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What changed in PIONEER POWER SOLUTIONS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PIONEER POWER SOLUTIONS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+235 added−248 removedSource: 10-K (2024-07-26) vs 10-K (2023-04-11)

Top changes in PIONEER POWER SOLUTIONS, INC.'s 2023 10-K

235 paragraphs added · 248 removed · 138 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

33 edited+9 added−15 removed27 unchanged
Biggest changeDuring the year ended December 31, 2022, the Company experienced a surge in orders for its E-Bloc power system which was the primary driver for the increase in the Company’s year over year ending backlog. Orders included in our sales backlog are represented by customer purchase orders and contracts that we believe to be firm.
Biggest changeOur revenue backlog as of December 31, 2023 was approximately $45,165, as compared to $38,278 as of December 31, 2022. During the year ended December 31, 2023, we experienced a surge in orders and contracts for our mobile EV charging solutions, e-Boost, which was the primary driver for the increase in our revenue backlog.
North America is estimated to reach $194 billion by 2027, at a significant CAGR of 27.5%. In 2010, only about 17,000 electric vehicles were on the world’s roads. By 2019, that number had swelled to 7.2 million and is increasing rapidly according to the International Energy Agency (IEA).
North America is estimated to reach $194 billion by 2027, at a significant CAGR of 27.5%. In 2010, only about 17,000 electric vehicles were on the world’s roads. By 2019, that number had swelled to 7.2 million and is increasing rapidly according to the International Energy Agency.
We believe several of the key industry trends supporting future growth in our industry are as follows: ● Aging and Overburdened North American Power Grid — The aging and overburdened North American power grid is expected to require significant capital expenditures to upgrade the existing infrastructure over the next several years to maintain adequate levels of reliability and efficiency.
We believe that several of the key industry trends supporting future growth in our industry are as follows: ● Aging and Overburdened North American Power Grid — The aging and overburdened North American power grid is expected to require significant capital expenditures to upgrade the existing infrastructure over the next several years to maintain adequate levels of reliability and efficiency.
We believe these factors give us a competitive advantage and that they are a major contributor to our frequency of repeat customer orders and the longevity of our customer relationships. 8 Raw Materials and Suppliers The principal raw materials purchased by us are steel, copper, sensors, circuit breakers, meters, cassettes and relays.
We believe these factors give us a competitive advantage and that they are a major contributor to our frequency of repeat customer orders and the longevity of our customer relationships. Raw Materials and Suppliers The principal raw materials purchased by us are steel, copper, sensors, circuit breakers, meters, cassettes and relays.
In response to these challenges, there is an increasing trend among commercial and industrial companies to invest in on-site power sources, both for standby purposes in the event of a catastrophic power outage, or to reduce the amount of electricity they draw from the utility grid during peak periods. ● Rapidly Expanding Electric Vehicle (EV) and Charging Infrastructure Market — A report from Allied Market Research in 2020 projected that the global electric vehicle market will reach $803 billion by the year 2027, registering a compound annual growth rate (CAGR) of 22.6%.
In response to these challenges, there is an increasing trend among commercial and industrial companies to invest in on-site power sources, both for standby purposes in the event of a catastrophic power outage, or to reduce the amount of electricity they draw from the utility grid during peak periods. ● Rapidly Expanding EV and Charging Infrastructure Market — A report from Allied Market Research in 2020 projected that the global electric vehicle market will reach $803 billion by the year 2027, registering a compound annual growth rate (“CAGR”) of 22.6%.
Significant capital investment will be required to relieve congestion, meet growing demand, achieve targets for efficiency, emissions and use of renewable sources, and to replace components of the U.S. power grid operating at, near or past their planned service lives. ● Increasing Long-Term Demand for Electricity and Reliable Power — The Department of Energy’s Energy Information Administration, or EIA, forecasts that total electricity use in the U.S. will increase by approximately 28% from 2011 to 2040.
Significant capital investment will be required to relieve congestion, meet growing demand, achieve targets for efficiency, emissions and use of renewable sources, and to replace components of the U.S. power grid operating at, near or past their planned service lives. ● Increasing Long-Term Demand for Electricity and Reliable Power — The Department of Energy’s Energy Information Administration, or EIA, forecasts that total electricity use in the United States will increase by approximately 28% from 2011 to 2040.
Power Generation Equipment ▪ Engine-generator sets: power generation equipment with up to 2 MW of power output per genset, sourced from several manufacturers and available for install by our expert, licensed technicians. ▪ Available individually or in multi-unit paralleled configurations. Fuel options include liquid propane, natural gas, diesel and bi-fuel. ▪ Uninterruptible Power Supply (UPS) systems.
Power Generation Equipment ▪ Engine-generator sets: power generation equipment with up to 2 MW of power output per genset, sourced from several manufacturers and available for install by our expert, licensed technicians. ▪ Available individually or in multi-unit paralleled configurations. Fuel options include liquid propane, natural gas, diesel and bi-fuel. ▪ Uninterruptible Power Supply (“UPS”) systems.
On the investor relations section of our website, we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file them with or furnish them to the Securities and Exchange Commissions (“SEC”).
On the investor relations section of our website, we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file them with or furnish them to the Securities and Exchange Commission (“SEC”).
Certain of our employees located at our manufacturing facility in Santa Fe Springs, California are covered by a collective bargaining agreement with Local Union 1710 of the International Brotherhood of Electrical Workers, AFL-CIO that expires in June 2024.
Certain of our employees located at our manufacturing facility in Santa Fe Springs, California are covered by a collective bargaining agreement with Local Union 1710 of the International Brotherhood of Electrical Workers, AFL-CIO that expires in June 2027.
We serve customers in a variety of industries including, but not limited to, utilities, EV charging infrastructure, data center developers and owners, distributed energy resource developers, EPC contractors and renewable energy developers and producers.
We serve customers in a variety of industries including, but not limited to, utilities, EV charging infrastructure integrators, data center developers and owners, distributed energy resource developers, contractors, and renewable energy developers and producers.
The contents of and the information on or accessible through our corporate website, including the investor relations portion of our website, are not a part of, and are not intended to be incorporated into, this report or any other report or document we file with or furnish to the SEC, and any references to our website are intended to be an inactive textual references only. 9
The contents of and the information on or accessible through our corporate website, including the investor relations portion of our website, are not a part of, and are not intended to be incorporated into, this report or any other report or document we file with or furnish to the SEC, and any references to our website are intended to be inactive textual references only. 6
To complete our geographic coverage, we maintain a network of field service partners located in other regions, enabling us to provide quick-response, 24/7 service capability that can effectively service and maintain any make and model of back-up power equipment.
To complete our geographic coverage, we maintain a network of field service partners located in other regions, enabling us to provide a quick-response, 24/7 service capabilities that can effectively repair and maintain any make and model of back-up power equipment.
Many orders are custom-engineered and tend to be time-sensitive since other critical work is frequently being coordinated around the customer’s electrical equipment installation. The vast majority of North American demand for the types of solutions we provide is satisfied by thousands of producers and service companies in the U.S.
Many orders are custom-engineered and tend to be time-sensitive since other critical work is frequently being coordinated around the customer’s electrical equipment installation. The vast majority of North American demand for the types of solutions we provide is satisfied by thousands of producers and service companies in the United States.
We intend to significantly increase the percentage of our sales derived from engineered-to-order products and differentiated services and believe this can be accomplished by targeting market segments such as EV charging infrastructure, microgrid developers, national and regional retailers, water treatment facilities, data centers and independent power producers which have growth characteristics exceeding the norm in our industry.
We intend to significantly increase the percentage of our sales derived from engineered-to-order products and differentiated services and believe this can be accomplished by targeting market segments such as EV charging infrastructure, microgrid developers, national and regional retailers, water treatment facilities, data centers and independent power producers which have growth characteristics exceeding the norm in our industry. 3 We intend to build our revenue and net income through internal growth initiatives.
During the years ended December 31, 2022 and 2021, we sold our electrical equipment and services to over 900 individual customers and our twenty largest customers represented approximately 78% and 68% of our consolidated revenue, respectively.
During the years ended December 31, 2023 and 2022, we sold our electrical equipment and services to over 900 individual customers, and our twenty largest customers represented approximately 82% and 77% of our consolidated revenue, respectively.
A representative list of our direct competitors in our T&D Solutions segment includes Crown Electric Engineering and Manufacturing, LLC, Industrial Electric Machinery, LLC, RESA Power, LLC, Eaton Corporation, Switchgear Power Systems, LLC, Myers Power Products, Inc. and Powell Industries, Inc.
A representative list of our direct competitors in our Electrical Infrastructure segment includes Crown Electric Engineering and Manufacturing, LLC, Industrial Electric Machinery, LLC, RESA Power, LLC, Switchgear Power Systems, LLC, Myers Power Products, Inc. and Powell Industries, Inc.
Critical Power Segment Our Critical Power business designs, manufactures and sells mobile EV charging solutions under our e-Boost suite of products, in addition to refurbishing and reselling used power generation equipment, distributing new power generation equipment and performing service and maintenance on our customers’ existing power generation equipment.
We engineer, manufacture and integrate these offerings at our facility in Southern California. 2 Critical Power Segment Our Critical Power business designs, manufactures and sells mobile EV charging solutions under our e-Boost suite of products, in addition to distributing new power generation equipment, refurbishing and reselling used power generation equipment, and performing service and maintenance on our customers’ existing equipment.
Description of Business Segments We have two reportable segments: Transmission & Distribution Solutions (“T&D Solutions”) and Critical Power Solutions (“Critical Power”). ● Our T&D Solutions business provides equipment solutions that help customers effectively and efficiently protect, control, transfer, monitor and manage their electric energy requirements. These solutions are marketed principally through our Pioneer Custom Electrical Products Corp.
Description of Business Segments We have two reportable segments: Electrical Infrastructure Equipment (“Electrical Infrastructure”) and Critical Power Solutions (“Critical Power”). ● Our Electrical Infrastructure business provides equipment solutions that allow customers to effectively and efficiently protect, control, transfer, monitor and manage their electric energy usage and requirements. These solutions are marketed principally through our Pioneer Custom Electrical Products Corp.
Our direct sales force, as well as our authorized manufacturers’ representatives, market to end users and to third parties, such as OEMs, EPC firms, electrical wholesalers, energy developers and value added integrators.
Our direct sales force and authorized representatives market our products and services to end users and third parties, such as original equipment manufacturers, EPC firms, electrical wholesalers, energy developers and value-added integrators.
The balance of the contract is expected to be completed and recognized in the first quarter of 2023. 4 Summary of T&D Solutions Segment Offerings Product Category Solutions Power Systems ▪ Integrated Power Centers (“IPC”): indoor and outdoor power systems integrating any combinations of the following, but not limited to: switchgear, controls, engine generator sets, energy storage, fuel cells, solar power and EV charging solutions marketed and internally designated as “E-Bloc” power solutions.
Summary of Electrical Infrastructure Segment Offerings Product Category Solutions Power Systems ▪ Integrated Power Centers (“IPC”): indoor and outdoor power systems integrating any combination of the following, but not limited to: switchgear, controls, engine generator sets, energy storage, fuel cells, solar power, and EV charging solutions marketed and internally designated as “E-Bloc” power solutions.
In addition, we distinguish ourselves by producing a wide range of highly engineered power solutions, sold either directly to end users, engineering, procurement and construction (“EPC”) firms, or through electrical distributors.
In addition, we distinguish ourselves by producing a wide range of highly engineered power solutions, typically integrating circuit protection, metering and transmission schemes, as well as unitized medium and low voltage substations. Electrical Infrastructure equipment is sold either directly to end users, engineering, procurement and construction (“EPC”) firms, or through electrical distributors.
We are focused on internal growth through operating efficiencies, new product development, customer focus and our continued migration towards more highly-engineered products and specialized services.
Business Strategy We believe we have established a stable platform from which to develop and grow our business lines, revenue, profitability and shareholder value. We are focused on internal growth through operating efficiencies, new product development, customer focus and our continued migration towards more highly-engineered products and specialized services.
Since November 2021, we have been aggressively marketing our e-Boost mobile EV charging products to electric bus and truck manufacturers, fleet management companies, municipalities and EV infrastructure providers. 6 Our Industry The market for T&D equipment and Critical Power solutions is very fragmented due to the range of equipment types, electrical and mechanical properties, technological standards and service parameters required by different categories of end users for their specific applications.
Our Industry The market for Electrical Infrastructure equipment and Critical Power solutions is very fragmented due to the range of equipment types, electrical and mechanical properties, technological standards and service parameters required by different categories of end users for their specific applications.
Customers For the years ended December 31, 2022 and 2021, 100% of our sales were to U.S. customers, represented in large part by companies involved in distributed generation, regulated and non-regulated utilities and industrial and wholesale business.
In order to meet the rapidly growing demand for EV’s and the infrastructure supporting it, substantial investment in grid connectivity and enhancement will be required. 4 Customers For the years ended December 31, 2023 and 2022, 100% of our sales were to U.S. customers, represented in large part by companies involved in DG, regulated and non-regulated utilities, and industrial and wholesale business.
We are headquartered in Fort Lee, New Jersey and operate from three (3) additional locations in the U.S. for manufacturing, service and maintenance, engineering, and sales and administration. We intend to grow our business through continued internal investments in product development and expansion of our manufacturing, engineering, sales and marketing personnel.
We are headquartered in Fort Lee, New Jersey and operate from three (3) additional locations in the United States for manufacturing, service and maintenance, engineering, and sales and administration.
(“PCEP”) brand name. ● Our Critical Power business provides customers with our suite of mobile e-Boost© EV charging solutions, power generation equipment and all forms of service and maintenance on our customers’ power generation equipment. These products and services are marketed by our operations headquartered in Minnesota, currently doing business under both the Titan Energy Systems Inc.
(“PCEP”) brand name. ● Our Critical Power business provides customers with our suite of mobile e-Boost© EV charging solutions, power generation equipment and all forms of preventative maintenance, repairs, remote monitoring and other equipment service on our customers’ equipment.
Our largest suppliers during the year ended December 31, 2022 included Industrial Connections & Solutions, LLC, Royal Industrial Solutions, B&B Metals, Inc., Eaton Corporation, and Thyssenkrupp Materials NA. Employees As of December 31, 2022, we had 99 employees consisting of 32 salaried staff and 67 hourly workers.
Our largest suppliers during the year ended December 31, 2023 included Industrial Connections & Solutions, LLC, Royal Industrial Solutions, Schweitzer Engineering Laboratories, Inc., Eaton Corporation and Thyssenkrupp Materials NA.
Circuit Protective Equipment ▪ Low and medium voltage switchgear, switchboards and automatic transfer switches. We engineer, manufacture and integrate these offerings at our facility in Southern California.
Circuit Protective Equipment ▪ Low and medium voltage switchgear, switchboards and automatic transfer switches.
Additionally, approximately 19% of our sales during the year ended December 31, 2021 were made to a large international container shipping company in Hawaii. Marketing, Sales and Distribution A substantial portion of the products we offer are sold directly to customers by our marketing and sales personnel operating from our office locations in the U.S.
The majority of our sales to customers were made pursuant to specific contract terms and conditions for each project. Marketing, Sales and Distribution A substantial portion of the products and services we offer are sold directly to customers by our marketing and sales personnel operating from our office locations in the United States.
Our field service organization services more than 2,700 generators owned by more than 900 customers located throughout the United States and its territories, including for multi-site, multi-state customers. 5 We recognize discrete revenue streams from service contracts, sales, installation, maintenance and repair services, and we offer service contracts to all owners of power generation and related equipment, whether or not the equipment was originally sold by us.
We recognize discrete revenue streams from service contracts, sales, installation, maintenance and repair services, and we offer service contracts to all owners of power generation and related equipment, whether or not the equipment was originally sold by us. Our service agreements have terms ranging from one to five years in duration, providing the Company with a recurring revenue stream.
Sales Backlog Backlog reflects the amount of revenue we expect to realize upon the shipment of customer orders for our products that are not yet complete or for which work has not yet begun or been completed. Our sales backlog as of December 31, 2022 was approximately $37.2 million, as compared to $22.8 million as of December 31, 2021.
Revenue Backlog Revenue backlog, which consists of purchase orders and contracts from customers that we believe to be firm, reflects the amount of revenue that we expect to realize in the future upon the satisfaction of customer orders for our products or services that are not yet complete or for which work has not yet begun.
(“Titan”) and Pioneer Critical Power brand names. T&D Solutions Segment We design, manufacture, integrate and sell a wide range of distribution and transmission equipment. Our focus since approximately 2020 has been to address the Distributed Generation (“DG”) and Electric Vehicle Charging Infrastructure (“EVCI”) markets. We primarily compete in these markets with our E-Bloc product.
Our focus since approximately 2020 has been to address the Distributed Generation (“DG”) and Electric Vehicle Charging Infrastructure markets. We primarily compete in these markets with our E-Bloc product. E-Bloc combines an automatic transfer switch, circuit protection and special programmable controls into an integrated, compact outdoor system.
Approximately 45% of our sales during the year ended December 31, 2022 were made to Enchanted Rock Electric, LLC and we did not sell any equipment to Enchanted Rock Electric, LLC during the year ended December 31, 2021. The majority of our sales to Enchanted Rock Electric, LLC were made pursuant to contract terms and conditions for each project.
Approximately 42% and 20% of our sales during the year ended December 31, 2023 were made to Enchanted Rock Electric, LLC and Sequel Electrical Supply, LLC, respectively. Approximately 43% and 10% of our sales during the year ended December 31, 2022 were made to Enchanted Rock Electric, LLC and Southern California Gas Company, respectively.
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E-Bloc combines an automatic transfer switch, circuit protection and special programmable controls into an integrated, compact outdoor system. We believe that demand for our solutions is driven primarily by new installations, customer growth and the global transition to lower carbon emissions.
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These products and services are marketed by our operations headquartered in Minnesota, currently doing business under our Pioneer eMobility (“e-Boost”), Titan Energy Systems Inc. (“Titan”) and Pioneer Critical Power brand names. Electrical Infrastructure Segment We design, manufacture, integrate and sell a wide range of electrical distribution and control equipment.
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Our focus, nevertheless, has been on expanding the sales of our E-Bloc power solution, and as a result, in December 2021, we received a $12 million order for use by one of the largest mass merchandise retailers in the world. This order was secured through one of our distributed energy resource developers and was approximately 75% completed in 2022.
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We believe that demand for our Electrical Infrastructure solutions is driven primarily by customers’ demands to improve the cost of electricity, electrical resilience and reliability, and the world-wide transition to lower carbon emissions.
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Our service agreements have terms ranging from one to five years in duration, providing the Company with a recurring revenue stream. Business Strategy We believe we have established a stable platform from which to develop and grow our business lines, revenues, profitability and shareholder value.
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Our field service organization services more than 2,400 generators owned by more than 900 customers located throughout the United States and its territories, including for multi-site, multi-state customers.
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We intend to build our revenue and net income at rates exceeding industry norms through internal growth initiatives.
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Electrical Infrastructure Segment We intend to accomplish our growth objectives within our Electrical Infrastructure segment by concentrating on our ability to deliver scalable solutions for the EV infrastructure, DG, and microgrid markets.
Removed
T&D Solutions Segment We intend to accomplish our growth objectives within our T&D Solutions business by emphasizing our capabilities in EV charging infrastructure and original equipment manufacturers (“OEMs”) equipment solutions and continuing to invest in marketing and engineering resources to increase our pipeline of recurring order customers that demand custom solutions for their power needs.
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Our Electrical Infrastructure equipment can be used in many applications and large vertical markets, including but not limited to, electrical, gas and water utilities, EV charging infrastructure integrators, and solar, microgrid and data center developers.
Removed
In order to meet the rapidly growing demand for EV’s and the infrastructure supporting it, substantial investment in grid connectivity and enhancement will be required.
Added
Since November 2021, we have been aggressively marketing our e-Boost mobile EV charging products to electric bus and truck manufacturers, fleet management companies, municipalities and EV infrastructure providers.
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Approximately 22% of our sales during the year ended December 31, 2021 were made to CleanSpark Inc (“CleanSpark”). The majority of our sales to CleanSpark were made pursuant to the Contract Manufacturing Agreement we entered into with CleanSpark in January 2019 (the “Contract Manufacturing Agreement”).
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Research and Development Because the industries in which we compete are characterized by rapid technological advances, our ability to compete successfully depends heavily upon our ability to ensure a continual and timely flow of competitive products, services and technologies to the marketplace.
Removed
Pursuant to the terms of the Contract Manufacturing Agreement, the Company manufactured parallel switchgear, automatic transfer switches and related products (collectively, “Products”) exclusively for purchase by CleanSpark.
Added
We continue to develop new technologies to enhance existing products and services, and to expand the range of our offerings through research and development (“R&D”), licensing of intellectual property and acquisition of third-party businesses and technology. During the year ended December 31, 2023, we incurred $885 of R&D costs related to our mobile EV charging solutions, e-Boost.
Removed
The Contract Manufacturing Agreement had a term of 18 months and expired on the 18-month anniversary of the execution of the Contract Manufacturing Agreement. 7 In connection with the expiry of the Contract Manufacturing Agreement, we entered into a Distribution Agreement with CleanSpark (the “Distribution Agreement”), dated as of May 31, 2021, pursuant to which CleanSpark served as our exclusive distributor of the Products within any geographic region in which CleanSpark conducts its business.
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We did not incur any R&D costs during the year ended December 31, 2022. 5 Employees As of December 31, 2023, we had 143 employees consisting of 41 salaried staff and 102 hourly workers.
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On June 3, 2022, the Company and CleanSpark entered into a termination agreement (the “Termination Agreement”) to terminate the Distribution Agreement.
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Pursuant to the Termination Agreement, the Company agreed to, amongst others, (i) release CleanSpark from further liabilities due under the Distribution Agreement, including for certain future amounts due under the Distribution Agreement and certain accounts payable invoices, (ii) assume the responsibility of billing and collecting payment from Enchanted Rock Electric, LLC, a third party and mutual client of both the Company and CleanSpark for all open sales orders amounts under its outstanding agreements for Products that have or will be manufactured by the Company, and (iii) return portions of certain deposits advanced to the Company pursuant to the Distribution Agreement.
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CleanSpark additionally transferred the services and maintenance agreements and associated rights and liabilities it had related to switchgear products manufactured by the Company, and the Company assumed all liability and responsibility for all claims of the Products including, but not limited to, all repairs, defects, and warranty liability of the Products that were previously manufactured by the Company and then distributed or sold by CleanSpark .
Removed
During the year ended December 31, 2022, we experienced an increase in raw material costs as a result of disruptions to our supply chain. These disruptions were initially generated by the recovery from the coronavirus pandemic that had caused many suppliers and sub-suppliers to temporarily reduce or close down excess facilities.
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The restart of the world economy created initial pressures on the said facilities reaching their pre-pandemic capacity. More recently, geopolitical conflicts have further pressured material costs such as aluminum and nickel.
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These supply pressures have, and continue to, make it more difficult for us to secure all the material we need in a timely manner in order to meet our obligations and forecasts regarding our customers’ orders.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

46 edited+43 added−28 removed77 unchanged
Biggest changeIf the trading volume of our common stock decreases, we will not be able to ensure investors that an active market for our common stock will be sustained; ● Our stock price may be volatile, which could result in substantial losses for investors; ● Our risk management activities may leave us exposed to unidentified or unanticipated risks; ● Regulatory, environmental, monetary and other governmental policies could have a material adverse effect on our profitability; 10 ● Global, market and economic conditions may negatively impact our business, financial condition and stock price; ● We face risks associated with litigation and claims, which could impact our financial results and condition; ● Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline; ● We are subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared; ● There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected; ● Any acquisitions that we have completed, or may complete in the future, may not perform as planned and could disrupt our business and harm our financial condition and operations; ● The success of our business depends on achieving our strategic objectives, including dispositions; ● If we do not conduct an adequate due diligence investigation of a target business that we acquire, we may be required subsequently to take write downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment; ● We may be unable to generate internal growth; and ● In the event that we fail to satisfy any of the listing requirements of the NASDAQ Capital Market, our common stock may be delisted, which could affect our market price and liquidity.
Biggest changeMaterial or significant loss of business from these customers could have an adverse effect on our business, financial condition and operating results; ● Certain of our business units have historically generated operating losses and negative cash flows, which may result in the usage of our cash; ● The departure or loss of key personnel could disrupt our business; ● Fluctuations in the price and supply of raw materials used to manufacture our products may reduce our profits; ● We may not be able to fully realize the revenue value reported in our backlog; ● We are subject to pricing pressure from our larger customers; ● Deterioration in the credit quality of several major customers could have a material adverse effect on our operating results and financial condition; ● We rely on third parties for key elements of our business whose operations are outside our control; ● Supply chain and shipping disruptions may result in shipping delays, a significant increase in shipping costs, and could increase product costs and result in lost sales and reputational damage, which may have a material adverse effect on our business, operating results and financial condition; ● Our business may face cybersecurity risk generally associated with our information technology systems which could materially affect our business, and our results of operations could be materially affected if our information technology systems (or third-party systems we rely on) are interrupted, damaged by unforeseen events, or fail for any extended period of time; ● Our business requires skilled labor, and we may be unable to attract and retain qualified employees; ● Our business operations are dependent upon our ability to engage in successful collective bargaining with our unionized workforce; ● Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable; ● Our stock price may be volatile, which could result in substantial losses for investors; ● Our risk management activities may leave us exposed to unidentified or unanticipated risks; ● Regulatory, environmental, monetary and other governmental policies could have a material adverse effect on our profitability; ● Global, market and economic conditions may negatively impact our business, financial condition and stock price; 7 ● We face risks associated with litigation and claims, which could impact our financial results and condition; ● Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline; ● We are subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared; ● There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected; ● Any acquisitions that we have completed, or may complete in the future, may not perform as planned and could disrupt our business and harm our financial condition and operations; ● The success of our business depends on achieving our strategic objectives, including dispositions; ● If we do not conduct an adequate due diligence investigation of a target business that we acquire, we may be required subsequently to take write downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment; ● We may be unable to generate internal growth; and ● In the event that we fail to satisfy any of the listing requirements of the Nasdaq Capital Market, our common stock may be delisted, which could affect our market price and liquidity.
Factors that affect our operating results include the following: ● the size, timing and terms of sales and orders, especially large customer orders; ● variations caused by customers delaying, deferring or canceling purchase orders or making smaller purchases than expected; 11 ● the timing and volume of work under new agreements; ● the spending patterns of customers; ● customer orders received; ● a change in the mix of our products having different margins; ● a change in the mix of our customers, contracts and business; ● increases in design and manufacturing costs; ● the length of our sales cycles; ● the rates at which customers renew their contracts with us; ● changes in pricing by us or our competitors, or the need to provide discounts to win business; ● a change in the demand or production of our products caused by severe weather conditions; ● our ability to control costs, including operating expenses; ● losses experienced in our operations not otherwise covered by insurance; ● the ability and willingness of customers to pay amounts owed to us; ● the timing of significant investments in the growth of our business, as the revenue and profit we hope to generate from those expenses may lag behind the timing of expenditures; ● costs related to the acquisition and integration of companies or assets; ● general economic trends, including changes in equipment spending or national or geopolitical events such as economic crises, wars or incidents of terrorism; and ● future accounting pronouncements and changes in accounting policies.
Factors that affect our operating results include the following: ● the size, timing and terms of sales and orders, especially large customer orders; 9 ● variations caused by customers delaying, deferring or canceling purchase orders or making smaller purchases than expected; ● the timing and volume of work under new agreements; ● the spending patterns of customers; ● customer orders received; ● a change in the mix of our products having different margins; ● a change in the mix of our customers, contracts and business; ● increases in design and manufacturing costs; ● the length of our sales cycles; ● the rates at which customers renew their contracts with us; ● changes in pricing by us or our competitors, or the need to provide discounts to win business; ● a change in the demand or production of our products caused by severe weather conditions; ● our ability to control costs, including operating expenses; ● losses experienced in our operations not otherwise covered by insurance; ● the ability and willingness of customers to pay amounts owed to us; ● the timing of significant investments in the growth of our business, as the revenue and profit we hope to generate from those expenses may lag behind the timing of expenditures; ● costs related to the acquisition and integration of companies or assets; ● general economic trends, including changes in equipment spending or national or geopolitical events such as economic crises, wars or incidents of terrorism; and ● future accounting pronouncements and changes in accounting policies.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also significantly affect the market price of our common stock. 16 Our risk management activities may leave us exposed to unidentified or unanticipated risks.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also significantly affect the market price of our common stock. Our risk management activities may leave us exposed to unidentified or unanticipated risks.
In addition, charges of this nature may cause us to violate net worth or other covenants that we may be subject to as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing. We may be unable to generate internal growth.
In addition, charges of this nature may cause us to violate net worth or other covenants that we may be subject to as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing. 16 We may be unable to generate internal growth.
An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows. Our business operations are dependent upon our ability to engage in successful collective bargaining with our unionized workforce.
An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows. 12 Our business operations are dependent upon our ability to engage in successful collective bargaining with our unionized workforce.
In addition, the consequences of the ongoing conflict between Russia and Ukraine, including related sanctions and countermeasures, and the effects of rising global inflation, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations.
In addition, the consequences of the ongoing conflict between Israel and Hamas, and the ongoing conflict between Russia and Ukraine, including related sanctions and countermeasures, and the effects of rising global inflation, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations.
Before investing in our common stock you should carefully consider the following risks, together with the financial and other information contained in this Annual Report on Form 10–K for the year ended December 31, 2022 and our other periodic filings with the Securities and Exchange Commission.
Before investing in our common stock you should carefully consider the following risks, together with the financial and other information contained in this Annual Report on Form 10–K for the year ended December 31, 2023 and our other periodic filings with the Securities and Exchange Commission.
Our remaining business units have historically generated operating losses and negative cash flows, which may result in the usage of our cash. We have two business units (PCEP and Titan), and these two units have been unable to earn positive income and generate positive cash flow in their recent history.
Certain of our business units have historically generated operating losses and negative cash flows, which may result in the usage of our cash. We have two business units (PCEP and Titan), and these two units have been unable to earn positive income and generate positive cash flow in their recent history.
Concerns over inflation, geopolitical issues, the U.S. financial markets, capital and exchange controls, unstable global credit markets and financial conditions and the COVID-19 pandemic, have led to periods of significant economic instability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, and increased unemployment rates.
Concerns over inflation, geopolitical issues, the U.S. financial markets, capital and exchange controls, unstable global credit markets and financial conditions, have led to periods of significant economic instability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, and increased unemployment rates.
In addition, delisting could materially adversely impact Pioneer Power’s ability to raise capital or pursue strategic restructuring, refinancing or other transactions. Delisting from NASDAQ could also have other negative results, including the potential loss of confidence by institutional investors.
In addition, delisting could materially adversely impact our ability to raise capital or pursue strategic restructuring, refinancing or other transactions. Delisting from the Nasdaq Capital Market could also have other negative results, including the potential loss of confidence by institutional investors.
Our third-party manufacturers and suppliers have experienced, and expect to continue to experience, supply chain disruption and shipping disruptions, including disruptions or delays in loading container cargo in ports of origin or off-loading cargo at ports of destination, as a result of the COVID-19 pandemic, congestion in port terminal facilities, labor supply and shipping container shortages, inadequate equipment and persons to load, dock and offload container vessels and for other reasons.
Our third-party manufacturers and suppliers have experienced, and expect to continue to experience, supply chain disruption and shipping disruptions, including disruptions or delays in loading container cargo in ports of origin or off-loading cargo at ports of destination, congestion in port terminal facilities, labor supply and shipping container shortages, inadequate equipment and persons to load, dock and offload container vessels and for other reasons.
A significant asset included in our working capital is accounts receivable from customers. If customers responsible for a significant amount of accounts receivable become insolvent or are otherwise unable to pay for products and services, or become unwilling or unable to make payments in a timely manner, our operating results and financial condition could be adversely affected.
If customers responsible for a significant amount of accounts receivable become insolvent or are otherwise unable to pay for products and services, or become unwilling or unable to make payments in a timely manner, our operating results and financial condition could be adversely affected.
Our inability to manage our business in light of the competitive forces we face could have a material adverse effect on our results of operations. We currently derive a significant portion of our revenues from one customer. Material or significant loss of business from this customer could have an adverse effect on our business, financial condition and operating results.
Our inability to manage our business in light of the competitive forces we face could have a material adverse effect on our results of operations. We currently derive a significant portion of our revenues from two customers. Material or significant loss of business from these customers could have an adverse effect on our business, financial condition and operating results.
Loss of business from this customer could have an adverse effect on our business, financial condition and operating results. The majority of our sales to Enchanted Rock Electric, LLC were made pursuant to contract terms and conditions for each project. See “Item 1. Business - Customers”.
Loss of business from these customers could have an adverse effect on our business, financial condition and operating results. The majority of our sales to Enchanted Rock Electric, LLC and Sequel Electrical Supply, LLC were made pursuant to contract terms and conditions for each project. See “Item 1. Business - Customers”.
Our ability to maintain our productivity and profitability will be limited by our ability to employ, train and retain skilled personnel necessary to meet our requirements. We may experience shortages of qualified personnel.
Our business requires skilled labor, and we may be unable to attract and retain qualified employees. Our ability to maintain our productivity and profitability will be limited by our ability to employ, train and retain skilled personnel necessary to meet our requirements. We may experience shortages of qualified personnel.
If we are unable to renew our collective bargaining agreements, or if additional segments of our workforce become unionized, we may be subject to work interruptions or stoppages. Strikes or labor disputes with our employees may adversely affect our ability to conduct our business. The COVID-19 pandemic and its ongoing effects may adversely affect our business.
If we are unable to renew our collective bargaining agreements, or if additional segments of our workforce become unionized, we may be subject to work interruptions or stoppages. Strikes or labor disputes with our employees may adversely affect our ability to conduct our business.
In the event of any future acquisitions, we could: ● issue additional securities that would dilute our current stockholders’ percentage ownership or provide the purchasers of the additional securities with certain preferences over those of common stockholders, such as dividend or liquidation preferences; ● incur debt and assume liabilities; and ● incur large and immediate write-offs of intangible assets, accounts receivable or other assets. 18 These events could result in significant expenses and decreased revenue, which could adversely affect the market price of our common stock.
In the event of any future acquisitions, we could: ● issue additional securities that would dilute our current stockholders’ percentage ownership or provide the purchasers of the additional securities with certain preferences over those of common stockholders, such as dividend or liquidation preferences; ● incur debt and assume liabilities; and ● incur large and immediate write-offs of intangible assets, accounts receivable or other assets.
Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.
Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price. 13 General Risk Factors Our stock price may be volatile, which could result in substantial losses for investors.
Principal competitors in our markets in the T&D Solutions segment include Crown Electric Engineering and Manufacturing, LLC, Industrial Electric Machinery, LLC, RESA Power, LLC, Eaton Corporation, Switchgear Power Systems, LLC, Myers Power Products, Inc. and Powell Industries, Inc.
Principal competitors in our markets include Crown Electric Engineering and Manufacturing, LLC, Industrial Electric Machinery, LLC, RESA Power, LLC, Switchgear Power Systems, LLC, Myers Power Products, Inc. and Powell Industries, Inc.
Successful claims for misappropriation or release of confidential or personal data brought against us in excess of available insurance or fines or other penalties assessed or any claim that results in significant adverse publicity against us could have a material adverse effect on our business and our reputation. 14 Our business requires skilled labor, and we may be unable to attract and retain qualified employees.
Successful claims for misappropriation or release of confidential or personal data brought against us in excess of available insurance or fines or other penalties assessed or any claim that results in significant adverse publicity against us could have a material adverse effect on our business and our reputation.
Types of potential litigation cases include product liability, contract, employment-related, labor relations, personal injury or property damage, intellectual property, trade secret or unfair competition claims, stockholder claims and claims arising from any injury or damage to persons, property or the environment from hazardous substances used, generated or disposed of in the conduct of our business. 17 Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
Types of potential litigation cases include product liability, contract, employment-related, labor relations, personal injury or property damage, intellectual property, trade secret or unfair competition claims, stockholder claims and claims arising from any injury or damage to persons, property or the environment from hazardous substances used, generated or disposed of in the conduct of our business.
If Pioneer Power’s common stock is delisted from NASDAQ, Pioneer Power expects that its common stock would begin trading on the over-the-counter markets. The delisting of Pioneer Power’s common stock could result in a reduction in its trading price and would substantially limit the liquidity of Pioneer Power’s common stock.
If our common stock is delisted from the Nasdaq Capital Market, we expect that our common stock would begin trading on the over-the-counter markets. The delisting of our common stock could result in a reduction in our trading price and would substantially limit the liquidity of our common stock.
When we decide to sell assets or a business, we may encounter difficulty in finding buyers or executing alternative exit strategies on acceptable terms in a timely manner, which could delay the accomplishment of our strategic objectives.
We continue to evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives. When we decide to sell assets or a business, we may encounter difficulty in finding buyers or executing alternative exit strategies on acceptable terms in a timely manner, which could delay the accomplishment of our strategic objectives.
A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our manufacturing facilities and overall business.
An overall tightening and increasingly competitive labor market has been observed in the United States. A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our manufacturing facilities and overall business.
If we do not achieve internal growth, our results of operations will suffer and we will likely not be able to expand our operations or grow our business. In the event that we fail to satisfy any of the listing requirements of the NASDAQ Capital Market, our common stock may be delisted, which could affect our market price and liquidity.
If we do not achieve internal growth, our results of operations will suffer and we will likely not be able to expand our operations or grow our business. We may not meet the continued listing requirements of Nasdaq, which could result in a delisting of our common stock.
Furthermore, if we continue to have this existing material weakness, other material weaknesses or significant deficiencies in the future, it could create a perception that our financial results do not fairly state our financial condition or results of operations. Any of the foregoing could have an adverse effect on the value of our stock.
If we continue to have these existing material weaknesses, other material weaknesses or significant deficiencies in the future, it could create a perception that our financial results do not fairly state our financial condition or results of operations. See “ Part II.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common stock. ● We are vulnerable to economic downturns in the commercial construction market, which may reduce the demand for some of our products and adversely affect our sales, net income, cash flow or financial condition; ● Our operating results may vary significantly from quarter to quarter, which makes our operating results difficult to predict and can cause our operating results in any particular period to be less than comparable quarters and expectations from time to time; ● Our industry is highly competitive; ● We currently derive a significant portion of our revenues from one customer.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common stock. ● We have concluded that certain of our previously issued financial statements should not be relied upon and have restated certain of our previously issued consolidated financial statements which was time-consuming and expensive and could expose us to additional risks that could have a negative effect on us; ● The restatement of the Prior Financial Statements may lead to future stockholder litigation; ● We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which may adversely affect investor confidence in our company and, as a result, the value of our common stock; ● We are vulnerable to economic downturns in the commercial construction market, which may reduce the demand for some of our products and adversely affect our sales, net income, cash flow or financial condition; ● Our operating results may vary significantly from quarter to quarter, which makes our operating results difficult to predict and can cause our operating results in any particular period to be less than comparable quarters and expectations from time to time; ● Our industry is highly competitive; ● We currently derive a significant portion of our revenues from two customers.
In addition, integrating acquired businesses and completing any future acquisitions involve numerous operational and financial risks. These risks include difficulty in assimilating acquired operations, diversion of management’s attention, and the potential loss of key employees or customers of acquired operations. Furthermore, companies acquired by us may not generate financial results consistent with our management’s plans at the time of acquisition.
These risks include difficulty in assimilating acquired operations, diversion of management’s attention, and the potential loss of key employees or customers of acquired operations. Furthermore, companies acquired by us may not generate financial results consistent with our management’s plans at the time of acquisition. The success of our business depends on achieving our strategic objectives, including dispositions.
We have identified a material weakness in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting or effective disclosure controls, this could have a material adverse effect on our business .
See also “—Risks Relating to Our Organization— We have identified material weaknesses in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting or effective disclosure controls, this could have a material adverse effect on our business .” We do not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all error or fraud.
In addition, there is a risk that one or more of our current or future service providers, manufacturers, suppliers, our third-party payors, and other partners could be negatively affected by difficult economic times, which could adversely affect our ability to attain our operating goals on schedule and on budget or meet our business and financial objectives.
In addition, there is a risk that one or more of our current or future service providers, manufacturers, suppliers, our third-party payors, and other partners could be negatively affected by difficult economic times, which could adversely affect our ability to attain our operating goals on schedule and on budget or meet our business and financial objectives. 14 In addition, we face several risks associated with international business and are subject to global events beyond our control, including war, public health crises, such as pandemics and epidemics, trade disputes, economic sanctions, trade wars and their collateral impacts and other international events.
These raw materials and components are available from, and supplied by, numerous sources at competitive prices. Unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect our profitability. We cannot provide any assurances that we will not experience difficulties sourcing our raw materials in the future.
Unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect our profitability. We cannot provide any assurances that we will not experience difficulties sourcing our raw materials in the future. We may not be able to fully realize the revenue value reported in our backlog.
Prolonged supply chain disruptions that may impact us or our manufacturers and suppliers could interrupt product manufacturing, increase raw material and product lead times, increase raw material and product costs, impact our ability to meet customer demand and result in lost sales and reputational damage, all of which could have a material adverse effect on our business, financial condition and results of operations.
Prolonged supply chain disruptions that may impact us or our manufacturers and suppliers could interrupt product manufacturing, increase raw material and product lead times, increase raw material and product costs, impact our ability to meet customer demand and result in lost sales and reputational damage, all of which could have a material adverse effect on our business, financial condition and results of operations. 11 Our business may face cybersecurity risk generally associated with our information technology systems which could materially affect our business, and our results of operations could be materially affected if our information technology systems (or third-party systems we rely on) are interrupted, damaged by unforeseen events, or fail for any extended period of time.
We depend on one customer for a large portion of our business, and any change in the level of orders from this customer could have a significant impact on our results of operations. Enchanted Rock Electric, LLC accounted for 45% of our total sales in the year ended December 31, 2022.
We depend on two customers for a large portion of our business, and any change in the level of orders from these customers could have a significant impact on our results of operations. Approximately 42% and 20% of our sales during the year ended December 31, 2023 were made to Enchanted Rock Electric, LLC and Sequel Electrical Supply, LLC, respectively.
With $10.3 million of cash as of December 31, 2022, any such losses will negatively impact our cash balance. 12 The departure or loss of key personnel could disrupt our business. We depend heavily on the continued efforts of Nathan J.
With $3,582 of cash as of December 31, 2023, any such losses will negatively impact our cash balance. The departure or loss of key personnel could disrupt our business. We depend heavily on the continued efforts of Nathan J. Mazurek, our principal executive officer, and on other senior officers who are responsible for the day-to-day management of our operating subsidiaries.
Additional impacts could include a decline in our stock price, suspension of trading or delisting of our common stock by the Nasdaq Capital Market, or other material adverse effects on our business, reputation, and results of operations, financial condition or liquidity.
Additional impacts could include a decline in our stock price, suspension of trading or delisting of our common stock by the Nasdaq Capital Market. Any of the foregoing could have an adverse effect on the value of our stock.
To the extent any of our end-customers have negative experiences with any of our distributors or manufacturer’s representatives; it could reflect poorly on us and damage our reputation, thereby negatively impacting our financial results. 13 Supply chain and shipping disruptions may result in shipping delays, a significant increase in shipping costs, and could increase product costs and result in lost sales and reputational damage, which may have a material adverse effect on our business, operating results and financial condition.
Supply chain and shipping disruptions may result in shipping delays, a significant increase in shipping costs, and could increase product costs and result in lost sales and reputational damage, which may have a material adverse effect on our business, operating results and financial condition.
Fluctuations in the price and supply of raw materials used to manufacture our products may reduce our profits. Our raw material costs represented approximately 54% and 53% of our revenues for the years ended December 31, 2022 and 2021, respectively. The principal raw materials purchased by us are copper, sensors, breakers, meters, relays, switches, fuses, protectors and circuit breakers.
Our raw material costs represented approximately 38% and 50% of our revenues for the years ended December 31, 2023 and 2022, respectively. The principal raw materials purchased by us are metal, copper, sensors, breakers, meters, relays, switches, fuses, protectors and circuit breakers. These raw materials and components are available from, and supplied by, numerous sources at competitive prices.
In the latter case, the revenue value reported in backlog is the remaining value associated with work that has not yet been billed and recognized as revenue. From time to time, customer orders are canceled that appeared to have a high certainty of going forward at the time they were recorded as new business taken.
Backlog consists of customer orders that either (1) have not yet been started or (2) are in progress and are not yet completed. In the latter case, the revenue value reported in backlog is the remaining value associated with work that has not yet been billed and recognized as revenue.
If we are not able to offset pricing reductions resulting from these pressures by improved operating efficiencies and reduced expenditures, those price reductions may have an adverse impact on our financial results. Deterioration in the credit quality of several major customers could have a material adverse effect on our operating results and financial condition.
Because of their purchasing size, our larger customers can influence market participants to compete on price terms. Such customers also use their buying power to negotiate lower prices. If we are not able to offset pricing reductions resulting from these pressures by improved operating efficiencies and reduced expenditures, those price reductions may have an adverse impact on our financial results.
See “—Risks Relating to Our Organization-- We have identified a material weakness in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting or effective disclosure controls, this could have a material adverse effect on our business .” Such an occurrence could discourage certain customers or suppliers from doing business with us and adversely affect how our stock trades.
See “—Risks Relating to the Restatement of the Prior Financial Statements— We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which may adversely affect investor confidence in our company and, as a result, the value of our common stock. ” Such an occurrence could discourage certain customers or suppliers from doing business with us and adversely affect how our stock trades.
In the event of a customer order cancellation, we may be reimbursed for certain costs but typically have no contractual right to the total revenue reflected in our backlog. In addition to us being unable to recover certain direct costs, canceled customer orders may also result in additional unrecoverable costs due to the resulting underutilization of our assets.
From time to time, customer orders are canceled that appeared to have a high certainty of going forward at the time they were recorded as new business taken. In the event of a customer order cancellation, we may be reimbursed for certain costs but typically have no contractual right to the total revenue reflected in our backlog.
Mazurek, our principal executive officer, and on other senior officers who are responsible for the day-to-day management of our operating subsidiaries. In addition, we rely on our current electrical and mechanical design engineers, many of whom are important to our operations and would be difficult to replace.
In addition, we rely on our current electrical and mechanical design engineers, many of whom are important to our operations and would be difficult to replace. We cannot be certain that any of these individuals will continue in their respective capacities for any particular period of time.
We may not be able to fully realize the revenue value reported in our backlog. We routinely have a backlog of work to be completed on contracts representing a significant portion of our annual sales. As of December 31, 2022, our order backlog was $37.2 million.
We routinely have a backlog of work to be completed on contracts representing a significant portion of our annual sales. As of December 31, 2023, our order backlog was $45,165. Orders included in our backlog are represented by customer purchase orders and service contracts that we believe to be firm.
We cannot be certain that any of these individuals will continue in their respective capacities for any particular period of time. The departure or loss of key personnel, or the inability to hire and retain qualified employees, could negatively impact our ability to manage our business.
The departure or loss of key personnel, or the inability to hire and retain qualified employees, could negatively impact our ability to manage our business. 10 Fluctuations in the price and supply of raw materials used to manufacture our products may reduce our profits.
There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.
Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all.
A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. 15 We cannot assure you that we will be able to remediate our existing material weakness in a timely manner, if at all, or that in the future additional material weaknesses will not exist, reoccur or otherwise be discovered, a risk that is significantly increased in light of the complexity of our business.
As a result of these material weaknesses, the Company’s management, under the supervision of the Audit Committee and with participation of the Company’s Chief Executive Officer and Chief Financial Officer, concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2023. 8 Although we are working to remedy the material weaknesses and ineffectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures, there can be no assurance as to when the remediation plan will be fully developed and implemented or the outcome of such remediation efforts, or that in the future, additional material weaknesses will not exist, reoccur or otherwise be discovered, a risk that is significantly increased in light of the complexity of our business.
Removed
Loss of business from this customer could have an adverse effect on our business, financial condition and operating results; ● Our remaining business units have historically generated operating losses and negative cash flows, which may result in the usage of our cash; ● The departure or loss of key personnel could disrupt our business; ● Fluctuations in the price and supply of raw materials used to manufacture our products may reduce our profits; ● We may not be able to fully realize the revenue value reported in our backlog; ● We are subject to pricing pressure from our larger customers; ● Deterioration in the credit quality of several major customers could have a material adverse effect on our operating results and financial condition; ● We rely on third parties for key elements of our business whose operations are outside our control; ● Supply chain and shipping disruptions may result in shipping delays, a significant increase in shipping costs, and could increase product costs and result in lost sales and reputational damage, which may have a material adverse effect on our business, operating results and financial condition; ● Our business may face cybersecurity risk generally associated with our information technology systems which could materially affect our business, and our results of operations could be materially affected if our information technology systems (or third-party systems we rely on) are interrupted, damaged by unforeseen events, or fail for any extended period of time; ● Our business requires skilled labor, and we may be unable to attract and retain qualified employees; ● Our business operations are dependent upon our ability to engage in successful collective bargaining with our unionized workforce; ● The COVID-19 pandemic and its ongoing effects may adversely affect our business; ● Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable; ● The trading volume of our common stock has recently increased to a level that is significantly higher than our historical average.
Added
Risks Relating to the Restatement of the Prior Financial Statements We have concluded that certain of our previously issued financial statements should not be relied upon and have restated certain of our previously issued financial statements which was time-consuming and expensive and could expose us to additional risks that could have a negative effect on us.
Removed
Orders included in our backlog are represented by customer purchase orders and service contracts that we believe to be firm. Backlog consists of customer orders that either (1) have not yet been started or (2) are in progress and are not yet completed.
Added
As discussed in the Explanatory Note of this Comprehensive Form 10-K and in Note 2, “Restatement of Previously Issued Consolidated Financial Statements” under Item 8 of this Comprehensive Form 10-K, we have concluded that the Prior Financial Statements should not be relied upon.
Removed
We are subject to pricing pressure from our larger customers. We face significant pricing pressures in all of our business segments from our larger customers. Because of their purchasing size, our larger customers can influence market participants to compete on price terms. Such customers also use their buying power to negotiate lower prices.
Added
We have restated our previously issued (i) audited consolidated financial statements as of and for the fiscal year ended December 31, 2022, included in the 2022 10-K, and (ii) unaudited condensed consolidated financial statements for the quarterly periods ended March 31, 2022, through September 30, 2023, included in the Form 10-Qs.
Removed
Our business may face cybersecurity risk generally associated with our information technology systems which could materially affect our business, and our results of operations could be materially affected if our information technology systems (or third-party systems we rely on) are interrupted, damaged by unforeseen events, or fail for any extended period of time.
Added
The restatement process was time consuming and expensive and could expose us to additional risks that could have a negative effect on us.
Removed
An overall tightening and increasingly competitive labor market, notably in response to the COVID-19 pandemic, has been recently observed in the U.S.
Added
In particular, we incurred substantial unanticipated expenses and costs, including audit, legal and other professional fees, in connection with the restatement of the Prior Financial Statements and the ongoing remediation of material weaknesses in our internal control over financial reporting.
Removed
The global coronavirus pandemic and its ongoing effects could have a negative impact on our revenues and operating results.
Added
We are in the process of implementing certain remediation actions (see Part II, Item 9A, Controls and Procedures of this Comprehensive Form 10-K for a description of these remediation measures). To the extent these steps are not successful, we could be required to incur additional time and expense.
Removed
This pandemic could result in disruptions and damage to our business, caused by both the negative impact to our ability to obtain cost effective raw materials, supplies and component parts necessary to operate our business and the negative impact on our ability to operate our facility should the coronavirus spread more broadly in the regions we are located, thereby creating an increased risk of exposure to our workforce which cannot operate our facility remotely.
Added
Our management’s attention was also diverted from some aspects of the operation of our business in connection with the restatement of the Prior Financial Statements and these ongoing remediation efforts. In addition, the restatement and related matters could impair our reputation and could cause our counterparties to lose confidence in us.
Removed
The full impact of the COVID-19 pandemic and its ongoing effects continues to evolve as the date of this report. As such, it continues to be uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations.
Added
Each of these occurrences could have an adverse effect on our business, results of operations, financial condition and stock price. The restatement of the Prior Financial Statements may lead to future stockholder litigation.
Removed
During the year ended December 31, 2022, the Company was able to operate substantially at capacity during the COVID-19 pandemic.
Added
Lawsuits may be commenced against the Company and its officers and directors based in part or whole on allegations related to the restatement of the Prior Financial Statements.
Removed
Given the daily evolution of the COVID-19 pandemic, its ongoing effects, and the global responses to the continuing crisis, we are not able to estimate the full effects of the COVID-19 pandemic and its ongoing effects at this time, however, if the ongoing effects of the COVID-19 pandemic continue or worsen, it may have an adverse effect on the Company’s results of operations, financial condition, or liquidity.
Added
As with any substantial litigation, the Company expects to devote significant time, attention and resources to the defense of the litigation, which may have a material adverse effect on the Company even if the litigation is resolved in a manner favorable to the Company, and cannot predict when or how the litigation will be resolved or estimate what the potential loss or range of loss would be, if any.
Removed
Mitigation efforts will not completely prevent our business from being adversely affected, and the longer the pandemic impacts supply and demand and the more broadly the pandemic spreads, it is more likely that the impact on our business, revenues and operating results will become increasingly negative.
Added
We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
Removed
In addition, the continuation of the COVID-19 pandemic or a significant outbreak of other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations.
Added
Section 404 of the Sarbanes-Oxley Act of 2002 requires that public companies evaluate and report on their systems of internal control over financial reporting.
Removed
As discussed in Item 9A “Controls and Procedures”, we concluded there is a material weakness of our internal control over financial reporting.
Added
As disclosed in Part II, Item 9A, Controls and Procedures of this Comprehensive Form 10-K, our management, including our Chief Executive Officer and our Chief Financial Officer, has determined that we had material weaknesses in our internal control over financial reporting as of December 31, 2023, due to the following material weaknesses: (i) the accounting for revenues and costs associated with over-time contracts, which resulted in material misstatements relating to the percentage of completion used to recognize revenue; (ii) the accounting for inventory and related cost of sales and (iii) lack of sufficient accounting personnel which negatively impacted the Company’s ability to maintain appropriate segregation of duties, and close, consolidate and file financial statements on a timely basis to meet SEC regulations.
Removed
If our efforts to remediate these material weaknesses, as described in Item 9A “Controls and Procedures”, are not successful or if other deficiencies occur, our ability to accurately and timely report our financial position, results of operations, cash flows or key operating metrics could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements or other corrective disclosures.
Added
These material weaknesses resulted in identified material misstatements to the financial statements, and the Prior Financial Statements are restated in this filing.
Removed
Risks Relating to our Common Stock The trading volume of our common stock has recently increased to a level that is significantly higher than our historical average. If the trading volume of our common stock decreases, we will not be able to ensure investors that an active market for our common stock will be sustained.
Added
Until our remediation plan is fully implemented, our management will continue to devote significant time, attention and financial resources to these efforts.
Removed
The trading volume of our common stock spiked significantly in Fiscal 2022 and Fiscal 2021, and our common stock has continued to trade at higher volumes than our historical average.
Added
If we do not complete our remediation in a timely fashion, or at all, or if our remediation plan is inadequate, there will continue to be an increased risk that our future consolidated financial statements could contain errors that will be undetected.
Removed
We do not know why the trading volume of our common stock has spiked significantly; we believe, however, that the sharp spike in the trading volume of our common stock is the result of a number of factors outside our control, including recent volatility in the stock market, which continues to remain unpredictable.
Added
Item 9A – Controls and Procedures. ” These material weaknesses could adversely affect our business, reputation, revenues, results of operations, financial condition, and liquidity. They could also adversely affect our ability to timely file periodic reports under the Exchange Act, and limit our ability to access the capital markets through equity or debt issuances.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeApproximate Owned or Square Lease Location Description Footage Expiration Date Santa Fe Springs, California Manufacturing, sales, engineering and administration 40,000 August 2024 Champlin, Minnesota Manufacturing, sales, service and warehouse 16,000 March 2026 Miami, Florida Sales, service and warehouse 3,600 December 2024 Fort Lee, New Jersey Corporate management and sales office 2,700 December 2025 We believe our facilities are well maintained, in proper condition to operate at higher than current levels and are adequately insured.
Biggest changeApproximate Owned or s quare l ease Location Description f ootage e xpiration date Santa Fe Springs, California Manufacturing, sales, engineering and administration 40,000 August 2024 Champlin, Minnesota Manufacturing, sales, service and warehouse 16,000 March 2026 Miami, Florida Sales, service and warehouse 3,600 December 2024 Fort Lee, New Jersey Corporate management and sales office 2,700 December 2025 We believe our facilities are well maintained, in proper condition to operate at higher than current levels and are adequately insured.
We do not anticipate significant difficulty in renewing or extending existing leases as they expire, or in replacing them with equivalent facilities or office locations.
We do not anticipate significant difficulty in renewing or extending existing leases as they expire, or in replacing them with equivalent facilities or office locations. 18

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we may become involved in lawsuits, investigations and claims that arise in the ordinary course of business.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we may become involved in lawsuits, investigations and claims that arise in the ordinary course of business. On June 15, 2023, Terrence and Kay Mimick (the “Plaintiffs”) filed a complaint in the U.S.
As of the date hereof, we are not aware of or a party to any legal proceedings to which we or any of our subsidiaries is a party or to which any of our property is subject, nor are we aware of any such threatened or pending litigation or any such proceedings known to be contemplated by governmental authorities that we believe could have a material adverse effect on our business, financial condition or operating results.
As of the date hereof, we are not aware of or a party to any other legal proceedings to which we or any of our subsidiaries is a party or to which any of our property is subject, nor are we aware of any such threatened or pending litigation or any such proceedings known to be contemplated by governmental authorities that we believe could have a material adverse effect on our business, financial condition or operating results.
We are not aware of any material proceedings in which any of our directors, officers or affiliates or any registered or beneficial shareholder of more than 5% of our common stock is an adverse party or has a material interest adverse to our interest. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 20 PART II
We are not aware of any material proceedings in which any of our directors, officers or affiliates or any registered or beneficial shareholder of more than 5% of our common stock is an adverse party or has a material interest adverse to our interest. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 19 PART II
Added
District Court, District of Nebraska naming the Company, its wholly-owned subsidiary, Pioneer Critical Power, Inc., and an individual acting in his capacity as an employee of the Company, collectively as defendants.
Added
Plaintiffs filed an amended complaint on July 7, 2023, alleging negligent driving, negligent entrustment, and negligent hiring, training and supervision, as a result of a car accident that occurred on September 9, 2019, and seeking special damages related to the injuries allegedly sustained by Plaintiffs.
Added
The amended complaint also named Titan Energy Systems, Inc. as a defendant instead of Pioneer Critical Power, Inc. On July 27, 2023, the defendants filed an Answer to Plaintiff’s Amended Complaint. On October 6, 2023, a mediation was held, but the parties did not reach a settlement.
Added
In June 2024 another mediation was held and the parties reached a settlement for all of the Plaintiffs’ claims. On May 26, 2023, the Company filed a complaint against PowerSecure, Inc. (“PowerSecure”) in Minnesota state court, which was subsequently removed to U.S.
Added
District Court, District of Minnesota on June 20, 2023, alleging breach of contract, unjust enrichment and tortious interference (the “PowerSecure Action”). Thereafter, in the fourth quarter of 2023, the Company entered into a Settlement Agreement and Release with PowerSecure.
Added
On January 4, 2024, the Company and PowerSecure stipulated to a voluntary dismissal of the PowerSecure Action with prejudice, and as a result, the PowerSecure Action was dismissed with prejudice on January 5, 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe timing and amount of future dividends could require the Company to seek capital funding to support its ongoing operations as the Company’s historical credit arrangements were terminated in connection with the Equity Transaction. We did not repurchase any of our equity securities during the fourth quarter of the fiscal year ended December 31, 2022. ITEM 6. [RESERVED].
Biggest changeThe timing and amount of future dividends could require us to seek capital funding to support our ongoing operations as our historical credit arrangements were terminated in connection with the sale of the transformer business units in August 2019 (the “Equity Transaction”).
The last reported sales price of our common stock on the Nasdaq Capital Market on April 10, 2023, was $4.35 per share. As of April 10, 2023, there were 38 holders of record of our common stock.
The last reported sales price of our common stock on the Nasdaq Capital Market on July 25, 2024, was $4.42 per share. As of July 25, 2024, there were 37 holders of record of our common stock.
Added
We did not repurchase any of our equity securities during the fourth quarter of the fiscal year ended December 31, 2023. ITEM 6. [RESERVED].

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the year ended December 31, 2022, our gross margin increased by 1.5%, to 16.7%, from 15.2% for the year ended December 31, 2021. 25 Operating Expenses The following table represents our operating expenses by reportable segment for the periods indicated (in thousands, except percentages): Year Ended December 31, 2022 2021 Variance % T&D Solutions Selling, general and administrative expense $ 1,197 $ 1,099 $ 98 8.9 Depreciation and amortization expense 18 15 3 20.0 Segment operating expense $ 1,215 $ 1,114 $ 101 9.1 Critical Power Solutions Selling, general and administrative expense $ 3,464 $ 1,660 $ 1,804 108.7 Depreciation and amortization expense 147 64 83 129.7 Segment operating expense $ 3,611 $ 1,724 $ 1,887 109.5 Unallocated Corporate Overhead Expenses Selling, general and administrative expense $ 3,784 $ 2,389 $ 1,395 58.4 Depreciation and amortization expense 26 28 (2 ) (7.1 ) Segment operating expense $ 3,810 $ 2,417 $ 1,393 57.6 Consolidated Selling, general and administrative expense $ 8,445 $ 5,148 $ 3,297 64.0 Depreciation and amortization expense 191 107 84 78.5 Consolidated operating expense $ 8,636 $ 5,255 $ 3,381 64.3 Depreciation and amortization expense included in selling, general and administrative expense in the Company’s consolidated statement of operations have been disclosed as a separate component of operating expense in the tables above.
Biggest changeThe increase was also primarily due to a favorable sales mix and the acceptance of price increases from our customers. 23 Operating Expenses The following table represents our operating expenses by reportable segment for the periods indicated (in thousands, except percentages): Year Ended December 31, 2023 2022 Variance % Electrical Infrastructure Selling, general and administrative $ 1,707 $ 1,197 $ 510 42.6 Depreciation and amortization 38 18 20 111.1 Segment operating expense $ 1,745 $ 1,215 $ 530 43.6 Critical Power Solutions Selling, general and administrative $ 3,679 $ 3,464 $ 215 6.2 Depreciation and amortization 176 147 29 19.7 Research and development 885 - 885 - Segment operating expense $ 4,740 $ 3,611 $ 1,129 26 Unallocated Corporate Overhead Expenses Selling, general and administrative $ 4,510 $ 3,784 $ 726 19.2 Depreciation and amortization 9 26 (17 ) (65.4 ) Segment operating expense $ 4,519 $ 3,810 $ 709 18.6 Consolidated Selling, general and administrative $ 9,896 $ 8,445 $ 1,451 17.2 Depreciation and amortization 223 191 32 16.8 Research and development 885 - 885 - Consolidated operating expense $ 11,004 $ 8,636 $ 2,368 27.4 Selling, General and Administrative Expense .
General Corporate Expense . Our general corporate expenses consist primarily of executive management, corporate accounting and human resources personnel, corporate office expenses, financing and corporate development activities, payroll and benefits administration, treasury, tax compliance, legal, stock-based compensation, public reporting costs and costs not specifically allocated to reportable business segments.
Our general corporate expenses consist primarily of executive management, corporate accounting and human resources personnel, corporate office expenses, financing and corporate development activities, payroll and benefits administration, treasury, tax compliance, legal, stock-based compensation, public reporting costs and costs not specifically allocated to reportable business segments.
As of December 31, 2022, we had no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that had, or that may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
As of December 31, 2023, we had no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that had, or that may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
For a further discussion of factors that may affect future operating results see the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” 29 Off Balance Sheet Transactions and Related Matters We have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
For a further discussion of factors that may affect future operating results see the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” 27 Off Balance Sheet Transactions and Related Matters We have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
This information, as well as the selected financial data provided in Note 13 and our audited Consolidated Financial Statements and related notes included in this Annual Report on Form 10-K, should be referred to when reading our discussion and analysis of results of operations below.
This information, as well as the selected financial data provided in Note 14 and our Consolidated Financial Statements and related notes included in this Annual Report on Form 10-K, should be referred to when reading our discussion and analysis of results of operations below.
We are headquartered in Fort Lee, New Jersey and operate from three (3) additional locations in the U.S. for manufacturing, service and maintenance, engineering, and sales and administration. We intend to grow our business through continued internal investments in product development and expansion of our manufacturing, engineering, sales and marketing personnel.
We are headquartered in Fort Lee, New Jersey and operate from three (3) additional locations in the United States for manufacturing, service and maintenance, engineering, and sales and administration. We intend to grow our business through continued internal investments in product development and expansion of our manufacturing, engineering, sales and marketing personnel.
New Accounting Pronouncements The information required by this Item is provided in “Note 2 - Summary of Significant Accounting Policies” to our audited financial statements for the year ended December 31, 2022 included in this Annual Report on Form 10-K.
New Accounting Pronouncements The information required by this Item is provided in “Note 2 - Summary of Significant Accounting Policies” to our consolidated financial statements for the year ended December 31, 2023 included in this Annual Report on Form 10-K.
In addition, the consequences of the ongoing conflict between Russia and Ukraine, including related sanctions and countermeasures, and the effects of rising global inflation, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations.
In addition, the consequences of the ongoing geopolitical conflicts, such as the ongoing conflict between Russia and Ukraine and the ongoing conflict between Israel and Hamas, including related sanctions and countermeasures, and the effects of rising global inflation, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations.
We have met our cash needs through a combination of cash flows from operating activities and bank borrowings, the completion of the Equity Transaction, proceeds from the sale of the CleanSpark Common Stock and warrants to purchase CleanSpark Common Stock, proceeds from insurance, sale of common stock under the ATM Program, funding from the Payroll Protection Program and collecting all unpaid principal and interest from the Seller Notes.
We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings, the completion of the Equity Transaction, proceeds from the sale of the CleanSpark common stock and warrants to purchase CleanSpark common stock, sale of common stock under the ATM Program and collecting all unpaid principal and interest from the Seller Notes.
Other Expense (Income) . Other expense (income) in the consolidated statements of operations reports certain gains and losses associated with activities not directly related to our core operations. For the year ended December 31, 2022, other non-operating expense was $67, as compared to other non-operating income of $1.3 million during the year ended December 31, 2021.
Other (Income) Expense . Other (income) expense in the consolidated statements of operations reports certain gains and losses associated with activities not directly related to our core operations. For the year ended December 31, 2023, other non-operating income was $524, as compared to other non-operating expense of $67 during the year ended December 31, 2022.
On December 13, 2021, we filed a prospectus supplement, which forms a part of our registration statement on Form S-3 (File No. 333-249569), that was declared effected by the SEC on October 27, 2020, in connection with the offer and sale of up to an aggregate offering amount of $8.6 million of common stock that may be issued and sold under the ATM Program.
On December 13, 2021, we filed a prospectus supplement to the prospectus which forms a part of our registration statement on Form S-3 (File No. 333-249569) (the “Prior Shelf Registration Statement”), that was declared effective by the SEC on October 27, 2020 (the “Prior ATM Prospectus”), in connection with the offer and sale of up to an aggregate offering amount of $8,600 of common stock that may be issued and sold under the ATM Program.
We expect that product development and promotional activities related to our new initiatives will continue in the near future and we expect to continue to incur costs related to such activities. We expect that our cash balance is sufficient to fund operations for the next twelve months.
We expect that product development and promotional activities related to our new initiatives will continue in the near future and we expect to continue to incur costs related to such activities. We expect that our cash balance is sufficient to fund operations for the next twelve months from the date our consolidated financial statements are issued.
Our operations are divided into two reportable segments: T&D Solutions segment and Critical Power segment. Our T&D Solutions business provides equipment solutions that help customers effectively and efficiently protect, control, transfer, monitor and manage their electric energy requirements. These solutions are marketed principally through our PCEP brand name.
Our operations are divided into two reportable segments: Electrical Infrastructure segment and Critical Power segment. Our Electrical Infrastructure business provides equipment solutions that allow customers to effectively and efficiently protect, control, transfer, monitor and manage their electric energy usage and requirements. These solutions are marketed principally through our PCEP brand name.
We expect to meet our cash needs with our working capital and cash flows from our operating activities. We expect our cash requirements to be generally for operating activities, capital improvements and product development.
Historically, our cash requirements were generally for operating activities, debt repayment, capital improvements and acquisitions. We expect to meet our cash needs with our working capital and cash flows from operating activities. We expect our cash requirements to be generally for operating activities, capital improvements and product development.
Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell our shares of common stock, preferred stock, warrants and/or units of up to $25.0 million from time to time through Wainwright, acting as sales agent or principal (the “ATM Program”).
Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell our shares of common stock from time to time through Wainwright, acting as sales agent or principal (the “ATM Program”).
At December 31, 2022, we had $10.3 million of cash on hand generated primarily from the sale of common stock under the ATM Program during the year ended December 31, 2021 and payment of all unpaid principal and interest from the Seller Notes during the year ended December 31, 2022.
At December 31, 2023, we had $3,582 of cash on hand generated primarily from the sale of common stock under the ATM Program, payment of all unpaid principal and interest from the Seller Notes during the year ended December 31, 2022, and cash flows from operating activities.
ITEM 7. 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 related notes appearing elsewhere in this prospectus.
ITEM 7. 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 consolidated financial statements and related notes appearing elsewhere in this annual report on Form 10-K.
As of December 31, 2022, we had $10.3 million of cash on hand generated primarily from the sale of common stock under the ATM Program during the year ended December 31, 2021 and payment of all unpaid principal and interest from the Seller Notes during the year ended December 31, 2022.
At December 31, 2023, we had $3,582 of cash on hand generated primarily from the sale of common stock under the ATM Program, payment of all unpaid principal and interest from the Seller Notes during the year ended December 31, 2022 and cash flows from operating activities.
During the year ended December 31, 2022, our unallocated corporate overhead expense increased by $1.4 million, or 57.6%, as compared to the year ended December 31, 2021, primarily due to an increase in payroll related expenses, including stock-based compensation, commercial insurance premiums and business travel related costs. Non-Operating (Income) Expense Interest Income .
During the year ended December 31, 2023, our unallocated corporate overhead expense increased by $709, or 18.6%, as compared to the year ended December 31, 2022, primarily due to an increase in payroll related costs, including stock-based compensation, professional fees and business travel related costs. Non-Operating (Income) Expense Interest Income .
The selling, general and administrative expense in our unallocated corporate overhead expenses increased by $1.4 million, or 58.4%, during the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to an increase in stock-based compensation and payroll related costs, commercial insurance premiums and business travel related costs. Depreciation and Amortization Expenses .
The selling, general and administrative expense in our unallocated corporate overhead expenses increased by $726, or 19.2%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in payroll related costs, including stock-based compensation, professional fees and business travel related costs. Depreciation and Amortization Expenses .
Capital Expenditures Our additions to property and equipment were $1.5 million during the year ended December 31, 2022 as compared to $237 additions during the year ended December 31, 2021.
Capital Expenditures Our additions to property and equipment were $2,497 during the year ended December 31, 2023, as compared to $1,512 additions during the year ended December 31, 2022.
As a percentage of our consolidated revenue, selling, general and administrative expense increased to 31.3% in the year ended December 31, 2022, as compared to 28.1% in the year ended December 31, 2021.
As a percentage of our consolidated revenue, selling, general and administrative expense decreased to 24.4% in the year ended December 31, 2023, as compared to 33.4% in the year ended December 31, 2022.
Our provision reflects an effective tax rate on loss before taxes of (0.2)% for the year ended December 31, 2022, as compared to 0.7% for the year ended December 31, 2021, as set forth below: Year Ended December 31, 2022 2021 Variance Loss before income taxes $ (3,631 ) $ (2,183 ) $ (1,448 ) Income tax expense (benefit) 7 (16 ) 23 Effective income tax rate % (0.2 ) 0.7 (0.9 ) Net Loss per Share We generated a net loss of $3.6 million for the year ended December 31, 2022, as compared to a net loss of $2.2 million during the year ended December 31, 2021.
Our provision reflects an effective tax rate on loss before taxes of 0.0% for the year ended December 31, 2023, as compared to (0.1)% for the year ended December 31, 2022, as set forth below: Year Ended December 31, 2023 2022 (Restated) Variance Loss before income taxes $ (1,898 ) $ (5,412 ) $ 3,514 Income tax expense - 7 (7 ) Effective income tax rate % - (0.1 ) 0.1 25 Net Loss per Share We generated a net loss of $1,898 for the year ended December 31, 2023, as compared to a net loss of $5,419 during the year ended December 31, 2022.
Recent Accounting Pronouncements There have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on the Company’s financial statements. Measurement of Credit Losses on Financial Instrument.
Recent Accounting Pronouncements There have been no recent accounting pronouncements not yet adopted by us which would have a material impact on our consolidated financial statements.
The selling, general and administrative expense in our Critical Power segment increased by $1.8 million, or 108.7%, during the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to an increase in payroll related costs and product development and promotional costs related to our e-Boost initiative.
The selling, general and administrative expense in our Critical Power segment increased by $215, or 6.2%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in payroll related costs and business travel related costs.
Backlog reflects the amount of revenue we expect to realize upon the shipment of customer orders for our products that are not yet complete or for which work has not yet begun or been completed.
Revenue backlog, which consists of purchase orders and contracts from customers that we believe to be firm, reflects the amount of revenue that we expect to realize in the future upon the satisfaction of customer orders for our products or services that are not yet complete or for which work has not yet begun.
Cash used in our financing activities was $353 during the year ended December 31, 2022, as compared to cash provided by our financing activities of $7.6 million during the year ended December 31, 2021.
Cash used in investing activities during the year ended December 31, 2023 was $2,497, as compared to cash provided by our investing activities of $4,722 during the year ended December 31, 2022.
Critical Power . For the year ended December 31, 2022, revenue from our equipment sales increased by $338, or 17.9%, as compared to the year ended December 31, 2021, primarily due to increased sales of our refurbished generation equipment.
For the year ended December 31, 2023, revenue for our Critical Power segment increased by $1,508, or 15.7%, as compared to the year ended December 31, 2022, primarily due to an increase in sales of our new and refurbished generation equipment.
Selling, General and Administrative Expense . For the year ended December 31, 2022, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $3.4 million, or 64.3%, to $8.6 million, as compared to $5.3 million during the year ended December 31, 2021.
For the year ended December 31, 2023, consolidated selling, general and administrative expense, before depreciation and amortization, increased by $1,451, or 17.2%, to $9,896, as compared to $8,445 during the year ended December 31, 2022.
Gross Profit and Gross Margin The following table represents our gross profit by reporting segment for the periods indicated (in thousands, except percentages): Year Ended December 31, 2022 2021 Variance % T&D Solutions Gross profit $ 2,999 $ 54 $ 2,945 5,453.7 Gross margin % 17.2 0.6 16.6 Critical Power Solutions Gross profit 1,608 1,339 269 20.1 Gross margin % 16.7 15.2 1.5 Consolidated gross profit $ 4,607 $ 1,393 $ 3,214 230.7 Consolidated gross margin % 17.1 7.6 9.5 For the year ended December 31, 2022, our gross margin percentage was 17.1% of revenues, compared to 7.6% during the year ended December 31, 2021.
Gross Profit and Margin The following table represents our gross profit by reporting segment for the periods indicated (in thousands, except percentages): Year Ended December 31, 2023 2022 (Restated) Variance % Electrical Infrastructure Gross profit $ 6,125 $ 1,218 $ 4,907 402.9 Gross margin % 20.2 7.5 12.7 Critical Power Solutions Gross profit 2,225 1,608 617 38.4 Gross margin % 20.0 16.7 3.3 Consolidated gross profit $ 8,350 $ 2,826 $ 5,524 195.5 Consolidated gross margin % 20.1 10.9 9.2 For the year ended December 31, 2023, our gross margin percentage was 20.1% of revenues, compared to 10.9% during the year ended December 31, 2022.
Operating loss from our Critical Power segment increased by $1.6 million, or 420.3%, during the year ended December 31, 2022, primarily due to an increase in consulting, marketing and promotion fees related to our e-Boost initiative, as compared to lower material and overhead costs and no recognition of product development or promotion fees related to our e-Boost initiative during the year ended December 31, 2021.
Operating loss from our Critical Power segment increased by $512, or 25.6%, during the year ended December 31, 2023, primarily due to an increase in payroll related costs and consulting, marketing and promotion fees related to our e-Boost initiative. General Corporate Expense .
The selling, general and administrative expense in our T&D Solutions segment increased by $98, or 8.9%, during the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to an increase in payroll related costs and product development costs related to our E-Bloc initiative.
The selling, general and administrative expense in our Electrical Infrastructure segment increased by $510, or 42.6%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in payroll related costs and third party commissions expense.
Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of right-of-use assets related to our finance leases and excludes amounts included in cost of sales.
Depreciation and amortization expense included in selling, general and administrative expense in our consolidated statement of operations have been disclosed as a separate component of operating expense in the tables above. Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of right-of-use assets related to our finance leases and excludes amounts included in cost of sales.
Cash provided by investing activities during the year ended December 31, 2022 was $4.7 million, as compared to cash used in our investing activities of $237 during the year ended December 31, 2021. The increase in cash provided by investing activities is primarily due to collecting all unpaid principal and interest from the Seller Notes.
The decrease in cash provided by investing activities is primarily due to collecting all unpaid principal and interest from the Seller Notes during the year ended December 31, 2022. During the year ended December 31, 2023 and 2022, additions to our property and equipment were $2,497 and $1,512, respectively. Cash Used in Financing Activities.
Cash used in our operating activities was $5.8 million during the year ended December 31, 2022, as compared to cash used in our operating activities of $3.2 million during the year ended December 31, 2021. The increase in cash used in operating activities is primarily due to working capital fluctuations. Cash Provided by/ Used in Investing Activities.
The decrease in cash used in operating activities is primarily due to working capital fluctuations and the significant reduction to net loss of $3,521 during the year ended December 31, 2023. Cash Used in/Provided by Investing Activities.
As of December 31, 2022, we had working capital of $14.1 million, including $10.3 million of cash, compared to working capital of $18.6 million, including $9.9 million of cash on hand and $1.8 million of restricted cash at December 31, 2021.
As of December 31, 2023, we had working capital of $9,421, including $3,582 of cash, compared to working capital of $12,293, including $10,296 of cash on hand at December 31, 2022. Assessment of Liquidity .
For the year ended December 31, 2022, we had interest income of approximately $465, as compared to interest income of approximately $387 during the year ended December 31, 2021. We generated the majority of our interest income from the Seller Notes we received from the sale of the transformer business units in August 2019 and our cash on hand.
We generated the majority of our interest income from our cash on hand during the year ended December 31, 2023, as compared to generating the majority of our interest income from the two subordinated promissory notes (the “Seller Notes”) we received from the Equity Transaction, and our cash on hand, during the year ended December 31, 2022.
T&D Solutions. For the year ended December 31, 2022, our gross margin increased by 16.6%, to 17.2%, from 0.6% for the year ended December 31, 2021. The increase in our gross margin percentage was primarily due to increased sales of our E-Bloc power systems and automatic transfer switches, a favorable sales mix and improved productivity from our manufacturing facility.
Electrical Infrastructure. For the year ended December 31, 2023, our gross margin increased by 12.7%, to 20.2%, from 7.5% for the year ended December 31, 2022. The increase was primarily due to the significant increase in sales of our E-Bloc power systems and related equipment and medium and low voltage circuit protective equipment and improved productivity from our manufacturing facility.
Our Critical Power business provides customers with our suite of mobile e-Boost© EV charging solutions, power generation equipment and all forms of service and maintenance on our customers’ power generation equipment. These products and services are marketed by our operations headquartered in Minnesota, currently doing business under both the Titan and Pioneer Critical Power brand names.
Our Critical Power business provides customers with our suite of mobile e-Boost© EV charging solutions, power generation equipment and all forms of preventative maintenance, repairs, remote monitoring and other service on our customers’ equipment.
During the year ended December 31, 2022, revenue from our switchgear and E-Bloc power system product lines increased by $7.9 million, or 83.3%, as compared to the year ended December 31, 2021, primarily due to increased sales of our E-Bloc power systems, automatic transfer switches and low voltage power systems offset by a decrease in sales of our medium voltage power systems.
Electrical Infrastructure . During the year ended December 31, 2023, revenue from our equipment sales increased by $14,042 or 86.4%, as compared to the year ended December 31, 2022, primarily due to increased sales of our E-Bloc power systems and related equipment, as well as medium and low voltage circuit protective equipment. Critical Power .
The following table represents the progression of our backlog, by reporting segment, for the periods ended as indicated: December 31, 2022 2021 T&D Solutions $ 30,871 $ 17,499 Critical Power Solutions 6,284 5,349 Total order backlog $ 37,155 $ 22,848 24 Revenue The following table represents our revenues by reporting segment and major product category for the periods indicated (in thousands, except percentages): Year Ended December 31, 2022 2021 Variance % T&D Solutions Power Systems $ 17,382 $ 9,484 $ 7,898 83.3 Service 10 - 10 - 17,392 9,484 7,908 83.4 Critical Power Solutions Equipment 2,229 1,891 338 17.9 Service 7,379 6,936 443 6.4 9,608 8,827 781 8.8 Total revenue $ 27,000 $ 18,311 $ 8,689 47.5 For the year ended December 31, 2022, our consolidated revenue increased by $8.7 million, or 47.5% to $27.0 million, up from $18.3 million during the year ended December 31, 2021, primarily due to an increase in sales of our power systems from our T&D Solutions segment.
The following table represents the progression of our backlog, by reporting segment, for the periods ended as indicated: December 31, 2023 2022 (Restated) Electrical Infrastructure $ 28,497 $ 31,994 Critical Power Solutions 16,668 6,284 Total order backlog $ 45,165 $ 38,278 22 Revenue The following table represents our revenues by reporting segment and major product category for the periods indicated (in thousands, except percentages): Year Ended December 31, 2023 2022 (Restated) Variance % Electrical Infrastructure Equipment $ 30,302 $ 16,260 $ 14,042 86.4 Service 75 10 65 650.0 30,377 16,270 14,107 86.7 Critical Power Solutions Equipment 3,413 2,229 1,184 53.1 Service 7,703 7,379 324 4.4 11,116 9,608 1,508 15.7 Total revenue $ 41,493 $ 25,878 $ 15,615 60.3 For the year ended December 31, 2023, our consolidated revenue increased by $15,615, or 60.3% to $41,493, up from $25,878 during the year ended December 31, 2022, primarily due to an increase in sales of our power systems from our Electrical Infrastructure segment and an increase in sales of our equipment from our Critical Power segment.
Our summary of operating results during the years ended 2022 and 2021 are as follows: Year Ended December 31, 2022 2021 Revenues T&D Solutions $ 17,392 $ 9,484 Critical Power Solutions 9,608 8,827 Consolidated 27,000 18,311 Cost of goods sold T&D Solutions 14,393 9,430 Critical Power Solutions 8,000 7,488 Consolidated 22,393 16,918 Gross profit 4,607 1,393 Selling, general and administrative expenses 8,445 5,148 Depreciation and amortization expense 191 107 Total operating expenses 8,636 5,255 Operating loss from continuing operations (4,029 ) (3,862 ) Interest income (465 ) (387 ) Other expense (income) 67 (1,292 ) Loss income before taxes (3,631 ) (2,183 ) Income tax expense (benefit) 7 (16 ) Net loss $ (3,638 ) $ (2,167 ) Backlog .
Our summary of operating results during the years ended 2023 and 2022 are as follows: Year Ended December 31, 2023 2022 (Restated) Revenues Electrical Infrastructure $ 30,377 $ 16,270 Critical Power Solutions 11,116 9,608 Consolidated 41,493 25,878 Cost of goods sold Electrical Infrastructure 24,252 15,052 Critical Power Solutions 8,891 8,000 Consolidated 33,143 23,052 Gross profit 8,350 2,826 Selling, general and administrative 9,896 8,445 Depreciation and amortization 223 191 Research and development 885 - Total operating expenses 11,004 8,636 Operating loss from continuing operations (2,654 ) (5,810 ) Interest income (232 ) (465 ) Other (income) expense (524 ) 67 Loss before income taxes (1,898 ) (5,412 ) Income tax expense - 7 Net loss $ (1,898 ) $ (5,419 ) Backlog .
Amounts may not foot due to rounding. 23 RESULTS OF OPERATIONS Overview of 2022 Operating Results Selected financial and operating data for our reportable business segments for the most recent two years is summarized below.
We follow a standard contract review process in which we review the progress and performance on our ongoing contracts at least quarterly. 21 RESULTS OF OPERATIONS Overview of 2023 Operating Results Selected financial and operating data for our reportable business segments for the most recent two years is summarized below.
Operating income from our T&D Solutions segment increased by $2.8 million, or 268.3%, during the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due an increase in sales of our power systems, a favorable sales mix and improved productivity from our manufacturing facility during the year ended December 31, 2022. Critical Power .
The increase is primarily due to the large increase in sales of our power systems equipment and related equipment, reduced input costs and improved productivity from our manufacturing facility during the year ended December 31, 2023. Critical Power .
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Overview We design, manufacture, integrate, refurbish, service, distribute and sell electric power systems, distributed energy resources, power generation equipment and mobile electric vehicle (“EV”) charging solutions.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” The discussion in this section has been impacted by the restatement described in the Explanatory Note at the beginning of this Comprehensive Form 10-K and in Note 2 and Note 4 of the consolidated financial statements of this Comprehensive Form 10-K.
For the year ended December 31, 2021, included in other income was a gain of $1.4 million for the extinguishment and forgiveness of the PPP Loan. Provision for Income Taxes .
Included in other non-operating income during the year ended December 31, 2023, is a settlement gain of $525 related to a legal matter. Provision for Income Taxes .
The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expense during the periods presented.
Our net loss per basic and diluted share for the year ended December 31, 2022 was $0.37, compared to $0.24 for the year ended December 31, 2021. 27 LIQUIDITY AND CAPITAL RESOURCES General . On October 20, 2020, we entered into an At the Market Sale Agreement with H.C.
Our net loss per basic and diluted share for the year ended December 31, 2023 was $0.19, compared to a net loss per basic and diluted share of $0.56 for the year ended December 31, 2022.
During the year ended December 31, 2022 and 2021, additions to our property and equipment were $1.5 million and $237, respectively. Cash Used in/ Provided by Financing Activities.
Cash used in our operating activities was $3,894 during the year ended December 31, 2023, as compared to cash used in our operating activities of $5,772 during the year ended December 31, 2022.
For the year ended December 31, 2022, consolidated depreciation and amortization expense increased by $84, or 78.5%, as compared to the year ended December 31, 2021. 26 Operating Income (Loss) The following table represents our operating income (loss) by reportable segment for the periods indicated: Year Ended December 31, 2022 2021 Variance % T&D Solutions $ 1,784 $ (1,060 ) $ 2,844 268.3 Critical Power Solutions (2,003 ) (385 ) (1,618 ) (420.3 ) Unallocated corporate overhead expenses (3,810 ) (2,417 ) (1,393 ) (57.6 ) Total operating loss $ (4,029 ) $ (3,862 ) $ (167 ) (4.3 ) T&D Solutions .
There were no R&D expenses incurred during 2022. 24 Operating Income (Loss) The following table represents our operating income (loss) by reportable segment for the periods indicated: Year Ended December 31, 2023 2022 (Restated) Variance % Electrical Infrastructure $ 4,380 $ 3 $ 4,377 145,900.0 Critical Power Solutions (2,515 ) (2,003 ) (512 ) (25.6 ) Unallocated corporate overhead expenses (4,519 ) (3,810 ) (709 ) (18.6 ) Loss from operations $ (2,654 ) $ (5,810 ) $ 3,156 54.3 Electrical Infrastructure .
During the year ended December 31, 2022, the Company experienced a surge in orders for its E-Bloc power system which was the primary driver for the increase in the Company’s year over year ending backlog.
Our revenue backlog at December 31, 2023 was $45,165, an increase of $6,887, or 18.0%, when compared to $38,278 at December 31, 2022. During the year ended December 31, 2023, we experienced a surge in orders and contracts for our mobile EV charging solutions, e-Boost, which was the primary driver for the increase in our revenue backlog.
We did not sell any shares of common stock under the ATM Program during the year ended December 31, 2022. As of December 31, 2022, $8.6 million of common stock remained available for issuance under the ATM Program.
During the year ended December 31, 2023, we sold an aggregate of 27,559 shares of common stock for an aggregate consideration of approximately $184, before any sales agent fees and expenses payable by us under the ATM Program.
Removed
The financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. Significant estimates in these financial statements include, inventory provisions, useful lives and impairment of long-lived assets, income tax provision, stock-based compensation, and allowance for doubtful accounts.
Added
Certain of the financial and other information provided in this Management’s Discussion and Analysis of our financial condition and results of operations has been updated to reflect the restatement adjustments. Overview We design, manufacture, integrate, refurbish, service, distribute and sell electric power systems, distributed energy resources, power generation equipment and mobile EV charging solutions.
Removed
Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions. 21 Revenue Recognition .
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These products and services are marketed by our operations headquartered in Minnesota, currently doing business under the Titan, Pioneer eMobility and Pioneer Critical Power brand names. 20 Critical Accounting Estimates The preparation of financial statements and related disclosures are in conformity with U.S. GAAP.
Removed
Revenue is recognized when (1) a contract with a customer exists, (2) performance obligations promised in a contract are identified based on the products or services that will be transferred to the customer, (3) the transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer, (4) the transaction price is allocated to the performance obligations in the contract and (5) the Company satisfies performance obligations.
Added
We believe that the estimates and judgments upon which we rely are reasonable based upon information available to us at the time that we make these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected.
Removed
The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised product or service to a customer.
Added
The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below.
Removed
Revenue from the sale of our electric power systems is recognized either over time or at a point in time and substantially all of our revenue from the sale of power generation equipment is recognized at a point in time.
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We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Removed
Revenues are recognized at the point in time that the customer obtains control of the good which is when it has taken title to the products and has assumed the risks and rewards of ownership specified in the purchase order or sales agreement.
Added
Management has identified certain critical accounting estimates which are outlined below. In addition, there are other items within our consolidated financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
Removed
Certain sales of highly customized electrical power systems are recognized over time when such equipment has no alternative use and the Company has an enforceable right to payment for performance completed to date.
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Our significant accounting policies are more fully described in Note 3 – Summary of Significant Accounting Policies, in our financial statements included elsewhere in this Annual Report. Revenue Recognition A significant portion of our business is derived from design and production contracts.
Removed
Revenue for such agreements is recognized under the input method based on either cost or direct labor hours incurred relative to the estimated cost or direct labor hours expected to be consumed to complete the project.
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Revenue for these contracts is recognized proportionally over the term of the contract using an input method based on the proportion of labor hours incurred as compared to the total estimated labor hours for the fixed-fee contract performance obligations, which we consider the best available indicator of the pattern and timing in which contract performance obligations are fulfilled and control transfers to the customer.
Removed
Service revenues include maintenance contracts that are recognized over time based on the contract term and repair services which are recognized as services are delivered. Return of a product requires that the buyer obtain permission in writing from the Company.
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This percentage is multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period. There are situations where the number of hours to complete projects may exceed our original estimate as a result of an increase in project scope or unforeseen events.
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If products are returned without such permission, the buyer authorizes the Company, in addition to such other remedies as it may have, to hold the returned products at the buyer’s sole risk and expense.
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The related impact on income is recognized using the cumulative catch-up method, which the Company recognizes in the current period. Recognition of revenue on a contract requires estimates of the total labor hours at completion and the measurement of progress towards completion.
Removed
When the buyer requests authorization to return material for reasons of their own, the buyer will be charged for placing the returned goods in saleable condition, restocking charges and for any outgoing and incoming transportation paid by the Company.
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Due to the long-term nature of many of our contracts, developing the estimated total labor hours at completion often requires judgment. Factors that must be considered in estimating the total labor hours to be completed include the nature and complexity of the work to be performed and the risk and impact of delayed performance.
Removed
The Company warrants title to the products, and also warrants the products on date of shipment to the buyer, to be of the kind and quality described in the contract, merchantable, and free of defects in workmanship and material. Returns and warranties during the years ended December 31, 2022 and 2021 were insignificant. Inventories .
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At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total number of labor hours at completion in line with these expectations.
Removed
A substantial portion of the Company’s inventory includes raw materials and parts utilized to support the manufacturing process at PCEP and equipment sales and service offerings at Titan. We value inventories at the lower of cost or net realizable value.
Added
Backlog may vary significantly from reporting period to reporting period due to the timing of customer commitments. As of December 31, 2023, backlog from our E-Bloc power systems and related equipment was approximately $12,706, or 28.1% of the total backlog.
Removed
If a write down to the current market value is necessary, the market value cannot be greater than the net realizable value, which is defined as selling price less costs to complete and dispose, and cannot be lower than the net realizable value less a normal profit margin.
Added
Critical Power . For the year ended December 31, 2023, our gross margin increased by 3.3%, to 20.0%, from 16.7% for the year ended December 31, 2022.

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