Financial Performance - Net sales for Q1 2025 were $1.7 million, unchanged from the same period last year[6] - Gross profit increased to $320,000, representing 18.6% of sales, an improvement of 180% from a gross loss of $402,000 in Q1 2024[6] - Operating expenses declined by 10% to $1.4 million compared to $1.5 million in Q1 2024[6] - Net loss improved to $1.2 million, or $(0.50) per share, a 41% reduction from a net loss of $2.1 million, or $(0.85) per share in Q1 2024[6] - Cash used in operating activities was $584,000, down from $989,000 in the same period last year[6] Sales Performance - Sales to telecom customers represented 82% of total net sales in Q1 2025, up from 71% in Q1 2024[4] - Sales to international markets increased to 18% of total net sales in Q1 2025, compared to 6% in Q1 2024[4] Future Plans and Potential - The company plans to implement a remote monitoring system on over 5,000 legacy units in the next twelve months, expected to generate additional aftermarket revenue[4] - Approximately $13 million of raw materials in inventory will help reduce cash burn for the rest of the year[4] - The company has the potential to produce over $50 million in revenue per year with sufficient bookings due to improvements in manufacturing capacity[4]

Core Viewpoint - Polar Power, Inc. reported its financial results for Q1 2025, highlighting improvements in operational efficiency, increased sales in aftermarket parts and services, and a focus on expanding its customer base [1][3]. Financial Performance - Net sales for Q1 2025 were $1.7 million, consistent with the same period last year [6]. - Gross profit increased to $320,000, representing 18.6% of sales, an improvement of 180% from a gross loss of $402,000 in Q1 2024 [6]. - Operating expenses declined by 10% to $1.4 million compared to $1.5 million in Q1 2024 [6]. - Net loss decreased to $1.2 million, or $(0.50) per share, a 41% improvement from a net loss of $2.1 million, or $(0.85) per share in the same period last year [6]. - Cash used in operating activities was $584,000, down from $989,000 in Q1 2024 [6]. Sales and Market Segments - Sales to telecom customers represented 82% of total net sales in Q1 2025, up from 71% in Q1 2024 [3]. - Sales to international markets increased to 18% of total net sales in Q1 2025, compared to 6% in the same period last year [3]. - Sales to military customers accounted for 17% of total net sales in Q1 2025, down from 26% in Q1 2024 [3]. Operational Developments - The company has seen a steady decline in excess inventory at its largest customer, leading to higher bookings towards the end of Q1 2025 [3]. - Implementation of a companywide ERP system has streamlined manufacturing operations, improving labor efficiencies and manufacturing lead times [3]. - Approximately $13 million of raw materials in inventory is expected to help reduce cash burn for the remainder of the year [3]. - The company has enhanced its manufacturing capacity, with the potential to generate over $50 million in revenue annually, assuming sufficient bookings [3]. Product and Service Innovations - Polar Power provides advanced DC power solutions across various sectors, including telecom, military, renewable energy, and more [4]. - The company is focusing on aftermarket parts and services, which accounted for 28% of total net sales in Q1 2025 [3]. - Joint efforts with telecom customers to implement remote monitoring systems on legacy units are expected to enhance product uptime and generate additional revenue [3].

General Information [Form 10-Q Details](index=1&type=section&id=Form%2010-Q%20Details) This section provides Form 10-Q filing details for Q1 2025, identifying Polar Power, Inc. as a non-accelerated and smaller reporting company - The report is a Quarterly Report on Form 10-Q for the period ended March 31, 2025[1](index=1&type=chunk) - Polar Power, Inc. is incorporated in Delaware and listed on The NASDAQ Stock Market, LLC under the symbol POLA[2](index=2&type=chunk) - The registrant is a Non-Accelerated Filer and a Smaller Reporting Company[2](index=2&type=chunk) [Forward-Looking and Cautionary Statements](index=4&type=section&id=FORWARD%20LOOKING%20AND%20CAUTIONARY%20STATEMENTS) This section defines forward-looking statements, noting actual results may differ due to various risks, and disclaims any obligation to update them - All statements not of historical fact are forward-looking, subject to risks, uncertainties, and assumptions[6](index=6&type=chunk) - Factors that could cause material differences include projected net sales, costs, gross margins, accounting estimates, product demand, impact of COVID-19, wars (Russia-Ukraine, Israel-Hamas), industry competition, production capacity, acquisitions, and capital needs[6](index=6&type=chunk) - The company undertakes no obligation to revise or update any forward-looking statement, except as required by law[6](index=6&type=chunk) [Financial Presentation](index=4&type=section&id=FINANCIAL%20PRESENTATION) This section clarifies that all dollar amounts are in thousands, except share data, retroactively adjusted for a 1-for-7 reverse stock split - All dollar amounts are presented in thousands, except share and per share data[9](index=9&type=chunk) - Share and per share data have been retroactively adjusted for a 1-for-7 reverse stock split effective November 18, 2024[9](index=9&type=chunk) PART I – FINANCIAL INFORMATION [ITEM 1. Condensed Financial Statements](index=5&type=section&id=ITEM%201.%20Condensed%20Financial%20Statements) This section presents Polar Power, Inc.'s unaudited condensed financial statements for Q1 2025 and 2024, covering balance sheets, operations, equity, cash flows, and accounting notes Condensed Balance Sheets | Metric | March 31, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------- | :------------------ | | Cash and cash equivalents | $68 | $498 | | Accounts receivable | $1,687 | $2,153 | | Inventories | $13,134 | $12,893 | | Total current assets | $14,963 | $15,597 | | Total assets | $16,592 | $17,546 | | Total current liabilities | $9,140 | $8,560 | | Total liabilities | $9,337 | $9,034 | | Total stockholders' equity | $7,255 | $8,512 | - Total assets decreased by **$954 thousand** from December 31, 2024, to March 31, 2025, primarily due to a decrease in cash and cash equivalents and accounts receivable[13](index=13&type=chunk) - Total stockholders' equity decreased by **$1,257 thousand**, mainly due to the net loss incurred during the period[13](index=13&type=chunk) Unaudited Condensed Statements of Operations | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | | Net Sales | $1,723 | $1,775 | -$52 (-3%) | | Cost of Sales | $1,403 | $2,177 | -$774 (-36%) | | Gross profit (loss) | $320 | $(402) | +$722 (+180%) | | Total operating expenses | $1,421 | $1,577 | -$156 (-10%) | | Loss from operations | $(1,101) | $(1,979) | +$878 (+44%) | | Net loss | $(1,265) | $(2,142) | +$877 (+41%) | | Net loss per share – basic and diluted | $(0.50) | $(0.85) | +$0.35 | | Weighted average shares outstanding | 2,510,669 | 2,508,802 | +1,867 | - Net sales decreased by **3%** year-over-year, while cost of sales decreased significantly by **36%**, leading to a positive gross profit of **$320 thousand** in Q1 2025 compared to a gross loss of **$402 thousand** in Q1 2024[15](index=15&type=chunk) - The company reduced its net loss by **41%** from **$2,142 thousand** in Q1 2024 to **$1,265 thousand** in Q1 2025, with a corresponding improvement in net loss per share from **$(0.85)** to **$(0.50)**[15](index=15&type=chunk) Unaudited Condensed Statements of Stockholders' Equity | Metric | December 31, 2024 (in thousands) | March 31, 2025 (in thousands) | | :-------------------------------- | :------------------ | :--------------- | | Total Stockholders' Equity | $8,512 | $7,255 | | Accumulated Deficit | $(30,336) | $(31,601) | | Common Stock (Number of Shares) | 2,511,350 | 2,514,029 | | Additional Paid-in Capital | $38,886 | $38,896 | - Total stockholders' equity decreased by **$1,257 thousand** from December 31, 2024, to March 31, 2025, primarily due to the net loss of **$1,265 thousand**[17](index=17&type=chunk) - The company issued **2,679 shares** of common stock valued at **$8 thousand** to a director for accrued fees during the period[17](index=17&type=chunk) Unaudited Condensed Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(584) | $(989) | | Net cash provided by financing activities | $154 | $652 | | Net decrease in cash and cash equivalents | $(430) | $(337) | | Cash and cash equivalents, end of period | $68 | $212 | - Net cash used in operating activities decreased from **$989 thousand** in Q1 2024 to **$584 thousand** in Q1 2025, primarily due to a lower net loss and favorable changes in accounts receivable and accounts payable[21](index=21&type=chunk) - Net cash provided by financing activities decreased significantly from **$652 thousand** in Q1 2024 to **$154 thousand** in Q1 2025, mainly due to no proceeds from credit facility advances in 2025 compared to **$676 thousand** in 2024, partially offset by proceeds from related-party notes payable[21](index=21&type=chunk) NOTE 1 – Organization and Summary of Significant Accounting Policies - The Company designs, manufactures, and sells DC power systems for off-grid, bad-grid, backup power, EV charging, and nano-grid applications, integrating DC generators, electronic controls, lithium batteries, and solar PV technologies[23](index=23&type=chunk) - The Company's ability to continue as a going concern is dependent on obtaining additional financing, growing revenue, improving operational efficiency, and reducing costs, given a net loss of **$1,265 thousand** and cash used in operations of **$584 thousand** for the three months ended March 31, 2025[24](index=24&type=chunk)[25](index=25&type=chunk) - Inflation had a modest effect on financial condition and results of operations for Q1 2025, but anticipated increases in tariffs on imported products may impact profitability[26](index=26&type=chunk) - Revenue is primarily derived from product sales, recognized upon shipment or delivery when control is transferred, and also from engineering services, technical support, accessories, and equipment rentals (though rental revenue was **$nil** for the periods presented)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) Disaggregated Net Sales by Product Type | Disaggregated Net Sales by Product Type | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | DC power systems | $1,230 | $1,567 | | Engineering & Tech Support Services | — | $86 | | Accessories | $493 | $122 | | Total net sales | $1,723 | $1,775 | Disaggregated Net Sales by Customer Type | Disaggregated Net Sales by Customer Type | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Telecom | $1,419 | $1,258 | | Government/Military | $294 | $460 | | Marine | $7 | $38 | | Other | $3 | $19 | | Total net sales | $1,723 | $1,775 | Disaggregated Net Sales by Geographical Region | Disaggregated Net Sales by Geographical Region | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | | United States | $1,421 | $1,675 | | South Pacific Islands | $6 | $79 | | Japan | — | $20 | | Canada | $1 | — | | Europe and Middle East | $295 | — | | Other Asia Pacific | — | $1 | | Total net sales | $1,723 | $1,775 | - Inventories are valued at the lower of cost or net realizable value (FIFO basis); no write-downs occurred in Q1 2025[34](index=34&type=chunk) Inventory Composition | Inventory Composition | March 31, 2025 (unaudited) (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :------------------------- | :------------------ | | Raw materials | $11,689 | $11,902 | | Finished goods | $1,445 | $991 | | Total Inventories | $13,134 | $12,893 | - The Company accrued a product warranty liability of **$600 thousand** as of March 31, 2025, unchanged from December 31, 2024[37](index=37&type=chunk) - The Company operates as a single operating segment, with the CEO making resource allocation and performance assessment decisions on a consolidated basis[44](index=44&type=chunk) - For Q1 2025, **71%** of revenues came from the largest customer (U.S. Tier-1 telecom) and **17%** from the second largest (U.K. military market). Telecommunications customers accounted for **82%** of total revenues, and international sales for **18%**[45](index=45&type=chunk) - At March 31, 2025, the two largest receivable accounts represented **74%** and **19%** of total accounts receivable[46](index=46&type=chunk) - Potentially dilutive shares (options) totaling **20,002** were excluded from diluted EPS calculation for Q1 2025 and Q1 2024 as their inclusion would be anti-dilutive[50](index=50&type=chunk) - Recent accounting pronouncements (ASU 2023-09 on Income Tax Disclosures and ASU 2024-03 on Expense Disaggregation Disclosures) are not expected to have a material impact on the Company's financial statements or disclosures upon adoption[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) NOTE 2 – Property and Equipment Property and Equipment | Property and Equipment | March 31, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------- | :------------------ | | Total property and equipment, cost | $4,512 | $4,512 | | Less: accumulated depreciation and amortization | $(4,334) | $(4,316) | | Property and equipment, net | $178 | $196 | - Net property and equipment decreased from **$196 thousand** at December 31, 2024, to **$178 thousand** at March 31, 2025[54](index=54&type=chunk) - Depreciation and amortization expense for Q1 2025 was **$17 thousand**, down from **$66 thousand** in Q1 2024[54](index=54&type=chunk) NOTE 3 – Notes Payable, Related Party - The Company's CEO made an additional loan of **$160 thousand** to the Company on March 24, 2025, with similar unsecured terms and a **3.5%** annual interest rate[55](index=55&type=chunk) - As of March 31, 2025, the aggregate outstanding balance of related-party loans, including accrued interest, was **$429 thousand**[55](index=55&type=chunk) NOTE 4 – Line of Credit - The Company's revolving credit facility with Pinnacle Bank was extended until September 30, 2026, providing advances up to **$7,500 thousand** based on accounts receivable and inventory[56](index=56&type=chunk) - Interest rates are **1.25%** above prime for receivables (min **3.75%**) and **2.25%** above prime for inventory (min **4.75%**), both at **9.75%** and **10.75%** respectively as of March 31, 2025[57](index=57&type=chunk) - The outstanding balance under the line of credit was **$4,788 thousand** at March 31, 2025, with **$33 thousand** available, and the Company was in compliance with all covenants[60](index=60&type=chunk)[61](index=61&type=chunk) - Total interest expense, fees, and financing costs under the Loan Agreement were **$161 thousand** for both Q1 2025 and Q1 2024[62](index=62&type=chunk) NOTE 5 – Operating Leases - The Company has two operating lease agreements for warehouse and office facilities, extended until February 28, 2026, and August 31, 2026, respectively, with an aggregate commitment of **$3,896 thousand**[63](index=63&type=chunk) Lease Information | Lease Information | March 31, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------- | :------------------ | | Long-term right-of-use assets, net | $1,343 | $1,645 | | Current portion of operating lease liabilities | $1,339 | $1,382 | | Noncurrent portion of operating lease liabilities | $197 | $474 | | Total operating lease liabilities | $1,536 | $1,856 | Lease Maturities | Lease Maturities | Operating Leases (in thousands) | | :------------------------------ | :--------------- | | 2025 (remaining 9 months) | $1,104 | | 2026 | $496 | | Total lease payments | $1,600 | | Present value of lease liabilities | $1,536 | - Rent expense for Q1 2025 was **$391 thousand**, slightly down from **$399 thousand** in Q1 2024[67](index=67&type=chunk) NOTE 6 – Stockholders' Equity - In January 2025, the Company issued **2,679 shares** of common stock, valued at **$8 thousand**, to an independent director as settlement for accrued fees[68](index=68&type=chunk) NOTE 7 – Stock Options Stock Option Activity | Stock Option Activity | Number of Options | Weighted Average Exercise Price | | :-------------------- | :---------------- | :------------------------------ | | Outstanding, Dec 31, 2024 | 20,002 | $36.56 | | Outstanding, Mar 31, 2025 | 20,002 | $36.56 | | Exercisable, Mar 31, 2025 | 20,002 | $36.56 | - As of March 31, 2025, the Company had **20,002** fully vested stock options outstanding with exercise prices ranging from **$33.88** to **$39.20**, and no intrinsic value[70](index=70&type=chunk)[71](index=71&type=chunk) NOTE 8. Segment Information - The Company operates and manages its business as one reportable and operating segment, focusing on designing, manufacturing, and selling DC power systems[72](index=72&type=chunk) - The Chief Executive Officer reviews financial information on a consolidated basis and allocates resources based on net income (loss)[73](index=73&type=chunk) [ITEM 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations](index=20&type=section&id=ITEM%202.%20Management's%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) Management discusses the Company's Q1 2025 financial condition and results, analyzing revenue, costs, liquidity, and backlog, while highlighting diversification and efficiency efforts Overview - The Company designs, manufactures, and sells DC power generators, renewable energy, and cooling systems primarily for the telecommunications market, with increasing diversification into military, EV charging, marine, and industrial markets[78](index=78&type=chunk) - DC power systems are offered in diesel, natural gas, LPG/propane, and renewable formats, with output power ranging from **5 kW** to **50 kW**[80](index=80&type=chunk) - In Q1 2025, **82%** of total net sales were in the telecommunications market (up from **71%** in Q1 2024), with the two largest customers accounting for **71%** (Tier-1 telecom) and **17%** (U.K. military market) of sales[81](index=81&type=chunk) - The Company launched prime power DC generators with Toyota 1KS engines optimized for propane and natural gas, anticipating growth due to increasing restrictions on diesel engines[82](index=82&type=chunk) - Plans include expanding mobile EV charging offerings to the universal combined charging system standard and developing new configurations of DC power systems, battery storage, and solar products for microgrid needs[85](index=85&type=chunk)[87](index=87&type=chunk) Effects of Inflation - The impact of inflation and rapidly changing prices did not materially affect operations during Q1 2025, with a very small portion of sales from fixed contracts[88](index=88&type=chunk) - Rapid changes in the global economy may cause significant spikes in inflation, potentially impacting financial condition in 2025 and beyond[88](index=88&type=chunk) Critical Accounting Policies - Management makes significant estimates for credit loss reserves, inventory valuation, impairment testing, deferred tax assets, warranty reserves, and potential liabilities[91](index=91&type=chunk) - There were no changes to critical accounting policies described in the 2024 Annual Report on Form 10-K that impacted the condensed financial statements[91](index=91&type=chunk) Financial Performance Summary and Outlook Financial Performance Summary | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change | | :---------------- | :-------------------------------- | :-------------------------------- | :----- | | Net Sales | $1,723 | $1,775 | -3% | | Net Loss | $(1,265) | $(2,142) | +41% | | Net Loss per Share | $(0.50) | $(0.85) | +$0.35 | - Net sales decreased by **3%** year-over-year, attributed to excess customer inventory and economic/geopolitical factors[93](index=93&type=chunk)[94](index=94&type=chunk) - Net loss improved by **41%** due to cost reductions in operating expenses[93](index=93&type=chunk) - The Company plans to hire sales and marketing staff, expand its customer base, and proactively manage operations to mitigate financial impacts in 2025[95](index=95&type=chunk) Results of Operations Results of Operations Summary | Metric | 3 Months Ended Mar 31, 2025 (in thousands) | 3 Months Ended Mar 31, 2024 (in thousands) | Dollar Variance | Percentage Variance | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------- | :------------------ | | Net sales | $1,723 | $1,775 | $(52) | (3)% | | Cost of sales | $1,403 | $2,177 | $774 | 36% | | Gross profit (loss) | $320 | $(402) | $722 | 180% | | Sales and marketing expenses | $260 | $231 | $(29) | (13)% | | Research and development expenses | $160 | $220 | $60 | 27% | | General and Administrative expenses | $1,001 | $1,126 | $125 | 11% | | Total operating expenses | $1,421 | $1,577 | $156 | 10% | | Loss from operations | $(1,101) | $(1,979) | $878 | 44% | | Interest and finance costs | $(164) | $(163) | $(1) | (1)% | | Net loss | $(1,265) | $(2,142) | $877 | 41% | - Net sales decreased by **3%** to **$1,723 thousand** in Q1 2025, with aftermarket parts revenue increasing to **28%** of total revenues (from **6.8%** in Q1 2024)[98](index=98&type=chunk) - Cost of sales decreased by **36%** to **$1,403 thousand**, improving gross profit to **$320 thousand** (**18.6%** of net sales) from a gross loss of **$402 thousand** (**-22.6%** of net sales) in Q1 2024, mainly due to decreased factory overhead absorption and reduced field services[100](index=100&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) - Operating expenses decreased by **10%** overall, driven by a **27%** decrease in R&D expenses and an **11%** decrease in G&A expenses, partially offset by a **13%** increase in sales and marketing expenses due to increased marketing and tradeshow participation[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - Net loss improved by **41%** to **$1,265 thousand**, or **$(0.50)** per share, compared to **$2,142 thousand**, or **$(0.85)** per share, in Q1 2024[108](index=108&type=chunk) Liquidity and Capital Resources - Working capital decreased by **$1,214 thousand** to **$5,823 thousand** at March 31, 2025, from **$7,037 thousand** at December 31, 2024, primarily due to a decrease in cash and cash equivalents[110](index=110&type=chunk) - Cash and cash equivalents were **$68 thousand** at March 31, 2025, down from **$498 thousand** at December 31, 2024[112](index=112&type=chunk) - The Company's credit facility with Pinnacle Bank has an outstanding balance of **$4,788 thousand** and **$33 thousand** available as of March 31, 2025[117](index=117&type=chunk) Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net Cash Used In Operating Activities | $(584) | $(989) | | Net Cash Provided By Investing Activities | — | — | | Net Cash Provided By Financing Activities | $154 | $652 | | Net decrease in cash | $(430) | $(337) | - Net cash used in operating activities decreased to **$584 thousand** in Q1 2025, driven by a lower net loss and favorable changes in accounts receivable and accounts payable[119](index=119&type=chunk) - Net cash provided by financing activities was **$154 thousand**, primarily from net borrowings from the line of credit and **$163 thousand** from related-party notes payable[121](index=121&type=chunk) - Backlog as of March 31, 2025, was **$2,238 thousand**, with **86%** from U.S. telecommunications customers, and the majority expected to ship within the next six months[122](index=122&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section confirms the Company has no material quantitative or qualitative disclosures regarding market risk for the reporting period - The Company has no applicable quantitative and qualitative disclosures about market risk[123](index=123&type=chunk) [ITEM 4. Controls and Procedures](index=27&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025[124](index=124&type=chunk) - No changes in internal control over financial reporting occurred during Q1 2025 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[125](index=125&type=chunk) PART II – OTHER INFORMATION [ITEM 1. Legal Proceedings](index=28&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is not currently involved in legal proceedings expected to materially adversely affect its business, financial condition, or operations - The Company is not currently involved in legal proceedings expected to have a material adverse effect on its business[127](index=127&type=chunk) [ITEM 1A. Risk Factors](index=28&type=section&id=ITEM%201A.%20Risk%20Factors) This section details various risks that could materially affect Polar Power, Inc.'s business, financial condition, and stock price, categorized by business, IP, and common stock Risks Related to Our Business and Industry - Rising inflation, increased energy/material costs, and higher tariffs on key components may adversely affect operating margins and profitability, as the Company may not be able to pass all cost increases to customers[130](index=130&type=chunk) - Geopolitical events (e.g., Russia-Ukraine war, Hamas-Israel conflict) could disrupt supply chains, delay customer spending, increase oil/natural gas prices, and negatively impact the stock market[131](index=131&type=chunk)[132](index=132&type=chunk) - The Company has incurred significant net losses in the past (**$1,265 thousand** in Q1 2025, **$4.1 million** in FY2024, **$6.5 million** in FY2023) and may continue to do so, hampering operations and business expansion[133](index=133&type=chunk) - Substantial revenue dependence on sales of DC base power systems to one Tier-1 U.S. telecommunications customer poses a risk if demand declines or the business relationship changes[134](index=134&type=chunk)[135](index=135&type=chunk) - Long design and sales cycles (**3-24 months**) for DC power systems require significant upfront investment in sales, engineering, and R&D, with no guarantee of purchase, potentially affecting financial performance[136](index=136&type=chunk)[137](index=137&type=chunk) - Lack of long-term volume purchase commitments from most customers means sales rely on individual purchase orders, creating uncertainty for future revenue growth[138](index=138&type=chunk) - High concentration of sales in the telecommunications market makes the Company vulnerable to declining demand in this sector if diversification efforts are unsuccessful[139](index=139&type=chunk) - Inventory risk exists due to reliance on management estimates for net realizable value; inaccurate estimates or unforeseen changes in demand could lead to additional write-downs[140](index=140&type=chunk)[141](index=141&type=chunk) - Unavailability, shortage, or increased cost of raw materials (aluminum, copper, Neodymium magnets, engines) could adversely affect sales and profitability, especially given limited fixed-price contracts and reliance on a few key engine suppliers (Yanmar, Toyota, Ford)[142](index=142&type=chunk)[154](index=154&type=chunk)[156](index=156&type=chunk)[158](index=158&type=chunk) - The markets are highly competitive, with larger competitors potentially using greater resources to gain market share, and the Company's ability to respond to design changes, pricing pressure, and lead times is critical[143](index=143&type=chunk)[144](index=144&type=chunk) - Rapid technological changes, especially in telecommunications, could render existing products obsolete, requiring continuous and costly development of new and enhanced products to maintain competitiveness and market acceptance[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[152](index=152&type=chunk) - Natural disasters, pandemics (like COVID-19), and other catastrophic events could disrupt operations, international commerce, and demand for services[153](index=153&type=chunk) - Sourcing key components from foreign countries (primarily Asia) exposes the Company to risks like inflation, political/economic instability, trade restrictions, currency fluctuations, and logistical challenges[157](index=157&type=chunk)[159](index=159&type=chunk) - Prolonged disruption at the two manufacturing and assembly facilities in Gardena, California, due to various events (e.g., natural disaster, equipment failure) would significantly decline sales and profitability[160](index=160&type=chunk) - Business operations are subject to substantial government regulations (building codes, safety, licensing), and changes or non-compliance could lead to material costs, liabilities, or restrictions[161](index=161&type=chunk)[162](index=162&type=chunk) - Use of products in critical communications networks could lead to significant liability claims if products malfunction, potentially resulting in costly litigation and reputational damage[163](index=163&type=chunk) - Failure to comply with laws applicable to foreign activities, such as the U.S. Foreign Corrupt Practices Act (FCPA), could result in severe penalties, sanctions, and harm to reputation[164](index=164&type=chunk) - International sales (**18%** of revenue in Q1 2025) expose the Company to risks from political/economic events, trade policies, tariffs, and compliance with complex foreign and U.S. laws[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) - Cyberattacks and security vulnerabilities could lead to business disruption, data loss, liability claims, harm to reputation, and increased costs, despite implemented security measures[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) Risks Related to Our Intellectual Property - Failure to adequately protect intellectual property rights (primarily through trade secret laws, non-competition, and confidentiality agreements) could lead to loss of proprietary technology and harm business[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - Litigation to enforce intellectual property rights or defend against infringement claims could be costly, time-consuming, divert management resources, and potentially result in significant damages or restrictions on product sales[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) Risks Related to Our Common Stock - Operating results can fluctuate significantly due to factors beyond control (e.g., customer order size/timing, project completion), making predictions difficult and potentially leading to operating losses or declines in profit margins[184](index=184&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - The Chairman, President, and CEO, Arthur D. Sams, beneficially owns approximately **32%** of outstanding common stock, giving him significant influence over corporate matters and potentially limiting other stockholders' ability to influence decisions[189](index=189&type=chunk) - The price of common stock is volatile due to various factors (e.g., competition, operating results, financing efforts, market conditions), and broad market fluctuations could negatively impact its price[190](index=190&type=chunk)[191](index=191&type=chunk) - A prolonged decline in stock price could reduce liquidity and hinder the ability to raise further working capital through equity sales, potentially forcing curtailment of operations[192](index=192&type=chunk) - The Company does not anticipate paying cash dividends, meaning stockholders must rely solely on stock appreciation for any return on investment[193](index=193&type=chunk)[195](index=195&type=chunk) - Failure to maintain Nasdaq listing requirements (e.g., minimum bid price, board composition) could result in delisting, decreasing liquidity and making it more difficult for shareholders to sell shares, despite regaining compliance with the Bid Price Rule and board composition requirements in late 2024[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - Lack of research coverage or unfavorable reports from securities/industry analysts could negatively impact share price and trading volume[204](index=204&type=chunk) - The Company elected not to be subject to Section 203 of the Delaware General Corporation Law, which could make it more vulnerable to takeovers without board approval[205](index=205&type=chunk) - Provisions in charter documents and Delaware law (e.g., special meeting requirements, advance notice for proposals, preferred stock issuance authority) may have anti-takeover effects, discouraging acquisitions or changes in management[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) - The certificate of incorporation designates the Delaware Court of Chancery as the sole forum for certain stockholder actions, potentially limiting stockholders' ability to choose a favorable judicial forum and increasing litigation costs[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) - Failure to maintain an effective system of internal control over financial reporting could lead to inaccurate financial reports, fraud, loss of investor confidence, and potential delisting from Nasdaq, despite management's assessment of effectiveness[212](index=212&type=chunk)[214](index=214&type=chunk)[217](index=217&type=chunk)[219](index=219&type=chunk) - Operating as a public company incurs significant legal, accounting, and compliance costs (e.g., Sarbanes-Oxley Act, Dodd-Frank Act), requiring substantial management time and resources[215](index=215&type=chunk)[216](index=216&type=chunk) - Raising additional capital through equity or convertible debt offerings could result in substantial dilution for existing stockholders and impose restrictive covenants if debt financing is used[220](index=220&type=chunk)[221](index=221&type=chunk) - The board's authority to issue preferred stock could adversely affect the market value of common stock, dilute voting power, and delay or prevent a change of control[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities or use of proceeds to report[225](index=225&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=49&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section reports no defaults upon senior securities for the period - No defaults upon senior securities to report[226](index=226&type=chunk) [ITEM 4. Mine Safety Disclosure](index=49&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosure) This section states that mine safety disclosure is not applicable to the Company - Mine safety disclosure is not applicable to the Company[227](index=227&type=chunk) [ITEM 5. Other Information](index=49&type=section&id=ITEM%205.%20Other%20Information) This section reports no other information for the period - No other information to report[228](index=228&type=chunk) [ITEM 6. Exhibits](index=49&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - The report includes certifications required by Rule 13a-14(a) and 18 U.S.C. Section 1350, as well as Inline XBRL documents[231](index=231&type=chunk) SIGNATURES [Signatures](index=51&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its submission by Arthur D. Sams on behalf of Polar Power, Inc. - The report was signed on May 15, 2025, by Arthur D. Sams, President, Chief Executive Officer, and Secretary of Polar Power, Inc[234](index=234&type=chunk)

Financial Performance - Sales for 2024 were $14 million, representing a 6.7% decline from 2023[6] - Gross profit increased by 89% to $1.3 million, or 9.4% of sales, compared to $695,000, or 4.5% of sales in 2023[6] - Net loss for 2024 was $4.6 million, or $(1.86) per share, a decrease from a net loss of $6.5 million, or $(3.45) per share in 2023[6] - Operating expenses declined by $1 million to $5.7 million compared to $6.7 million in the prior year[6] Revenue Sources - Military/government revenues nearly doubled to approximately $1.5 million for the year[4] - The company expects follow-on orders from the UNHCR and other global customers due to successful hybrid solutions[4] Cash Flow and Liquidity - Cash used in operating activities was $536,000 in 2024, significantly reduced from $3.4 million in 2023[6] - Total net debt was $5.0 million, with total liquidity of $1.1 million as of December 31, 2024[6] Product Development - New product line for mobile electric vehicle chargers was successfully tested in 2024 and is planned for launch this year[4] - Inventories decreased by $3.5 million, primarily due to the utilization of existing inventory[6]

Financial Performance - Polar Power reported sales of $14 million for 2024, representing a 6.7% decline from 2023 [6] - Gross profit increased by 89% to $1.3 million, or 9.4% of sales, compared to $695,000, or 4.5% of sales in 2023 [6] - Operating expenses decreased by $1 million to $5.7 million compared to $6.7 million in the prior year [6] - The net loss for 2024 was $4.6 million, a reduction of $1.9 million from a net loss of $6.5 million in 2023 [6] Operational Highlights - The company achieved profitability in two quarters of 2024, primarily through the production of standard DC generators for backup and prime power applications [3] - Polar Power successfully reduced customer concentration in the telecom sector, with military/government revenues nearly doubling to approximately $1.5 million for the year [3] - The company implemented internal changes to broaden product penetration in traditional and new markets, including mobile electric vehicle chargers [3] Strategic Developments - Polar Power has established a new reference account with the United Nations High Commissioner for Refugees (UNHCR), showcasing significant fuel savings of up to 70% in diesel costs through their hybrid solution [3] - The hybrid system provided to UNHCR in Lagos, Nigeria, has exceeded performance expectations, leading to potential follow-on orders from this and other government agencies globally [3] Inventory and Cash Flow - Inventories decreased by $3.5 million, primarily due to the utilization of existing inventory rather than new acquisitions [6] - Cash used in operating activities was $536,000 in 2024, a significant improvement from $3.4 million in 2023 [6] Balance Sheet Overview - As of December 31, 2024, total assets were $17.5 million, down from $25.3 million in 2023 [10][11] - Total liabilities decreased to $9.0 million from $12.1 million in the previous year [11] - Total stockholders' equity was $8.5 million, down from $13.2 million in 2023 [11]

Core Points - Polar Power, Inc. has successfully regained compliance with Nasdaq's minimum bid price requirement, which is crucial for the company's growth and stability [1][8] - The company emphasizes its commitment to protecting and building shareholder value through corporate actions [6] - Polar Power's product portfolio includes innovative solutions for various sectors, including telecom, military, renewable energy, and residential applications [9][10] Company Overview - Polar Power specializes in prime, backup, solar hybrid power, and microgrid solutions, providing advanced power and cooling systems across diverse industrial applications [1][9] - The company offers mobile rapid battery charging technology for electric vehicles and combined heat and power (CHP) residential systems [3][9] - Its micro/nano grid solutions are designed to provide lower-cost energy in challenging grid environments [10] Market Position - Polar Power's telecom power solutions are noted for significant cost savings in installation, permitting, site leases, and operation [6] - The company is pioneering technological advancements that aim to change the production, consumption, and environmental impact of power generation [9]

Core Viewpoint - Polar Power, Inc. intends to execute a reverse stock split at a ratio of 1-for-7 to regain compliance with Nasdaq's minimum bid price requirement of $1.00, effective November 19, 2024 [1][2]. Group 1: Reverse Stock Split Details - The reverse stock split will combine every seven shares of common stock into one share, without changing the par value per share [3]. - The reverse stock split will affect all outstanding shares and the number of shares available under the equity incentive plan, as well as stock options, which will see a corresponding increase in exercise price [3]. - No fractional shares will be issued; stockholders entitled to fractional shares will receive an additional fraction to round up to the next whole share, with no cash paid for fractional shares [4]. Group 2: Company Overview - Polar Power is a global provider of prime, backup, solar hybrid power, and microgrid solutions, focusing on innovative power and cooling systems across various industrial applications [5]. - The company's product portfolio includes solutions for telecom, military, renewable energy, marine, automotive, residential, commercial, oil field, and mining applications, emphasizing efficiency and durability [5]. - Polar Power's technology includes mobile rapid battery charging for electric vehicles and combined heat and power systems for residential use, optimizing performance and costs [6].

Financial Performance - Net sales for Q3 2024 were $4.9 million, a 157% year-over-year increase[2] - Gross profit for Q3 2024 was $1.4 million, representing 29% of sales, a significant improvement from a gross loss of $108,000 in the same period last year[2] - Net income for Q3 2024 was $13,000, a $1.9 million improvement from a net loss of $1,844,000 in Q3 2023[2] - Net loss for the nine months ended September 30, 2024, was $1.6 million, an improvement from a net loss of $3.4 million in the same period in 2023[14] - Net loss decreased to $1.628 million in September 2024 from $3.393 million in September 2023, showing a significant improvement[15] Working Capital and Inventory - Working capital as of September 30, 2024, was $10.1 million, including $15.0 million in inventory[2] - Inventories increased by $1.492 million in September 2024, compared to a decrease of $3.695 million in September 2023[15] Sales and Backlog - Backlog as of September 30, 2024, was $3.1 million[2] - Military sales increased in Q3 2024, positively impacting margins[3] - The company is focusing on converting its sales pipeline into purchase orders, with opportunities from large overseas deals[4] Cash Flow and Financing - Net cash used in operating activities improved to $400 thousand in September 2024 from $3.084 million in September 2023[15] - Net cash used in investing activities decreased to $18 thousand in September 2024 from $194 thousand in September 2023[15] - Net cash provided by financing activities was $367 thousand in September 2024, down from $3.363 million in September 2023[15] - Cash and cash equivalents decreased by $51 thousand in September 2024, compared to an increase of $85 thousand in September 2023[15] - Cash and cash equivalents at the end of the period were $498 thousand in September 2024, up from $296 thousand in September 2023[15] Depreciation and Amortization - Depreciation and amortization expenses reduced to $146 thousand in September 2024 from $309 thousand in September 2023[15] Accounts Receivable - Accounts receivable decreased by $1.273 million in September 2024 compared to an increase of $648 thousand in September 2023[15] Employee Retention Credit - Employee retention credit contributed $2 million in September 2024, which was not present in September 2023[15] Total Assets - Total assets as of September 30, 2024, were $20.9 million, down from $25.3 million at the end of 2023[11] Nasdaq Compliance - Polar Power is taking steps to regain Nasdaq compliance, including a planned reverse stock split[5]

Core Insights - Polar Power, Inc. reported preliminary third quarter net sales between $4.7 million and $5.2 million, indicating a growth of 147% to 174% year-over-year, with gross margins ranging from 26% to 32% and breakeven net earnings [1][2] - The increase in net sales is attributed to strong performance across both diesel and natural gas-powered product lines, with new customers contributing 18% and 12% to total sales respectively [2] - The company has seen substantial year-over-year improvement in gross margins due to higher revenues, lower labor costs, and improved factory overhead absorption [2] - Net income from operations has improved significantly, driven by higher sales, better gross margins, reduced R&D expenditures, and lower general and administrative costs [2] - CEO Arthur Sams highlighted the positive trajectory of the company, emphasizing the benefits of investments in a new ERP system and other initiatives that have diversified the customer base and enhanced operational efficiency [2] Company Overview - Polar Power, Inc. is a global provider of prime, backup, and solar hybrid power solutions, with a product portfolio that includes systems for telecom, military, renewable energy, marine, automotive, residential, commercial, oil field, and mining applications [3] - The company’s products are designed to operate on various energy sources, including photovoltaics, diesel, LPG, and renewable fuels, showcasing its commitment to innovation and efficiency [3] - Polar Power's telecom power solutions offer significant cost savings in installation, permitting, site leases, and operation, while its military solutions provide compact and fuel-efficient power for various applications [4] Technological Advancements - The company has developed mobile rapid battery charging technology for on-demand roadside charging of electric vehicles, as well as combined heat and power (CHP) systems for residential use that optimize performance and costs [5] - Polar Power's micro/nano grid solutions are designed to provide lower-cost energy in challenging grid environments, reflecting the company's focus on technological advancement and efficiency [6]

Company Overview - Polar Power (NASDAQ: POLA) is a global provider of prime, backup, solar hybrid power, and microgrid solutions, focusing on innovative DC advanced power and cooling systems across various industrial applications [2][6]. - The company's product portfolio includes solutions for telecom, military, renewable energy, marine, automotive, residential, commercial, oil field, and mining applications, emphasizing innovation, durability, and efficiency [6]. Event Participation - Polar Power will present at the 17th annual LD Micro Main Event on October 29th at 0430 PM PT, with CEO Arthur Sams representing the company [2]. - The event will feature around 150 companies presenting in half-hour increments and will include opportunities for private meetings with investors [5]. Industry Context - LD Micro, a subsidiary of Freedom US Markets, aims to serve as an independent resource in the micro-cap space, facilitating the discovery of emerging companies through its index and annual investor conferences [7].