NASDAQ: POLA

●
Base
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. These stationary systems incorporate photovoltaic and other sources of renewable energy into
our DC hybrid power systems.

●
Mobile
power systems. These are very light weight and compact power systems used for EV charging, robotics, communications, security.

Our
DC power systems are available in diesel, natural gas, LPG / propane and renewable fuel formats, with diesel, natural gas and propane
gas being the predominant formats.

We
were incorporated in 1979 in the State of Washington as Polar Products, Inc., and in 1991 we reincorporated in the State of California
under the name Polar Power, Inc. In December 2016, Polar Power, Inc. reincorporated in the State of Delaware. Our internet website address
is https://polarpower.com/.

Recent
Developments

On October 6, 2025, the Company entered into an ATM sales agreement (the
“Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), pursuant to which the Company may offer and sell,
from time to time (the “Offering”) through the Sales Agent, shares (the “Shares”) of the Company’s common
stock, par value $0.0001 per share (the “Common Stock”), up to a maximum amount as set forth in the Sales Agreement, subject
to the terms and conditions of the Sales Agreement. On October 6, 2025, the Company filed a prospectus supplement to its registration
statement on Form S-3 (File No. 333-276705) offering the Shares up to an aggregate offering price of up to $2,382,043.

On December 15, 2025, the stockholders of the Company approved the Polar
Power, Inc. 2026 Equity Incentive Plan at the 2025 annual meeting of stockholders of the Company, among other matters.

1

Recent
Business Events

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. During 2025 and 2024, sales to customers in international markets represented 7% and 13%
of our total net sales, respectively.

During
2025, 88% of our total net sales were derived from customers in the telecommunications market, 8% from customers in the military market,
1% from marine customers, and 1% from customers in other markets. During 2024, 88% of our total net sales were derived from customers
in the telecommunications market, 8% from customers in the military market, 3% from marine customers, and 1% from customers in other
markets

.

Approximately
66% of our net sales during 2025 were for our DC power systems to support 5G networks for our Tier-1 telecommunications customers in
the U.S., as compared to 50% of our net sales during 2024. Purchase orders of our DC power systems for our U.S. Tier-1 telecommunications
customers represent 74% of our total sales backlog at December 31, 2025.

Our
sales backlog as of December 31, 2025 was $4,306, with 82% of that amount being attributable to telecommunications customer, 17% to
military customers, 1% to marine customers, and 1% to customers in other markets.

Going
Concern

The
accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. In accordance
with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company’s management has evaluated
whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability
to continue as a going concern within one year after the date the accompanying financial statements were issued. For the year ended December
31, 2025, the Company recorded a net loss of $9,133 and used cash in operating activities of $1,061. These factors raise substantial doubt
about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued.
The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company manufactures and assembles its DC power systems at two production
facilities located in Gardena, California. It is currently delinquent in rent payments to its landlords for office and warehouse facilities.
The landlord for its headquarters and manufacturing facility at 249 E. Gardena Blvd., Gardena, California filed a summons for eviction
on October 24, 2025. On February 23, 2026, the landlord stopped the actions for eviction and continued discussions with the Company to
resolve the delinquent rents and expired lease agreement. The Company expects to be in the position to make significant payment towards
the delinquent rents in the near term and/or provide a payment plan mutually agreeable to both parties. The landlord for the other facility
for which the Company is delinquent on rent, has not served the Company any legal documents or assessed late fees for the delinquent rent.
However, they may do so in the future. The Company is also negotiating with this landlord on a payment plan for the delinquent rent. During the first quarter of 2026, the Company paid $206 towards its past due lease obligations reported as of
December 31, 2025. While
the Company is negotiating with both landlords in good faith on payment plans, there is no guarantee that it and the landlords could reach
an agreement on a payment plan, or that even if they reached an agreement, the Company could raise sufficient capital to pay the delinquent
rent. It is possible that the Company will be forced to vacate from any or all facilities, and if that happens, we might have difficulty
locating new headquarters, or new manufacturing or warehouse facilities that are adequate, in a timely manner. Our production could be
significantly delayed, access to our inventory could be impaired, and our operations could halt for a significant period of time.

2

Effective September 30, 2020, the Company entered into a loan agreement
with Pinnacle (the “Loan Agreement”) which will expire on September 30, 2026. The Loan Agreement, as amended, provides for
a revolving credit facility under which Pinnacle may, in its sole discretion upon the Company’s request, make advances to us up
to $7,500, subject to certain limitations and adjustments. The Loan Agreement contains certain affirmative and negative covenants. At
December 31, 2025, the Company was not in compliance with the affirmative covenant requiring the Company to attain a minimum Effective
Tangible Net Worth greater than $6,000, as the Company attained an Effective Tangible Net Worth of approximately $755 after recording
an inventory write-down of $1,967 to adjust the book value of its inventory to its net realizable value, and $455 impairment of right-of-use
asset and deposits. On March 10, 2026, the Company and Pinnacle executed a Notice of Additional Defaults and Forbearance Agreement, in
which Pinnacle agrees to forbear from exercising certain rights and remedies under the Loan Agreement and related documents (the “Loan
Documents”) arising from the Specified Existing Defaults for the period commencing March 10, 2026, the Effective Date, to July 31,
2026, the Forbearance Termination Date, considering the Company 1) on or prior to the Effective Date, pays Pinnacle the amount of $250,
2) on or prior to the Effective Date, assigns to Pinnacle new Eligible Accounts in the aggregate amount of at least $185, with 85% of
the Net Face Amount of such new Eligible Accounts to be applied to reduce the loan obligations, 3) within forty-five (45) days of the
Effective Date, reduce the loan obligations by the aggregate amount of $225, which reduction can result from a cash payment or the assignment
of sufficient new Eligible Accounts, with 85% of the Net Face Amount of such new Eligible Accounts to be applied towards such reduction
amount, 4) does not create any new events of default, 5) pays in full all obligations to Pinnacle by the Termination Date. If the Company
timely complies with all terms listed above, and so long as the Forbearance Termination Date has not occurred, Pinnacle agrees that it
will re-commence making Advances to the Company in the amount equal to 42.5% of the Net Face Amount of the thereafter arising Eligible
Accounts, with the remaining 42.5% of the Net Face Amount of such Eligible Accounts to be applied to reduce the then outstanding obligations.
In March 2026, the Company paid $250 to Pinnacle Bank and timely complied
with the requirements under the Forbearance Agreement and commenced taking advances at 42.5% of the Net Face Amount of Eligible Accounts
on March 12, 2026. While the Company expects to stay in compliance and pay the full obligation to Pinnacle by July 31, 2026, there is
no guarantee that the Company will be able to do so. If the Company is unable to comply with the Loan Agreement, or pay the full obligation
to Pinnacle by the July 31, 2026, Pinnacle may immediately enforce its claims, rights, liens, and security interests under the Forbearance
Agreement and the Loan Documents, including but not limited to, taking possession of its collateral, or any portion thereof, and foreclosing
upon its collateral, or any portion thereof, in accordance with the Loan Documents and applicable law.

On
October 6, 2025, the Company entered into an ATM sales agreement (the “Sales Agreement”) with ThinkEquity LLC (the
“Sales Agent”), pursuant to which the Company may offer and sell, from time to time (the “ATM Offering”)
through the Sales Agent, shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the
“Common Stock”), up to a maximum amount as set forth in the Sales Agreement, subject to the terms and conditions of the
Sales Agreement. The Company filed a prospectus supplement to its registration statement on Form S-3 (File No. 333-276705) offering
the Shares up to an aggregate offering price of up to $2,382.

As of December 31, 2025, the Company sold 166,127 shares of Common
Stock in the ATM Offering at a weighted-average price of $4.70 per share, for net proceeds of $757, after deducting commissions to
the sales agent and other ATM Offering related expenses of $23. On December 12, 2025, the Company filed a prospectus supplement to its
registration statement on Form S-3 (File No. 333-276705) to increase the amount of shares of Common Stock that the Company may offer and
sell under the Sales Agreement and applicable registration statement to an aggregate offering price of up to $2,500, which amount does
not include the shares of Common Stock having an aggregate gross sales price of approximately $757 that were sold under the ATM Offering
through December 11, 2025, in accordance with the limitations set forth in Instruction I.B.6 of Form S-3. During 2026 and as of April 15, 2026, the Company has sold 962,500 shares of Common Stock in the ATM Offering at a weighted-average price of $2.60 per share, for
net proceeds of $2,425, after deducting commissions to the sales agent and other ATM Offering related expenses of $75.

3

On
December 23 2025, the Company entered into a business loan and security agreement (the “WWCM Loan Agreement”) with World
Wide Capital Management (“WWCM”), pursuant to which the Company borrowed net proceeds of $399 from WWCM, after deducting fees as
outlined in the WWCM loan agreement. The loan amount is $500, with a loan origination fee of $20, providing for an advance amount of
$480. The loan is to be paid in 48 weekly payments of $13 with the first six payments paid in advance and deducted from the initial
funding. Net proceeds of $399 were received by the Company on December 26, 2025. The total repayment obligation to the Company is
$640.

Furthermore,
the Company’s ability to secure other financing is uncertain. The Company’s ability to continue as a going concern is dependent
upon its ability to obtain additional financing, grow and diversify our revenue, improve operational efficiency, reduce overhead and
fixed costs, and to create a profitable operation. Its ability to obtain additional financing in the debt and equity capital markets
is subject to several factors, including market and economic conditions, its performance and investor sentiment with respect to the Company
and its industry. The Company has taken action to diversify sales to consume existing inventory, increase higher margin aftermarket parts
revenue, to fund operations. In the event that the Company does not generate sufficient cash flows from operations and is unable to obtain
funding, the Company will be forced to delay, reduce, or eliminate some or all of its discretionary spending, which could adversely affect
the Company’s business prospects, ability to meet long-term liquidity needs or ability to continue operations.

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 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.
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 approximately 88% and 88% of our annual revenues in 2025 and 2024, respectively.

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. In the past nine years,
we have gained approval and certifications from four top Tier-1 telecommunications operators in the U.S. market. 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.

4

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. 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. 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. 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.

Wireless
network capabilities continue to expand far beyond smart phones and mobile devices. The 5G mobile network is converging connectivity,
intelligent edge and Internet of Things (IoT) technologies resulting in an increase in telecommunications tower sites in both the U.S.
and abroad. The 5G network delivers broadband-like services such as high-definition streaming video to a cell phone. Businesses benefit
from using 5G for data monitoring and cloud-native 5G networks to compute and store data locally. All of these applications dramatically
scale up data usage which requires an increase in infrastructure and an increase in power and backup generators.

The
pervasiveness of 5G, including reliance by users on, among other things, local weather, traffic conditions, self-driving vehicles, wearable
health monitoring devices that automatically informs doctors, stores automatically ordering items sold on virtual carts, farmers automated
irrigation system with tracking sensors, will require robust backup equipment at telecommunications sites. We believe higher data usage
will require higher reliability backup systems that are fuel efficient and are located in proximity to the point of use. In urban environments,
roof-top space, weight of the equipment and the amount of fuel storage are critical factors in the selection of backup equipment. As
one of the leading providers of DC power generation equipment, we have demonstrated these benefits to telecommunications providers for
decades and we are therefore encouraged with the prospect of infrastructure expansion in this space that requires fuel efficient and
lower emission power generation equipment.

Military

Since
1979, we have been developing and marketing products to the U.S. military and large defense contractors in the U.S. and international
markets. The need for light weight and compact DC power generation systems are vital for military operations and commonly used to charge
storage batteries, provide backup emergency power, or provide startup power for military applications. During the past decade,
digitization of the military accelerated exponentially to support modern information, communication, and military applications. The need to
process information rapidly has led to digitization of command, control, communications, computers and intelligence across both combat
support and service support. This expansion in data transfer and storage has led to an increase in energy needs, which requires efficient
power generation equipment that can charge batteries or directly power these systems.

5

A
digitized battlefield includes sensors, information processing, data distribution, electronic countermeasures, all requiring with few
exceptions, DC power. Our DC generators designed for military applications provide:

●
enhanced
mobility, reliability and maintainability;

●
improved
fuel efficiency;

●
reduced
system size and weight;

●
reduced
infrared and acoustic signatures;

●
increased
survivability in rugged combat operations; and

●
reduced
total cost of ownership.

In
2016, the military began the Advanced Medium Mobile Power Sources, or AMMPS, a U.S. Department of Defense program to develop and deliver
5 kW-50 kW output ranging generators in either a skid, trailer mounted, or microgrid configurations to replace legacy standalone AC generators.
The new generation of mobile power generators combined with solar and wind power can function as sustainable sources of DC and AC power
in remote areas. The new generation of AMMPS power systems are required to provide 21% higher fuel efficiency, lower noise, weight, 90%
reliability and be capable of performing in extreme environments. During 2020, we directly and jointly partnered with defense contractors,
provided DC hybrid power systems, with integrated controls providing higher fuel efficiency than legacy AC generators currently in use.

Improvements
in sensors, navigation and communication technologies have led to increased integration of situational awareness systems that allow all
combat assets to communicate and coordinate both defensive and offensive efforts during combat. In earlier combat vehicle designs, these
surveillance systems were powered by the main auxiliary vehicle battery, which required the vehicle’s main engine to continue operating
to power auxiliary battery systems. A decade ago, we began delivering compact 3 kW – 15 kW DC power systems for communication and
reconnaissance systems thereby improving fuel efficiency of the combat and vehicles when deployed. During the decade we have delivered
several configurations of these auxiliary power units to the military, which vary in function from battery charging to supplying power
to military applications.

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 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.

The
50 kW generator can also provide roadside emergency charging services for electric vehicles.

Electric
Vehicle Charging

According
to Precedence Research, a market research company, the global electric vehicle market size accounted for USD 255.54 billion in 2023 and
is expected to reach USD 2,108.80 billion by 2033, growing at a compound annual growth rate (CAGR) of 23.4% during the forecast period
2024 to 2033. The primary growth factors driven by significant number of government incentives such as tax rebates, subsidies, and grants.
This increase will require a significant increase in charging stations globally to support the cumulative growth of electric vehicles.
During 2023, the global electric vehicle charging station market size reached USD 34.59 billion and has a forecasted CAGR of 29.1% for
the period of 2023 to 2032.

A
2018 article by McKinsey & Company entitled “The potential impact of electric vehicles on global energy systems”
stated that although a modest increase in electric vehicle sales of 5% will not lead to a shortage in electricity since most new capacity
can be delivered by renewables like solar, wind, and gas-powered generation. This modest increase in sales may have a significant impact
on peak loads, especially in concentration points of electric vehicle charging and during the evening peak times when most electric vehicle
users connect their vehicles for charging. The report claims unmanaged peak load increases due to electric vehicle charging will require
increases in costly sub-station upgrades. We believe that the more cost-effective option will be investing into battery storage at the
utility level to manage the peak loads or flexible electricity costs for electric vehicle charging to discourage peak load charging.

6

Regardless
of how the peak charging issue is resolved, most homes have not been designed to allow for fast charging of electric vehicles. 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 addition, the heat generated while charging is captured and delivered
to heat the home, heat water for laundry, or heat the pool.

Our
CHAdeMO style electric vehicle charger was initially designed in 2009 as a diesel-fueled mobile charger for EV manufacturers to aid in
testing their vehicles in the field. We have supplied these mobile chargers to five of the leading automakers in the USA. We are presently
improving this product using heavy duty 60,000-hour Toyota natural gas or propane engine. This product targets residential customers
that own or are expected to own electric vehicles.

With
the anticipated stress on utility grids due to an increase in the number of electric vehicles that require charging, combined with the
fact that most homes are unable to provide fast charging, we believe that an independent natural gas-powered electric vehicle charger
would be ideal and cost effective. Currently, many electric vehicle owners exceed the base power usage at home resulting in peak hour
usage penalties which diminishes anticipated cost savings of using electric vehicles. Our residential natural gas-powered EV charger
eliminates these costs while also providing backup power in case of emergencies.

The
benefits of fast charging with a natural gas generator, as opposed to using the electric grid, includes avoids peak rate charges, a reduced
carbon footprint and the opportunity to provide heating and air conditioning, through combined heat and power or CHP systems that utilize
waste heat from the generator/charger which we believe is a compelling market opportunity for our new product.

Residential
and Commercial Power – Mini-Grid

Increased
use of electricity worldwide is directly related to humanity’s improvement in the quality of life. Increased global urbanization
has resulted in many governments investing in power plants and providing infrastructure to satisfy the growing demand for electricity.
Similar needs of the rural populations have been largely ignored worldwide due to the isolation, low density and population spread over
vast areas resulting in an increased cost of infrastructure. Even in rural areas where the infrastructure was built to deliver electricity,
frequent blackout and infrastructure failures are commonplace and often not repaired for long periods.

According
to recent World Bank data, approximately 733 million, 9%, of the world’s population still lack electricity compared to 25% in 1994.
While 42% of the world’s population still lives in rural areas, about 12% of those living in rural areas lack electricity. Approximately
69% of the population living without electricity are in sub-Saharan Africa while approximately 29% are located in South Asia and 2% in
other areas.

During
the past decade, developments in renewable energy and battery storage have provided an alternate method to resolve this energy inequity
between rural and urban populations worldwide. However, due to weather and costs of such systems and technologies are still at an early
stage of mass adoption. We envision a hybrid system with natural gas or LPG integrated with a solar and battery system to generate power
during peaks and valleys of demand that we believe would be more cost effective and reliable than the current systems in place. These
“Mini-Grid” hybrid systems would generate between 5kW – 25kW of power on 24/7 basis and provide electricity for a small
housing unit, commercial facility or a school building.

Our
Mini-Grid system uses natural gas or LPG as primary fuel source, the same fuel as cooking fuel in rural and remote regions worldwide.
For decades, many governments have been allocating resources to eliminate solid fuels like wood, solid waste as cooking fuels from rural
and remote communities. Significant progress has been made by providing economic subsidies for use of natural gas or LPG as cooking fuel
to reduce pollution. 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.

7

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. We have invested significant capital
and engineering expertise to develop power generation systems that are environmentally friendly and fuel-efficient. We further believe
our success will be based on the following key competitive strengths:

●
Proprietary
Technologies. Our decades of research and development has led to the development of DC power systems with output ranging
from 5 kW – 50 kW. Our DC power systems integrates our proprietary DC alternator with electronic controls to monitor and control
the power being outputted to the equipment, which is then coupled to an engine assembly and cooling systems. 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.). Over the past decades we have developed
proprietary charge algorithms for most commercially available batteries and match charge algorithms to battery model or chemistry
prior to initiating a charge cycle. Unlike AC power systems, our DC power systems are directly connected to the battery source and
therefore optimized for efficiently and safely charging a particular battery chemistry. AC power systems are indirectly connected
to commercially available battery chargers that convert the AC output to DC voltage making it less efficient, higher in cost, and
require considerably more space.

●
Engineering
Expertise. Over the past four decades we have strategically constructed a product portfolio that focuses on improving energy
efficiency by developing DC power output-based equipment where all major components and technologies are developed in-house, and
proprietary manufacturing processes created in-house to ensure product reliability and long life. Our leading competitors approached
the need for DC equipment in the telecom, military, and industrial markets by modifying legacy AC generators with conversion equipment
resulting in significantly lower efficiency when compared to DC power systems. Being one of the first companies to develop DC generators
for telecommunications, we developed proprietary components ranging from alternators, control systems and charging algorithms for
various battery chemistries. We have focused on providing the lowest cost of ownership with demonstrated long life of our equipment
during the past thirty years. Lowest cost of ownership is complemented with the best fuel economy, best in class weather resistance
provided by aluminum enclosures and customized algorithms matching battery chemistries and operational profiles.

●
Manufacturing
Competitiveness. We believe that our vertical integration approach to manufacturing lowers our production costs and improves
our overall operational efficiency. In addition, vertically integrated manufacturing of our proprietary technologies such as DC alternators,
charge controls and battery management systems, provides us with a greater control and protection over our intellectual property.
We believe our modular approach to manufacturing provides us with the lowest manufacturing costs for our proprietary technologies
while giving us the ability to deliver customized solutions to our Tier-1 wireless telecommunications customers.

●
Strong
Customer Base. Our customer base consists of large telecommunications companies, military sub-contractors and industrial
companies. Tier-1 telecommunications customers have represented 62% to 91% of our aggregated sales for the past five years. Initial
demand of our products by telecommunications customers was primarily based on the need to provide backup power during electricity
outages and for off grid remote locations. While our competitors provided and continue to provide legacy AC generators with DC conversion
devices, we elected to invest significant time and capital in the research and development of products with a lowest cost of ownership.
Certification of our products by Tier-1 telecommunications customers was time intensive and takes upwards of three years of field
trials to receive final product acceptance. This thorough approach to vendor selection reduces the number of vendors selected by
our telecommunications customers and has dramatically reduced the number of competitors in the U.S. markets. Currently, a significant
percentage of our U.S. sales are to national Tier-1 telecommunications providers with multiple facilities. Since 2021, we increased
our efforts to diversify our sales efforts to include Tier-2 telecommunications customers, off-grid remote area products and residential
charging. In the international markets, our customers are regional Tier-1 telecommunications providers. 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.

8

●
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. Our engineers have equipment design experience, as well as hands-on
skills to build prototypes. A key factor demonstrating our management’s abilities and our engineering aptitude can be found
in our successful track record over the last 40 years of executing research, design and engineering contracts.

Business
Strategy

For
the past three decades we have been promoting the use of DC power systems where DC power is the primary power in use. The telecommunications
tower application is the largest user of DC power, in both grid and off-grid connected sites. Furthermore, we believe that the growth
in wireless telecommunications infrastructure in the U.S. and international markets has led to a rapid rise in the need for DC backup
power systems.

With
over 40 years of experience and reputation within the DC power systems market, we are working to increase awareness, availability and
affordability of more efficient DC-based products as a backup power and charging sources within the telecommunications industry. Because
of the increased power outages during emergencies and natural disasters, existing and new wireless installations need to be upgraded
to provide reliable operations during times of emergency. The primary elements of our business strategy include:

●
Further
develop U.S. mobile telecommunications market. We continue to invest capital into our sales and marketing efforts to demonstrate
our DC power systems to the top Tier-1 wireless telecommunications providers and more than 300 small wireless and cable operators
in the U.S. Our goal is to further diversify our customer base. 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. 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 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. With the increased growth in off-grid and bad-grid telecommunications
sites, emissions generated by telecommunications towers is beginning to be a major contributor of pollution and greenhouse gases.
Since 2019, we have developed lower emission LPG and natural gas DC power generators for use in rural off-grid and bad-grid sites.
We initiated this development by partnering with world’s largest natural gas engine manufacturer, Toyota Engines, located in
Japan. Subsequently, we integrated engine control systems utilizing control technology from Bosch, located in Germany, and concluded
by receiving certification from the EPA in December 2019 to sell our new product in all 50 states in the U.S. Upon certification,
we began marketing this low emission natural gas solution to telecommunications customers worldwide and in the midst of the COVID-19
pandemic we secured several orders for natural gas configured backup and prime power applications. During 2020, we began shipments
of our DC natural gas generators to several domestic and international Tier-1 telecommunications customers. 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.

9

●
Expand
renewable solar energy product offerings. 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. Installing fuel inefficient generators combined with solar and batteries without any integration is proving to
be cost prohibitive. Several local government programs to subsidize the adoption of solar and battery storage along with generators
in off-grid telecommunications towers have failed due to lack of quality components and integration. We believe our hybrid systems
using natural gas fuel powered generators integrated with solar and battery storage offer an ideal solution for this market.

Our
Technologies

Starting
in 1979, Polar began manufacturing and exporting solar PV vaccine refrigerator/freezers as part of the WHO Cold Chain projects. We developed
solar refrigeration and air conditioning systems that operated directly with DC batteries, along with solar photovoltaic charge controls.
Our DC power and refrigeration technologies drew the attention of various military projects. We manufactured packaged remote home power
systems for Arizona Public Service who in turn provided them to remote customers. The use of remote home power systems drew our attention
to the need for DC generator sets.

In
the early 1990’s, we began introducing DC generators to provide backup and prime power for off-grid and bad-grid applications.
Our initial products were predominantly designed for military applications and used as auxiliary power for vehicles, battlefield tanks
and radar sites. In the late 1990s, we introduced our DC power systems for commercial applications like mobile telecommunications towers,
solar refrigerators and oil field applications.

We
introduced our 6200 PMHH alternator, which combines the attributes of homopolar alternator technology with a permanent magnet. When mounted
on an engine and operated at either a fixed or variable speed, the model 6200 PMHH generates a precise amount of regulated voltage and
current. The DC output can then be used to power electronics or charge batteries.

We
developed our own proprietary DC alternator to improve system efficiency, reduce costs and lower weight. Our design replaced a conventional
4-pole, three-phase designs with a light weight, low cost 12-pole incorporating either 6 or 3 phases. Another unique aspect of the design
of our DC alternators is the elimination of bearings, internal wiring connections, and an exciter (i.e., a device which supplies the
magnetizing current to generate working flux) to provide a longer life cycle than conventional motor designs in the marketplace.

In
2006, we introduced our next generation 8000 Series alternators designed for higher power and voltage applications, which features our
proprietary 32-pole permanent magnet alternator technology. The 8000 Series offers high efficiency at a lower cost while integrating
our proprietary digital control system, Supra Controller™, that manages and optimizes alternator output. Our Supra Controller™
networks all components via CAN bus communications and software and has the ability to control, analyze, monitor, record and communicate
all key system parameters to ensure efficiency, safety and reliability of the overall system. The ability to remotely monitor and calibrate
each system parameter, receive system alarms and auto-reset the system when a fault is corrected are the key differentiating factors
of our DC power systems.

In
telecommunications tower backup applications, backup generators are used to provide power during grid outages or to charge batteries
to provide longer run times during emergencies. Due to battery costs and availability issues, many telecommunications providers are known
to use various types of chemistries or capacities as storage sources. During the past decade, we have successfully integrated various
battery chemistry charge algorithms into our Supra Controller™ software.

In
2011, we added charge algorithms for various lithium battery chemistries and integrated our proprietary battery management system, or
BMS, with our Supra Controller™ software. 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.

10

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 2025,
we plan to continue our research and development efforts to further enhance these integrations for remote telecommunications towers in
Southeast Asia and Africa.

In
2018, we developed our next generation BMS that enhances our current technology to more accurately measure, monitor, control and integrate
battery performance data with our Supra Controller™. In addition, we enhanced the user interface to allow us the ability to update
or develop new charging algorithms in the field which can be remotely programmed or uploaded.

In
2018, we introduced our Toyota natural gas / propane engine across our product line. The Toyota product is a more advanced engine used
in heat pump applications. We have negotiated a supply agreement with Toyota for the engine and with Bosch for the ignition control.
In December 2019, we received our certificate of conformity from the EPA. These new generators provide power outputs between 5 kW to
15 kW and incorporate a 60,000- to 90,000-hour life engine with our proprietary control system. We are presently marketing these stationary
generators within the telecommunications, commercial and residential markets.

In
2021, we began development of a higher power natural gas-powered DC backup power system utilizing larger engines and improved emission
control systems. The implementation of 5G networks by Tier-1 telecommunication customers currently have significantly higher power requirements
at cell sites than the previous 4G networks. In addition, use of 5G technology in IoT, video streaming, and data analytics applications
requires cell sites to be operational 100% of the time which, in turn, increases the demand for reliable and fuel-efficient power generation
backup systems. We believe increased power usage of 5G networks and higher fuel prices enhances market opportunities for our fuel-efficient
DC power systems as compared to lower efficiency AC power systems.

In
March 2022, we received our 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 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.

In
June 2024, we introduced MCS2020 a remote monitoring technology for our DC generators where we can remotely monitor generator performance,
diagnose failures, monitor maintenance records and dispatch local technicians to maintain or repair. This proprietary technology also
allows us to integrate other systems such as solar, wind, batteries, and additional DC generators into a single platform allowing operator
to use the most efficient platform based on demand and environmental conditions. The MCS2020 allows us to connect multiple generators
to a single platform where systems can be removed for refueling and maintenance without disrupting operations.

Products
and Services

DC
Base Power Systems

Our
DC base power systems are designed for use in prime power and backup power applications. All of our DC power systems are designed to
last 20 years or more in backup applications and meet all UL2200 standards. To maximize operational life, we incorporate (over and above
our competition) the following:

●
all
aluminum, powder coated, enclosure with stainless hardware, which is lightweight and corrosion resistant;

●
105
C rated signal wire, tinned copper strands;

●
stainless
steel braided covering hoses for fuel and coolant lines;

●
Class
220 C magnet wire for alternator windings;

●
watertight
connectors in place of terminal strips and other non-sealed connectors; and

●
our
proprietary Supra Controller™ modules that are environmentally sealed.

11

We
believe that the number one reliability issue with a generator set is the failure to start. To improve the reliability of our generators,
we remove the engine’s starting battery and replace it with a super capacitor. The super capacitor has a 15- to 20-year service
life, greater cold cranking amps and withstands greater temperature extremes than conventional starting batteries.

To
reduce maintenance and help ensure that there is always adequate oil, we increase the engine’s oil capacity to provide for a 4,300-hour
(natural gas / propane) or 1,500-hour (diesel) maintenance interval. Standard oil intervals for typical generators range from 200 to
500 hours.

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. DC Hybrid systems typically include a DC generator and energy storage
system to optimize operations.

In
a remote prime power site fuel efficiency, maintenance cost and long life, are the competitive differentiators. Since 2018, we invested
in testing and certifying LPG/NG engine manufactured by Toyota which provides over 90,000-hour life which is about four times longer
than a non-Toyota equivalent diesel engine. In addition, this product has maintenance cycle every 4,500 hours where equivalent engines
require maintenance every 200 to 500 hours.

Our
Hybrid Systems include battery packs of varying chemistries; however, the market predominantly uses lithium batteries commonly used in
electric vehicles. The ability to charge batteries at full power improves fuel efficiency, where charged batteries can then provide continuous
or intermittent power without the need to power up the generator.

In
2024 we introduced a remote monitoring system MCS2020 that integrates our Supra controller, engine controller, battery management system
and other ancillary components to optimize the fuel efficiency of the complete system. Remote off-grid and bad-grid used in continuous
high load conditions also have redundant systems which allows operator to take primary system offline during maintenance and repairs.
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. In most off-grid or bad-grid outdoor applications, such as telecommunications towers in rural or suburban
areas, the fuel costs of operating a generator can account for more than half of the total operating costs. We believe that incorporating
renewable energy sources, such as solar, with our DC hybrid power systems is ideal solution for numerous off-grid and bad-grid applications
worldwide. Our DC solar hybrid power systems incorporate the following features:

●
Hybrid
power panel. We produce distribution panel assemblies that make use of punched and plated buss bars to make the heavy current
connections between appliances. The industry standard is using labor intensive hand crimped wires and lugs which are accomplished
in the field.

●
Photovoltaic
Arrays. Our telecommunications customers request photovoltaic array structures to withstand winds of 150 mph and 200 mph exceeding
the industry standard of 120 mph.

●
Shelter.
We provide an all-weather light-weight aluminum walk-in shelter that is easy to transport by truck or helicopter.

12

●
Lightning
protection. We provide the highest degree of lightning protection through the use of air-coil type inductors designed by us.

●
Air-Conditioning.
We provide DC air-conditioning if required in very hot weather environments. We also provide cooling systems using ambient air.

Our
environmentally friendly solar hybrid power systems based on a combination of solar with LPG and propane power sources offer significant
cost savings in capital expenditures and operating expenditures when compared to similar products offered by our competitors. Our solar
hybrid power systems have been specifically designed to run in residential applications and provide power outputs between 5 kW to 22
kW and incorporate a 30,000- to 90,000-hour life engine with our proprietary control system. Our natural gas generators when integrated
with battery storage and solar are ideal microgrids for off-grid and bad grid residential and commercial applications.

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.

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.

Our
telematics tools also provide information to our customers on specific equipment utilization that provides the abilities to determine
the functional status of the equipment and proactively schedule maintenance. We believe these tools assist in reducing equipment downtime,
thereby reducing the overall cost of ownership. In addition, we plan to use these tools to monitor and provide accurate billing for our
rental equipment deployed at customer facilities.

Aftermarket
and Service Parts

We
offer extensive aftermarket and service parts programs. We maintain an extensive inventory of aftermarket parts and sell parts directly
to customers or through our qualified network of service providers. In addition, we require our regional service providers to maintain
sufficient quantities of aftermarket parts in their inventory to ensure minimum downtime upon product failure.

We
maintain accurate records of bill of materials for each serial number shipped and service our products well beyond their recommended
lives. In the marketplace, our products are known for their long life and durability.

Product
and Warranty Support

We
utilize a nationwide network of dealers and service providers to perform installation and warranty services for our customers. Through
our dealers we offer product commissioning as an added service to all our customers and require the purchase of such services as a condition
for acceptance of any warranty claims in the future. We offer installation of the equipment, preliminary testing, integration of equipment
with other assets located at the site and introductory maintenance and safety training. We offer various levels of fee-based services
to support our products in the field. In addition, we have trained product and application engineers that deliver high quality, responsive
lifetime technical support to all our customers worldwide.

We
further support our customers by using qualified regional independent service providers to perform warranty and aftermarket service and
repair on our products. Our regional service providers are factory trained and certified prior to being authorized to repair or service
our equipment. We generally reimburse regional service providers for the warranty services they perform on our systems.

13

Sales
and Marketing

Our
sales strategy focuses on using our direct sales force to market our DC backup power products to telecommunications providers in the
U.S. We use local regional sales managers in the U.S. market to demonstrate our products to Tier-1 telecommunications providers. 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. With over 75% of the telecommunications market outside the U.S. we have concentrated our efforts in developing markets outside
the U.S. as a long term strategy. Despite the lack of reliable electricity grid in international markets like Africa and Asia, telecom
operators continue to build infrastructure using hybrid systems.

We
established regional offices in Australia, Romania, South Africa and Poland to address global markets. During the past 4 years we have
had some significant successes in international marketplace however capital constraints of customers have limited the scale of the deployment.
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. We believe this strategy of demonstrating our products and
technologies to prospective customers expedites the sales process for our DC power systems.

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. 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.

In
the international markets, we utilize local service partners to perform installation and service on our equipment. We have hired trained
personnel in Australia, Romania, and South Africa to assist in regional training of technicians and also in product demonstrations.

14

Competition

Within
the telecommunications power generation market, we compete with a few manufacturers of AC and DC generators that offer generators with
an output power of 5 kW to 50 kW. In the U.S. market, our competitors are global manufacturers of AC generators designed primarily for
the residential and industrial off-grid power markets. Internationally, our competitors include regional manufacturers of both AC and
DC generators.

In
the U.S. market, our competitors are large volume manufacturers of AC generators with a primary focus on emergency power backup generation
for the residential marketplace. These AC generators are constructed using steel enclosures and are therefore heavier and can rust more
easily in outdoor applications as compared to our products which generally have a smaller footprint and are constructed using aluminum
enclosures. Due to the inherent design of AC motors, their units are approximately 40% larger in size than our DC generators. 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. We believe that the smaller size, lighter weight and higher fuel efficiency of our products
are performance parameters that offset the lower price alternative of AC generators. In addition, we believe that our recently introduced
long-life (90,000 hours), natural gas-powered DC generator product line significantly increases our competitive advantage in densely
populated urban markets.

Micro-grids
and electric vehicle charging in remote areas that lack utility grids is developing as a new market for our products. During the past
two years we have been successful in delivering initial test and evaluation units to these customers demonstrating fuel efficiency and
low maintenance. As part of our diversification strategy, we believe these new products can be significant percentage of our sales during
the next twelve months. These products combined with battery storage deliver intermittent or continuous power to small housing units
or provide charging infrastructure for electric vehicles in remote locations where connection to grid is not cost effective.

Increased
digitization of our lives has resulted in the need for more power usage in both residential and commercial applications. In the telecommunications
tower market, the majority of the outdoor power needs are DC power since most components are DC powered. Historically, AC generator companies
have utilized conversion technologies to convert AC output to DC output. This conversion results in an approximately 40% loss in energy.
Meanwhile, our DC generators supply DC power directly to the telecommunications tower systems increasing the system’s overall efficiency.
These efficiencies are further enhanced in off-grid and bad-grid applications where more power is being used from the generators due
to the lack of grid power.

Below
are our primary competitors across these applications:

DC
Power: 3Tech Corporate Limited, Ascot Industrial srl, Ausonia srl, and Controllis.

AC
Power: Generac Power Systems, Inc., Kohler Co., Onan, FG Wilson and many other companies.

Manufacturing
and Assembly

A
significant percentage of our business comes from multinational global corporations seeking configured product solutions ready to be
field deployed with a minimum installation time. Our manufacturing process begins with our direct sales force and engineering team defining
customer application needs and concludes with the production of a custom configured product solution. We believe our ability to have
total control over the sales and manufacturing process is a key competitive differentiator in the markets we serve.

By
implementing vertical integration throughout our manufacturing process, we believe that we reduce overall manufacturing costs, thereby
increasing profitability and market competitiveness. Our production processes encompass all aspects of production of our DC power systems,
which includes alternators, aluminum enclosures, engine configurations, control electronics, cooling systems, wiring harnesses, exhaust
systems and final assembly. Manufacturing of our proprietary technologies requires proprietary automated equipment that ensures total
control and agility in our production processes. Over the past decade, we have made significant investments in highly specialized manufacturing
tooling, jigs and fixtures that allow us to manufacture products at lower cost while maintaining the highest quality.

15

Our
production assembly lines are designed to be flexible, and we utilize advanced manufacturing planning software to predict, monitor and
control demand levels and product mix to provide the shortest delivery time to our customers. We utilize 3-D CAD software to product
design and document assembly instructions throughout our production process. All our products are 100% tested to customer specific application
requirements prior to shipment.

Throughout
our operations we utilize computerized ERP software that integrates all our processes from lead generation to product shipment and aftermarket
support. Our focus on safety, quality and on-time delivery is supported by employee training and information systems that monitor process
and product quality and communicate trends and findings to senior management on a real-time basis.

Design
Engineering/Research and Development

Our
research and development efforts are market driven and are focused on the development of new technologies and product improvements, as
well as reducing costs and improving product quality and reliability. The primary focus of our research and development activities is
the development of lighter-weight, more compact and lower cost DC power generation systems for our Tier-1 wireless provider customers
in the U.S. and international markets. Over the years, we have expended significant resources in enhancing our system controls like our
Supra Controller™ and BMS.

A
significant part of our research and development effort has focused on the development of control software that integrates engine controls,
power management and battery algorithms to fully optimize fuel consumption in both prime power and backup power generation applications.
We use a high level of integration with a single control and communication module, our Supra Controller™, rather than competitive
system designs with a number of independent control modules controlling a single function. Our integrated approach ensures software compatibility,
reduces complexity in wiring, increases reliability and reduces cost. We maintain an in-house design, prototyping, testing and application
engineering capabilities including expertise in 3-D solid modeling and finite element analysis, computer-based modeling and testing,
rapid prototyping, design verification testing and document publication, which includes manufacturing assembly instructions, supplier
drawings and product manuals. 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. In the last two years, we invested
significant engineering resources in development of remote monitoring MCS2020 to remotely monitor and optimize efficiency of our systems
and integrate them with other systems such as solar, wind, energy storage systems. During this period significant work was performed
to develop electric vehicle charging system for remote locations and roadside assistance. This system is in its final stage of development
and upon completion will be marketed to regions that lack electric infrastructure. In 2026, 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. 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. 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
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. We may register patents and trademarks in future
to protect our intellectual property rights and enhance our competitive position.

16

Suppliers

We
attempt to mitigate the adverse effect of component shortages in our business through detail material planning and by qualifying multiple
vendor sources for key components and outside processes. We conduct supplier audits of all major suppliers for initial qualification
and to ensure reliability, quality, and sustainability of critical components. To meet our customer demands, we forecast the supply of
our long lead time items such as engines, castings and electronic components through use of sales forecasting tools and ERP system.

Our
suppliers are extensively surveyed and audited; and field or process generated non-conformities communicated with our Suppliers to continuously
improve quality. To improve our costs and deliveries, our ERP system invites for all qualified suppliers to participate in relevant bids
to ensure best proposals are selected.

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.
Although we believe we can mitigate a portion of material price increases by passing through some cost increases to our customers, we
believe a fair portion can be mitigated through increases in efficiency.

Quality
Control

Our
quality control is established to maintain the highest level of quality in the manufacturing of our DC power systems, spare parts, and
services. The foundation of our quality control was initially set in the early 1980s, much of which was required by our customers at
the time, including NASA and Hughes Aircraft. In the late 1980s, we implemented the MIL-I-45208A quality control system monitored by
U.S. Department of Defense, to meet prime source requirements for a contract we received from the U.S. Army Picatinny Arsenal to design
and manufacture an advanced battery and monitoring system for a security device used in nuclear munitions depots around the world.

Certifications

Our
DC generator systems comply with UL2200 safety standards. Our products also comply with applicable regulatory emission standards of the
Environmental Protection Agency, and the California Air Quality Management District.

Product
Warranties

The
Company provides limited warranties for parts and labor at no cost to its customers within a specified time period after the sale. Our
standard warranty on new products is two years from the date of delivery to the customer. We offer a limited extended warranty of up
to five years on our certified DC power systems based on application and usage. Our warranties are of an assurance-type and come standard
with all of our products to cover repair or replacement should a product not perform as expected. Under our standard warranty, provisions
for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical
information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and recovery
from suppliers.

Information
Systems

We
utilize integrated information systems (i.e., ERP) that link our lead management, sales planning, order entry, purchasing, engineering,
production control, manufacturing, inventory and accounting systems. During the past five years we have made significant investments
to upgrade and customize our information systems to improve productivity and our ability to accurately forecast inventory and manpower
requirements. We plan to invest additional capital in software and information systems to integrate aftermarket sales and service with
our ERP system to improve post sales customer experience with our products and services.

17

Government
Regulations and Environmental Matters

Our
business operations are subject to certain federal, state, local and foreign laws and regulations. For example, our products, services
and technologies are subject to regulations relating to building codes, public safety, electrical connections, security protocols, and
local and state licensing requirements. The regulations to which we are subject may change, additional regulations may be imposed, or
existing regulations may be applied in a manner that creates special requirements for the implementation and operation of our products
or services that may significantly impact or even eliminate some of our revenues or markets. 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.

The
modification of existing laws and regulations or interpretations thereof or the adoption of future laws and regulations could adversely
affect our business, cause us to modify or alter our methods of operations and increase our costs and the price of our products, services
and technology. In addition, we cannot provide any assurance that we will be able, for financial or other reasons, to comply with all
applicable laws and regulations. If we fail to comply with these laws and regulations, we could become subject to substantial penalties
or restrictions that could materially and adversely affect our business.

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 15, 2026, we had 67 full time employees, which included 63 employees in the U.S.
and 4 employees outside the U.S. During 2025, 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
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. To achieve our human capital goals, we intend to remain focused on providing our personnel with career development
opportunities to expand our business within their areas of expertise and continue to provide our personnel with personal and professional
growth. In addition to salaries, we also provide a 401(k)-retirement plan, healthcare and insurance benefits, paid time off, and various
services and tools to support our employees’ health and wellness. Our leaders, managers, and eligible employees are provided an
opportunity to participate in our stock option plans. We emphasize a number of measures and objectives in managing our human capital
assets, including, among others, employee safety and wellness, talent acquisition and retention, employee engagement, development, and
training, diversity and inclusion, and compensation and pay equity.

Employee
Engagement, Development, and Training. We provide all employees with the opportunity to share their opinions and feedback on our
culture which helps enhance the employee experience, promote employee retention, drive change, and leverage the overall success of our
organization. We provide all employees a wide range of professional development experiences, both formal and informal, at all stages
in their careers.

Diversity
and Inclusion and Ethical Business Practices. We are committed to fostering work environments that value and promote diversity and
inclusion, including our Diversity and Inclusion Program which focuses on initiatives to increase the diversity of our workforce and
promote an environment of trust where employees feel safe to express their opinions and perspectives without fear of repercussion. This
commitment includes providing equal access to, and participation in, equal employment opportunities, programs, and services without regard
to race, religion, color, national origin, disability, sex, sexual orientation, gender identity, stereotypes or assumptions based thereon.
We pride ourselves in the development and fair treatment of our workforce, including healthcare and benefit programs for our employees,
equal employment hiring practices and policies, anti-harassment, workforce safety, and anti-retaliation policies. We welcome and celebrate
our teams’ differences, experiences, and beliefs, and we are investing in a more engaged, diverse, and inclusive workforce.

We
foster a strong corporate culture that promotes high standards of ethics and compliance for our businesses, including policies that set
forth principles to guide employee, officer, director, and vendor conduct, such as our Code of Business Conduct and Ethics. We maintain
a whistleblower policy and anonymous hotline for the confidential reporting of any suspected policy violations or unethical business
conduct on the part of our businesses, employees, officers, directors, or vendors and provide training and education to our global workforce
with respect to our Code of Business Conduct and Ethics and anti-corruption and anti-bribery policies.

Facilities

Our
principal offices are located in Gardena, California, where we lease a 40,000 square foot facility that includes our corporate staff
offices, our manufacturing facility, and our research and development center. We also lease a 29,000 square foot facility as our second
manufacturing facility and a 20,000 square foot warehouse facility across the street from our corporate offices. We believe that our
current facilities are sufficient to accommodate our anticipated production volumes for the next twelve months. If required, additional
office and manufacturing space is available within less than three miles from our present location.