Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion And Analysis Of Financial Condition And Results Of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" and elsewhere in this report. Our historical results are not necessarily indicative of the results to be expected for any future period, and results for any interim period are not necessarily indicative of the results to be expected for the full year.

All dollar amounts are presented in thousands, except share and per-share data and where otherwise noted. Share and per share data have been retroactively adjusted to reflect the decreased number of shares resulting from a 1 for 7 reverse stock split which took effect on November 18, 2024.

Overview

We design, manufacture, and sell DC power generators, renewable energy and cooling systems for applications primarily in the telecommunications market and, to a lesser extent, in other markets, including military, electric vehicle charging, marine and industrial. We are continuously diversifying our customer base and are selling our products into non-telecommunication markets and applications at an increasing rate.

Within the various markets we service, our DC power systems provide reliable and low-cost DC power to service applications that do not have access to the utility grid (i.e., prime power applications and mobile applications) or have critical power needs and cannot be without power in the event of utility grid failure (i.e., back-up power applications) or charge batteries of various chemistries to be used in electric vehicle or renewable storage applications.

Serving these various markets, we offer the following configurations of our DC power systems, with output power ranging from 5 kW to 50 kW:

	●	Base power systems. These stationary systems integrate a DC generator with automated controls and remote monitoring, contained within an environmentally regulated enclosure.
	●	Hybrid power systems. These systems incorporate 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 and security.

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

During the three months ended June 30, 2026 and 2025, 88% and 92%, respectively, of our total net sales were within the telecommunications market. During the three months ended June 30, 2026 and 2025, sales to international customers accounted for 26 and 3% of total net sales, respectively; sales to military customers accounted for 3% and 6% of total net sales, respectively; and sales to other customers accounted for 3% and 2% of total net sales, respectively.

During the six months ended June 30, 2026 and 2025, 93% and 88%, respectively, of our total net sales were within the telecommunications market. During the six months ended June 30, 2026 and 2025, sales to international customers accounted for 12 and 9% of total net sales, respectively; sales to military customers accounted for 3% and 10% of total net sales, respectively; and sales to other customers accounted for 2% and 1% of total net sales, respectively.

During 2024, we launched our prime power DC generators incorporating the Toyota 1KS engines optimized for propane, natural gas, and extremely long operational life. We believe that with the increasing installation restrictions on small diesel engines along with their limited availability due to stringent EPA regulations will force a change to natural gas and propane (LPG) generators. LPG and natural gas are lower in cost than diesel fuel in many areas throughout the world. Our new LPG and natural gas generators will provide strong opportunities for growth and diversification in line with our long-term plan.

At the international level, we have several telecommunications customers in the south pacific region purchasing our DC generators to develop the telecommunications infrastructure in this region. We believe the implementation and ongoing development of 5G networks along with programs to develop the telecommunications infrastructure in rural and underdeveloped countries will continue to fuel our growth in the telecommunications market over the next five to ten years.

We are expanding our mobile offerings by upgrading our mobile CHAdeMO EV chargers to the universal combined charging system standard to reach the mobile EV charging market. Mobile EV chargers are used for emergency roadside service providing a fast-charging solution for EVs that have run out of charge before reaching a stationary charging facility. During the second half of 2024, we successfully tested our demonstrator model on several platforms and made appropriate improvements and changes. We believe this configuration of remote mobile electric vehicle charger is just an initial model and based on power and fuel needs will result in various additional configurations.

We also continue to market our DC generators for the military, advanced mobility and marine markets as part of our ongoing customer diversification strategy. The military's increasing use of robotics, drones, and computerization in the field is driving the demand for battery charging with DC generators. Military sales are advantageous because of their long-term contracts and they tend to cover the cost of product development.

We expect that opportunities in the bad-grid (i.e., areas where wireless towers are connected to an electrical grid that loses power for more than eight hours), and off-grid (i.e., areas where wireless towers are not connected to an electrical grid) applications, which include telecommunications towers, commercial and residential backup power, electric vehicle charging, "mini-grid" and various other power applications, will help to expand the market for our natural gas/LPG (propane) product lines domestically and internationally. In 2024, we demonstrated a microgrid product that can provide 24/7 electric power to a commercial facility. This project was funded by United Nations High Commissioner for Refugees ("UNHCR"), a United Nations organization. The product included a DC generator, battery storage, AC inverter, solar charge controller and remote monitoring in a single container which can be delivered to any remote location to provide power. We believe this product in its current configuration can serve mid-level micro grid needs in residential and commercial areas. We plan to develop new configurations of DC power system, battery storage and solar products to optimize the match between our solutions and various application needs.

Effects of Inflation

The impact of inflation and rapidly changing prices has not impacted our operations during the three and six months ended June 30, 2026. Rapid changes in the global economy may cause significant spikes in inflation which may have an impact in our financial condition during 2026 and beyond. Very small portion of our sales is a result of fixed contracts thereby resulting in negligible impact on our gross profits.

Recent Business Events

Our sales backlog as of June 30, 2026 was $3,668, of which our telecommunications customers accounted for 77%, customers in the military market accounted for 22%, and customers in other markets accounted for 1%.

Critical Accounting Policies and Estimates

The preparation of the Company's financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in reserves for uncollectible receivables, inventory reserves and returns, impairment analysis of long-term assets, valuation allowance on deferred tax assets, income tax accruals, accruals for potential liabilities and warrant reserves and assumptions made in valuing equity instruments issued for services. There were no changes to our critical accounting policies described in the financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, that impacted our condensed financial statements and related notes included herein.

Impact of New Accounting Pronouncements

See "Note 1 - Organization and Summary of Significant Accounting Policies - Recent Accounting Pronouncements" of the Notes to our condensed financial statements.

Financial Performance Summary and Outlook

Our net sales for the three months ended June 30, 2026 were $1,019, which represents a 62% decrease in net sales as compared to $2,708 for the three months ended June 30, 2025. Our net sales for the six months ended June 30, 2026 were $2,747, which represents a 38% decrease in net sales as compared to $4,431 for the same period in 2025.

We experienced delays sourcing components and third-party services which affected our production during the three months period ending June 30, 2026.

During the second half of 2026, we plan to increase our inventory of key components used in the productions of our power systems. We also lan to hire sales and marketing staff to continue to market our products globally and expand our customer base in all market segments. We also plan to continue to be proactive in managing our operations and mitigate the financial impacts of higher costs, supply chain issues, and geopolitical factors.

See "Risk Factors" commencing on page 27 of this Quarterly Report on Form 10-Q for additional considerations.

Results of Operations

The tables presented below, which compare our results of operations from one period to another, present the results for each period, the change in those results from one period to another in both dollars and percentage change, and the results for each period as a percentage of net revenues. The columns present the following:

	●	The first two data columns in each table show the absolute results for each period presented.
	●	The columns entitled "Dollar Variance" and "Percentage Variance" shows the change in results, both in dollars and percentages. These two columns show favorable changes as a positive and unfavorable changes as negative. For example, when our net revenues increase from one period to the next, that change is shown as a positive number in both columns. Conversely, when expenses increase from one period to the next, that change is shown as a negative in both columns.
	●	The last two columns in each table show the results for each period as a percentage of net revenues.

Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025

		Three Months Ended June 30,								Dollar Variance				Percentage Variance				Results as a Percentage of Net Sales for the Period Ended June 30,
		2026 (unaudited)				2025 (unaudited)				Favorable (Unfavorable)				Favorable (Unfavorable)				2026				2025
Net sales		$	1,019			$	2,708			$	(1,689	)			(62	)%			100.0	%			100.0	%
Cost of sales			1,356				1,778				422				24	%			133.1	%			65.7	%
Gross profit (loss)			(337	)			930				(1,267	)			(136	)%			(33.1	)%			34.3	%
Sales and marketing expenses			126				184				58				32	%			12.4	%			6.8	%
Research and development expenses			128				146				18				12	%			12.6	%			5.4	%
General and Administrative expenses			1,080				710				(370	)			(52	)%			106.0	%			26.2	%
Total operating expenses			1,334				1,040				(294	)			(28	)%			130.9	%			38.4	%
Loss from operations			(1,671	)			(110	)			(1,561	)			(1,419	)%			(164.0	)%			(4.1	)%
Interest and finance costs			(447	)			(171	)			(276	)			(161	)%			(43.9	)%			(6.3	)%
Other income			-				10				(10	)			-	%			0.4	%			0.4	%
Change in derivative liabilities			287				-				287				-	%			28.2	%			0.0	%
Net loss		$	(1,831	)		$	(271	)		$	(1,560	)			(576	)%			(179.7	)%			(10.0	)%

Net Sales. Net sales decreased $1,689, or 62%, to $1,019 for the three months ended June 30, 2026, as compared to $2,708 for the same period in 2025. The decrease in sales was primarily attributed to a shortage of components in the production of our DC power systems.

For the three months ended June 30, 2026, sales to our largest telecommunication customers in the U.S. accounted for 29%, 14%, 12%, and 11% of our total net sales. For the same period in 2025, 69% of our total net sales were generated from our largest U.S. telecommunications customer. There was no other revenue from customers in excess of 10% of total net sales in either period.

Net sales to customers in the U.S. accounted for 88% of our total net sales for the three months ended June 30, 2026, as compared to 92% for the same period in 2025. Our international sales represented 26% of our net sales for the three months ended June 30, 2026, as compared to 3% in international sales in the same period in 2025.

Cost of Sales. Cost of sales during the three months ended June 30, 2026 decreased by $422, or 24%, to $1,356, as compared to $1,778 during the same period in 2025. Cost of sales as a percentage of net sales during the three months ended June 30, 2026 increased to 133.1% as compared to 65.7% in the same period in 2025 primarily as a result of an increase in factory overhead absorption as compared to the same period in 2025.

Gross Profit (Loss). We had a gross loss of $337 for the three months ended June 30, 2026, which is a decrease of $1,267 or 136%, as compared to gross profit of $930 during the same period in 2025. The decrease in gross profit for the three months ended June 30, 2026 was primarily a result of diminished revenue, which was insufficient to absorb fixed factory overhead costs compared with the same period in 2025. Our gross loss as a percentage of net sales was (33.1)% for the quarter ended June 30, 2026, as compared to a gross profit as a percentage of net sales of 34.3% in the same period in 2025.

Sales and Marketing Expenses. During the three months ended June 30, 2026, sales and marketing expenses decreased by $58, or 32%, to $126, as compared to $184 during the same period in 2025. The decrease was attributable to a decrease in sales support staff and travel related expenses during the quarter as compared to the same period in 2025.

Research and Development Expenses. During the three months ended June 30, 2026, research and development expenses decreased by $18, or 12%, to $128, as compared to $146 during the same period in 2025. The decrease was primarily due to a decrease in research and development support staff and consulting services during the three months ended June 30, 2026 as compared to the same period in 2025. We plan to recruit additional engineers during 2026 to support new product developments and our customer diversification efforts.

General and Administrative Expenses. General and administrative expenses increased by $370, or 52%, to 1,080 during the three months ended June 30, 2026, as compared to $710 during same period in 2025. The increase in general and administrative expenses during the three months ended June 30, 2026 was primarily due to an increase in consulting services.

Interest and Finance Costs. Interest expense for the three months ended June 30, 2026 was $447, as compared to $171 during the same period in 2025. The interest expense is primarily from an interest on amount borrowed from our line of credit with Pinnacle Bank.

Net Loss. As a result of the factors identified above, we reported net loss of $1,831, or $(0.49) per basic and diluted share, for the three months ended June 30, 2026, as compared to net loss of $271, or $(0.11) per basic and diluted share, for the same period in 2025.

Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025

		Six Months Ended June 30,								Dollar Variance				Percentage Variance				Results as a Percentage of Net Sales for the Period Ended June 30,
		2026 (unaudited)				2025 (unaudited)				Favorable (Unfavorable)				Favorable (Unfavorable)				2026				2025
Net sales		$	2,747			$	4,431			$	(1,684	)			(38	)%			100.0	%			100.0	%
Cost of sales			1,948				3,183				1,235				39	%			70.9	%			71.8	%
Gross profit			799				1,248				(449	)			(36	)%			29.1	%			28.2	%
Sales and marketing expenses			285				443				158				36	%			10.4	%			10.0	%
Research and development expenses			297				305				8				3	%			10.8	%			6.9	%
General and Administrative expenses			1,863				1,711				(152	)			(9	)%			67.8	%			38.6	%
Total operating expenses			2,445				2,459				14				1	%			89.0	%			55.5	%
Loss from operations			(1,646	)			(1,211	)			(435	)			(36	)%			(59.9	)%			(27.3	)%
Interest and finance costs			(650	)			(335	)			(315	)			(94	)%			(23.7	)%			(7.6	)%
Other Income			-				10				(10	)			-	%			0.0	%			0.2	%
Change in derivative liabilities			287				-				287				-	%			10.4	%			-
Net loss		$	(2,009	)		$	(1,536	)		$	(473	)			(31	)%			(73.1	)%			(34.7	)%

Net Sales. Net sales decreased $1,684, or 38%, to $2,747 for the six months ended June 30, 2026, as compared to $4,431 for the same period in 2025. The decrease in sales was primarily attributed to a decrease in shipments of our DC power systems during the three months ended June 30, 2026, due to parts shortages affecting production on our DC power systems.

For the six months ended June 30, 2026, sales to our largest telecommunication customer accounted for 56% of our total net sales. For the six months ended June 30, 2025, sales to our largest telecommunication customer accounted for 70% of our total net sales. There was no other revenue from customers in excess of 10% of total net sales in either period.

Our international sales represented 12% of our net sales for the six months ended June 30, 2026, as compared to 9% in international sales in the same period in 2025. Sales to customers in the military market represented 3% of our to net sales for the six months ended June 30, 2026, compared to 10% in the same period in 2025.

Cost of Sales. Cost of sales during the six months ended June 30, 2026 decreased by $1,235, or 39%, to $1,948, as compared to $3,183 during the same period in 2025. Cost of sales as a percentage of net sales during the six months ended June 30, 2026 decreased to 70.9%, as compared to 71.8% in the same period in 2025.

Gross Profit. Gross profit during the six months ended June 30, 2026 decreased by $449, or 36%, to gross profit of $799, as compared to gross profit of $1,248 during the same period in 2025. Our gross profit as a percentage of net sales was 29.1% for the six months ended June 30, 2026, as compared to 28.2% in the same period in 2025.

Sales and Marketing Expenses. During the six months ended June 30, 2026, sales and marketing expenses decreased by $158, or 36%, to $285, as compared to $443 during the same period in 2025. The decrease was attributable to a decrease in sales support staff and travel related expenses. We plan to expand our marketing efforts by adding staff and product demonstrations to support our diversification strategy and expand our customer base in all market segments.

Research and Development Expenses. During the six months ended June 30, 2026, research and development expenses decreased by $8, or 3%, to $297, as compared to $305 during the same period in 2025. The decrease was primarily due to a decrease in research and development support staff and consulting services during the six months ended June 30, 2026, as compared to the same period in 2025. We plan to recruit additional engineers during the second half of 2026 to support growth and our customer diversification efforts.

General and Administrative Expenses. General and administrative expenses increased by $152, or 9.0%, to $1,863 during the six months ended June 30, 2026, as compared to $1,711 during same period in 2025. The increase in general and administrative expenses during the six months ended June 30, 2026 was primarily due to an increase in consulting services primarily during the second quarter of 2026.

Interest and Finance Costs. Interest expense for the six months ended June 30, 2026 was $650, as compared to $335 during the same period in 2025. The interest expense is primarily from an interest on amount borrowed from our line of credit with Pinnacle Bank.

Net Loss. For the six months ended June 30, 2026, we incurred net loss of $2,009, or $(0.56) per basic and diluted share, as compared to net loss of $1,536, or $(0.61) per basic and diluted share for the six months ended June 30, 2025.

Liquidity and Capital Resources

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 three and six months ended June 30, 2026, the Company recorded a net loss of $1,831, and $2,009, respectively, and used cash in operations of $2,171. In addition, our independent registered public accounting firm, in its audit report to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Sources of Liquidity

During the six months ended June 30, 2026, we funded our operations primarily from cash on hand. As of June 30, 2026, we had working capital of $695, as compared to working capital deficit of ($262) at December 31, 2025. This $957 increase in working capital is primarily attributable to $17 decrease in cash and cash equivalents resulting from net cash of $2,171 used in operating activities, and net cash of $nil used in investing activities, and net cash of $2,154 from financing activities.

On June 30, 2026 and December 31, 2025, our net trade receivables totaled $566 and $330, respectively. On June 30, 2026, $294 (52%), and $119 (21%) represented the two largest open customer account balances, while $196 (59%) and $58 (18%) represented the two largest open customer account balances on December 31, 2025.

Our available capital resources on June 30, 2026 consisted primarily of $183 in cash and cash equivalents, as compared to $200 as of December 31, 2025. We expect our future capital resources will consist primarily of cash on hand, cash generated by operations, if any, drawdowns on our credit facility with Pinnacle Bank and future debt or equity financings, if any.

Credit Facility

Effective September 30, 2020, the Company entered into the Loan Agreement with Pinnacle. The Loan Agreement, as amended, provides for a revolving credit facility under which Pinnacle may, in its sole discretion upon our request, make advances to the Company up to $7,500, subject to certain limitations and adjustments, of up to $7,500, subject to certain limitations and adjustments. The Loan Agreement contains certain affirmative and negative covenants.

Borrowings based on receivables bears an interest on the daily balance at a rate of 1.25% above the prime rate, but in no event less than 3.75% per annum (8.0% at June 30, 2026 and 8.0% at December 31, 2025). Interest on the portion of the daily balance consisting of advances against inventory accrues interest at a rate of 2.25% above the prime rate, but in no event less than 4.75% per annum (9.0% at June 30, 2026 and 9.0% at December 31, 2025).

Pursuant to the Loan Agreement, as amended, the standards of eligible accounts receivable include AT&T accounts receivable up to 120 days of invoice date, and eligible accounts receivable with other customers have up to 90 days of invoice date. Customer accounts with eligible accounts receivable cannot exceed a concentration percentage which is a customer's total obligations to the Company as a percentage of eligible accounts receivable from all customers. The concentration percentage applicable to certain Tier-1 telecommunications customers is 75% of all eligible accounts receivable, and the concentration percentage applicable to all other customer is 25% of all eligible accounts.

Pinnacle may terminate the Loan Agreement at any time upon ninety days prior written notice and immediately upon the occurrence of an event of default. Under the Loan Agreement, the Company granted Pinnacle a security interest in all presently existing and thereafter acquired or arising assets of the Company.

At June 30, 2026, and 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. On March 10, 2026, the Company and Pinnacle executed the Forbearance Agreement, in which Pinnacle agrees to forbear from exercising certain rights and remedies under 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 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 expected to stay in compliance and pay the full obligation to Pinnacle by July 31, 2026, it was unable to do so. The Company is in discussions with Pinnacle with the purpose to secure an extension on the Forbearance Agreement, and if the Company is unable to secure a payment extension or pay the full obligation within time satisfactory to Pinnacle, 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 July 31, 2026, Pinnacle Bank provided to the Company a Notice of Additional Events and Defaults and Modifications to Forbearance Agreement and Loan Documents, the "Forbearance Modification Agreement", for the purpose of granting a time extension to the Forbearance Agreement executed on March 10, 2026. The Forbearance Modification Agreement would extend the July 31, 2026 deadline for the Company to repay the full balance on the credit facility to August 31, 2026, with an automatic extension to September 30, 2026, if the Company complies to certain payment plan and the terms and conditions on the Forbearance Modification Agreement. The agreement has not been signed by either party as of this date of this report.

The balance of the loan agreement at December 31, 2025 was $4,036. During 2026, the Company repaid a net of $1,306 to reduce the Loan. At June 30, 2026, the outstanding balance under the line of credit was $2,730 which includes interest, fees and financing costs (see below), and $566 of the Company's accounts receivable is held as collateral under the credit facility.

The total interest expense, fees, and financing costs incurred under the Loan Agreement for the three-month periods ended June 30, 2026 and 2025 were $139 and $168, respectively. Of these amounts, $7 in 2026 and $1 in 2025 were recorded under general and administrative expenses, while $132 in 2026 and $167 in 2025 were recorded under interest expense and finance costs in the accompanying statements of operations.

The total interest expense, fees, and financing costs incurred under the Loan Agreement for the six-month periods ended June 30, 2026 and 2025 were $271 and $329, respectively. Of these amounts, $14 in 2026 and $1 in 2025 were recorded under general and administrative expenses, while $257 in 2026 and $327 in 2025 were recorded under interest expense and finance costs in the accompanying statements of operations.

Leases

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 its headquarters and warehouse facilities. The landlord for its headquarters 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 landlord for the other warehouse for which the Company is delinquent on rent, has not served the Company any legal documents. However, they may do so in the future.

On May 11, 2026, the Company entered into a Settlement Agreement with the landlord for each of its headquarters facility and its warehouse facility that became effective as of May 7, 2026. The Settlement Agreement addressed the matter of delinquent rents and an expired lease. Regarding the Company's headquarters facility, the Company agreed to make immediate payment of $400 towards past due rents, and the landlord agreed to cease eviction procedures. The landlord also agreed to extend the property lease commencing June 1, 2026, to April 1, 2027, and reduce the monthly rent from $84 to $55. Regarding the warehouse facility, the Company agreed to vacate the facility by August 31, 2026 and leave the premises in the condition required by the relevant lease agreement; in exchange, the landlord agreed to waive rents for the months of June, July, and August 2026. Each landlord reserved the right to charge for any waived rents or continue with eviction action should the Company fail to meet the requirements listed in the Settlement Agreement. The Company also may have to pay liquidated damages if it fails to vacate the properties in the event either or both landlords decide to exercise their rights for eviction.

As of May 19, 2026, the Company had not made a payment per the Settlement Agreement, and on May 19, 2026, the landlord for the Company's headquarters facility evicted the Company from that facility.

On May 22, 2026, the Company entered into a new settlement agreement under which the Company paid the landlords a combined $755 and regained access to its headquarters facility. The new settlement agreement provides for a schedule of monthly payments through April 2027 in exchange for the landlord's agreement not to seek to evict us from the headquarters facility through June 30, 2027, and the Company continued its agreement to vacate the warehouse facility by August 31, 2026 in exchange for a waiver of June, July and August 2026 rents. If the Company fails to satisfy the conditions of the new settlement agreement, the landlords may resume eviction proceedings and the Company may be liable for liquidated damages and previously waived rents. The Company made timely rent payments in July and August 2026 and is in compliance with the new settlement agreement.

As of June 30, 2026, the Company was delinquent in $654 of rent to its headquarters landlord and other leases which are included in accounts payable.

Nasdaq

On May 1, 2026, the Company received a letter from the Nasdaq staff notifying it that the Company was not in compliance with the $2.5 million minimum stockholders' equity requirement for continued listing under Nasdaq Listing Rule 5550(b)(1), based on the approximately $0.1 million of stockholders' equity reported in our Annual Report on Form 10-K for the year ended December 31, 2025. The Company's Common Stock continues to trade on the Nasdaq Capital Market under the symbol "POLA." On June 29, 2026, the Company received a letter from the Staff granted us an extension of time to regain compliance with the Rule. The terms of the extension are as follows: on or before October 28, 2026, it must opt for one of the two following alternatives to evidence compliance with the Rule: (A) the Company must furnish to the SEC and Nasdaq a publicly available report (e.g., a Form 8-K or Form 6-K) including: (1) a disclosure of Staff's deficiency letter and the specific deficiency(ies) cited; (2) a description of the completed transaction or event that enabled the Company to satisfy the stockholders' equity requirement for continued listing; (3) an affirmative statement that, as of the date of the report, it believes it has regained compliance with the stockholders' equity requirement based upon the specific transaction or event referenced in Step 2; and (4) a disclosure stating that Nasdaq will continue to monitor the Company's ongoing compliance with the stockholders' equity requirement and, if at the time of its next periodic report the Company does not evidence compliance, that it may be subject to delisting, or (B) the Company must furnish to the SEC and Nasdaq a publicly available report including: (1) steps 1 & 2 set forth above; (2) a balance sheet no older than 60 days with pro forma adjustments for any significant transactions or event occurring on or before the report date. The pro forma balance sheet must evidence compliance with the stockholders' equity requirement; and (3) a disclosure that the Company believes it also satisfies the stockholders' equity requirement as of the report date and that Nasdaq will continue to monitor the Company's ongoing compliance with the stockholders' equity requirement and, if at the time of its next periodic report the Company does not evidence compliance, that it may be subject to delisting.

On May 14, 2026, Keith Albrecht and Katherine Koster, two of the Company's independent directors, resigned as members of the Board of the Company, effective May 19, 2026. On May 18, 2026, Keith Albrecht rescinded his resignation as a director, and the Board approved the rescinding of Keith Albrecht's resignation, effective immediately.

Convertible Notes

On May 21, 2026, the Company entered into a Securities Purchase Agreement (the "CFI SPA") with CFI Capital LLC ("CFI"). Pursuant to the CFI SPA, on May 21, 2026 (the "Issue Date"), the Company issued to CFI a 6% convertible redeemable note in the aggregate principal amount of $600 (the "CFI Note"). The purchase price of the CFI Note was $546, and the Company received net proceeds of $500, after deducting $10 to cover CFI's legal fees and a $36 payment to Craft Capital Management, LLC ("Craft") as a broker/placement agent fee. The CFI Note has an interest rate of 6% per annum, and the maturity date is 12 months from the Issue Date. The CFI SPA and CFI Note also contain other customary terms and conditions.

On or following six months from the Issue Date, CFI has the right to convert the outstanding and unpaid principal amount and interest into the Company's shares of common stock, $0.0001 par value per share (the "Common Stock"). The conversion price equals 80% of the lowest daily VWAP of the Company's Common Stock for the last 10 trading days prior to conversion; provided, that if the Company is delisted from NASDAQ, then the conversion discount shall increase to 65% of the lowest trading price and the lookback shall be for the last 20 trading days. The Company granted to CFI piggy-back registration rights for the shares of Common Stock issuable upon conversion of the CFI Note. The Company has instructed its transfer agent to reserve 1,206,434 shares of Common Stock for the conversion.

On May 21, 2026, the Company entered into a Securities Purchase Agreement (the "Monroe SPA") with Monroe Street Capital Partners, LP ("Monroe"). Pursuant to the Monroe SPA, on May 21, 2026 (the "Issue Date"), the Company issued to Monroe a 6% convertible redeemable note in the aggregate principal amount of $370 (the "Monroe Note"). The purchase price of the Monroe Note was $340, and the Company received net proceeds of $307, after deducting $12 to cover Monroe's legal fees and a $20 payment to Craft. The Monroe Note has an interest rate of 6% per annum, and the maturity date is 12 months from the Issue Date. The Monroe SPA and Monroe Note also contain other customary terms and conditions.

On or following six months from the Issue Date, Monroe has the right to convert the outstanding and unpaid principal amount and interest into the Company's shares of Common Stock. The conversion price equals to 80% of the lowest daily VWAP of the Company's Common Stock for the last 10 trading days prior to conversion; provided, that if the Company is delisted from NASDAQ, then the conversion discount shall increase to 65% of the lowest trading price and the lookback shall be for the last 20 trading days. The Company granted to Monroe piggy-back registration rights for the shares of Common Stock issuable upon conversion of the Monroe Note. The Company has instructed its transfer agent to reserve 1,000,000 shares of Common Stock for the conversion.

Cash Flow

The following table sets forth the significant sources and uses of cash for the six-month periods set forth below:

		June 30, 2026				June 30, 2025
		(Unaudited)				(Unaudited)
Net Cash Provided By (Used In)
Operating Activities		$	(2,171	)		$	(988	)
Investing Activities			-				-
Financing Activities			2,154				665
Net increase (decrease) in cash		$	(17	)		$	(323	)

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2026 was $2,171 as compared to net cash used by operating activities of $988 for the same period in 2025. This change in net cash used in the six months ended June 30, 2026 was primarily due to a net loss of $2,009, an increase in in accounts receivable of $236, and a decrease in accounts payable of $41.

Investing Activities

We did not have any investing activities for the three and six months ended June 30, 2026, and June 30, 2025.

Financing Activities

Net cash provided by financing activities totaled $2,154 for the six months ended June 30, 2026, as compared to $665 provided by financing activities during the same period in 2025. This cash provided was primarily net proceeds of $2,424 from shares sold under the ATM facility, convertible notes payable of $1,136, coupled with repayment of advances from the credit facility of $1,306.

Backlog

Our sales backlog as of June 30, 2026 was $3,668, of which our telecommunications customers accounted for 77%, customers in the military market accounted for 22%, and customers in other markets accounted for 1%. We believe the majority of our backlog will be shipped within the next three months.