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Polar Power Reports Second Quarter 2019 Financial Results

Management to Host Conference Call Today at 4:30 p.m. EDT

/EIN News/ -- GARDENA, Calif., Aug. 12, 2019 (GLOBE NEWSWIRE) -- Polar Power, Inc. (NASDAQ: POLA), a global provider of prime, backup and solar hybrid DC power solutions, today reported its financial results for the second quarter and six months ended June 30, 2019.

Key 2Q 2019 Results and Highlights:

Financial Results for the Three and Six Months Ended June 30, 2019

  • Net sales for Q2 2019 were $9.2 million, a 59% increase compared to $5.8 million in the same period last year. Net sales for the six months ended June 30, 2019 were $17.0 million, a 59% increase, as compared to $10.7 million in the same period last year.
     
  • Backlog as of the end of Q2 2019 was $7.6 million, compared to $5.8 million at end of Q2 2018. The increase in sales backlog was primarily attributable to the increased sales of DC power systems to Tier-1 telecom customers.
     
  • Gross profit during the Q2 2019 increased by $0.9 million, or 44%, to $3.0 million, as compared to $2.1 million in the same period in 2018. Gross margins during Q2 2019 decreased to 32.1%, as compared to 35.5% during Q2 2018 as a result of sales discounts for higher volume sales received from Tier-1 telecom customers. Gross profit during the six months ended June 30, 2019, increased $1.8 million to $5.3 million, as compared to $3.5 million for the same period in 2018. The gross margin during the six months ended June 30, 2019 was 31.5%, as compared to 33.2% during the same period in 2018.  
     
  • Operating expenses were $2.4 million during Q2 2019, as compared to $1.8 million for Q2 2018. Operating expenses for the six months ended June 30, 2019 were $4.7 million, as compared to $3.5 million for the same period in 2018. The year-over-year increase in operating expenses is attributable to an increase in sales support activities, added management to support our production ramp-up, and the addition of office rent related to our new facility. These initiatives are in part of our ongoing strategy to increase our production capacity and diversify our customer base.
     
  • Net income for Q2 2019 totaled $0.6 million, or $0.06 per basic and diluted share, compared to a net income of $0.2 million, or $0.02 per basic and diluted share in Q2 2018. Net income for the six months ended June 30, 2019 totaled $0.6 million, or $0.06 per basic and diluted share, compared to a net loss of $0.1 million, or $(0.01) per basic and diluted share during the same period in 2018. The increase in net income is attributed to higher shipment and improved production efficiency during second quarter when compared to same period last year.
     
  • Cash at June 30, 2019 totaled $5.4 million, as compared to $5.6 million at December 31, 2018. During the six months ended June 30, 2019, we funded our operations primarily from cash on hand and borrowings under our Supplier Agreement with Citibank. These funds were also used to make capital expenditures and to increase inventory to support a higher level of production. As of June 30, 2019, we had working capital of $21.0 million, which had a slight increase of $217K from our total at December 31, 2018.

Management Commentary

“During the first half of 2019, we are only just starting  to see the positive impact of our investments in production  equipment and inventory. Additional plant capacity has positively impacted our revenue and production efficiency, while simultaneously lowering our backlog and enabling us to achieve our targeted lead times. We believe, our investments in plant automation and capacity will give us additional flexibility to optimize production schedules to achieve even higher labor efficiencies and margins,” commented Arthur Sams, the CEO of Polar Power.

Mr. Sams continued, “In the remainder of 2019 we plan to roll out new products designed to increase our market share with domestic Tier-1 and Tier-2 customers as well as in the with overseas telecom markets as we  build and automate our production facilities.

The transition of telecom to 5G and “Edge Computing at the cell tower” requires an increase in power and reliability. There is also a desire among our telecom customers of not increasing the use of land space at cell sites in this transition to prevent increases in rent and permitting costs. During 2019, we began demonstrating higher-power DC generators to our Tier-1 customers without a change in weight or footprint of the generators. AC generators can be up to twice the size and weight of our DC generators, which are based on permanent magnet technology. We believe that as the need for more power grows, the size and weight difference between AC generators and our DC generators will become another tipping point in favor of our DC generators.

Along with the need for increased power and reliability, more compact and lower maintenance types of storage solutions are required.  We will be introducing significant upgrades to our lithium-ion storage systems. We have upgraded our battery management electronics and software along with adding environmental controls for cell temperatures and the ability to manage multiple battery modules in parallel configurations along with improved cell protection from overcharge and discharge. Lithium-ion batteries are approximately 1/4 the space and weight of lead acid-based chemistries.

In 2012, we introduced DC power backup systems that integrated our DC generators with supercapacitors to eliminate the need for a backup battery. The energy stored in the supercapacitors supplies power for the short-term grid disruptions and the energy supplied in the fuel of the DC generator provides the power needed for the extended power outages. The supercapacitors also provided uninterrupted power to the load while the DC generator starts up and take over the electrical load. This solution is very compact, reliable, and low maintenance. During the last three years, due to higher usage of supercapacitors in electric vehicles and energy storage applications, there has been a significant reduction in the cost of supercapacitors. This cost reduction, together with market acceptance of supercapacitors as reliable energy storage devices, has reinvigorated interest by telecom companies in our compact DC power backup solution introduced seven years ago.

Our increasing product and service offerings are improving our competitiveness within our market space. And this is helping to diversify our customer base along with building revenues.  

We believe our business from domestic Tier-1 telecom customers, which are still in the early stages of a multiyear expansion cycle, is driven primarily by need for network reliability.  The telecom industry’s capital investment to upgrade existing telecom sites with backup power systems is competing with the capital needs for expansion of 5G and “cell site Edge” networks. We believe these rollouts will exponentially expand the use of data and video streaming services including IoT uses, autonomous vehicles, industrial internet, etc., thereby requiring robust backup systems that eliminate the smallest data disruptions. We believe our higher capacity backup systems, which are more dense in terms of storage and power, satisfy the need for next generation cell sites.

Furthermore, increased production capacity along with a stronger sales force allows us to pursue small to medium size “Last Mile” telecom providers that address off-grid and rural applications.

 Overall, in 2019 we are pleased with the progress we have made in: fending off tariffs, supply chain disruptions, increasing production capacity and bending the gross margin curve through improvements in production efficiency and controlling manufacturing overhead costs. We believe our products and technologies have significant opportunities in the military, marine, EV-charging and renewable energy markets and we are just at the beginning of becoming a diversified global company.” 

Conference Call Details

Polar Power CEO Arthur Sams, COO Rajesh Masina and CFO Luis Zavala will host the conference call, followed by a question and answer period.

To access the call, please use the following information:

Date:    Monday August 12, 2019
Time:   4:30 p.m. ET, 1:30 p.m. PT
Toll-free dial-in number:        1-888-394-8218
International dial-in number:    1-323-794-2588
Conference ID:    8102366
     

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Integra Investor Relations at 415-233-7094.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=135690 and via the investor relations section of the Company’s website at www.polarpower.com.

A replay of the conference call will be available after 7:30 p.m. Eastern time through August 19, 2019.

Toll-free replay number:    1-844-512-2921 
International replay number:   1-412-317-6671 
Replay ID:      8102366
     

About Polar Power, Inc.

Gardena, California-based Polar Power, Inc. (NASDAQ: POLA), designs, manufactures and sells direct current, or DC, power systems, lithium battery powered hybrid solar systems for applications in the telecommunications market and, in other markets, including military, electric vehicle charging, cogeneration, distributed power and uninterruptable power supply. Within the telecommunications market, Polar’s systems provide reliable and low-cost energy for applications for off-grid and bad-grid applications with critical power needs that cannot be without power in the event of utility grid failure. For more information, please visit www.polarpower.com. or follow us on www.linkedin.com/company/polar-power-inc/

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 
This news release contains certain statements of a forward-looking nature relating to future events or future business performance. Forward-looking statements can be identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “plans,” “will,” “outlook” and similar expressions. Forward-looking statements are based on management’s current plans, estimates, assumptions and projections, and speak only as of the date they are made. With the exception of historical information, the matters discussed in this press release including, without limitation, Polar Power’s belief that it is only starting to see the positive impact of its investments in production equipment and inventory and that such investments will provide Polar Power with additional flexibility to achieve higher margins; Polar Power’s belief that its products, which are lower in weight and smaller in size than comparable AC generators is a tipping point in favor of Polar Power’s DC generators; Polar Power’s belief that its business from domestic Tier-1 telecom customers is still in the early stages of a multiyear expansion cycle; Polar power’s belief that the telecom industry’s rollout of 5G technology will exponentially expand the use of data and video streaming services thereby requiring robust backup systems; and Polar Power’s belief that it is at the beginning of becoming a diversified global company are forward-looking statements and considerations that involve a number of risks and uncertainties. The actual future results of Polar Power could differ from those statements. Factors that could cause or contribute to such differences include, but are not limited to, adverse domestic and foreign economic and market conditions, including demand for DC power systems; trade tariffs on raw materials; changes in domestic and foreign governmental regulations and policies; and other events, factors and risks. We undertake no obligation to update any forward-looking statement in light of new information or future events, except as otherwise required by law. Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Actual results or outcomes may differ materially from those implied by the forward-looking statements as a result of the impact of a number of factors, many of which are discussed in more detail in our reports filed with the Securities and Exchange Commission.

Media and Investor Relations:
Integra Investor Relations
Shawn M. Severson
+1 415-233-7094
info@integra-ir.com
@Integra IR
www.integra-ir.com

Company Contact:
Polar Power, Inc.
249 E. Gardena Blvd.
Gardena, CA 90248
Tel: 310-830-9153
ir@polarpowerinc.com
www.polarpower.com


 POLAR POWER, INC.
BALANCE SHEETS 
 
             
    June 30,
2019
    December 31,
2018
 
    (Unaudited)        
ASSETS                
 Current assets                
Cash and cash equivalents (including restricted cash $1,002,683 at December 31, 2018)     $ 5,430,916       $ 5,640,078  
Accounts receivable       5,900,897         7,726,919  
Inventories, net       12,125,062         8,471,769  
Prepaid expenses       1,170,164         468,666  
Refundable income taxes       231,444         715,916  
Total current assets       24,858,483         23,023,348  
                 
Operating lease right-of-use assets, net       2,490,784          
Property and equipment, net       2,117,906         2,122,757  
Deposits       94,001         94,001  
Total assets     $ 29,561,174       $ 25,240,106  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities                
Accounts payable     $ 1,367,138       $ 1,066,415  
Customer deposits       244,101         79,184  
Accrued expenses and other current liabilities       1,121,608         504,559  
Current portion of operating lease liabilities       562,126          
Current portion of notes payable       278,465         283,388  
Total current liabilities       3,573,438         1,933,546  
                 
Operating lease liabilities, net of current portion       1,975,459          
Notes payable, net of current portion       834,878         924,539  
                 
Total liabilities       6,383,775         2,858,085  
                 
Commitments and Contingencies                
                 
Stockholders’ Equity                
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding                
Common stock, $0.0001 par value, 50,000,000 shares authorized, 10,143,158 shares issued and outstanding       1,014         1,014  
Additional paid-in capital       19,736,314         19,578,426  
Retained earnings       3,440,071         2,802,581  
Total stockholders’ equity       23,177,399         22,382,021  
                 
Total liabilities and stockholders’ equity     $ 29,561,174       $ 25,240,106  


   
POLAR POWER, INC.
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)
 
   
  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
    2019       2018     2019       2018    
Net Sales $ 9,236,548     $ 5,815,775     $ 16,983,333       $ 10,687,687    
Cost of Sales   6,274,404       3,753,586       11,629,164         7,141,860    
Gross Profit   2,962,144       2,062,189       5,354,169         3,545,827    
                           
Operating Expenses                          
Sales and marketing   695,438       639,832       1,325,472         1,250,169    
Research and development   541,380       336,580       1,103,650         800,681    
General and administrative   1,152,748       847,517       2,274,244         1,584,034    
Total operating expenses   2,389,566       1,823,929       4,703,366         3,634,884    
                           
Income (loss) from operations   572,578       238,260       650,803         (89,057 )  
                           
Other (expenses) income                          
Interest expense   (10,012 )     (2,394 )     (20,713 )       (5,404 )  
Other income (expense)   4,221       (12,425 )     7,400         (900 )  
Total other (expenses) income, net   (5,791 )     (14,819 )     (13,313 )       (6,304 )  
                           
Income (loss) before income taxes   566,787       223,441       637,490         (95,361 )  
Net income (loss) $ 566,787     $ 223,441     $ 637,490       $ (95,361 )  
                           
Net income (loss) per share – basic and diluted $ 0.06     $ 0.02     $ 0.06       $ (0.01 )  
Weighted average shares outstanding, basic and diluted   10,143,158       10,143,158       10,143,158         10,143,158    


POLAR POWER, INC.
STATEMENTS OF CASH FLOWS

(Unaudited) 
 
   
    Six Months Ended
June 30,
 
    2019       2018    
Cash flows from operating activities:                
Net income (loss)   $ 637,490       $ (95,361 )  
Adjustments to reconcile net income (loss) to net cash used in operating activities:                
Fair value of vested stock options     157,888         128,383    
Depreciation and amortization     295,221         154,947    
Amortization of operating lease right-of-use asset     239,282            
Changes in operating assets and liabilities                
Accounts receivable     1,826,022         (1,173,814 )  
Inventories     (3,653,293 )       (797,992 )  
Prepaid expenses     (815,385 )       (298,929 )  
 Deposits             (26,705 )  
 Refundable income taxes     484,472            
 Accounts payable     300,723         (346,997 )  
 Customer deposits     164,917         158,124    
 Accrued expenses and other current liabilities     647,358         4,616    
 Decrease in lease liability     (222,790 )          
Net cash from (used in) operating activities     61,905         (2,293,728 )  
                 
Cash flows from investing activities:                
Acquisition of property and equipment     (176,483 )       (138,821 )  
Net cash used in investing activities     (176,483 )       (138,821 )  
                 
Cash flows from financing activities:                
Repayment of notes     (94,584 )       (54,578 )  
Net cash used in financing activities     (94,584 )       (54,578 )  
                 
Decrease in cash and cash equivalents     (209,162 )       (2,487,127 )  
Cash and cash equivalents, beginning of period     5,640,078         14,201,163    
Cash and cash equivalents, end of period   $ 5,430,916       $ 11,714,036    


SUPPLEMENTAL NON-CASH INVESTING AND          
FINANCING ACTIVITIES:          
Initial recognition of operating lease right-of-use assets and          
  operating lease obligations upon adoption of ASC Topic 842  $  2,847,495   $
Reclassification of prepaid expenses to property and equipment  $ 113,887   $

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