Quarterly Report for Quarter Ending March 31, 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 in an environmentally regulated enclosure.
	●	Hybrid power systems. These systems integrate lithium-ion batteries (or other advanced battery chemistries) storage and our standard DC power systems to provide power in both bad and off-grid applications.
	●	DC solar hybrid power systems. These stationary systems incorporate photovoltaic and other sources of renewable energy into our DC hybrid power system.
	●	Mobile power systems. These are very light weight and compact power systems used for EV charging, robotics, communications, security.

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

During the three months ended March 31, 2026 and March 31, 2025, 96% and 82%, respectively, of our total net sales were within the telecommunications market. During the first quarter of 2026, our largest customer, a Tier-1 telecommunications customer in the U.S., represented 72% of our total net sales. During the same period in 2025, our two largest customers represented 71% and 17% of our total net sales, respectively, one being a Tier-1 telecommunications customer in the U.S. and one being a customer in the military market in the U.K. There was no other revenue from customers in excess of 10% of total net sales in either period. During those periods, the majority of our sales were of our DC base powers systems. During three months ended March 31, 2026 and 2025, sales to international customers accounted for 5% and 18% of total net sales, respectively. Sales to military customers during three months ended March 31, 2026 and 2025 accounted for 3% and 17% of total net sales, respectively. During three months ended March 31, 2026 and 2025, sales to customers in the marine and other markets accounted for 1% 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.

In May 2023, we announced plans to expand 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. 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 months ended March 31, 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

None.

Critical Accounting Policies

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 March 31, 2026 were $1,728, compared to $1,723 for the three months ended March 31, 2025. We reported a net loss of $178 for the three months ended March 31, 2026, as compared to a net loss of $1,265 for the same period in 2025. Cost reductions in operating expenses helped improve the net loss from 2025 to 2026.

We believe revenue during the quarter ended March 31, 2026 continued to be impacted by excess inventory at our customer's warehouse in addition to economic and geopolitical factors influencing our customers' buying decisions.

During 2026, we plan 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 20 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 March 31, 2026 Compared to the Three Months Ended March 31, 2025

		Three Months Ended March 31,								Dollar Variance				Percentage Variance				Results as a Percentage of Net Sales for the Period Ended March 31,
		2026				2025				Favorable (Unfavorable)				Favorable (Unfavorable)				2026				2025
		(unaudited)				(unaudited)
Net sales		$	1,728			$	1,723			$	5				-	%			100.0	%			100.0	%
Cost of sales			593				1,403				810				58	%			34.3	%			81.4	%
Gross profit			1,135				320				815				255	%			65.7	%			18.6	%
Sales and marketing expenses			159				260				101				39	%			9.2	%			15.1	%
Research and development expenses			169				160				(9	)			(6	)%			9.8	%			9.3	%
General and Administrative expenses			783				1,001				218				22	%			45.3	%			58.1	%
Total operating expenses			1,111				1,421				310				22	%			64.3	%			82.5	%
Income (loss) from operations			24				(1,101	)			1,125				102	%			1.4	%			(63.9	)%
Interest and finance costs			(202	)			(164	)			(38	)			(23	)%			(11.7	)%			(9.5	)%
Loss before income taxes			(178	)			(1,265	)			1,087				86	%			(10.3	)%			(73.4	)%
Income tax benefit			-				-				-				-	%			-	%			-	%
Net loss		$	(178	)		$	(1,265	)		$	1,087				86	%			(10.3	)%			(73.4	)%

Net Sales. Net sales increased $5 to $1,728 for the three months ended March 31, 2026, as compared to $1,723 for the same period in 2025. During the three months ended March 31, 2026, our largest customer accounted for 72% of our total net sales. During the same period in 2025, our two largest customers accounted for 71% and 17% of our total net sales, respectively. There was no other revenue from customers in excess of 10% of total net sales in either period.

Net sales to telecommunications customers in the U.S. accounted for 96% of our total net sales for the three months ended March 31, 2026, as compared to 82% for the same period in 2025. Our international sales represented 5% of our net sales in the three months ended March 31, 2026, as compared to 18% in international sales in the same period in 2025.

Cost of Sales. Cost of sales during the three months ended March 31, 2026 decreased by $810, or 58%, to $593, as compared to $1,403 during the same period in 2025. Cost of sales as a percentage of net sales during the three months ended March 31, 2026 decreased to 34.3% as compared to 81.4% in the same period in 2025. The decrease in cost of sales was primary attributable to a $450 adjustment to warranty reserve and decrease in factory overhead absorption in three months ended March 31, 2026 as compared to the same period in 2025.

Gross Profit. We had a gross profit of $1,135 for the three months ended March 31, 2026, which is an increase of $815, or 255%, as compared to gross profit of $320 during the same period in 2025. The increase in gross profit for the three months ended March 31, 2026, was primarily a result of a $450 adjustment to warranty reserve and a decrease in factory overhead absorption during the three months ended March 31, 2026. Our gross profit as a percentage of net sales was 65.7% for the quarter ended March 31, 2026, as compared to a gross profit as a percentage of net sales of 18.6% in the same period in 2025.

Sales and Marketing Expenses. During the three months ended March 31, 2026, sales and marketing expenses decreased by $101, or 39%, to $159, as compared to $260 during the same period in 2025. The decrease was attributable to a decrease in marketing expenditures during three months ended March 31, 2026 as compared to the same period in 2025. We plan to increase our sales force and increase our marketing and tradeshow activities in 2026 to support our diversification strategy and expand our customer base in all market segments.

Research and Development Expenses. During the three months ended March 31, 2026, research and development expenses increased by $9 or 6%, to $169, as compared to $160 during the same period in 2025. The decrease in research and development expenses resulted from a decrease in new product development activity during the same period in 2026. 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 were $783 for the three months ended March 31, 2026, as compared to $1,001 for the same period in 2025. The 22% decrease in general and administrative expenses resulted from consolidating administrative tasks to improve efficiency.

Interest and Finance Costs. Interest expense for the three months ended March 31, 2026 was $202, as compared to $164 during the same period in 2025. The interest expense was primarily from an interest on amount borrowed from our line of credit with Pinnacle Bank ("Pinnacle").

Net Loss. As a result of the factors identified above, we reported net loss of $178, or $(0.05) per basic and diluted share, for the three months ended March 31, 2026, as compared to net loss of $1,265, or $(0.50) per basic and diluted share, for the same period in 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 months ended March 31, 2026, the Company recorded a net loss of $178 and used cash in operations of $2,191. 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 three months ended March 31, 2026, we funded our operations primarily from cash on hand. As of March 31, 2026, we had working capital of $2,106, as compared to working capital deficit of $(262) at December 31, 2025. This $2,368 increase in working capital was primarily attributable to $173 decrease in cash and cash equivalents resulting from net cash of $2,191 used in operating activities, net cash of $nil used in investing activities, and net cash of $2,018 from financing activities.

On March 31, 2026 and December 31, 2025, our net trade receivables totaled $1,511 and $330, respectively. On March 31, 2026, $1,252 (83%) represented the largest open customer account balance, while $196 (59%) and $58 (18%) represented the two largest open customer account balances on December 31, 2025.

Our available capital resources on March 31, 2026 consisted primarily of $27 in cash and cash equivalents, as compared to $68 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 and future debt or equity financings, if any.

Credit Facility

Effective September 30, 2020, the Company entered into a Loan and Security Agreement (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. The Loan Agreement contains certain affirmative and negative covenants.

Borrowings based on receivables bear 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 March 31, 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 March 31, 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 March 31, 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 $6,000On 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 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 (as defined by the Forbearance Agreement) 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 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 expects to stay in compliance and pay the full obligation to Pinnacle by July 31, 2026, there is no guarantee that the Company will be able to do so. If the Company is unable to comply with the Loan Agreement, or pay the full obligation to Pinnacle by the July 31, 2026, Pinnacle may immediately enforce its claims, rights, liens, and security interests under the Forbearance Agreement, and the Loan Documents, including, but not limited to, taking possession of its collateral, or any portion thereof, and foreclosing upon its collateral, or any portion thereof, in accordance with the Loan Documents and applicable law.

The balance of the loan agreement at December 31, 2025 was $4,036. During 2026, the Company repaid a net of $332 to reduce the Loan. At March 31, 2026, the outstanding balance under the line of credit was $3,704 which includes interest, fees and financing costs (see below), and $1,498 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 during the three months ended March 31, 2026 and 2025 were $125 and $160, respectively, and were recorded under interest expense and finance costs in the accompanying statements of operations.

Cash Flow

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

		March 31, 2026				March 31, 2025
		(Unaudited)				(Unaudited)
Net Cash Provided By (Used In)
Operating Activities		$	(2,191	)		$	(584	)
Investing Activities			-				-
Financing Activities			2,018				154
Net decrease in cash		$	(173	)		$	(430	)

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2026 was $2,191 as compared to net cash used in operating activities of $584 for the same period in 2025. This increase in net cash used in the three months ended March 31, 2026 was primarily due to a net loss of $178, an increase in accounts receivable of $1,181, and an increase in accounts payable of $111.

Investing Activities

We did not have any investing activities for the three months ended March 31, 2026 and March 31, 2025.

Financing Activities

Net cash provided by financing activities totaled $2,018 for the three months ended March 31, 2026, as compared to $154 provided by financing activities during the same period in 2025. This cash provided during 2026 was primarily proceeds from shares sold under the ATM facility.

Backlog

As of March 31, 2026, we had a backlog of $3,744. The amount of backlog represents revenue that we anticipate recognizing in the future, as evidenced by purchase orders and other purchase commitments received from customers, but on which work has not yet been initiated or with respect to which work is currently in progress. Backlog at March 31, 2026 was comprised of the following elements: 82% in purchases of DC power systems by telecommunications customers, and 18% in purchases by customers in the military markets. We believe the majority of our backlog will be shipped within the next six months.