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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ___________
Commission
file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
The number of shares outstanding of the registrant’s common stock, $0.001 par value, as of November 15, 2021 was .
PIONEER POWER SOLUTIONS, INC.
Form 10-Q
For the Quarterly Period Ended September 30, 2021
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PIONEER POWER SOLUTIONS, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Cost of goods sold | ||||||||||||||||
| Write down of inventory | ||||||||||||||||
| Total cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense (income) | ( | ) | ( | ) | ( | ) | ||||||||||
| (Loss) income before taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense (benefit) | ( | ) | ||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| (Loss) income per share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
PIONEER POWER SOLUTIONS, INC.
Consolidated Statements of Comprehensive (Loss) Income
(In thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Comprehensive (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
PIONEER POWER SOLUTIONS, INC.
Consolidated Balance Sheets
(In thousands, except share data)
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Insurance receivable | ||||||||
| Inventories, net | ||||||||
| Income taxes receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Notes receivable | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Deferred revenue | ||||||||
| Current maturities of long-term debt | ||||||||
| Income taxes payable | ||||||||
| Total current liabilities | ||||||||
| Long-term debt | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value, shares authorized; issued | ||||||||
| Common stock, $ par value, shares authorized; shares issued and outstanding on September 30, 2021 and December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
PIONEER POWER SOLUTIONS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Depreciation | ||||||||
| Amortization of right-of-use assets | ||||||||
| Amortization of imputed interest | ( | ) | ( | ) | ||||
| Interest expense from PPP Loan | ||||||||
| Non-cash cost of operating leases | ||||||||
| Change in receivable reserves | ( | ) | ||||||
| Change in inventory reserves | ||||||||
| Change in long term payables | ( | ) | ||||||
| Proceeds from insurance receivable | ||||||||
| Loss on investments | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Payroll tax deferral | ||||||||
| Changes in current operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other assets | ||||||||
| Income taxes | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Deferred revenue | ||||||||
| Net cash provided by/ (used in) operating activities | ( | ) | ||||||
| Investing activities | ||||||||
| Additions to property, plant and equipment | ( | ) | ||||||
| Proceeds from sale of investments | ||||||||
| Change in notes receivable | ||||||||
| Net cash (used in) / provided by investing activities | ( | ) | ||||||
| Financing activities | ||||||||
| Bank overdrafts | ( | ) | ||||||
| Funding from PPP Loan | ||||||||
| Payment of deferred purchase price | ( | ) | ||||||
| Dividend paid to shareholders | ( | ) | ||||||
| Gain on forgiveness of PPP Loan | ( | ) | ||||||
| Principal repayments of financing leases | ( | ) | ( | ) | ||||
| Net cash (used in) / provided by financing activities | ( | ) | ||||||
| (Decrease) / increase in cash and restricted cash | ( | ) | ||||||
| Cash, and restricted cash, beginning of year | ||||||||
| Cash, and restricted cash, end of period | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Acquisition of right-of-use assets | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
PIONEER POWER SOLUTIONS, INC.
Consolidated Statement of Stockholders’ Equity
(In thousands)
(Unaudited)
| Accumulated | ||||||||||||||||||||||||
| Additional | other | Total | ||||||||||||||||||||||
| Common Stock | paid-in | comprehensive | Accumulated | stockholders' | ||||||||||||||||||||
| Shares | Amount | capital | income | deficit | equity | |||||||||||||||||||
| Balance - June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Balance - September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance - June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Balance - September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Additional | other | Total | ||||||||||||||||||||||
| Common Stock | paid-in | comprehensive | Accumulated | stockholders' | ||||||||||||||||||||
| Shares | Amount | capital | income | deficit | equity | |||||||||||||||||||
| Balance - January 1, 2020 (Revised) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Balance - September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance - January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Dividend to shareholders | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance - September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
PIONEER POWER SOLUTIONS, INC.
Notes to Consolidated Financial Statements
September 30, 2021 (Unaudited)
1. BASIS OF PRESENTATION
Overview
Pioneer
Power Solutions, Inc. and its wholly owned subsidiaries (referred to herein as the “Company,” “Pioneer Power,”
“we,” “our” and “us”) manufacture, sell and service a broad range of specialty electrical
infrastructure and on-site power generation equipment for applications in the utility, industrial, commercial and backup power
markets. Our principal products and services include switchgear and engine-generator controls, complemented by a national field-service
network to maintain and repair power generation assets. The Company is headquartered in Fort Lee, New Jersey and operates from
We
have
Presentation
The accompanying unaudited interim consolidated financial statements of the Company have been prepared pursuant to the rules of the SEC and reflect the accounts of the Company as of September 30, 2021. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), have been condensed or omitted pursuant to those rules and regulations. We believe that the disclosures made are adequate to make the information presented not misleading to the reader. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included. The results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year. The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP for a year-end balance sheet.
All dollar amounts (except share and per share data) presented in the notes to our unaudited interim consolidated financial statements are stated in thousands of dollars, unless otherwise noted. Amounts may not foot due to rounding. ASC 740-270 requires the use of an estimated annual effective tax rate to compute the tax provision during an interim period unless certain exceptions are met. We have used a discrete-period computation method to calculate taxes for the fiscal three and nine month periods ended September 30, 2021. Due to operating losses, the Company has determined that it is unable to reliably estimate its annual effective tax rate.
These unaudited interim consolidated financial statements include the accounts of Pioneer Power and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
These unaudited interim consolidated financial statements should be read in conjunction with the risk factors under the heading “Part II - Item 1A. Risk Factors” and the risk factors and the audited consolidated financial statements and notes thereto of the Company and its subsidiaries included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Liquidity
The
accompanying financial statements have been prepared on a basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying financial statements as of the nine months ended
September 30, 2021, the Company had $
On
6
During
the first quarter of 2021, the Company executed a cash collateral security agreement with a commercial bank, which agreement required
us to pledge cash collateral as security for all unpaid reimbursement obligations owing to the commercial bank for an irrevocable
standby letter of credit in the amount of $
In November 2016, the FASB issued amended guidance to ASU No. 2016-18, Statement of Cash Flows - Restricted Cash (Topic 230), which requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and restricted cash and that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.
The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited interim consolidated statement of cash flows:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and restricted cash as shown in the statement of cash flows | $ | $ | ||||||
COVID-19
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic (the “COVID-19 pandemic”), based on the rapid increase in exposure globally.
The full impact of the COVID-19 pandemic continues to evolve as the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. During the three months ended September 30, 2021, the Company experienced an impact to productivity as a result of following social distancing guidelines and practicing personal protective measures. Notwithstanding, the Company has been able to operate substantially at capacity during the COVID-19 pandemic. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 pandemic and the global responses to contain its spread, the Company is not able to estimate the full effects of the COVID-19 pandemic at this time, however, if the pandemic continues, it may continue to have an adverse effect on the Company’s results of operations, financial condition, or liquidity.
On
March 27, 2020, then President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act”
(the “CARES Act”) The CARES Act, among other things, appropriates funds for the SBA Paycheck Protection Program loans
that are forgivable in certain situations to promote continued employment. On April 13, 2020, after having determined that it
met the qualifications for this loan program due to the impact that COVID-19 would have on our financial condition, results of
operations, and/or liquidity and applying for relief, the Company received a loan under the SBA Paycheck Protection Program (the
“PPP Loan”) in the amount of $
Under
the terms of the PPP Loan, the Company was eligible for full or partial loan forgiveness. During the first quarter of 2021, the
Company received full forgiveness of the PPP Loan and recognized a $
7
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There have been no significant changes in the Company’s accounting policies during the third quarter of 2021.
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.
Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The ASU is effective for all annual and interim periods beginning December 15, 2020, with early adoption permitted. The Company adopted this guidance on January 1, 2021. The adoption of this ASU did not have a material impact on the consolidated financial statements.
Fair Value Measurement. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement that eliminates, amends, and adds certain disclosure requirements for fair value measurements. The Company adopted this guidance on January 1, 2020. The adoption of this ASU did not have a material impact on the consolidated financial statements.
Measurement of Credit Losses on Financial Instrument. In June 2016, the FASB issued amended guidance to ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments that changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. This amended guidance for small reporting companies is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period. The Company does not expect that the amended guidance will have a material effect on our consolidated financial statements and related disclosures.
3. FAIR VALUE MEASUREMENTS
ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value standard also establishes a three level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:
| ● | Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market. |
| ● | Level 2 - inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability. |
| ● | Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability. |
On
January 22, 2019, Pioneer Critical Power, Inc., a Delaware corporation, and a wholly-owned subsidiary of the Company within the
T&D Solutions segment, entered into an Agreement and Plan of Merger with CleanSpark and CleanSpark Acquisition, Inc., a Delaware
corporation, which resulted in the Company receiving financial instruments that included the right to receive (i) shares
of CleanSpark Common Stock (“CleanSpark Common Stock”), (ii) a -year warrant to purchase shares of CleanSpark
Common Stock at an exercise price of $ per share, and (iii) a -year warrant to purchase shares of CleanSpark Common
Stock at an exercise price of $ per share. The share quantities and exercise prices of warrants reflect the
During
the three months ended September 30, 2020, the Company sold all of the CleanSpark Common Stock and warrants to purchase CleanSpark
Common Stock it received in connection with the Merger Agreement and recorded proceeds of $
8
No changes in valuation techniques or inputs occurred during the nine months ended September 30, 2021 and 2020. No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the nine months ended September 30, 2021 and 2020.
4. REVENUES
Nature of our products and services
Our principal products and services include switchgear and engine-generator controls, complemented by a national field-service network to maintain and repair power generation assets.
Products
We provide a portfolio of distributed generation products, including switchgear that helps customers effectively and efficiently manage their electrical power distribution systems to desired specifications and allows for flexibility to combine a wide variety of distributed energy resources in a compact, integrated package.
Additionally, we provide our customers with new and used sophisticated power generation equipment intended to ensure smooth, uninterrupted power to operations during times of emergency.
Services
Power generation systems represent considerable investments that require proper maintenance and service in order to operate reliably during a time of emergency. Our power maintenance programs provide preventative maintenance, repair and support service for our customers’ power generation systems.
Our principal source of revenue is derived from sales of products and fees for services. We measure revenue based upon the consideration specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Customers typically receive the benefit of our products when the risk of loss or control for the product transfers to the customer and for services as they are performed. Under ASC 606, revenue is recognized when a customer obtains control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services. To achieve this core principal, the Company applies the following five steps:
1) Identify the contract with a customer
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the products or services to be transferred and identifies the payment terms related to these products or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for products or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the products or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised products or services, the Company must apply judgment to determine whether promised products or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised products or services are accounted for as a combined performance obligation.
3) Determine the transaction price
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. The customer payments are generally due in 30 days.
9
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis or cost of the product or service. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
5) Recognize revenue when or as the Company satisfies a performance obligation
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.
Revenue from the sale of our switchgear equipment is predominantly recognized 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. 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. Certain sales of highly customized large switchgear equipment 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. Revenue for such agreements is recognized under the input method based on cost incurred relative to the estimated cost expected to be consumed to complete the project.
During
the three months ended September 30, 2021, the Company recognized $
The following table presents our revenues disaggregated by revenue discipline:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Products | $ | $ | $ | $ | ||||||||||||
| Services | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
See Note 12 - Business Segment and Geographic Information in Notes to Consolidated Financial Statements in Part I of this Form 10-Q.
5. OTHER EXPENSE (INCOME)
Other
expense (income) in the unaudited interim consolidated statements of operations reports certain gains and losses associated with
activities not directly related to our core operations. For the three months ended September 30, 2021, other expense was $
For
the nine months ended September 30, 2021, other income was $ million, as compared to other income of $ during the nine months
ended September 30, 2020. For the nine months ended September 30, 2021, included in other income was a gain of $
10
6. INVENTORIES
The components of inventories are summarized below:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Provision for excess and obsolete inventory | ( | ) | ( | ) | ||||
| Total inventories | $ | $ | ||||||
Inventories are stated at the lower of cost or a net realizable value determined on a weighted average method.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized below:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Computer hardware and software | ||||||||
| Leasehold improvements | ||||||||
| Construction in progress | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property, plant and equipment, net | $ | $ | ||||||
Depreciation
expense was $
Depreciation
expense was $
11
8. NOTES RECEIVABLE
In connection with the sale of the transformer business
units in August 2019, amongst other consideration, we received two subordinated promissory notes in the aggregate principal amount of
$
9. DEBT
On
March 27, 2020, then President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.”
The CARES Act, among other things, appropriates funds for the SBA Paycheck Protection Program loans that are forgivable in certain
situations to promote continued employment. On April 13, 2020 after having determined that it met the qualifications for this
loan program due to the impact that COVID-19 would have on our financial condition, results of operations, and/or liquidity and
applying for relief, the Company received a loan under the SBA Paycheck Protection Program in the amount of $
Under
the terms of the PPP Loan, the Company was eligible for full or partial loan forgiveness. The Company received full forgiveness
of the PPP Loan during the first quarter of 2021 and recognized a $
At
December 31, 2020, $
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| PPP Loan | $ | $ | ||||||
| Less: current portion | ||||||||
| Total long-term obligations | $ | $ | ||||||
12
10. STOCKHOLDERS’ EQUITY
Common Stock
The Company had shares of common stock, $ par value per share, outstanding as of September 30, 2021 and December 31, 2020.
Stock-Based Compensation
| Stock Options | Weighted average exercise price | Weighted average remaining contractual term | Aggregate intrinsic value | |||||||||||||
| Outstanding as of January 1, 2021 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Outstanding as of September 30, 2021 | $ | $ | ||||||||||||||
| Exercisable as of September 30, 2021 | $ | $ | ||||||||||||||
As of September 30, 2021, there were shares available for future grants under the Company’s 2011 Long-Term Incentive Plan.
Stock-based compensation expense recorded for the three and nine months ended September 30, 2021 was approximately $ and $, respectively, as compared to an insignificant amount of stock-based compensation expense during the three and nine months ended September 30, 2020. At September 30, 2021, the Company had total stock-based compensation expense remaining to be recognized in the consolidated statements of operations of approximately $.
The Company’s 2011 Long-Term Incentive Plan expired during the second quarter of 2021 and there was no plan in effect at September 30, 2021.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Denominator: | ||||||||||||||||
| Weighted average basic shares outstanding | ||||||||||||||||
| Effect of dilutive securities - equity based compensation plans | ||||||||||||||||
| Denominator for diluted net (loss) income per common share | ||||||||||||||||
| Net (loss) income per common share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
13
12. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The
Company follows ASC 280 - Segment Reporting in determining its reportable segments. The Company considered the way its
management team, most notably its chief operating decision maker, makes operating decisions and assesses performance and
considered which components of the Company’s enterprise have discrete financial information available. As the Company
makes decisions using a manufactured products vs. distributed products and services group focus, its analysis resulted in
The T&D Solutions segment is involved in the design, manufacture and distribution of switchgear used primarily by large industrial and commercial operations to manage their electrical power distribution needs. The Critical Power segment provides new and used power generation equipment and aftermarket field-services primarily to help customers ensure smooth, uninterrupted power to operations during times of emergency.
The following tables present information about segment loss and income:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | ||||||||||||||||
| T&D Solutions | ||||||||||||||||
| Switchgear | $ | $ | $ | $ | ||||||||||||
| Critical Power Solutions | ||||||||||||||||
| Equipment | ||||||||||||||||
| Service | ||||||||||||||||
| Consolidated | $ | $ | $ | $ | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Depreciation and amortization | ||||||||||||||||
| T&D Solutions | $ | $ | $ | $ | ||||||||||||
| Critical Power Solutions | ||||||||||||||||
| Unallocated corporate overhead expenses | ||||||||||||||||
| Consolidated | $ | $ | $ | $ | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Operating (loss) income | ||||||||||||||||
| T&D Solutions | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Critical Power Solutions | ( | ) | ||||||||||||||
| Unallocated corporate overhead expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Consolidated | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Revenues are attributable to countries based on the location of the Company's customers:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | ||||||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
14
13. LEASES
The Company leases certain offices, facilities
and equipment under operating and financing leases. Our leases have remaining terms ranging from less than
The components of the lease expense were as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||
| Finance lease cost | ||||||||||||||||
| Amortization of right-of-use asset | $ | $ | $ | $ | ||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Total finance lease cost | $ | $ | $ | $ | ||||||||||||
Other information related to leases was as follows:
Supplemental Cash Flows Information
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Operating cash flow payments for operating leases | $ | $ | ||||||
| Operating cash flow payments for finance leases | ||||||||
| Financing cash flow payments for finance leases | ||||||||
| Right-of-use assets obtained in exchange for lease obligations | ||||||||
| Operating lease liabilities arising from obtaining right of use assets | ||||||||
| Capitalized lease obligations | ||||||||
Weighted Average Remaining Lease Term
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating leases | | |||||||
| Finance leases | ||||||||
Weighted Average Discount Rate
| September 30, | ||||
| 2021 | 2020 | |||
| Operating leases | % | % | ||
| Finance leases | % | % | ||
14
Future minimum lease payments under non-cancellable leases as of September 30, 2021 were as follows:
| Operating | Finance | ||||
| Leases | Leases | ||||
| 2021 | |||||
| 2022 | |||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| Thereafter | |||||
| Total future minimum lease payments | |||||
| Less imputed interest | ( |
( | |||
| Total future minmum lease payments | $ | $ | |||
Reported as of September 30, 2021:
| Operating | Finance | ||||
| Leases | Leases | ||||
| Accounts payable and accrued liabilities | $ | $ | |||
| Other long-term liabilities | |||||
| Total | $ | $ | |||
14. SUBSEQUENT EVENTS
On October 20, 2020, we entered into an At The Market Sale Agreement with
H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell our common shares having an aggregate
price of up to $
14
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated interim financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on March 30, 2021.
Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “Pioneer Power,” “we,” “our” and “us” refer to Pioneer Power Solutions, Inc. and its subsidiaries.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
| ● | General economic conditions and their effect on demand for electrical equipment, particularly in the commercial construction market, but also in the power generation, industrial production, data center, oil and gas, marine and infrastructure industries. |
| ● | The effects of fluctuations in sales on our business, revenues, expenses, net income, income (loss) per share, margins and profitability. |
| ● | Many of our competitors are better established and have significantly greater resources and may subsidize their competitive offerings with other products and services, which may make it difficult for us to attract and retain customers. |
| ● | We depend on CleanSpark, Inc (“CleanSpark”) for a large portion of our business, and any change in the level of orders from CleanSpark could have a significant impact on results of operations. |
| ● | The potential loss or departure of key personnel, including Nathan J. Mazurek, our chairman, president and chief executive officer. |
| ● | Our ability to generate internal growth, maintain market acceptance of our existing products and gain acceptance for our new products. |
| ● | Unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect our profitability. |
| ● | Our ability to realize revenue reported in our backlog. |
| ● | Operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor or overhead cost increases, interest rate risk and commodity risk. |
| ● | Strikes or labor disputes with our employees may adversely affect our ability to conduct our business. |
| ● | The impact of geopolitical activity on the economy, changes in government regulations such as income taxes, climate control initiatives, the timing or strength of an economic recovery in our markets and our ability to access capital markets. |
| ● | Our chairman controls a majority of our voting power, and may have, or may develop in the future, interests that may diverge from yours. |
| ● | Future sales of large blocks of our common stock may adversely impact our stock price. |
| ● | The liquidity and trading volume of our common stock. |
| ● | Our business could be adversely affected by an outbreak of disease, epidemic or pandemic, such as the global coronavirus pandemic, or similar public threat, or fear of such an event. |
15
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. Moreover, new risks regularly emerge, and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should review carefully the risks and uncertainties described under the heading “Part II - Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q and “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock.
Business Overview
We manufacture, sell and service a broad range of specialty electrical infrastructure and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets. Our principal products and services include switchgear and engine-generator controls, complemented by a national field-service network to maintain and repair power generation assets. The Company is headquartered in Fort Lee, New Jersey and operates from three (3) additional locations in the U.S. for manufacturing, service and maintenance, engineering, sales and administration.
Recent Developments
On October 20, 2020, we entered into an At The Market Sale Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell our common shares having an aggregate price of up to $9.0 million from time to time through Wainwright, acting as agent or principal (the “ATM Program”). Shares of common stock are offered pursuant to a sales agreement prospectus included in the Company’s shelf registration on Form S-3 filed with the Securities and Exchange Commission on October 20, 2020, which was declared effective on October 27, 2020. On November 8, 2021, we sold 888,500 shares of common stock under the ATM Program, for total gross proceeds of approximately $9.0 million, at an average price of $10.1288 per share. We incurred approximately $273 of costs related to the common shares issued (including a placement fee of 3.0%, or approximately $270, to Wainwright), resulting in net proceeds of approximately $8.7 million.
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 manage their electrical power distribution systems to desired specifications. These solutions are marketed principally through our Pioneer Custom Electrical Products Corp. (“PCEP”) brand name. |
| ● | Our Critical Power business performs service and maintenance on our customers’ sophisticated power generation equipment and also provides customers with new and used power generation equipment intended to ensure smooth, uninterrupted power to operations during times of emergency. These solutions are marketed by our operations headquartered in Minnesota, currently doing business under the Titan Energy Systems Inc. (“Titan”) brand name. |
Distribution Agreement
As previously reported, on January 22, 2019, we entered into a Contract Manufacturing Agreement, dated as of January 22, 2019 (the “Contract Manufacturing Agreement”), by and among us and CleanSpark. Pursuant to the terms of the Contract Manufacturing Agreement, the Company manufactured parallel switchgears, automatic transfer switches and related products (collectively, “Products”) exclusively for purchase by CleanSpark. 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.
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 will serve as our exclusive distributor of the Products within any geographic region in which CleanSpark conducts its business (the “Sales Channel”). We will serve as CleanSpark’s sole source of the Products, and of any similar goods or products that would reasonably be deemed as interchangeable with such Products for sale within the Sales Channel. CleanSpark will purchase the Products via written purchase orders to us. The price for the Products sold under the Distribution Agreement will be determined on a job-by-job basis, provided that CleanSpark shall pay us 97% of the contract sales price of the Products to all end-use customers. The Distribution Agreement terminates on December 31, 2023 and may be extended by mutual agreement of us and CleanSpark.
16
Critical Accounting Policies
There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
RESULTS OF OPERATIONS
Overview of the Three and Nine Months Results
Selected financial and operating data for our reportable business segments for the most recent reporting period is summarized below. This information, as well as the selected financial data provided in Note 12 - Business Segment and Geographic Information and in our unaudited Consolidated Financial Statements and related notes included in this Quarterly Report on Form 10-Q, should be referred to when reading our discussion and analysis of results of operations below.
Our summary of operating results during the three and nine months ended September 30, 2021 and 2020 are as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | ||||||||||||||||
| T&D Solutions | $ | 2,996 | $ | 1,507 | $ | 7,980 | $ | 7,370 | ||||||||
| Critical Power Solutions | 2,689 | 2,544 | 6,833 | 6,768 | ||||||||||||
| Consolidated | 5,685 | 4,051 | 14,813 | 14,138 | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| T&D Solutions | 2,810 | 1,199 | 7,807 | 7,639 | ||||||||||||
| Critical Power Solutions | 2,162 | 2,113 | 5,638 | 5,881 | ||||||||||||
| Consolidated | 4,972 | 3,312 | 13,445 | 13,520 | ||||||||||||
| Gross profit | 713 | 739 | 1,368 | 618 | ||||||||||||
| Selling, general and administrative expenses | 1,207 | 1,157 | 3,664 | 3,890 | ||||||||||||
| Depreciation and amortization expense | 24 | 33 | 74 | 111 | ||||||||||||
| Total operating expenses | 1,231 | 1,190 | 3,738 | 4,001 | ||||||||||||
| Operating loss from continuing operations | (518 | ) | (451 | ) | (2,370 | ) | (3,383 | ) | ||||||||
| Interest income | (99 | ) | (55 | ) | (288 | ) | (242 | ) | ||||||||
| Other expense (income) | 13 | (1,735 | ) | (1,294 | ) | (904 | ) | |||||||||
| (Loss) income before taxes | (432 | ) | 1,339 | (788 | ) | (2,237 | ) | |||||||||
| Income tax expense (benefit) | 2 | – | (19 | ) | 5 | |||||||||||
| Net (loss) income | $ | (434 | ) | $ | 1,339 | $ | (769 | ) | $ | (2,242 | ) | |||||
Backlog
Our backlog is based on firm orders from our customers expected to be delivered in the future, most of which is expected to occur during the next twelve months. Backlog may vary significantly from reporting period to reporting period due to the timing of customer commitments. The time between receipt of an order and actual delivery, or completion, of our products and services varies from one or more days, in the case of inventoried standard products, to three to nine months, in the case of certain custom engineered equipment solutions, and up to one year or more under our service contracts.
The following table represents the progression of our backlog, by reporting segment, as of the end of the last five quarters:
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||||||||
| T&D Solutions | $ | 5,032 | $ | 6,501 | $ | 10,210 | $ | 5,881 | $ | 3,872 | ||||||||||
| Critical Power Solutions | 5,823 | 6,225 | 6,934 | 6,792 | 7,472 | |||||||||||||||
| Total order backlog | $ | 10,855 | $ | 12,726 | $ | 17,144 | $ | 12,673 | $ | 11,344 | ||||||||||
17
Revenue
The following table represents our revenues by reporting segment and major product category for the periods indicated:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2021 | 2020 | Variance | % | 2021 | 2020 | Variance | % | |||||||||||||||||||||||||
| T&D Solutions | ||||||||||||||||||||||||||||||||
| Switchgear | $ | 2,996 | $ | 1,507 | $ | 1,489 | 98.8 | $ | 7,980 | $ | 7,370 | $ | 610 | 8.3 | ||||||||||||||||||
| 2,996 | 1,507 | 1,489 | 98.8 | 7,980 | 7,370 | 610 | 8.3 | |||||||||||||||||||||||||
| Critical Power Solutions | ||||||||||||||||||||||||||||||||
| Equipment | 694 | 411 | 283 | 68.9 | 1,379 | 891 | 488 | 54.8 | ||||||||||||||||||||||||
| Service | 1,995 | 2,133 | (138 | ) | (6.5 | ) | 5,454 | 5,877 | (423 | ) | (7.2 | ) | ||||||||||||||||||||
| 2,689 | 2,544 | 145 | 5.7 | 6,833 | 6,768 | 65 | 1.0 | |||||||||||||||||||||||||
| Total revenue | $ | 5,685 | $ | 4,051 | $ | 1,634 | 40.3 | $ | 14,813 | $ | 14,138 | $ | 675 | 4.8 | ||||||||||||||||||
For the three months ended September 30, 2021, our consolidated revenue increased by $1.6 million, or 40.3%, to $5.7 million, up from $4.1 million during the three months ended September 30, 2020, primarily due to an increase in sales of our switchgear from our T&D Solutions segment.
For the nine months ended September 30, 2021, our consolidated revenue increased by $675, or 4.8%, to $14.8 million, up from $14.1 million during the nine months ended September 30, 2020, primarily due to an increase in sales of our switchgear from our T&D Solutions segment.
T&D Solutions. During the three months ended September 30, 2021, revenue from our switchgear product lines increased by $1.5 million, or 98.8%, as compared to the three months ended September 30, 2020, as a result of increased sales of our automatic transfer switches and medium voltage switchgear.
During the nine months ended September 30, 2021, revenue from our switchgear product lines increased by $610, or 8.3%, as compared to the nine months ended September 30, 2020, as a result of increased sales of medium voltage switchgear, offset by a reduction in sales of our automatic transfer switches and low voltage switchgear.
Critical Power. For the three months ended September 30, 2021, revenue for our equipment sales increased by $283, or 68.9%, as compared to the same period in the prior year due to the shipment of two large equipment jobs during the three months ended September 30, 2021 and no comparable shipments being recognized during the three months ended September 30, 2020. Revenue for our service sales decreased by $138, or 6.5%, as compared to the three months ended September 30, 2020.
For the nine months ended September 30, 2021, revenue for our equipment sales increased by $488, or 54.8%, as compared to the same period in the prior year due to the shipment of two large equipment jobs during the nine months ended September 30, 2021 and no comparable shipments being recognized during the nine months ended September 30, 2020. Revenue for our service sales decreased by $423, or 7.2%, as compared to the nine months ended September 30, 2020.
18
Gross Profit (Loss) and Gross Margin
The following table represents our gross profit (loss) by reporting segment for the periods indicated:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2021 | 2020 | Variance | % | 2021 | 2020 | Variance | % | |||||||||||||||||||||||||
| T&D Solutions | ||||||||||||||||||||||||||||||||
| Gross profit (loss) | $ | 186 | $ | 308 | $ | (122 | ) | 39.6 | $ | 173 | $ | (269 | ) | $ | 442 | 164.3 | ||||||||||||||||
| Gross margin % | 6.2 | 20.4 | (14.2 | ) | 2.2 | (3.6 | ) | 5.8 | ||||||||||||||||||||||||
| Critical Power Solutions | ||||||||||||||||||||||||||||||||
| Gross profit | 527 | 431 | 96 | 22.3 | 1,195 | 887 | 308 | 34.7 | ||||||||||||||||||||||||
| Gross margin % | 19.6 | 16.9 | 2.7 | 17.5 | 13.1 | 4.4 | ||||||||||||||||||||||||||
| Consolidated gross profit (loss) | $ | 713 | $ | 739 | $ | (26 | ) | (3.5 | ) | $ | 1,368 | $ | 618 | $ | 750 | 121.4 | ||||||||||||||||
| Consolidated gross margin % | 12.5 | 18.2 | (5.7 | ) | 9.2 | 4.4 | 4.8 | |||||||||||||||||||||||||
For the three months ended September 30, 2021, our consolidated gross margin was 12.5% of revenues, compared to 18.2% during the three months ended September 30, 2020.
For the nine months ended September 30, 2021, our consolidated gross margin was 9.2% of revenues, compared to 4.4% during the nine months ended September 30, 2020.
T&D Solutions. For the three months ended September 30, 2021, our gross margin decreased by 14.2%, to 6.2%, down from 20.4% for the three months ended September 30, 2020 due to an increase in the cost of manufacturing supplies and labor. Furthermore, shipments of our low-voltage switchgear, which have historically generated lower margins, increased during the three months September 30, 2021 as compared to the same period last year.
For the nine months ended September 30, 2021, our gross margin increased by 5.8%, to 2.2%, up from (3.6)% for the nine months ended September 30, 2020 due to recognizing a one-time $546 write down of inventory during the nine months ended September 30, 2020.
Critical Power. For the three months ended September 30, 2021, our gross margin increased by 2.7%, to 19.6%, up from 16.9% for the three months ended September 30, 2020, predominately due to a reduction in overhead costs and the acceptance of price increases from our customers.
For the nine months ended September 30, 2021, our gross margin increased by 4.4%, to 17.5%, up from 13.1% for the nine months ended September 30, 2020, predominately due to a reduction in overhead costs and the acceptance of price increases from our customers.
19
Operating Expenses
The following table represents our operating expenses by reportable segment for the periods indicated:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2021 | 2020 | Variance | % | 2021 | 2020 | Variance | % | |||||||||||||||||||||||||
| T&D Solutions | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | $ | 283 | $ | 247 | $ | 36 | 14.6 | $ | 823 | $ | 1,044 | $ | (221 | ) | (21.2 | ) | ||||||||||||||||
| Depreciation and amortization expense | 3 | 11 | (8 | ) | (72.7 | ) | 14 | 40 | (26 | ) | (65.0 | ) | ||||||||||||||||||||
| Segment operating expense | $ | 286 | $ | 258 | $ | 28 | 10.9 | $ | 837 | $ | 1,084 | $ | (247 | ) | (22.8 | ) | ||||||||||||||||
| Critical Power Solutions | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | $ | 353 | $ | 380 | $ | (27 | ) | (7.1 | ) | $ | 1,122 | $ | 1,204 | $ | (82 | ) | (6.8 | ) | ||||||||||||||
| Depreciation and amortization expense | 14 | 14 | — | — | 39 | 46 | (7 | ) | (15.2 | ) | ||||||||||||||||||||||
| Segment operating expense | $ | 367 | $ | 394 | $ | (27 | ) | (6.9 | ) | $ | 1,161 | $ | 1,250 | $ | (89 | ) | (7.1 | ) | ||||||||||||||
| Unallocated Corporate Overhead Expenses | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | $ | 571 | $ | 530 | $ | 41 | 7.7 | $ | 1,719 | $ | 1,642 | $ | 77 | 4.7 | ||||||||||||||||||
| Depreciation and amortization expense | 7 | 8 | (1 | ) | (12.5 | ) | 21 | 25 | (4 | ) | (16.0 | ) | ||||||||||||||||||||
| Segment operating expense | $ | 578 | $ | 538 | $ | 40 | 7.4 | $ | 1,740 | $ | 1,667 | $ | 73 | 4.4 | ||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | $ | 1,207 | $ | 1,157 | $ | 50 | 4.3 | $ | 3,664 | $ | 3,890 | $ | (226 | ) | (5.8 | ) | ||||||||||||||||
| Depreciation and amortization expense | 24 | 33 | (9 | ) | (27.3 | ) | 74 | 111 | (37 | ) | (33.3 | ) | ||||||||||||||||||||
| Consolidated operating expense | $ | 1,231 | $ | 1,190 | $ | 41 | 3.4 | $ | 3,738 | $ | 4,001 | $ | (263 | ) | (6.6 | ) | ||||||||||||||||
Selling, General and Administrative Expense. For the three months ended September 30, 2021, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $50, or 4.3%, to $1.2 million, as compared to $1.2 million during the same period last year. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, decreased to 21.2% during the three months ended September 30, 2021, as compared to 28.6% in the three months ended September 30, 2020.
For the nine months ended September 30, 2021, consolidated selling, general and administrative expense, before depreciation and amortization, decreased by approximately $226, or 5.8%, to $3.7 million, as compared to $3.9 million during the nine months ended September 30, 2020, primarily due to a reduction in professional fees related to the then-pending case titled Myers Power Products, Inc. v. Pioneer Power Solutions, Inc., Pioneer Custom Electrical Products, Corp., et al., Los Angeles County Superior Court Case No. BC606546, which was settled on November 20, 2020. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, decreased to 24.7% during the nine months ended September 30, 2021, as compared to 27.5% in the nine months ended September 30, 2020.
Depreciation and Amortization Expense. Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of definite-lived intangible assets and right-of-use assets related to our finance leases, and excludes amounts included in cost of sales. For the three and nine months ended September 30, 2021, consolidated depreciation and amortization expense decreased by $9, or 27.3%, and $37, or 33.3%, respectively, as compared to the three and nine months ended September 30, 2020.
Operating (Loss) Income
The following table represents our operating (loss) income by reportable segment for the periods indicated:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2021 | 2020 | Variance | % | 2021 | 2020 | Variance | % | |||||||||||||||||||||||||
| T&D Solutions | $ | (100 | ) | $ | 50 | $ | (150 | ) | 300.0 | $ | (664 | ) | $ | (1,353 | ) | $ | 689 | 50.9 | ||||||||||||||
| Critical Power Solutions | 160 | 37 | 123 | (332.4 | ) | 34 | (363 | ) | 397 | 109.4 | ||||||||||||||||||||||
| Unallocated corporate overhead expenses | (578 | ) | (538 | ) | (40 | ) | (7.4 | ) | (1,740 | ) | (1,667 | ) | (73 | ) | (4.4 | ) | ||||||||||||||||
| Total operating loss | $ | (518 | ) | $ | (451 | ) | $ | (67 | ) | 14.9 | $ | (2,370 | ) | $ | (3,383 | ) | $ | 1,013 | 29.9 | |||||||||||||
T&D Solutions. During the three and nine months ended September 30, 2021, our T&D Solutions segment generated an operating loss of $100 and $664, respectively, as compared to an operating income of $50 and an operating loss of $1.4 million for the same respective periods in 2020.
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Critical Power. During the three and nine months ended September 30, 2021, our Critical Power segment generated an operating income of $160 and $34, respectively, as compared to operating income of $37 and an operating loss of $363 during the three and nine months ended September 30, 2020, respectively. The increase in operating income for the three and nine months ended September 30, 2021 is due primarily to a reduction in overhead costs and the acceptance of price increases from our customers.
General Corporate Expense. Our general corporate expense is comprised primarily of executive management, corporate accounting and human resources personnel, office expenses, financing and corporate development activities, payroll and benefits administration, treasury, tax compliance, legal, stock-based compensation and public reporting costs, and costs not specifically allocated to reportable business segments. During the three and nine months ended September 30, 2021, our unallocated corporate overhead expense increased by $39, or 7.2%, to $577, and by $73, or 4.4%, to $1.7 million, as compared to the three and nine months ended September 30, 2020, primarily due to an increase in stock-based compensation expense offset by a reduction in professional fees.
Non-Operating (Income) Expense
Interest Income. For the three and nine months ended September 30, 2021, we had interest income of approximately $99 and $288, respectively, as compared to interest income of approximately $55 and $242 during the three and nine months ended September 30, 2020, respectively. The Company generates the majority of its interest income from the Seller Notes it received from the sale of the transformer business units in August 2019 and its cash on hand.
Other Expense (Income). For the three months ended September 30, 2021, other expense was $13, as compared to other income of $1.7 million during the three months ended September 30, 2020. For the three months ended September 30, 2020, included in other income was a gain of $1.7 million related to the sale of CleanSpark Common Stock and warrants.
For the nine months ended September 30, 2021, other income was $1.3 million, as compared to other income of $904 during the nine months ended September 30, 2020. For the nine months ended September 30, 2021, included in other income was a gain of $1.4 million for the extinguishment and forgiveness of the PPP Loan. For the nine months ended September 30, 2020, included in other income was a gain of $968 related to the sale and mark to market adjustment on the fair value of the CleanSpark Common Stock and warrants.
Income Tax Expense (Benefit). Our effective income tax rate was (0.5)% for the three months ended September 30, 2021, compared to 0.0% during the three months ended September 30, 2020. For the nine months ended September 30, 2021, our effective income tax rate was 2.4%, as compared to an income tax rate of (0.2)% during the nine months ended September 30, 2020, as set forth below:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| 2021 | 2020 | Variance | 2021 | 2020 | Variance | |||||||||||||||||||
| (Loss) income before income taxes | $ | (432 | ) | $ | 1,339 | $ | (1,771 | ) | $ | (788 | ) | $ | (2,237 | ) | $ | 1,449 | ||||||||
| Income tax expense (benefit) | 2 | — | 2 | (19 | ) | 5 | (24 | ) | ||||||||||||||||
| Effective income tax rate % | (0.5 | ) | — | (0.5 | ) | 2.4 | (0.2 | ) | 2.6 | |||||||||||||||
Net (Loss) Income per Share
We generated a net loss of $434 during the three months ended September 30, 2021, as compared to net income of $1.3 million during the three months ended September 30, 2020. Our net loss per basic and diluted share for the three months ended September 30, 2021 was $0.05, as compared to net income per basic and diluted share of $0.15 for the three months ended September 30, 2020.
We generated a net loss of $769 during the nine months ended September 30, 2021, as compared to a net loss of $2.2 million during the nine months ended September 30, 2020. Our net loss per basic and diluted share for the nine months ended September 30, 2021 was $0.09, as compared to a net loss per basic and diluted share of $0.26 for the nine months ended September 30, 2020.
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LIQUIDITY AND CAPITAL RESOURCES
General. At September 30, 2021, we had $3.4 million of cash on hand. We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings. Our cash requirements have been generally applied toward operating activities, debt repayment, capital improvements and acquisitions.
The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited interim consolidated statement of cash flows:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Cash | $ | 3,372 | $ | 7,567 | ||||
| Restricted cash | 1,775 | — | ||||||
| Total cash and restricted cash as shown in the statement of cash flows | $ | 5,147 | $ | 7,567 | ||||
We have restricted cash of approximately $1.8 million as a result of executing a cash collateral security agreement with a commercial bank which required us to pledge cash collateral as security for all unpaid reimbursement obligations owing to the commercial bank for an irrevocable standby letter of credit.
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic (the “COVID-19 pandemic”), based on the rapid increase in exposure globally.
The full impact of the COVID-19 pandemic continues to evolve as the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. During the three months ended September 30, 2021, we experienced an impact to productivity as a result of following social distancing guidelines and practicing personal protective measures. Notwithstanding, the Company has been able to operate substantially at capacity during the COVID-19 pandemic. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 pandemic and the global responses to contain its spread, we are not able to estimate the full effects of the COVID-19 pandemic at this time, however, if the pandemic continues, it may continue to have an adverse effect on our results of operations, financial condition, or liquidity.
On March 27, 2020, then President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act” (the “CARES Act”) The CARES Act, among other things, appropriates funds for the SBA Paycheck Protection Program loans that are forgivable in certain situations to promote continued employment. On April 13, 2020, after having determined that it met the qualifications for this loan program due to the impact that COVID-19 would have on our financial condition, results of operations, and/or liquidity and applying for relief, we received a loan under the SBA Paycheck Protection Program (the “PPP Loan”) in the amount of $1.4 million.
Under the terms of the PPP Loan, we were eligible for full or partial loan forgiveness. During the first quarter of 2021, the Company received full forgiveness of the PPP Loan and recognized a $1.4 million gain on extinguishment and forgiveness of debt in other expense (income).
Cash Provided by/ (Used in) Operating Activities. Cash provided by our operating activities was $839 during the nine months ended September 30, 2021, as compared to cash used in our operating activities of $1.3 million during the nine months ended September 30, 2020. The decrease in cash used in operating activities is primarily due to recognizing a gain of $968 related to the sale and mark to market adjustment on the fair value of CleanSpark Common Stock and warrants during the nine months ended September 30, 2020, and there was no comparable gain during the nine months ended September 30, 2021.
Cash (Used in)/ Provided by Investing Activities. Cash used in investing activities during the nine months ended September 30, 2021 was $156, as compared to cash provided by investing activities of $2.6 million during the nine months ended September 30, 2020. The increase in cash used in investing activities in the comparable periods is primarily due to recognizing $2.4 million of proceeds from the sale of the CleanSpark Common Stock and warrants during the nine months ended September 30, 2020, and there were no comparable proceeds recognized during the nine months ended September 30, 2021.
Cash (Used in)/ Provided by Financing Activities. Cash used in our financing activities was $3.1 million during the nine months ended September 30, 2021, as compared to cash provided by financing activities of $116 during the nine months ended September 30, 2020. The primary use of cash in financing activities for the nine months ended September 30, 2021 was repayments of financing leases. The increase in cash used in financing activities for the comparable periods is due to recognizing a dividend paid to shareholders and a gain on the extinguishment and forgiveness of the PPP Loan during the nine months ended September 30, 2021, and there were no comparable payments or gain during the nine months ended September 30, 2020.
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Working Capital. As of September 30, 2021, we had working capital of $5.7 million, including $3.4 million of cash and $1.8 million of restricted cash, compared to working capital of $8.4 million, including $7.6 million of cash at December 31, 2020. At September 30, 2021 and December 31, 2020, we no longer had a revolving credit facility, as it was paid in full in August 2019 with the proceeds from the sale of the transformer business units.
Assessment of Liquidity. At September 30, 2021, we had $3.4 million of cash on hand, generated primarily from the completion of the August 2019 sale of (i) all of the issued and outstanding equity interests of Electrogroup Canada, Inc., a wholly owned subsidiary of the Company, and (ii) all of the issued and outstanding equity interests of Jefferson Electric, Inc., a wholly owned subsidiary of the Company, and JE Mexican Holdings, Inc., a wholly owned subsidiary of the Company, the sale of the CleanSpark Common Stock and warrants to purchase CleanSpark Common Stock, proceeds from insurance and the PPP Loan. We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings. Our cash requirements historically were generally for operating activities, debt repayment, capital improvements and acquisitions.
On June 1, 2021, our board of directors declared a special cash dividend of $0.12 per common share, payable to shareholders of record as of June 22, 2021, to be paid on July 7, 2021. The cash dividends were paid in July of 2021 and equaled $0.12 per share on the $0.001 par value common stock resulting in an aggregate distribution of approximately $1.0 million representing a capital repayment paid from APIC.
As all outstanding amounts under our credit facilities have been paid in full with the proceeds from the sale of the transformer business units during the year ended December 31, 2019, and the credit facilities terminated, 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 and capital improvements. We expect that our cash balance is sufficient to fund operations for the next twelve months.
Capital Expenditures
Our additions to property, plant and equipment were $156 during the nine months ended September 30, 2021 as compared to no additions during the nine months ended September 30, 2020. At September 30, 2021 and 2020, we no longer had a revolving credit facility as it was paid in full and terminated in August 2019 with the proceeds from the sale of the transformer business units.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2021 (the “Evaluation Date”), the end of the period covered by this Quarterly Report on Form 10-Q. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. As of September 30, 2021, based on the evaluation of these disclosure controls and procedures, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
Management believes that the condensed consolidated financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, the Company’s financial condition as of the Evaluation Date, and results of its operations and cash flows for the Evaluation Date, in conformity with United States Generally Accepted Accounting Principles.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended September 30, 2021 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in lawsuits, investigations and claims that arise in the ordinary course of business.
On January 11, 2016, Myers Power Products, Inc., a specialty electrical products manufacturer, filed suit with the Superior Court of the State of California, County of Los Angeles, against us, PCEP and two PCEP employees who are former employees of Myers Power Products, Inc., Geo Murickan, the president of PCEP (“Murickan”), and Brett DeChellis (“DeChellis”), alleging, among other things, that Murickan wrongly used and retained confidential business information of Myers Power Products, Inc. for the benefit of us and PCEP, in breach of their confidentiality agreement and/or employment agreement entered into with Myers Power Products, Inc., and that we and PCEP knowingly received and used such confidential business information. Myers Power Products, Inc. sought injunctive relief enjoining us, PCEP and our employees from using its confidential business information and compensatory damages of an unspecified unlimited amount; however, the Company recognized approximately $1.2 million for expected costs related to this litigation in the prior two fiscal years.
On October 4, 2019, the dividend that was payable by the Company was enjoined by court order of the Superior Court of California related to the foregoing case. On October 16, 2019, Myers Power Products, Inc. filed an ex parte application arguing the Company had violated, or intended to violate the modified preliminary injunction and sought an order from the court for the Company to post a bond in an amount of $30,000 or more (which was not granted). The Company cancelled the dividend as the result of this court order.
There were also two related appeals in the California Court of Appeal for the Second Appellate District (“Court of Appeal”). Case no. B301494 was an appeal of the October 4, 2019 order modifying a previously issued preliminary injunction. Case no. B302943 was an appeal of the November 26, 2019 order requiring Pioneer Power Solutions, Inc. and Pioneer Custom Electrical Products Corp. to obtain and post a $12 million bond. On April 10, 2020, the Court of Appeal granted our motion to combine the two appeals.
On November 20, 2020, the Company entered into a settlement and release agreement with Myers Power Products, Inc. As part of the settlement, all injunctions were dissolved, and all litigation and appeals related to the action were dismissed with prejudice. The parties executed full releases of all known and unknown claims, thereby eliminating all such restrictions on the Company. Terms of the settlement were not disclosed; however, the Company agreed to pay Myers Power Products, Inc. an amount that did not differ significantly from the $1.2 million of expected costs the Company recognized as a legal contingency during the year ended December 31, 2018. This payment was made during the fourth quarter of 2020.
We can give no assurance that any other lawsuits or claims brought in the future will not have an adverse effect on our financial condition, liquidity or operating results.
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.
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 1A. RISK FACTORS
Except as otherwise set forth below, there have been no material developments to alter the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
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.
The trading volume of our common stock spiked significantly in Fiscal 2021 and Fiscal 2020, and our common stock has continued to trade at higher volumes than our historical average. 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. There has been no recent change in our financial condition or results of operations that is consistent with the increase in the trading volume of our common stock, and the recent spike in the trading volume of our common stock may not be sustained.
In the event of a rapid decrease in the trading volume of our common stock, there can be no assurance that an active trading market in our common stock could be maintained, and any illiquidity resulting from such a decrease in the trading volume of our common stock may result in the market price not accurately reflecting our relative value. If our common stock were to be thinly traded, even limited trading in our common stock could lead, as it has at times in the past, to dramatic fluctuations in share price, and investors might not be able to liquidate their investment in us at all or at a price that reflects the value of the business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See
the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished
with this report, which Exhibit Index is incorporated herein by reference.
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EXHIBIT INDEX
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PIONEER POWER SOLUTIONS, INC. | ||
| Date: November 15, 2021 | By: | /s/ Nathan J. Mazurek |
| Name: Nathan J. Mazurek | ||
| Title: Chief Executive Officer |
| Date: November 15, 2021 | /s/ Walter Michalec |
| Name: Walter Michalec | |
Title: Chief Financial Officer (Principal Financial Officer duly authorized to sign on behalf of Registrant) |
