any of these suppliers.
Removed
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.
Added
The Company has taken action to improve its margins, reduce inventory and reduce overhead expenses.
Removed
In addition, in response to the concerns over inflation risk in the broader U.S. economy, the U.S. Federal Reserve has been steadily increasing its benchmark interest rate since March 2022 and has signaled that additional rate increases will continue in 2024.
Added
The COVID-19 pandemic and recovery has had a widespread and detrimental effect on the global economy, particularly in the U.S. since 2020, but to a lesser extent in 2023 and 2024.
Removed
For example, as a result of the COVID-19 pandemic, we are experienced both delays in sourcing, and price increases of, certain key components. As a result of these delays, our standard eight-week delivery time increased to fourteen weeks.
Added
As a result, the occurrence of any international, political, economic, or geographic event including changes in trade policy, tariffs, and/or export/import laws and regulations could result in a significant increase in the cost of materials used in our production and/or a significant decline in revenue.
Removed
We also use engines from Isuzu, Kubota and, to a lesser extent, Volvo Penta. In December 2019, we received our certificate of conformity from the EPA with respect to our small spark-ignition Toyota engines which will be used in our new LPG / natural gas generators.
Added
During the first quarter of 2025, the U.S. government imposed tariffs on many products imported from China, Canada, and Mexico. It has communicated to levy tariffs on additional countries in April 2025. Many of the countries on which tariffs have been levied have imposed retaliatory tariffs or threatened to impose tariffs on goods they import from the U.S.
Removed
We do not have any long-term contracts or commitments with any of these suppliers.
Added
While we obtain most of our raw materials from domestic sources, many of our suppliers source materials from various countries and may pass tariffs they pay on to us.
Removed
As a result, the occurrence of any international, political, economic, or geographic event could result in a significant decline in revenue. There are significant risks associated with conducting operations internationally, requiring significant financial commitments to support such operations. These operations present a number of challenges including oversight of daily operating practices in each location, handling employee benefits and employee behavior.
Added
As of the date of this report, we have not been materially affected by tariffs, but it is difficult to determine the impact of these tariffs on our business for the rest of 2025 and beyond. There are significant risks associated with conducting operations internationally, requiring significant financial commitments to support such operations.
Removed
If, at any time before May 22, 2024, the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq staff will provide written notification that we have achieved compliance with the Bid Price Rule.
Added
On May 17, 2024, we submitted a request for an extension of time to meet compliance, and on May 30, 2024, we received a Nasdaq extension letter granting us until November 18, 2024 to meet compliance. On November 11, 2024, we held our annual meeting of stockholders.
Removed
If we fail to regain compliance with the Bid Price Rule before May 22, 2024 but meet all of the other applicable standards for initial listing on The Nasdaq Capital Market with the exception of the minimum bid price, then we may be eligible to have an additional 180 calendar days, or until November 18, 2024, to regain compliance with the Bid Price Rule.
Added
At the meeting, our stockholders approved an amendment to our Certificate of Incorporation, in substantially the form attached to the proxy statement as Appendix A to allow the Board of Directors to effect, in its discretion prior to December 31, 2024, a reverse stock split of all of our issued and outstanding common stock, par value $0.0001 per share, at a specific ratio, ranging from one-for-three (1:3) to one-for-twenty (1:20), with the timing and ratio to be determined by the Board if effected.
Removed
If we do not regain compliance with the Bid Price Rule by the end of the compliance period (or the second compliance period, if applicable), our common stock will become subject to delisting.
Added
On November 11, 2024, our Board approved a reverse stock split at a ratio of one-for-seven (1:7) (the “Reverse Stock Split”). On November 18, 2024, the Company effected a 1:7 Reverse Stock Split of its shares of common stock.
Removed
In the event that we receive notice that our common stock is being delisted, the Nasdaq listing rules permit us to appeal a delisting determination by Nasdaq to a hearings panel.
Added
On November 19, 2024, the Company received a new letter from Nasdaq notifying the Company that, as a result of the Company’s failure to regain compliance with the Bid Price Rule by November 18, 2024, Nasdaq determined to delist the Company’s common stock from the Nasdaq Capital Market.
Removed
We intend to monitor the closing bid price of our common stock and may, if appropriate, consider available options to regain compliance with the Bid Price Rule, such as reverse stock split.
Added
On November 26, 2024, the Company submitted a hearing request to a hearing panel to appeal Nasdaq’s determination, and the hearing request stayed the suspension of the Company’s common stock. The hearing was scheduled to occur on January 23, 2025.
Added
On December 23, 2024, the Company received a letter from Nasdaq informing the Company that the Company regained compliance with the Bid Price Rule and that the Company is therefore in compliance with the Nasdaq’s listing requirements. Accordingly, the hearing was cancelled and the Company’s securities continue to be listed and traded on the Nasdaq Capital Market.
Added
Effective July 25, 2024, we appointed Michael Field as a new member of the Board of Directors of the Company and appointed him, as an independent director, to serve as a member of the audit committee, chair of the compensation committee and chair of the nominating and corporate governance committee of the Board.
Added
By admitting Michael Field to the Board of Directors, we are back in compliance with Nasdaq Listing Rule 5605 effective July 25, 2024.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

1 edited+0 added−0 removed5 unchanged
Biggest changeWhile we have not had a material cybersecurity incident impact our operations, we face various cyber and other security threats, including attempts to gain unauthorized access to sensitive information and networks; employee threats; virtual and cyber threats to our directors, officers, and employees; threats to the security of our facilities and infrastructure; and threats from terrorist acts or other acts of aggression.
Biggest changeWhile we have no t had a material cybersecurity incident impact our operations, we face various cyber and other security threats, including attempts to gain unauthorized access to sensitive information and networks; employee threats; virtual and cyber threats to our directors, officers, and employees; threats to the security of our facilities and infrastructure; and threats from terrorist acts or other acts of aggression.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+0 added−0 removed1 unchanged
Biggest changeItem 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 1, 2024, we had 17,561,612 shares of common stock outstanding held of record by approximately 21 stockholders.
Biggest changeItem 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 March 31, 2025, we had 2,511,532 shares of common stock outstanding held of record by approximately 22 stockholders.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeComparison of the Years Ended December 31, 2023 and 2022 (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 2023 2022 (Unfavorable) (Unfavorable) 2023 2022 Net sales $ 15,293 $ 16,056 $ (763 ) (5 )% 100.0 % 100.0 % Cost of sales (includes inventory write-downs of $450 and $nil, respectively) 14,598 13,931 (667 ) (5 )% 95.5 % 86.8 % Gross profit 695 2,125 (1,430 ) (67 )% 4.5 % 13.2 % Sales and marketing expenses 1,172 1,471 299 20 % 7.7 % 9.2 % Research and development expenses 1,222 1,460 238 16 % 8.0 % 9.1 % General and administrative expenses 4,291 4,727 436 9 % 28.1 % 29.4 % Total operating expenses 6,685 7,658 973 13 % 43.7 % 47.7 % Loss from operations (5,990 ) (5,533 ) (457 ) (8 )% (39.2 )% (34.5 )% Interest and finance costs (559 ) (58 ) (501 ) (864 )% (3.7 )% (0.4 )% Other income (expense), net 1 7 (6 ) (86 )% 0.0 % 0.0 % Loss before income taxes (6,548 ) (5,584 ) (964 ) (17 )% (42.8 )% (34.8 )% Income tax — — — — — — Net loss $ (6,548 ) $ (5,584 ) $ (964 ) (17 )% (42.8 )% (34.8 )% 38 Net Sales.
Biggest changeComparison of the Years Ended December 31, 2024 and 2023 (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 2024 2023 (Unfavorable) (Unfavorable) 2024 2023 Net sales $ 13,970 $ 15,293 $ (1,323 ) (9 )% 100.0 % 100.0 % Cost of sales (includes inventory write-downs of $900 and $450, respectively) 12,656 14,598 1,942 13 % 90.6 % 95.5 % Gross profit 1,314 695 619 89 % 9.4 % 4.5 % Sales and marketing expenses 1,010 1,172 162 14 % 7.2 % 7.7 % Research and development expenses 771 1,222 451 37 % 5.5 % 8.0 % General and administrative expenses 3,908 4,291 383 9 % 28.0 % 28.1 % Total operating expenses 5,689 6,685 996 15 % 40.7 % 43.7 % Loss from operations (4,375 ) (5,990 ) 1,615 (27 )% (31.3 )% (39.2 )% Interest and finance costs (649 ) (559 ) (90 ) 16 % (4.6 )% (3.7 )% Other income (expense), net 347 1 346 34600 % 2.5 % 0.0 % Loss before income taxes (4,677 ) (6,548 ) 1,871 (29 )% (33.5 )% (42.8 )% Income tax — — — — — — Net loss $ (4,677 ) $ (6,548 ) $ 1,871 (29 )% (33.5 )% (42.8 )% 38 Net Sales.
See “Risk Factors” commencing on page 16 of this Annual Report on Form 10-K for additional considerations. 37 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.
See “Risk Factors” commencing on page 17 of this Annual Report on Form 10-K for additional considerations. 37 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.
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, 2023 and 2022. Warranty Costs .
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 .
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.
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.
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.
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.
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. 40 Credit Facility Effective September 30, 2020, we entered into a Loan and Security Agreement, or Loan Agreement, with Pinnacle.
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 financings, if any. 40 Credit Facility Effective September 30, 2020, we entered into a Loan and Security Agreement, or Loan Agreement, with Pinnacle.
During 2023 and 2022, sales to the marine and other markets accounted for 2% and 3% 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.
During 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.
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.
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. There was no other revenue from customers in excess of 10% of total net sales in either period.
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.
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.
Sources of Liquidity During the year ended December 31, 2023, we funded our operations primarily from cash on hand. As of December 31, 2023, we had working capital of $11,775, as compared to working capital of $17,367 at December 31, 2022.
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.
During those 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 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.
During 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. and one being a telecommunications customer outside the U.S.
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. and one being a telecommunications customer outside the U.S.
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. 41 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, 2023 2022 Net Cash Provided By (Used In): Operating Activities $ (3,430 ) $ (6,507 ) Investing Activities $ (194 ) $ (25 ) Financing Activities $ 3,962 $ 1,642 Net increase (decrease) in cash $ 338 $ (4,890 ) Operating Activities Net cash used in operating activities for 2023 was $3,430, as compared to $6,507 for the same period in 2022.
As 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. 41 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, 2024 2023 Net Cash Provided By (Used In): Operating Activities $ (536 ) $ (3,430 ) Investing Activities $ (19 ) $ (194 ) Financing Activities $ 504 $ 3,962 Net increase (decrease) in cash $ (51 ) $ 338 Operating Activities Net cash used in operating activities for 2024 was $536, as compared to $3,430 for the same period in 2023.
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 $436 to $4,291 during 2023, as compared to $4,727 during 2022.
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 $383 to $3,908 during 2024, as compared to $4,291 during 2023.
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, 2023, the Company recorded a net loss of $6,548 and used cash in operations of $3,430.
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.
On 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.
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 31, 2023.
During 2023, revenue from telecommunications customers accounted for 95% of total net sales, as compared to 96% of total net sales during 2022. Our two largest customers represented 50% and 18% of our total net sales in 2023, as compared to 66% and 23% in 2022.
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.
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. Sales to marine and other markets during 2023 and 2022 accounted for 2% and 3% of total revenue, respectively.
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.
Financial Performance Summary – Year Ended December 31, 2023 Our net sales for the year ended December 31, 2023, were $15,293, as compared to $16,056 for the year ended December 31, 2022. We reported a net loss of $6,548 for 2023, as compared to net loss of $5,584 for 2022.
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.
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.
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. The decrease in net sales is primarily due to a decrease in deliveries of our DC power generators to our largest telecommunications customer in the U.S.
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. We plan to continue to expand our customer base in all market segments.
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 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. 39 Research and Development Expenses. During 2023, research and development expenses decreased by $238 to $1,222, as compared to $1,460 during 2022.
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. 39 Research and Development Expenses.
Our 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.
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.
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.
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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.
We have an outstanding balance of $4,238 under the Loan Agreement at December 31, 2023.
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.
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. 36 Stock-Based Compensation.
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.
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% in 2022.
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.
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.
Military sales are advantageous because of their long-term contracts and they tend to cover the cost of product development.
This $5,592 decrease in working capital is primarily attributable to a $338 increase in cash and cash equivalents resulting from net cash of $3,430 used in operating activities, net cash used in investing activities of $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.
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 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.
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.
As a result 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.
As of December 31, 2023, the ERC is still being processed by the IRS. Our 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.
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.
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.
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.
Most of our sales were of our DC base powers systems during the two years. Cost of Sales . 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.
Most of our sales were of our DC base powers systems during the two years. Cost of Sales . Cost of sales decreased by $1,942 or 13%, to $12,656 during 2024, compared to $14,598 during 2023.
Backlog at December 31, 2023, was comprised of the following elements: 60% in 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.
Backlog at December 31, 2024 was comprised of the following elements: 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. We believe the majority of our backlog will be shipped within the next six to twelve months.
Our new LPG and natural gas generators will provide strong opportunities for growth and diversification in line with our long-term plan. We also started deliveries of our Summit Series, 27 kW diesel fuel DC generators to the U.S. 5G telecommunications market.
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.
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. Interest and Finance Costs. Our interest expense was $559 in 2023, as compared to $58 in 2022.
The 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. Our interest expense is primarily from borrowings from our credit facility. Net Loss.
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.
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.
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.
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 of $1,354.
Financing Activities Net 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.
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. This cash provided was primarily borrowings from the line of credit with Pinnacle. 42 Backlog As of December 31, 2024, we had a backlog of $1,306.
The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods. Effects of Inflation The impact of inflation and changing prices during 2023 has not been significant on the financial condition or results of operations of our company.
Once inventory has been written down, it creates a new cost basis for inventory that may not subsequently written up. 36 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.
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. Gross Profit .
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 .
Investing Activities Net 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.
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.
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.
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.
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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 for 5G. 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.
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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.
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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.
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In 2024. We demonstrated 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.
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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.
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We believe this product in its current configuration can serve mid-level micro grid needs in residential and commercial areas.
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Stock-based 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 .
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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.
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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.
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We reached 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.
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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.
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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.
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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. During 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.
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Our international sales were $1,862, or 13% of total net sales in 2024, as compared to $3,216, or 21%, during 2023.
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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.
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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.
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We believe that the aftermath of the pandemic, inflation, the impacts of war and other recent geopolitical events will be an ongoing challenge for years to come and to adapt will require us to further globalize our vendors, engineering, and customers During 2023, our international sales were $3,216, or 21% of total net sales, as compared to $3,983, or 25%, during 2022.
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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.
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During the first quarter of 2024, the Company received $5,400 in new purchase orders from customers for its DC power systems.
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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.
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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.
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On September 23, 2024, the Loan and Security Agreement with Pinnacle was renewed for two years and expires September 30, 2026.
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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.
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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. Sales and Marketing Expenses.
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Sales and marketing expenses decreased $299 to $1,172 during 2023, as compared to $1,471 during 2022. The decrease was attributable to a slight decrease in sales support staff during 2023 as compared the same period in 2022.
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In 2023, our equipment financing expense decreased by $10, bank fees related to our line of credit with Pinnacle Bank increased by $508. Net Loss.
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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 value.
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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.
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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. 42 Backlog As of December 31, 2023, we had a backlog of $3,862.
Removed
During the first quarter of 2024, the Company received $5,400 in new purchase orders from customers for its DC power systems.
Removed
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.
Removed
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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.

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