Polar Power, Inc.

CONDENSED BALANCE SHEETS

(in thousands, except share and per share data)

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

UNAUDITED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Three months Ended June 30, 2026

Six months ended June 30, 2026

Three months Ended June 30, 2025

Six months ended June 30, 2025

UNAUDITED CONDENSED STATEMENTS OF CASH FLOW

(in thousands)

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025

(In thousands, except for share and per share data and where otherwise noted)

(UNAUDITED)

NOTE 1 –ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Polar Power, Inc. was incorporated in the State of Washington as Polar Products, Inc. and in 1991 reincorporated in the State of California under the name Polar Power, Inc. In December 2016, Polar Power, Inc. reincorporated in the State of Delaware (the “Company”, “we” or “us”). The Company designs, manufactures and sells direct current, or DC, power systems to supply reliable and low-cost energy to off-grid, bad-grid and backup power, electric vehicle (“EV”) charging, and nano-grid applications. The Company’s products integrate DC generator, proprietary electronic control systems, lithium batteries and solar photovoltaic (“PV”) technologies to provide low operating cost and emissions for telecommunications, Defense, automotive, nano-grid, EV charging and industrial 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 six months ended June 30, 2026, the Company recorded a net loss of $2,009 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.

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.

Effective September 30, 2020, the Company entered into a loan agreement (the “Loan Agreement”) with Pinnacle Bank (“Pinnacle”) 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 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 a Notice of Additional Defaults and Forbearance Agreement (the “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 (as defined by the Forbearance Agreement) 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 (as defined by the Forbearance Agreement) of such new Eligible Accounts (as defined by the Forbearance Agreement) 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 bank 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 Bank, 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.

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.

As discussed in Note 11, subsequent to June 30, 2026, the Company sold 1,611 shares of the Company’s Series A Convertible Preferred Stock, (the “Series A Preferred”), having an aggregate stated value of $1,611, of which the Company received net proceeds of $1,300. In addition, the Company has sold 21,727 of its Common Stock, $0.0001 par value, under its committed equity facility (the “ELOC”) agreement with Roth Capital Partners.

Furthermore, the Company’s ability to secure future 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.

Impact of inflation

The impact of inflation and changing prices during the three and six months ended June 30, 2026 has had modest effect on the financial condition or results of operations of the Company. 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. Because some of our contracts are at a fixed price, we face the risk that cost overruns or inflation may exceed, erode or eliminate our expected profit margin, or cause us to record a loss on certain projects. We are taking actions to manage the potential impacts of these matters and we will continue to assess the actual and expected impacts and the need for further action.

Basis of Presentation of Unaudited Financial Information

The unaudited condensed financial statements of the Company for the three and six months ended June 30, 2026 and 2025 have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2025 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended December 31, 2025 and 2024 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on May 20, 2026. These financial statements should be read in conjunction with that report.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Material estimates relate to the assumptions made in determining estimates for credit loss reserves for accounts receivable, assumptions used in valuing inventories at net realizable value, impairment testing of recorded long-term assets, the realizability of deferred tax assets and the related valuation allowance, accruals for warranty reserves, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in the determination of the Company’s liquidity. Actual results may differ from those estimates.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying the Company’s performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.

Substantially all of the Company’s revenue is derived from product sales. Product revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to its customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the products or services to a customer. The Company determines whether delivery has occurred based on when title transfers and the risks and rewards of ownership have transferred to the customer, which usually occurs when the Company places the product with the customer’s carrier or delivers assured. the product to a customer’s location. The Company regularly reviews its customers’ financial positions to ensure that collectability is reasonably

The Company also recognizes revenues from engineering services, technical support, and sale of accessories that support the Company’s direct current, or DC, power systems. Revenue is recognized when transfer of control to the customer has been made and the Company’s performance obligation has been fulfilled. The Company’s revenue from engineering services, technical support services, and product accessories are clearly defined in each transaction with its customers and have not been significant to date.

The Company also recognizes revenues from the rental of equipment. The Company’s rental revenues have not been significant to date and were $nil for the three months and six months ended June 30, 2026 and 2025. The Company’s rental contracts are fixed price contracts for fixed durations of time and include freight and delivery charges and are recognized on a straight-line basis over the rental period.

Disaggregation of Net Sales

The following table shows the Company’s disaggregated net sales by product type:

The following table shows the Company’s disaggregated net sales by customer type:

The following tables shows the Company’s net sales by the respective geographical regions of our customers:

For the three months ended June 30, 2026 and 2025, international sales totaled $264 and $84 respectively. For the six-months ended June 30, 2026 and 2025, international sales totaled $342 and $386 respectively.

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. The Company records adjustments to its inventory based on an estimated forecast of the inventory demand, taking into consideration, among others, inventory turnover, inventory quantities on hand, unfilled customer order quantities, forecasted demand, current prices, competitive pricing, and trends and performance of similar products. If the estimated net realizable value is determined to be less than the recorded cost of the inventory, the difference is recognized as a loss in the period in which it occurs. Once inventory has been written down, it creates a new cost basis for inventory that may not be subsequently written up. There wereno write downs of inventory for the three months and six months ended June 30, 2026.

As of June 30, 2026 and December 31, 2025, inventories consisted of the following:

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. As of December 31, 2025, the Company had a warranty reserve of $600. In March 2026, the Company adjusted the warranty reserve to $150 after conducting a reserve study of warranty expense over the previous three years. The results of the study indicate warranty expense has decreased as a result of a diminishing number of products sold with warranty over the last four years and an increase in sold products with warranty falling off the warranty period. As of June 30, 2026, and December 31, 2025, the Company had accrued a liability for warranty reserve of $150 and $600, respectively, which are included in other accrued liabilities in the accompanying condensed balance sheets. The following is a tabular reconciliation of the product warranty liability, excluding the deferred revenue related to the Company’s warranty coverage:

Stock-Based Compensation

The Company periodically issues stock-based compensation to officers, directors, and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date.

Stock-based payments to employees, directors, and for acquiring goods and services from nonemployees, which include grants of employee stock options, are recognized in the financial statements based on their grant date fair values in accordance with ASC 718,Compensation-Stock Compensation. Stock option grants to employees, which are generally time vested, are measured at the grant date fair value and depending on the conditions associated with the vesting of the award, compensation cost is recognized on a straight-line or graded basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The fair value of stock options granted is estimated using the Black-Scholes option-pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life, and future dividends. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

Convertible Notes

The Company accounts for its convertible notes in accordance with ASC 470-20,Debt with Conversion and Other Options, and ASC 815-15,Derivatives and Hedging — Embedded Derivatives. The Company evaluates the embedded conversion feature to determine whether it is clearly and closely related to the debt host and would separately meet the definition of a derivative. Embedded conversion features that are not indexed to the Company’s own stock, or that otherwise fail to meet the scope exception under ASC 815-10-15-74, are bifurcated and recorded as a derivative liability at fair value, with subsequent changes in fair value recognized in earnings each reporting period. Conversion features that are indexed to the Company’s own stock and meet the conditions for equity classification are not bifurcated; such notes are further evaluated for a beneficial conversion feature under ASC 470-20, with any resulting discount recognized as a reduction to the carrying value of the notes and amortized to interest expense over the term of the notes using the effective interest method.

Financial Assets and Liabilities Measured at Fair Value

The Company uses various inputs in determining the fair value of its financial assets and liabilities. Financial assets recorded at fair value in the balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value.

Authoritative guidance provided by the Financial Accounting Standards Board (“FASB”) defines the following levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these financial assets:

The carrying amounts of certain financial assets and liabilities, such as cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values because of the short maturity of these instruments. The carrying values of the line of credit and notes payable approximate their fair values since the interest rates on these obligations are based on prevailing market interest rates.

The fair values of the Company’s derivative liabilities are considered Level 3 liabilities. See Note 7.

Segments

Under ASC 280,Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company’s operating segment consists of one component, and the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment.

Concentrations

*Revenues.*For the three months ended June 30, 2026 and 2025, sales to telecommunications customers accounted for 88% and 92% of total revenues, respectively. Sales to international customers accounted for 26% and 3% of total revenues, respectively. The Company’s largest customers during the three months ended June 30, 2026, generated 29%,14%,12%, and 11% of total revenues, as compared to the largest customer during the three months ended June 30, 2025 generating 69% of total net revenues. There was no other revenue from customers in excess of 10% of revenues in either period.

For the six months ended June 30, 2026 and 2025, sales to telecommunications customers accounted for 93% and 88% of total revenues, respectively. For the six months ended June 30, 2026 and 2025, sales to international customers accounted for 12% and 9% of total revenue, respectively. For the six months ended June 30, 2026, the Company’s largest customer generated 56% of total revenues, as compared to the largest customer during the same period in 2025 generating 70% of total revenues. There was no other revenue from customers in excess of 10% of revenues in either period.

Accounts receivable. At June 30, 2026, the three largest accounts receivable account from the Company’s customers represented 52%,21%, and 12% of the Company’s total accounts receivable. At December 31, 2025, the Company’s two largest receivable accounts represented 59% and 18% of the Company’s total accounts receivable. There was no other customer that accounted for more than 10% of the Company’s accounts receivable as of June 30, 2026 or December 31, 2025.

Accounts payable. At June 30, 2026, accounts payable to the Company’s three largest vendors represented 13%,10% and 8%, of the Company’s accounts payable. On December 31, 2025, the three largest accounts payable accounts to the Company’s vendors represented 21%,7%, and 7%, respectively.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share is computed by dividing the net income applicable to common stockholders by the weighted average number of shares of common stock outstanding plus the number of additional shares of common stock that would have been outstanding if all dilutive potential shares of common stock had been issued using the treasury stock method. Potential shares of common stock are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of shares of common stock during the reporting period.

The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (FASB) issued ASU No. 2024-03,Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which includes amendments that require disclosure in the notes to financial statements of specified information about certain costs and expenses, including purchases of inventory; employee compensation; and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included. The amendments are effective for the Company’s annual periods beginning January 1, 2027, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is in the process of evaluating this ASU to determine its impact on the Company’s disclosures.

The Company’s management has evaluated all other recently issued, but not yet effective, accounting standards and guidance that have been issued or proposed by the FASB or other standards-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position and results of operations.

NOTE 2 –PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Depreciation and amortization expense on property and equipment for the three months ended June 30, 2026 and 2025 was $16 and $17, respectively. During the three months ended June 30, 2026 and 2025, $15 and $16, respectively, of the depreciation expense was included in cost of sales.

Depreciation and amortization expense on property and equipment for the six months ended June 30, 2026 and 2025 was $32 and $34, respectively. During the six months ended June 30, 2026 and 2025, $31 and $33, respectively, of the depreciation expense was included in cost of sales.

NOTE 3 –NOTES PAYABLE, RELATED PARTY

During 2023, the Company’s Chief Executive Officer made three loans to the Company for aggregate principal amount of $260 pursuant to terms of the note agreements. During 2025, the Company’s Chief Executive Officer made three additional loans to the Company for aggregate principal amount of $330 pursuant to terms of the note agreements. On April 10, 2026, the Company’s Chief Executive Officer made an additional loan to the Company for a principal amount of $150 pursuant to the terms of the note agreement. The notes have relatively similar terms, are unsecured, and accrue interest at 3.5% per annum, except for the note from April 2026 which accrues interest at 18% per annum. As of June 30, 2026, the aggregate outstanding balance of the loans including accrued interest is $771, with $72 due in August 2026, $72 due in September 2026, $102 due in October 2026, $30 due in November, $167 due in March 2027, $154 due in April 2027, and $174 due in May 2027.

NOTE 4 –LINE OF CREDIT

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 bank 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 Bank, 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.

NOTE 5 –NOTES PAYABLE

On December 23 2025, the Company entered into the WWCM Loan Agreement with WWCM, pursuant to which the Company borrowed net proceeds of $399, 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 of the Company is $640 resulting in an effective rate of approximately 74%. As of June 30, 2026, the outstanding loan balance was $179.

NOTE 6 –CONVERTIBLE NOTES PAYABLE

From May 21, 2026 to June 30, 2026, the Company issued three Convertible Redeemable Note (the “Notes”) with aggregate face amount of $1,245, of which $970 matures on May 21, 2027 and $275 matures December 31, 2027. The Notes were issued with a $110 original issue discount, resulting in net cash proceeds to the Company of $1,136. The Notes bear interest at stated rates ranging from 6% -10% per annum.

Beginning on the six-month anniversary of issuance, the holders may convert all or a portion of the outstanding principal and accrued interest into shares of the Company’s common stock at a conversion prices ranging from 80% -90% of the lowest daily volume-weighted average price (“VWAP”) of the Company’s common stock during the ten trading days preceding conversion, subject to adjustment to 70% in the event of any trading restriction imposed by the Depository Trust Company, a DTC “chill”, on the Company’s shares and to 65% in the event the Company’s shares are delisted from Nasdaq, among other adjustments, including a most-favored-nation provision and standard anti-dilution protections.

The Company evaluated the conversion feature embedded in the Notes in accordance with ASC 815, Derivatives and Hedging, and determined that the conversion feature is not clearly and closely related to the debt host and does not qualify for the scope exception for contracts indexed to and settled in the Company’s own stock under ASC 815-40, Contracts in Entity’s Own Equity, due to the variable, discount-to-market pricing mechanism and the additional contingent adjustments described above. Accordingly, the conversion features were bifurcated from the Notes and are separately accounted for as a derivative liability, initially and subsequently measured at fair value, with changes in fair value recognized in earnings each reporting period. (See discussion below).

The derivative liability was initially recorded as a valuation discount at its estimated fair value of $1,050 on the issuance date. The resulting debt discount of $1,050 is being amortized to interest expense over the term of the Note using the effective interest method. During the period, the Company recognized $100 of discount amortization. As of June 30, 2026, the face value of the notes payable was $1,245 with an unamortized note discount of $1,059 resulting in a net carrying value of the Notes of $186.

NOTE 7 –DERIVATIVE LIABILITIES

As discussed in Note 6 the Company issued convertible promissory notes to certain investors that are convertible at the option of the holder into shares of the Company’s common stock subject to variable conversion features and certain other adjustments. The Company evaluated the conversion feature embedded in the Notes in accordance with ASC 815-15,Derivatives and Hedging — Embedded Derivatives, to determine whether it requires bifurcation and separate accounting as a derivative liability. Bifurcation is required when all of the following criteria are met: (i) the economic characteristics and risks of the embedded feature are not clearly and closely related to those of the host contract (the debt instrument); (ii) a separate instrument with the same terms as the embedded feature would meet the definition of a derivative; and (iii) the hybrid instrument is not remeasured at fair value with changes recognized in earnings.

At issuance, the Company recorded the embedded derivative liability at its estimated fair value of $1,050 determined using an options pricing model.

The resulting debt discount of $1,050 is being amortized to interest expense using the effective interest method over the term of the Notes. As of June 30, 2026, the derivative liability was remeasured at fair value of $763, resulting in a gain of $287, recorded within other income in the accompanying condensed consolidated statements of operations. The following table summarizes the key assumptions at issuance date and at remeasurement date on June 30, 2026:

The changes in the Derivative liabilities are during the period are as follows: (in thousands)

NOTE 8 –OPERATING LEASES

The Company manufactures and assembles its DC power systems at its two production facilities located in Gardena, California under two operating lease agreements that expire in 2026, requiring aggregate monthly payments of $125. During 2025 the Company became delinquent in its rent payments to its landlords for its office 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. On May 11, 2026, the Company entered into settlement agreements with the landlords of its headquarters and one of the warehouse facilities. On May 19, 2026, the landlord of the Company’s headquarters facility evicted the Company from that facility for failing to make payment per the settlement agreement. On May 22, 2026, the Company entered into a new settlement agreement under which it 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 the Company from the headquarters facility through June 30, 2027, and provides for the Company 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 we may be liable for liquidated damages and previously waived rents. The Company made timely rent payments in July 2026 and August 2026 and is in compliance with the new settlement agreement as of the filing date. However, it is possible that the Company will be forced to vacate from any or all facilities in the event it fails to keep up with the terms of the settlement agreement, and if that happens, it might have difficulty locating a new headquarters, or new manufacturing or warehouse facilities that are adequate, in a timely manner. The Company’s production could be significantly delayed, access to its inventory could be impaired, and its operations could halt for a significant period of time.

Due to the circumstances described above, during 2025 the Company recorded total impairment charges of $455, which included $347 related to right-of-use asset on its headquarters and manufacturing facility, and $108 related to lease deposits. These charges were recorded in impairment of lease right-of-use assets and lease deposits in the Company’s Statements of Operations as of December 31, 2025. Right of use assets as of June 30, 2026 of $66 on the accompanying balance sheet represents the remaining right of use asset under its other facility which the Company expects to utilize until August 2026. As of June 30, 2026, the remaining lease obligation for both leases is $76 plus $364 in past due lease payments that is included in accounts payable.

The Company also has a third lease on a month-to-month basis and is charged $25 per month. As of June 30, 2026, $290 is delinquent and owed on the lease which is included in accounts payable.

The components of rent expense and supplemental cash flow information related to leases for the period are as follows:

The supplemental balance sheet information related to leases for the period is as follows:

Rent expense for the three months ended June 30, 2026 and 2025 was $337 and $325, respectively. Rent expense for the six months ended June 30, 2026 and 2025 was $697 and $630, respectively.

NOTE 9 –STOCKHOLDERS’ EQUITY

Common Stock

On May 21, 2026, the Company signed a Restructuring, Implementation and Management Services Agreement (the “Services Agreement”) with Mammoth Crest Capital, LLC. (“MCC”), effective as of May 19, 2026. Pursuant to the Services Agreement, MCC shall lead, manage, drive and implement the operational, organizational, governance, financial and capital-structure initiatives described in the Scope of Work attached to the Services Agreement. The agreement also states that no later than 30 days following May 19, 2026, the effective date of the Services Agreement, the Company shall cause its board of directors (the “Board”) to consist of seven directors, and appoint Barrett Evans and Michael Hill as directors who are designated by MCC, and that Arthur D. Sams will remain as the chairman of the Board and Michael Fields will remain on the Board. MCC shall, in consultation with the Company’s Chief Executive Officer, propose candidates to fill the remaining Board seats. These changes affecting the number or members of the board of directors have not taken place as of the date of this report.

In consideration, the Company shall pay to MCC $500 in two installments: (a) $100 on the effective date as a non-refundable retainer; and (b) $400 (the “Balance”) upon MCC’s delivery of the Deliverables and Milestones as defined by the Services Agreement. MCC agrees to defer collection of the Balance until the Company has consummated debt or equity financing(s) yielding aggregate gross proceeds to the Company of at $5,000. Commencing on the first day of the month calendar immediately after MCC’s delivery of the Deliverables and Milestones, the Company shall pay to MCC a monthly cash retainer of $25.

On the effective date, the Company shall issue to MCC (or its designee) a number of shares of the Company’s Common Stock (the “Shares”) such that, after giving effect to the issuance of the Shares, the Shares represent 4.5% of the issued and outstanding shares of common stock of the Company on the Effective Date. As such, on May 19, 2026, the Company issued 171,525 shares of Common Stock with a fair value of $298 to MCC as compensation for services and recorded the expense in the amount general and administrative expenses in the Company’s statement of operations for the three and six months ended June 30, 2026.

The Company shall include the Shares for resale registration in the next registration statement filed by the Company (other than a registration statement on Form S-4 or S-8 or in respect of a primary offering by the Company that excludes selling stockholders). The Services Agreement has a 12-month term beginning from the effective date, unless terminated earlier (the “Initial Term”). Upon expiration of the Initial Term, the term shall be renewed and extended automatically for additional, consecutive periods of three months each. The Services Agreement also contains other customary terms and conditions.

Common Stock

On October 6, 2025, the Company entered into the Sales Agreement with ThinkEquity LLC, pursuant to which the Company may sell and issue, subject to the limitations in the Sales Agreement, shares up to $2,382 of Common Stock from time to time in the ATM Offering. Under the Sales Agreement, ThinkEquity LLC is entitled to compensation of 3.0% of the gross offering proceeds of all shares of Common Stock sold through it pursuant to the Sales Agreement.

As of December 31, 2025, the Company has 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. In January 2026, the Company 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 $2,424, after deducting commissions to the sales agent and other ATM Offering related expenses of $75. On July 23, 2026, the Company delivered a written notice terminating the Sales Agreement to ThinkEquity LLC. The termination of the Sales Agreement was effective July 23, 2026, as acknowledged by ThinkEquity LLC. No termination fee or penalty is payable by the Company in connection with such termination.

At June 30, 2026 and December 31, 2025, the Company had 2,497 shares of Common Stock held as treasury stock at a cost of $40.

NOTE 10 –STOCK OPTIONS

The following table summarizes stock options:

Effective July 8, 2016, the Company’s board of directors approved the Polar Power 2016 Omnibus Incentive Plan (the “2016 Plan”), authorizing the issuance of up to 250,627 shares of Common Stock as incentives to employees and consultants to the Company with awards limited to a maximum of 50,125 shares to any one participant in any calendar year.

At December 31, 2025, the Company had total outstanding options of 12,858, which were carried forward to June 30, 2026. These options are fully vested, exercise prices ranging from $33.88 to $39.20, and with 1,429 option shares set to expire in December 2027 and the remaining 11,429 option shares set to expire in April 2028.

The outstanding options hadno intrinsic value at June 30, 2026.

On November 13, 2025, the Company’s Board of Directors, at the recommendation of the compensation committee, approved the 2026 Equity Incentive Plan (the “2026 Plan”), subject to approval by its stockholders at the stockholders meeting. On December 15, 2025, at the stockholders meeting, the 2026 Plan was passed and became effective January 1, 2026. The Company has not made any grants under the 2026 Plan yet.

NOTE 11 –SUBSEQUENT EVENTS

On July 16, 2026, the Company issued 40,000 restricted shares of Common Stock, par value $0.0001, to ConnectM Technology Solutions, Inc. as compensation for advisory and management consulting services rendered under an engagement letter dated April 24, 2026 that provides for a monthly grant of 20,000 shares of Common Stock (subject to a review of value versus services after three months), with the shares issued valued at $1.61 per share. The shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. As of June 30, 2026, the Company included an aggregate value of $64 in accounts payable in the accompanying condensed balance sheet.

On or about July 20, 2026, the Company entered into a Common Stock Purchase Agreement and a related Registration Rights Agreement with an affiliate of Roth Capital Partners establishing a committed equity facility (the “ELOC”) that provides for the sale, from time to time and at the Company’s option, of up to $25,000 of Common Stock, subject to the effectiveness of a resale registration statement and to volume, 4.99% beneficial-ownership and 19.99% Nasdaq exchange-cap limitations and the pricing/Base Price mechanics of that agreement. The Company filed a registration statement on Form S-1 (File No. 333-297749) covering the resale of shares issuable under the ELOC.

On July 21, 2026, the Company issued and sold to LU2 Holdings LLC, in a private placement,500 shares of its Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred”), having an aggregate stated value of $500, together with warrants to purchase an aggregate of 150,915 and 83,841 shares of Common Stock at an exercise price of $1.64 per share, to LU2 Holdings LLC and Mayers, respectively. The Series A Preferred has a stated value of $1,000 per share, accrues a 10% payment-in-kind dividend, is perpetual, ranks senior to our Common Stock, and is convertible into Common Stock at a price equal to 90% of the lowest VWAP over the seven consecutive trading days immediately preceding the applicable conversion date, but not less than the floor price. The shares of Common Stock issuable upon conversion of the Series A Preferred and upon exercise of those warrants are not registered by this prospectus and are expected to be registered pursuant to a separate registration statement.

On July 29, 2026, the Company entered into a series of agreements with each of CL Investment Group LLC (“CL Investment”) and LU2 Holdings LLC (“LU2” and, together with CL Investment, the “Investors” and each an “Investor”), providing for the issuance and sale to the Investors of shares of the Company’s Series A Convertible Preferred Stock and warrants to purchase shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). By their terms, the agreements became effective, and the closing thereunder was consummated, on the date that each of the closing conditions had been satisfied, which occurred on August 5, 2026 (the “Closing”). The transactions constitute a subsequent closing under the Company’s previously designated Series A Convertible Preferred Stock, following the initial closings previously disclosed by the Company.

On July 29, 2026, the Company entered into a Securities Purchase Agreement with CL Investment (the “CL Purchase Agreement”) and a separate Securities Purchase Agreement with LU2 (the “LU2 Purchase Agreement,” and together with the CL Purchase Agreement, the “Purchase Agreements”), in each case for the issuance and sale of shares of the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Convertible Preferred”), and certain common stock purchase warrants (the “Warrants”).

The Convertible Preferred was previously established as a series of the Company’s preferred stock pursuant to the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “COD”), which, the Company filed with the Secretary of State of the State of Delaware on July 10, 2026, and which was corrected by a Certificate of Correction filed on July 24, 2026. The COD designates 25,000 shares of Convertible Preferred, having a stated value of $1,000 per share (the “Stated Value”). Immediately prior to the transactions described herein, 500 shares of Convertible Preferred were issued and outstanding. Pursuant to the COD, the Convertible Preferred bears a dividend that accrues monthly at a rate of 10% per annum and is convertible into shares of Common Stock (the “Preferred Conversion Shares”) at the Market Conversion Price. The “Market Conversion Price” is equal to 90% of the lowest volume-weighted average price of the Common Stock for the seven consecutive trading days immediately preceding the applicable conversion date, but not less than the floor price set forth in the COD.

Pursuant to the CL Purchase Agreement, the Company agreed to issue and sell to CL Investment, and CL Investment agreed to purchase from the Company,833 shares of Convertible Preferred (representing an aggregate Stated Value of $833) at a purchase price equal to 90% of the Stated Value, for an aggregate subscription amount of $749. Pursuant to the LU2 Purchase Agreement, the Company agreed to issue and sell to LU2, and LU2 agreed to purchase from the Company,278 shares of Convertible Preferred (representing an aggregate Stated Value of $278) at a purchase price equal to approximately 90% of the Stated Value, for an aggregate subscription amount of $250. At the Closing on August 5, 2026, the Company issued an aggregate of 1,111 shares of Convertible Preferred to the Investors, for aggregate gross proceeds to the Company of $1,000, before deducting fees and expenses. After giving effect to these issuances,1,611 shares of Convertible Preferred were issued and outstanding.

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.

On August 16, 2026, the Company terminated the Restructuring, Implementation and Management Services Agreement with MCC. (See Note 9.)

NOTE 12. SEGMENT INFORMATION

The Company operates and manages its business asone reportable and operating segment. The Company designs, manufactures, and sells DC power systems for applications that do not have access to the utility grid (i.e., prime power and mobile applications) or have critical power needs and cannot be without power in the event of utility grid failure (i.e., back-up power applications). The measure of segment assets is reported on the balance sheet as total assets. In addition, the Company generates revenue primarily from the sale of its DC power systems, and to a lesser extent from the sale of parts and services to support its DC power systems. The Company manages the business activities on a consolidated basis.

The Company’s chief operating decision maker (“CODM”), Arthur D. Sams, reviews financial information presented on a consolidated basis and decides how to allocate resources based on net income (loss). Consolidated net income (loss) is used for evaluating financial performance and in establishing management’s compensation.

Significant segment expenses include research and development, salaries, insurance, and stock-based compensation. Operating expenses include all remaining costs necessary to operate our business, which primarily include external professional services and other administrative expenses. The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM: