Polar Power, Inc. (the ?Company?) entered into a Loan and Security Agreement (the ?Loan Agreement?) with Pinnacle Bank (?Pinnacle?). The Loan Agreement has been amended four times. The Loan Agreement, as most recently amended on September 5, 2023, provides for a revolving credit facility under which Pinnacle may, in its sole discretion upon the request of the Company, make advances to the Company in an amount, subject to certain limitations and adjustments, of up to (a) 85% of the aggregate net face amount of the Company?s accounts receivable and other contract rights and receivables, plus (b) the lesser of (i) 35% of the lower of cost or wholesale market value of certain inventory of the Company or (ii) $2.5 million.

In no event will the aggregate amount of the outstanding advances under the revolving credit facility be greater than $6 million. The Loan Agreement?s initial term ended on August 30, 2022 and has been renewed for two additional one-year terms with an expiration date of September 30, 2024. On September 5, 2023, the Company entered into a Fifth Modification to Loan and Security Agreement (the ?Fifth Modification?) by and between the Company and Pinnacle under which the parties agreed to: Extend the 90-day period on AT&T accounts receivable to 120 days; Increase the lesser of (i) 35% of the lower of cost or wholesale market value of certain inventory of the Company or (ii) $2.5 million to the lessor of (i) 40% of the aggregate eligible inventory value of eligible inventory or (ii) $4.0 million; Increase the aggregate advance limit under the credit facility from $6.0 million to $7.5 million; and Among other items, impose the Company?s payment of $22,500, 1.5% of the $1.5 million increase in the inventory advance limit, plus a $500 document fee, to Pinnacle, as conditions precedent to the Fifth Modification.