Polar Power, Inc. (NASDAQ:POLA) Q2 2019 Results Earnings Conference Call August 12, 2019 4:30 PM ET Company Participants Shawn Severson - Investor Relations Arthur Sams - Chief Executive Officer Raj Masina - Chief Operations Officer Luis Zavala - Chief Financial Officer Conference Call Participants Craig Irwin - ROTH Capital Partners Robert Marcin - Penn Capital Operator Please standby. Good day. And welcome to the Polar Power’s Second Quarter 2019 Financial Results Conference Call. Today’s conference is be ...

Financial Data and Key Metrics Changes - Revenues for Q1 2019 were $7.75 million, a 59% increase compared to $4.87 million in Q1 2018, primarily driven by sales to Tier-1 telecommunications customers in the U.S. [6][46] - Gross profit for the quarter was $2.39 million, up 61% from $1.48 million in the same period last year, with a gross margin of 31%, slightly up from 30% in Q1 2018 [8][48] - The company reported a net income of $70,703 or $0.01 per share, compared to a net loss of $318,802 or $0.03 per share in Q1 2018 [9][51] - Backlog at the end of Q1 2019 was $14.16 million, significantly higher than $2.56 million a year ago, but down from $16 million at the end of Q4 2018 [7][47] Business Line Data and Key Metrics Changes - The telecom segment is seeing increased demand driven by network hardening and the rollout of 5G, with a focus on larger DC generators [13][14] - The company is expanding its production capacity and workforce by 21% to meet expected higher demand [10][65] - Emerging growth areas include hybrid electric vehicles and solar hybrid systems, with military applications driving demand [18][19] Market Data and Key Metrics Changes - The U.S. telecom market remains a primary focus, with significant opportunities in last-mile carriers and international markets expected to grow [30][31] - International sales are anticipated to become a larger portion of the business, with ongoing proposals submitted to Tier-1 clients globally [31][32] Company Strategy and Development Direction - The company aims to increase market share with top-tier U.S. telecom providers and diversify its customer base by expanding into military, commercial, and residential markets [26][28] - Plans include opening a second manufacturing plant to nearly double production capacity and enhance operational efficiencies [37][41] - The company is focused on providing industry-leading technology and power solutions through R&D, including integrating solar and lithium battery storage solutions [42][44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sustained strength in the telecom segment for 2019, driven by current forecasts and backlog [14][29] - The company is in an investment phase to build a world-class global business, with expectations of improved operating efficiencies as production ramps up [10][41] - Management acknowledged challenges in supply chain and production ramp-up but remains confident in meeting growing demand [57][62] Other Important Information - The company is currently working on EPA certification for new LPG generators, with expected market entry in the U.S. contingent on successful testing [84][85] - Tariffs on raw materials like steel and aluminum are impacting costs, but the company has secured significant inventories to mitigate these effects [90][91] Q&A Session Summary Question: Revenue trends from January to March - Management noted that revenue started weak in January, improved in February, and continued to grow in March, primarily due to supply chain constraints [55][57] Question: Production capacity and cash position - The company expects to achieve up to $5 million in monthly revenue with both factories operating at full efficiency, and plans to secure a line of credit to support cash flow [58][60] Question: Staffing and operational improvements - The workforce has increased by 21%, with significant investments in mid-level management to enhance production capabilities [65][70] Question: International sales and revenue expectations - Management anticipates that international sales will contribute significantly to revenue by the end of the year, with ongoing efforts to close contracts in Southeast Asia and Africa [103][108] Question: Gross margin targets - Management indicated that gross margins are expected to remain in the 30% to 35% range as production efficiencies improve and the customer base diversifies [112][118]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission file number: 001-37960 POLAR POWER, INC. (Exact name of registrant as specified in its charter) Delaware 33-0479020 ...

1 INVESTOR PRESENTATION December 2018 Copyright 2018 Polar Power Inc. NASDAQ: POLA SAFE HARBOR 2 The following discussion, in addition to the other information contained in this presentation, should be considered carefully in evaluating our prospects. This presentation (including without limitation the following factors that may affect operating results) contains forward-looking statements regarding us and our business, financial condition, results of operations and prospects. Words such as "expects," "anti ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Polar Power, Inc. designs, manufactures, and sells DC power systems primarily for the telecommunications market, achieving record revenues in 2018 - The company's primary business is designing and selling DC power systems for the telecommunications market, providing power for off-grid or backup applications[11](index=11&type=chunk) 2018 Key Business Highlights | Metric | Value | Note | | :--- | :--- | :--- | | **Net Sales** | $24.0 million | Record level | | **Backlog (Year-End)** | $16.0 million | Record level | | **New Tier-1 Customer** | T-Mobile | Accounted for 22% of net sales | | **International Expansion** | Installations in Sri Lanka & Namibia | Demonstrating off-grid capabilities | | **Military Project** | U.S. Army Robotic Mule | Delivered 20 mobile DC power systems | - The company's business strategy focuses on penetrating the U.S. telecommunications market, expanding globally, and developing new power systems and renewable offerings[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - Research and development expenses **increased by 67% to $1.91 million in 2018** from $1.33 million in 2017, driven by new product development[91](index=91&type=chunk) [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from high customer concentration, supply chain dependencies, and the CEO's majority ownership Customer Concentration Risk (2018 & 2017) | Customer | 2018 % of Total Revenue | 2017 % of Total Revenue | | :--- | :--- | :--- | | **AT&T** | 53% | 15% | | **T-Mobile** | 22% | N/A | | **Verizon Wireless** | 10% | 71% | - The company is substantially dependent on three key engine suppliers: Yanmar, Kubota, and Perkins, which collectively represented **20% of total cost of sales in 2018** and **54% in 2017**[120](index=120&type=chunk) - Chairman, President, and CEO, Arthur D. Sams, beneficially owns approximately **55% of outstanding common stock**, giving him significant influence[153](index=153&type=chunk) - As a "controlled company" under NASDAQ rules due to CEO's majority ownership, the company may be exempt from certain corporate governance requirements[154](index=154&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[184](index=184&type=chunk) [Properties](index=36&type=section&id=Item%202.%20Properties) The company leases three facilities in Gardena, California, totaling 84,000 square feet for its operations - The company leases three facilities in Gardena, California, totaling **84,000 square feet** for its corporate, manufacturing, R&D, and storage needs[185](index=185&type=chunk) [Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings that would adversely affect its business - The company is not currently involved in any material legal proceedings[186](index=186&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Mine safety disclosures are not applicable[187](index=187&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ, has never paid dividends, and intends to retain earnings for growth - The company's common stock trades on The NASDAQ Capital Market under the symbol **"POLA"**[190](index=190&type=chunk) Quarterly Stock Price Range (2017-2018) | Period | High ($) | Low ($) | | :--- | :--- | :--- | | **2017** | | | | Q1 | 9.07 | 7.64 | | Q2 | 9.11 | 4.64 | | Q3 | 6.16 | 4.17 | | Q4 | 5.85 | 4.79 | | **2018** | | | | Q1 | 5.26 | 4.01 | | Q2 | 6.85 | 4.87 | | Q3 | 6.65 | 5.07 | | Q4 | 6.20 | 4.50 | - The company has never declared or paid cash dividends and plans to retain future earnings for business operations and growth[193](index=193&type=chunk) [Selected Financial Data](index=38&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable to the company - Selected Financial Data is not applicable[199](index=199&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2018, revenues increased by 67% to $24.0 million, but net loss widened due to higher operating expenses and production inefficiencies Financial Performance Summary (FY 2018 vs. FY 2017) | Metric | FY 2018 | FY 2017 | Change (%) | | :--- | :--- | :--- | :--- | | **Net Sales** | $24,046,354 | $14,418,726 | +67% | | **Gross Profit** | $7,431,780 | $4,761,168 | +56% | | **Gross Margin** | 30.9% | 33.0% | -2.1 p.p. | | **Loss from Operations** | ($1,098,788) | ($801,960) | +37% | | **Net Loss** | ($848,252) | ($757,416) | +12% | - The **67% increase in revenue** was a direct result of increased sales to U.S. Tier-1 telecommunications customers, with AT&T, T-Mobile, and Verizon Wireless representing **53%, 22%, and 10% of total net sales**, respectively[218](index=218&type=chunk)[221](index=221&type=chunk) - Cost of sales increased from 67% to **69% of net sales** due to volume discounts and short-term labor inefficiencies from rapid production ramp-up[222](index=222&type=chunk) - The company's backlog as of December 31, 2018, was approximately **$16 million**, with **92% attributable to U.S. Tier-1 telecommunications customers**[218](index=218&type=chunk)[244](index=244&type=chunk) Cash Flow Summary (FY 2018 vs. FY 2017) | Activity | FY 2018 | FY 2017 | | :--- | :--- | :--- | | **Net Cash Used In Operating Activities** | ($7,847,693) | ($1,587,130) | | **Net Cash Used In Investing Activities** | ($574,990) | ($342,121) | | **Net Cash Used In Financing Activities** | ($138,402) | ($111,744) | | **Net Decrease in Cash** | ($8,561,085) | ($2,040,995) | [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable to the company - Quantitative and Qualitative Disclosures About Market Risk are not applicable[245](index=245&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the full financial statements and supplementary data, which begin on page F-1 - This item references the financial statements which begin on page F-1 of the Annual Report[246](index=246&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=46&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - There were no changes or disagreements with accountants[247](index=247&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2018 - Based on an evaluation as of December 31, 2018, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[248](index=248&type=chunk) - Management concluded that as of December 31, 2018, the company's internal control over financial reporting was effective, based on the COSO framework[251](index=251&type=chunk) [Other Information](index=47&type=section&id=Item%209B.%20Other%20Information) No other information was reported in this section - No other information was reported[254](index=254&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=48&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's board includes independent directors, and despite CEO's majority ownership, it does not use "controlled company" exemptions Executive Officers and Directors | Name | Age | Position | | :--- | :--- | :--- | | **Arthur D. Sams** | 66 | Chairman, President, CEO, Secretary | | **Rajesh Masina** | 35 | Chief Operating Officer | | **Luis Zavala** | 49 | Chief Financial Officer | | **Keith Albrecht** | 66 | Director | | **Matthew Goldman** | 40 | Director | | **Peter Gross** | 67 | Director | - The Board of Directors has determined that a majority of its members are independent under NASDAQ listing rules[271](index=271&type=chunk) - The board has three standing committees: Audit, Compensation, and Nominating and Corporate Governance, each composed of independent directors[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk)[278](index=278&type=chunk) [Executive Compensation](index=53&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation in 2018 included base salaries, cash bonuses based on performance, and stock option grants vesting over three years 2018 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Option Awards ($) | Bonus ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Arthur D. Sams**, CEO | 2018 | 275,000 | 421,555 | 104,500 | 801,055 | | **Rajesh Masina**, COO | 2018 | 175,000 | 262,881 | 66,500 | 504,381 | | **Luis Zavala**, CFO | 2018 | 175,000 | 262,881 | 66,500 | 504,381 | - On April 2, 2018, base salaries were increased for the CEO to **$275,000** and for the COO and CFO to **$175,000** each[297](index=297&type=chunk)[307](index=307&type=chunk) - The 2018 non-equity incentive plan allowed executives to earn up to **100% of their base salary** based on seven performance goals[299](index=299&type=chunk)[300](index=300&type=chunk) - On April 2, 2018, incentive stock options were granted for **150,000 shares to the CEO** and **90,000 shares each to the COO and CFO**[304](index=304&type=chunk)[305](index=305&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=66&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) CEO Arthur D. Sams beneficially owns 54.7% of common stock, giving him significant control over the company - Arthur D. Sams, Chairman, President, and CEO, beneficially owns **5,626,676 shares**, representing **54.7% of the class** as of April 1, 2019[362](index=362&type=chunk) - All directors and executive officers as a group beneficially own **6,359,310 shares**, representing **61.8% of the class**[362](index=362&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=68&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company has a related party transaction with Smartgen Solutions, Inc., 40% owned by COO Rajesh Masina, for field services - The company has a Subcontractor Installer Agreement with Smartgen Solutions, Inc., a company **40% owned by COO Rajesh Masina**[367](index=367&type=chunk) Transactions with Smartgen Solutions, Inc. | Transaction Type | 2018 Amount | 2017 Amount | | :--- | :--- | :--- | | **Field services performed by Smartgen for Polar** | $174,290 | $186,392 | | **Goods/services purchased by Smartgen from Polar** | $496 | $1,136 | - The Board of Directors has adopted a written policy for the review and approval of related person transactions, managed by the Audit Committee[373](index=373&type=chunk) [Principal Accountant Fees and Services](index=71&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Weinberg & Company, P.A. served as the independent auditor, with total fees of $177,999 in 2018, all pre-approved by the Audit Committee Accountant Fees (Weinberg & Company, P.A.) | Fee Type | 2018 | 2017 | | :--- | :--- | :--- | | **Audit Fees** | $133,854 | $174,110 | | **Audit-Related Fees** | $820 | $2,634 | | **Tax Fees** | $43,325 | $60,226 | | **Total** | **$177,999** | **$236,970** | - The Audit Committee has a policy to pre-approve all audit and non-audit services performed by the independent auditor[385](index=385&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=71&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits filed as part of the Form 10-K, with financial statements beginning on page F-1 - This section references the financial statements beginning on page F-1 and lists all exhibits filed with the report[387](index=387&type=chunk)[390](index=390&type=chunk) [Form 10-K Summary](index=72&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided - No summary is provided for the Form 10-K[391](index=391&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=74&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Weinberg & Company, P.A. issued an unqualified opinion on the financial statements, confirming fair presentation in accordance with U.S. GAAP - The auditor, Weinberg & Company, P.A., provided an unqualified opinion on the financial statements, indicating they are presented fairly in accordance with U.S. GAAP[397](index=397&type=chunk) [Financial Statements Tables](index=75&type=section&id=Financial%20Statements%20Tables) Total assets increased to $25.2 million in 2018, while net loss widened to $848,252 on revenues of $24.0 million Key Balance Sheet Data (as of Dec 31) | Account | 2018 | 2017 | | :--- | :--- | :--- | | **Total Current Assets** | $23,023,348 | $23,612,468 | | Cash and cash equivalents | $5,640,078 | $14,201,163 | | Accounts receivable | $7,726,919 | $3,058,266 | | Inventories, net | $8,471,769 | $5,487,053 | | **Total Assets** | **$25,240,106** | **$24,524,040** | | **Total Current Liabilities** | $1,933,546 | $1,494,420 | | **Total Liabilities** | **$2,858,085** | **$1,621,238** | | **Total Stockholders' Equity** | **$22,382,021** | **$22,902,802** | Key Income Statement Data (for year ended Dec 31) | Account | 2018 | 2017 | | :--- | :--- | :--- | | **Net sales** | $24,046,354 | $14,418,726 | | **Gross profit** | $7,431,780 | $4,761,168 | | **Loss from operations** | ($1,098,788) | ($801,960) | | **Net Loss** | **($848,252)** | **($757,416)** | | **Net loss per share** | ($0.08) | ($0.07) | [Notes to Financial Statements](index=79&type=section&id=Notes%20to%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation, a $1 million unused credit facility, and a full valuation allowance against deferred tax assets - The company adopted the new revenue recognition standard ASC 606 on January 1, 2018, with no material impact on its financial statements[419](index=419&type=chunk)[422](index=422&type=chunk) Disaggregation of Net Sales by Customer Type | Customer Type | 2018 | 2017 | | :--- | :--- | :--- | | **Telecom** | $21,552,950 | $12,714,164 | | **Government/Military** | $1,477,121 | $1,244,267 | | **Marine** | $177,909 | $278,254 | | **Other** | $838,374 | $182,041 | | **Total net sales** | **$24,046,354** | **$14,418,726** | - The company has a **$1,000,000 revolving credit facility** with Citibank, which was unused as of December 31, 2018[453](index=453&type=chunk)[455](index=455&type=chunk) - The company established a **full valuation allowance** against its net deferred tax assets of approximately **$570,000**[475](index=475&type=chunk)

Polar Power, Inc. (NASDAQ:POLA) Q4 2018 Earnings Conference Call March 26, 2019 4:30 PM ET Company Participants Shawn Severson - Integra IR Arthur Sams - CEO Rajesh Masina - COO Luis Zavala - CFO Conference Call Participants Jeff Kobylarz - Diamond Bridge Capital Tim Chatard - Quantum Capital Ashok Kumar - ThinkEquity Operator Good day and welcome to the Polar Power's Fourth Quarter 2018 Financial Results Conference Call. Today’s conference is being recorded. At this time, I'd like to turn the conference ov ...