Form 10-Q PIONEER POWER SOLUTIONS, For: Jun 30
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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 |
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(Address of principal executive offices) |
(I.R.S. Employer Identification No.)
(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 August 15, 2022 was .
PIONEER POWER SOLUTIONS, INC.
Form 10-Q
For the Quarterly Period Ended June 30, 2022
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 | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense (income), net | ( | ) | ||||||||||||||
| Loss before taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense (benefit) | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss 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 Balance Sheets
(In thousands, except share data)
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Notes receivable and accrued interest | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value, shares authorized; issued | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding on June 30, 2022 and December 31, 2021, respectively | ||||||||
| 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.
2
PIONEER POWER SOLUTIONS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Depreciation | ||||||||
| Amortization of right-of-use finance leases | ||||||||
| Amortization of imputed interest | ( | ) | ( | ) | ||||
| Interest expense from PPP Loan | ||||||||
| Gain on forgiveness of PPP Loan | ( | ) | ||||||
| Amortization of right-of-use operating leases | ||||||||
| Change in receivable reserves | ( | ) | ||||||
| Proceeds from insurance receivable | ||||||||
| Stock-based compensation | ||||||||
| Changes in current operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Income taxes | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Deferred revenue | ||||||||
| Principal repayments of operating leases | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities | ||||||||
| Additions to property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Net proceeds from the exercise of options for common stock | ||||||||
| Principal repayments of financing leases | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Decrease 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 and lease liabilities | ||||||||
| Declared dividend unpaid | ||||||||
The
accompanying notes are an integral part of these consolidated financial statements.
3
PIONEER POWER SOLUTIONS, INC.
Consolidated Statement of Stockholders’ Equity
(In thousands, except per share data)
(Unaudited)
| Common Stock | Additional paid-in | Accumulated other comprehensive | Accumulated | Total stockholders’ | ||||||||||||||||||||
| Shares | Amount | capital | income | deficit | equity | |||||||||||||||||||
| Balance - March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Dividend to shareholders | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance - June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance - March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Balance - June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common Stock | Additional paid-in | Accumulated other comprehensive | Accumulated | Total stockholders’ | ||||||||||||||||||||
| Shares | Amount | capital | income | deficit | equity | |||||||||||||||||||
| Balance - January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Dividend to shareholders | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance - June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance - January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||
| Balance - June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
PIONEER POWER SOLUTIONS, INC.
Notes to Consolidated Financial Statements
June 30, 2022 (Unaudited)
1. BASIS OF PRESENTATION
Overview
Pioneer
Power Solutions, Inc. and its wholly owned subsidiaries (referred to herein as the “Company,” “Pioneer,”
“Pioneer Power,” “we,” “our” and “us”) design, manufacture, integrate, refurbish,
service, distribute and sell electric power systems, distributed energy resources, power generation equipment and mobile electric
vehicle (“EV”) charging solutions. Our products and services are sold to a broad range of customers in the utility,
industrial and commercial markets. Our customers include, but are not limited to, electric, gas and water utilities, data center
developers and owners, EV charging infrastructure developers and owners, and distributed energy developers. The Company is headquartered
in Fort Lee, New Jersey and operates from three (
We have two reportable segments as defined in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022: Transmission and Distribution Solutions (“T&D Solutions”) and Critical Power Solutions (“Critical Power”).
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 June 30, 2022. 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 six-month periods ended June
30, 2022. Due to projected operating losses for the year, the Company anticipates that its annual effective tax rate will be
These unaudited interim consolidated financial statements include the accounts of Pioneer 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, 2021.
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 June 30, 2022, the Company
had $
We have met our cash needs through a combination of cash flows from operating activities and bank borrowings, the completion of the Equity Transaction (as defined herein), proceeds from the sale of the CleanSpark Common Stock and warrants to purchase CleanSpark Common Stock, proceeds from insurance and the sale of common stock under the At The Market Sale Agreement and funding from the Payroll Protection Program. Our cash requirements historically 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 our operating activities. We expect our cash requirements to be generally for operating activities, product development and capital improvements. The Company expects that its current cash balance is sufficient to fund operations for the next twelve months.
5
On
During
the year ended December 31, 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 $
The Company accounts for restricted cash under the guidance of 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:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and restricted cash as shown in the statement of cash flows | $ | $ | ||||||
COVID-19
The full impact of the ongoing COVID-19 pandemic 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 the Company’s financial condition, liquidity, and future results of operations. 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 the continuing crisis, 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 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 $
6
Reclassification
The following items have been reclassified in the 2021 financial statements:
The unaudited consolidated statements of cash flows contain a reclassification of the gain on the extinguishment and forgiveness of the PPP Loan from financing activities to operating activities for the six months ended June 30, 2021. Additionally, principal repayments of financing leases and the reduction in operating leases have been reclassified and presented in the applicable cash flow activity for the six months ended June 30, 2021. The inventories footnote contains a reclassification of the provision for excess and obsolete inventory and reductions to net realizable value to the applicable inventory classification at December 31, 2021.
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, 2021. There have been no significant changes in the Company’s accounting policies during the second quarter of 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. 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. REVENUES
Nature of our products and services
Our principal products and services include electric power systems, distributed energy resources, power generation equipment and mobile EV charging solutions.
Products
Our T&D Solutions business provides electric power systems and distributed energy resources that help customers effectively and efficiently protect, control, transfer, monitor and manage their electric energy requirements.
Our Critical Power business provides customers with our suite of mobile e-Boost electric vehicle charging solutions and power generation equipment.
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.
7
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.
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 products is predominantly 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 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 June 30, 2022 and 2021, the Company recognized $
During
the six months ended June 30, 2022 and 2021, the Company recognized $
During
the three months ended June 30, 2021, the Company recognized $
8
During
the three months ended June 30, 2022, the Company recognized approximately $
During
the six months ended June 30, 2022, the Company recognized approximately $
The Company manages its accounts receivable credit risk by performing credit evaluations and monitoring amounts due from the Company’s customers. The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable.
At
June 30, 2022, three customers represented approximately
For
the six months ended June 30, 2022, three customers represented approximately
Return of a product requires that the buyer obtain permission in writing from the Company. 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. 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 three and six months ended June 30, 2022 and 2021 were insignificant.
The following table presents our revenues disaggregated by revenue discipline:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Products | $ | $ | $ | $ | ||||||||||||
| Services | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
See “Note 11 - Business Segment and Geographic Information in Notes to Consolidated Financial Statements” in Part I of this Quarterly Report on Form 10-Q.
4. 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 June 30, 2022, other expense was $
For
the six months ended June 30, 2022, other expense was $
9
5. INVENTORIES
The components of inventories are summarized below:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Total inventories | $ | $ | ||||||
Inventories are stated at the lower of cost or a net realizable value determined on a weighted average method.
6. PROPERTY AND EQUIPMENT
Property and equipment are summarized below:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Machinery, vehicles and equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Computer hardware and software | ||||||||
| Leasehold improvements | ||||||||
| Construction in progress | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation
expense was $
Depreciation
expense was $
7. NOTES RECEIVABLE
In
connection with the sale of the transformer business units in August 2019 (the “Equity Transaction”), amongst other
consideration, we received two subordinated promissory notes in the aggregate principal amount of $
10
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The components of accounts payable and accrued liabilities are summarized below:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Current portion of lease liabilities | ||||||||
| Total accounts payable and accrued liabilities | $ | $ | ||||||
Accrued
liabilities primarily consist of accrued insurance, accrued sales commissions and accrued compensation and benefits. At June 30,
2022 and December 31, 2021, accrued insurance was $
9. STOCKHOLDERS’ EQUITY
Common Stock
The Company had and shares of common stock, $par value per share, outstanding as of June 30, 2022 and December 31, 2021, respectively.
Stock-Based Compensation
| Stock Options | Weighted average exercise price | Weighted average remaining contractual term | Aggregate intrinsic value | |||||||||||||
| Outstanding as of January 1, 2022 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Outstanding as of June 30, 2022 | $ | $ | ||||||||||||||
| Exercisable as of June 30, 2022 | $ | $ | ||||||||||||||
On April 25, 2022, the Company awarded shares of restricted stock units (“RSU”) to an employee with the following vesting terms: (i) units on May 1, 2022, which are included in the calculation of basic EPS as of the vesting date, (ii) an additional units on May 1, 2023, and (iii) the remaining units on May 1, 2024, provided that the employee is employed by the Company or a subsidiary of the Company on each such vesting date. The vested RSUs will be converted into shares of the Company’s common stock no later than March 15 of the calendar year following the calendar year in which such RSUs vested. The fair value of the RSU award at the date of grant was $.
| Number of units | Weighted-average grant-date fair value | |||||||
| Unvested restricted stock units as of January 1, 2022 | $ | |||||||
| Units granted | ||||||||
| Units vested | ( | ) | ( | ) | ||||
| Units forfeited | ||||||||
| Unvested restricted stock units as of June 30, 2022 | $ | |||||||
As of June 30, 2022, there were shares available for future grants under the Company’s 2021 Long-Term Incentive Plan.
Stock-based compensation expense recorded for the three and six months ended June 30, 2022 was approximately $ and $, respectively. Stock-based compensation expense recorded for the three and six months ended June 30, 2021 was approximately $ and $, respectively. All of the stock-based compensation expense is included in selling, general and administrative expenses in the accompanying interim consolidated statements of operations. At June 30, 2022, there was approximately $.0 million of stock-based compensation expense remaining to be recognized in the interim consolidated statements of operations over a weighted average remaining period of years.
11
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted average basic shares outstanding | ||||||||||||||||
| Effect of dilutive securities - equity based compensation plans | ||||||||||||||||
| Denominator for diluted net loss per common share | ||||||||||||||||
| Net loss per common share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
As of June 30, 2022 and 2021, diluted loss per share excludes and potentially dilutive common shares related to equity awards, as their effect was anti-dilutive.
12
11. 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 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:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | ||||||||||||||||
| T&D Solutions | ||||||||||||||||
| Power Systems | $ | $ | $ | $ | ||||||||||||
| Service | ||||||||||||||||
| Critical Power Solutions | ||||||||||||||||
| Equipment | ||||||||||||||||
| Service | ||||||||||||||||
| Consolidated | $ | $ | $ | $ | ||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Depreciation and amortization | ||||||||||||||||
| T&D Solutions | $ | $ | $ | $ | ||||||||||||
| Critical Power Solutions | ||||||||||||||||
| Unallocated corporate overhead expenses | ||||||||||||||||
| Consolidated | $ | $ | $ | $ | ||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating loss | ||||||||||||||||
| 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 | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | ||||||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
13
12. LEASES
The
Company leases certain offices, facilities and equipment under operating and financing leases. Our leases have remaining terms
ranging from less than
As
of June 30, 2022 and December 31, 2021, assets recorded under operating leases were $
The components of the lease expense were as follows:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| 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
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| 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 | ||||||||
Weighted Average Remaining Lease Term
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
Weighted Average Discount Rate
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
14
Future minimum lease payments under non-cancellable leases as of June 30, 2022 were as follows:
| Operating | Finance | |||||||
| Leases | Leases | |||||||
| 2022 | $ | $ | ||||||
| 2023 | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| Thereafter | ||||||||
| Total future minmum lease payments | ||||||||
| Less imputed interest | ( | ) | ( | ) | ||||
| Total future minmum lease payments | $ | $ | ||||||
Reported as of June 30, 2022:
| Operating | Finance | |||||||
| Leases | Leases | |||||||
| Right-of-use assets | $ | $ | ||||||
| Operating | Finance | |||||||
| Leases | Leases | |||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Other long-term liabilities | ||||||||
| Total | $ | $ | ||||||
15
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, 2021, which was filed with the Securities and Exchange Commission on March 31, 2022.
Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “Pioneer,” “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 (loss), 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. |
| ● | 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. |
| ● | 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. |
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, 2021 for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock.
16
Business 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. Our products and services are sold to a broad range of customers in the utility, industrial and commercial markets. Our customers include, but are not limited to, electric, gas and water utilities, data center developers and owners, EV charging infrastructure developers and owners, and distributed energy developers. 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.
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. (“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. (“Titan”) and Pioneer Critical Power brand names. |
Termination Agreement
On June 3, 2022, the Company and CleanSpark Inc., a Nevada corporation (“CleanSpark”), entered into a termination agreement (the “Termination Agreement”) to terminate the Distribution Agreement dated May 31, 2021, by and between the Company and CleanSpark (the “Distribution Agreement”), pursuant to which CleanSpark served as the Company’s exclusive distributor of parallel switchgears, automatic transfer switches and related products (the “Products”). 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.
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.
Critical Accounting Policies and Estimates
Our financial statements have been prepared in accordance with U.S. GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the amounts and disclosures in the financial statements. Our estimates are based on our historical experience, knowledge of current events and actions we may undertake in the future, and on various other factors that we believe are reasonable under the circumstances. Our critical accounting policies and estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in our Annual Report on Form 10-K filed with the SEC on March 31, 2022. There were no material changes to our accounting policies during the six months ended June 30, 2022.
17
RESULTS OF OPERATIONS
Overview of the Three and Six 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 11 - 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 six months ended June 30, 2022 and 2021 are as follows:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | ||||||||||||||||
| T&D Solutions | $ | 1,969 | $ | 3,596 | $ | 5,366 | $ | 4,983 | ||||||||
| Critical Power Solutions | 2,320 | 2,029 | 4,959 | 4,144 | ||||||||||||
| Consolidated | 4,289 | 5,625 | 10,325 | 9,127 | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| T&D Solutions | 2,130 | 3,442 | 5,151 | 4,997 | ||||||||||||
| Critical Power Solutions | 2,078 | 1,688 | 4,218 | 3,476 | ||||||||||||
| Consolidated | 4,208 | 5,130 | 9,369 | 8,473 | ||||||||||||
| Gross profit | 81 | 495 | 956 | 654 | ||||||||||||
| Selling, general and administrative expenses | 2,557 | 1,215 | 4,277 | 2,456 | ||||||||||||
| Depreciation and amortization expense | 28 | 25 | 54 | 50 | ||||||||||||
| Total operating expenses | 2,585 | 1,240 | 4,331 | 2,506 | ||||||||||||
| Operating loss from continuing operations | (2,504 | ) | (745 | ) | (3,375 | ) | (1,852 | ) | ||||||||
| Interest income | (104 | ) | (95 | ) | (206 | ) | (189 | ) | ||||||||
| Other expense (income) | 117 | 36 | 129 | (1,307 | ) | |||||||||||
| Loss income before taxes | (2,517 | ) | (686 | ) | (3,298 | ) | (356 | ) | ||||||||
| Income tax expense (benefit) | — | — | 7 | (21 | ) | |||||||||||
| Net loss | $ | (2,517 | ) | $ | (686 | ) | $ | (3,305 | ) | $ | (335 | ) | ||||
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. 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. At June 30, 2022, backlog from our e-Bloc power systems solutions was approximately $15 million, or 60% of the total backlog.
The following table represents the progression of our backlog, by reporting segment, as of the end of the last five quarters:
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
| 2022 | 2022 | 2021 | 2021 | 2021 | ||||||||||||||||
| T&D Solutions | $ | 20,018 | $ | 18,732 | $ | 17,499 | $ | 5,032 | $ | 6,501 | ||||||||||
| Critical Power Solutions | 5,141 | 5,222 | 5,349 | 5,823 | 6,225 | |||||||||||||||
| Total order backlog | $ | 25,159 | $ | 23,954 | $ | 22,848 | $ | 10,855 | $ | 12,726 | ||||||||||
18
Revenue
The following table represents our revenues by reporting segment and major product category for the periods indicated (in thousands, except percentages):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||||||||
| 2022 | 2021 | Variance | % | 2022 | 2021 | Variance | % | |||||||||||||||||||||||||
| T&D Solutions | ||||||||||||||||||||||||||||||||
| Power Systems | $ | 1,969 | $ | 3,596 | $ | (1,627 | ) | (45.2 | ) | $ | 5,356 | $ | 4,983 | $ | 373 | 7.5 | ||||||||||||||||
| Service | — | — | — | — | 10 | — | 10 | — | ||||||||||||||||||||||||
| 1,969 | 3,596 | (1,627 | ) | (45.2 | ) | 5,366 | 4,983 | 383 | 7.7 | |||||||||||||||||||||||
| Critical Power Solutions | ||||||||||||||||||||||||||||||||
| Equipment | 463 | 159 | 304 | 191.2 | 1,578 | 685 | 893 | 130.4 | ||||||||||||||||||||||||
| Service | 1,857 | 1,870 | (13 | ) | (0.7 | ) | 3,381 | 3,459 | (78 | ) | (2.3 | ) | ||||||||||||||||||||
| 2,320 | 2,029 | 291 | 14.3 | 4,959 | 4,144 | 815 | 19.7 | |||||||||||||||||||||||||
| Total revenue | $ | 4,289 | $ | 5,625 | $ | (1,336 | ) | (23.8 | ) | $ | 10,325 | $ | 9,127 | $ | 1,198 | 13.1 | ||||||||||||||||
For the three months ended June 30, 2022, our consolidated revenue decreased by $1.3 million, or 23.8%, to $4.3 million, down from $5.6 million during the three months ended June 30, 2021, primarily due to a decrease in sales of our power systems from our T&D Solutions segment.
For the six months ended June 30, 2022, our consolidated revenue increased by $1.2 million, or 13.1%, to $10.3 million, up from $9.1 million during the six months ended June 30, 2021, primarily due to an increase in sales of equipment from both the T&D Solutions and Critical Power segments.
T&D Solutions. During the three months ended June 30, 2022, revenue for our power systems product lines decreased by $1.6 million, or 45.2%, as compared to the three months ended June 30, 2021, primarily due to decreased sales of our medium and low voltage power systems.
During the six months ended June 30, 2022, revenue for our power systems product lines increased by $373, or 7.5%, as compared to the six months ended June 30, 2021, primarily due to increased sales of our e-Bloc power systems and automatic transfer switches and a decrease in sales of our medium voltage power systems.
Critical Power. For the three months ended June 30, 2022, revenue for our equipment sales increased by $304, or 191.2%, as compared to the three months ended June 30, 2022, primarily due to increased sales of our refurbished generation equipment and the recognition of $129 of sales from our suite of e-Boost products.
During the three months ended June 30, 2022, our service revenue decreased by $13, or 0.7%, as compared to the three months ended June 30, 2021.
For the six months ended June 30, 2022, revenue for our equipment sales increased by $893, or 130.4%, as compared to the six months ended June 30, 2021, mainly due to increased sales of our refurbished generation equipment and the recognition of $917 of revenue from shipments of our suite of e-Boost products.
For the six months ended June 30, 2022, our service revenue decreased by $78, or 2.3%, as compared to the six months ended June 30, 2021, primarily due to the cyclicality of our preventative maintenance schedules.
19
Gross (Loss) Profit and Gross Margin
The following table represents our gross (loss) profit by reporting segment for the periods indicated (in thousands, except percentages):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||||||||
| 2022 | 2021 | Variance | % | 2022 | 2021 | Variance | % | |||||||||||||||||||||||||
| T&D Solutions | ||||||||||||||||||||||||||||||||
| Gross (loss) profit | $ | (161 | ) | $ | 154 | $ | (315 | ) | 204.5 | $ | 215 | $ | (14 | ) | $ | 229 | 1,635.7 | |||||||||||||||
| Gross margin % | (8.2 | ) | 4.3 | (12.5 | ) | 4.0 | (0.3 | ) | 4.3 | |||||||||||||||||||||||
| Critical Power Solutions | ||||||||||||||||||||||||||||||||
| Gross profit | 242 | 341 | (99 | ) | (29.0 | ) | 741 | 668 | 73 | 10.9 | ||||||||||||||||||||||
| Gross margin % | 10.4 | 16.8 | (6.4 | ) | 14.9 | 16.1 | (1.2 | ) | ||||||||||||||||||||||||
| Consolidated gross profit | $ | 81 | $ | 495 | $ | (414 | ) | (83.6 | ) | $ | 956 | $ | 654 | $ | 302 | 46.2 | ||||||||||||||||
| Consolidated gross margin % | 1.9 | 8.8 | (6.9 | ) | 9.3 | 7.2 | 2.1 | |||||||||||||||||||||||||
For the three months ended June 30, 2022, our consolidated gross margin was 1.9% of revenues, compared to 8.8% during the three months ended June 30, 2021.
For the six months ended June 30, 2022, our consolidated gross margin was 9.3% of revenues, compared to 7.2% during the six months ended June 30, 2021.
T&D Solutions. For the three months ended June 30, 2022, our gross margin percentage decreased by 12.5%, from 4.3% to (8.2)%, as compared to the three months ended June 30, 2021. The decrease was primarily due to decreased sales of our medium and low voltage power systems and the sale of stock inventory at a loss.
For the six months ended June 30, 2022, our gross margin percentage increased by 4.3%, from (0.3)% to 4.0%, as compared to the six months ended June 30, 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.
Critical Power. For the three months ended June 30, 2022, our gross margin decreased by 6.4%, to 10.4%, from 16.8% for the three months ended June 30, 2021, primarily due to an unfavorable sales mix and an increase in overhead costs.
For the six months ended June 30, 2022, our gross margin decreased by 1.2%, to 14.9%, from 16.1% for the six months ended June 30, 2021.
20
Operating Expenses
The following table represents our operating expenses by reportable segment for the periods indicated (in thousands, except percentages):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||||||||
| 2022 | 2021 | Variance | % | 2022 | 2021 | Variance | % | |||||||||||||||||||||||||
| T&D Solutions | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | $ | 261 | $ | 274 | $ | (13 | ) | (4.7 | ) | $ | 595 | $ | 538 | $ | 57 | 10.6 | ||||||||||||||||
| Depreciation and amortization expense | 2 | 5 | (3 | ) | (60.0 | ) | 3 | 11 | (8 | ) | (72.7 | ) | ||||||||||||||||||||
| Segment operating expense | $ | 263 | $ | 279 | $ | (16 | ) | (5.7 | ) | $ | 598 | $ | 549 | $ | 49 | 8.9 | ||||||||||||||||
| Critical Power Solutions | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | $ | 980 | $ | 370 | $ | 610 | 164.9 | $ | 1,615 | $ | 770 | $ | 845 | 109.7 | ||||||||||||||||||
| Depreciation and amortization expense | 19 | 13 | 6 | 46.2 | 37 | 25 | 12 | 48.0 | ||||||||||||||||||||||||
| Segment operating expense | $ | 999 | $ | 383 | $ | 616 | 160.8 | $ | 1,652 | $ | 795 | $ | 857 | 107.8 | ||||||||||||||||||
| Unallocated Corporate Overhead Expenses | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | $ | 1,316 | $ | 571 | $ | 745 | 130.5 | $ | 2,067 | $ | 1,148 | $ | 919 | 80.1 | ||||||||||||||||||
| Depreciation and amortization expense | 7 | 7 | — | — | 14 | 14 | — | — | ||||||||||||||||||||||||
| Segment operating expense | $ | 1,323 | $ | 578 | $ | 745 | 128.9 | $ | 2,081 | $ | 1,162 | $ | 919 | 79.1 | ||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | $ | 2,557 | $ | 1,215 | $ | 1,342 | 110.5 | $ | 4,277 | $ | 2,456 | $ | 1,821 | 74.1 | ||||||||||||||||||
| Depreciation and amortization expense | 28 | 25 | 3 | 12.0 | 54 | 50 | 4 | 8.0 | ||||||||||||||||||||||||
| Consolidated operating expense | $ | 2,585 | $ | 1,240 | $ | 1,345 | 108.5 | $ | 4,331 | $ | 2,506 | $ | 1,825 | 72.8 | ||||||||||||||||||
Selling, General and Administrative Expense. For the three months ended June 30, 2022, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $1.3 million, or 110.5%, to $2.6 million, due to an increase in payroll related costs, including stock-based compensation, and product development costs related to our e-Boost and e-Bloc initiatives, as compared to $1.2 million during the three months ended June 30, 2021. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, increased to 59.6% during the three months ended June 30, 2021, as compared to 21.6% in the three months ended June 30, 2021.
For the six months ended June 30, 2022, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $1.8 million, or 71.1%, to $4.3 million, as compared to $2.5 million during the six months ended June 30, 2021, primarily due to an increase in payroll related costs, including stock-based compensation, and product development costs related to our e-Boost and e-Bloc initiatives. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, increased to 41.4% during the six months ended June 30, 2022, as compared to 26.9% during the six months ended June 30, 2021.
Depreciation and Amortization 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. For the three months ended June 30, 2022, consolidated depreciation and amortization expense increased by $3, or 12.0%, as compared to the three months ended June 30, 2021.
For the six months ended June 30, 2022, consolidated depreciation and amortization expense increased by $4, or 8.0%, as compared to the six months ended June 30, 2021.
Operating Loss
The following table represents our operating loss by reportable segment for the periods indicated (in thousands, except percentages):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||||||||
| 2022 | 2021 | Variance | % | 2022 | 2021 | Variance | % | |||||||||||||||||||||||||
| T&D Solutions | $ | (424 | ) | $ | (125 | ) | $ | (299 | ) | (239.2 | ) | $ | (383 | ) | $ | (564 | ) | $ | 181 | 32.1 | ||||||||||||
| Critical Power Solutions | (757 | ) | (42 | ) | (715 | ) | (1,702.4 | ) | (911 | ) | (126 | ) | (785 | ) | (623.0 | ) | ||||||||||||||||
| Unallocated corporate overhead expenses | (1,323 | ) | (578 | ) | (745 | ) | (128.9 | ) | (2,081 | ) | (1,162 | ) | (919 | ) | (79.1 | ) | ||||||||||||||||
| Total operating loss | $ | (2,504 | ) | $ | (745 | ) | $ | (1,759 | ) | 236.1 | $ | (3,375 | ) | $ | (1,852 | ) | $ | (1,523 | ) | (82.2 | ) | |||||||||||
21
T&D Solutions. Operating loss from our T&D Solutions segment increased by $299, or 239.2%, during the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, primarily due a decrease in sales of our power systems, an increase in product development costs related to our e-Bloc initiative and the sale of stock inventory at a loss during the three months ended June 30, 2022.
For the six months ended June 30, 2022, operating loss from our T&D Solutions segment decreased by $181, or 32.1%, as compared to an operating loss of $564 during the six months ended June 30, 2021, primarily due to an increase in sales of our power systems, a favorable sales mix and improved productivity from our manufacturing facility.
Critical Power. Operating loss for the Critical Power segment increased by $715, or 1,702.4% during the three months ended June 30, 2022, primarily due to recognizing product development and promotion fees related to our e-Boost initiative during the three months ended June 30, 2022, as compared to no product development or promotion fees recognized during the three months ended June 30, 2021.
For the six months ended June 30, 2022, operating loss from our Critical Power segment increased by $785, or 623.0% during the six months ended June 30, 2022, primarily due to recognizing product development and promotion fees related to our e-Boost initiative during the six months ended June 30, 2022, as compared to no product development or promotion fees recognized during the six months ended June 30, 2021.
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.
During the three months ended June 30, 2022, our unallocated corporate overhead expense increased by $745, or 128.9%, as compared to the three months ended June 30, 2021, primarily due to an increase in payroll related expenses, including stock-based compensation, and business travel related costs.
During the six months ended June 30, 2022, our unallocated corporate overhead expense increased by $919, or 79.1%, as compared to the six months ended June 30, 2021, primarily due to an increase in payroll related expenses, including stock-based compensation, professional fees and business travel related costs.
Non-Operating (Income) Expense
Interest Income. For the three and six months ended June 30, 2022, the Company had interest income of approximately $104 and $206, respectively, as compared to interest income of approximately $95 and $189 during the three and six months ended June 30, 2021, respectively. We generate 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.
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. During the three months ended June 30, 2022, other expense was $117, as compared to other expense of $36 during the three months ended June 30, 2021.
During the six months ended June 30, 2022, other expense was $129, as compared to other income of $1.3 million during the six months ended June 30, 2021. For the six months ended June 30, 2021, included in other income was a gain of $1.4 million for the extinguishment and forgiveness of the PPP Loan.
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 $1.4 million. The Company made this assertion in good faith based upon all available guidance and accounted for the PPP Loan as a debt instrument in accordance with FASB ASC 470, Debt. The Company used the proceeds from the PPP Loan to retain employees, maintain payroll and make lease, rent and utility payments.
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 six months ended June 30, 2021 and recognized a $1.4 million gain on extinguishment and forgiveness of debt in other income.
Income Tax Expense (Benefit). Our effective income tax rate for the three months ended June 30, 2022 and 2021 was 0.0%.
22
For the six months ended June 30, 2022, our effective income tax rate was (0.2)%, as compared to an income tax rate of 5.9% during the six months ended June 30, 2021, as set forth below:
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||
| 2022 | 2021 | Variance | 2022 | 2021 | Variance | |||||||||||||||||||
| Loss income before income taxes | $ | (2,517 | ) | $ | (686 | ) | $ | (1,831 | ) | $ | (3,298 | ) | $ | (356 | ) | $ | (2,942 | ) | ||||||
| Income tax expense (benefit) | — | — | — | 7 | (21 | ) | 28 | |||||||||||||||||
| Effective income tax rate % | — | — | — | (0.2 | ) | 5.9 | (6.1 | ) | ||||||||||||||||
Net Loss per Share
We generated a net loss of $2.5 million during the three months ended June 30, 2022, as compared to net loss of $686 during the three months ended June 30, 2021.
Our net loss per basic and diluted share for the three months ended June 30, 2022 was $0.26, as compared to net loss per basic and diluted share of $0.08 for the three months ended June 30, 2021.
We generated a net loss of $3.3 million during the six months ended June 30, 2022, as compared to net loss of $335 during the six months ended June 30, 2021.
Our net loss per basic and diluted share for the six months ended June 30, 2022 was $0.34, as compared to net loss per basic and diluted share of $0.04 for the six months ended June 30, 2021.
LIQUIDITY AND CAPITAL RESOURCES
General. At June 30, 2022, we had $9.8 million of cash on hand generated primarily from the sale of common stock under the At The Market Sale Agreement (the “ATM Program”). 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, proceeds from the sale of common stock under the ATM Program and funding from the Payroll Protection Program. Our cash requirements historically were generally for 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:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Cash | $ | 9,785 | $ | 9,924 | ||||
| Restricted cash | — | 1,775 | ||||||
| Total cash and restricted cash as shown in the statement of cash flows | $ | 9,785 | $ | 11,699 | ||||
The full impact of the ongoing COVID-19 pandemic 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 the Company’s financial condition, liquidity, and future results of operations. 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 the continuing crisis, 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 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 $1.4 million. The Company accounted for the PPP Loan as a debt instrument in accordance with FASB ASC 470, Debt.
23
Under the terms of the PPP Loan, the Company was eligible for full or partial loan forgiveness. During the six months ended June 30, 2021, the Company received full forgiveness of the PPP Loan and recognized a $1.4 million gain on extinguishment and forgiveness of debt as other income in the audited consolidated statements of operations.
Cash Used in Operating Activities. Cash used in our operating activities was $1.6 million during the six months ended June 30, 2022, as compared to cash used in our operating activities of $433 during the six months ended June 30, 2021. The increase in cash used in operating activities is primarily due to working capital fluctuations.
Cash Used in Investing Activities. Cash used in investing activities during the six months ended June 30, 2022 was $174, as compared to $62 of cash used in investing activities during the six months ended June 30, 2021. Additions to property and equipment during the six months ended June 30, 2022 were $198, as compared to $62 additions to property and equipment during the six months ended June 30, 2021.
Cash Used in Financing Activities. Cash used in our financing activities was $119 during the six months ended June 30, 2022, as compared to $163 during the six months ended June 30, 2021. The primary use of cash in financing activities for the six months ended June 30, 2022 and 2021 was repayments of financing leases.
Working Capital. As of June 30, 2022, we had working capital of $15.4 million, including $9.8 million of cash, compared to working capital of $18.6 million, including $9.9 million of cash and $1.8 million of restricted cash at December 31, 2021.
Assessment of Liquidity. At June 30, 2022, we had $9.8 million of cash on hand generated primarily from the sale of common stock under the ATM Program during the year ended December 31, 2021. 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, proceeds from the sale of common stock under the ATM Program and funding from the Payroll Protection Program. 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.
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 H.C. Wainwright & Co., LLC), resulting in net proceeds of approximately $8.7 million. On December 13, 2021, we filed a new sales agreement prospectus supplement related to the Registration Statement, which covers the offering, issuance and sale of up to a maximum aggregate offering price of $8.6 million of common stock that may be issued and sold under the At The Market Sale Agreement. We did not sell any shares of common stock under the new sales agreement prospectus supplement during the six months ended June 30, 2022. As of June 30, 2022, $8.6 million of common stock remained available for issuance under the ATM Program.
During the year ended December 31, 2021, we 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 $1.8 million. During the first quarter of 2022, we amended our agreement with the commercial bank to decrease the required amount of cash collateral by $1.3 million. On May 6, 2022, we received notice that the cash collateral security agreement we had executed with the commercial bank was cancelled. Upon cancellation of the cash collateral security agreement, any unpaid reimbursement obligations owing to the commercial bank were also cancelled. On May 11, 2022, the commercial bank released and transferred the remaining cash collateral of $505. We had no restricted cash on the consolidated balance sheets at June 30, 2022.
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. We expect that product development and promotional activities related to our new initiatives will continue in the near future and 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.
As of June 30, 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.
24
Capital Expenditures
The Company had $198 of additions to property and equipment during the six months ended June 30, 2022, as compared to $62 of additions to property and equipment during the six months ended June 30, 2021.
Known Trends, Events, Uncertainties and Factors That May Affect Future Operations
We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the cyclical nature of the electrical equipment industry and the markets for our products and services. Our operating results could also be impacted by changing customer requirements and exposure to fluctuations in prices of important raw supplies, such as copper, steel and aluminum. We have various insurance policies, including cybersecurity, covering risks in amounts that we consider adequate. In addition to these measures, we attempt to recover other cost increases through improvements to our manufacturing efficiency and through increases in prices where competitively feasible. Lastly, other economic conditions we cannot foresee may affect customer demand. The impact of the ongoing COVID-19 pandemic, including the Omicron variant of COVID-19, which appears to be the most transmissible variant to-date, and the subvariant, BA.5, is currently indeterminable and rapidly evolving, and has affected and may continue to affect our operations and the global economy. In addition, the consequences of the ongoing conflict between Russia and Ukraine, including related sanctions and countermeasures, 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 predominately sell to customers in the industrial production and commercial construction markets. Accordingly, changes in the condition of any of our customers may have a greater impact than if our sales were more evenly distributed between different end markets. For a further discussion of factors that may affect future operating results see the sections entitled “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K.
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 June 30, 2022 (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 June 30, 2022, 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 U.S. GAAP.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended June 30, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
25
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.
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 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.
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
A description of the risks associated with our business, financial condition and results of operations is set forth in “Item 1A. Risk Factors” of our annual report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 31, 2022, and are supplemented with the following revised risk factors:
We currently derive a significant portion of our revenues from a few customers. Material or significant loss of business from these customers could have an adverse effect on our business, financial condition and operating results.
We currently derive a large portion of our revenues from a few customers, and material or significant loss of business from these customers could have a significant impact on our results of operations. As of June 30, 2022, three customers accounted for approximately 42% of our sales: CleanSpark accounted for approximately 14%, which were revenues recorded prior to the termination of the Distribution Agreement on June 3, 2022; Enchanted Rock, LLC became one of our largest customers following the termination of the Distribution Agreement and accounted for approximately 11%; and a utility company based in California accounted for approximately 17%. We expect that, following the termination of the Distribution Agreement, Enchanted Rock, LLC will constitute a large portion of our business, and material or significant loss of business from this customer could have an adverse effect on our business, financial condition and operating results.
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.
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.
26
EXHIBIT INDEX
Exhibit No. |
Description | |
| 10.1 | Fourth Amendment to Employment Agreement, dated April 25, 2022, by and between Pioneer Power Solutions, Inc. and Nathan J. Mazurek (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 29, 2022). | |
10.2
|
Employment Agreement, dated April 25, 2022, by and between Pioneer Power Solutions, Inc. and Wojciech (Walter) Michalec (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 29, 2022). | |
| 10.3 | Termination Agreement, dated as of June 3, 2022, between Pioneer Power Solutions, Inc. and CleanSpark, Inc. (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 8, 2022). | |
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
104 |
Inline XBRL Instance Document.
Inline XBRL Taxonomy Extension Schema Document.
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Inline XBRL Taxonomy Extension Definition Linkbase Document.
Inline XBRL Taxonomy Extension Labels Linkbase Document.
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
_______________
* 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: August 15, 2022 | By: | /s/ Nathan J. Mazurek |
| Name: Nathan J. Mazurek | ||
| Title: Chief Executive Officer | ||
| Date: August 15, 2022 | /s/ Walter Michalec |
| Name: Walter Michalec | |
Title: Chief Financial Officer
(Principal Financial Officer duly authorized to sign on behalf of Registrant)
|
Pioneer Power Solutions, Inc. 10-Q
EXHIBIT 31.1
CERTIFICATION
I, Nathan J. Mazurek, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Pioneer Power Solutions, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and; | |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 15, 2022 | /s/ Nathan J. Mazurek |
| Nathan J. Mazurek | |
President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer duly authorized to sign on behalf of Registrant) |
Pioneer Power Solutions, Inc. 10-Q
EXHIBIT 31.2
CERTIFICATION
I, Walter Michalec, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Pioneer Power Solutions, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and; | |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 15, 2022 | /s/ Walter Michalec |
| Walter Michalec | |
Chief Financial Officer (Principal Financial Officer duly authorized to sign on behalf of Registrant) |
Pioneer Power Solutions, Inc. 10-Q
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
This certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the Quarterly Report on Form 10-Q (the “Form 10-Q”) for the fiscal quarter ended June 30, 2022 of Pioneer Power Solutions, Inc. (the “Company”). I, Nathan J. Mazurek, the Chief Executive Officer of the Company, certify that, based on my knowledge:
| (1) | The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in this report. |
| Date: August 15, 2022 | By: | /s/ Nathan J. Mazurek |
| Name: | Nathan J. Mazurek | |
| Title: | Chief Executive Officer |
The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Pioneer Power Solutions, Inc. 10-Q
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
This certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the Quarterly Report on Form 10-Q (the “Form 10-Q”) for the fiscal quarter ended June 30, 2022 of Pioneer Power Solutions, Inc. (the “Company”). I, Walter Michalec, the Chief Financial Officer of the Company, certify that, based on my knowledge:
| (1) | The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in this report. |
| Date: August 15, 2022 | By: | /s/ Walter Michalec |
| Name: | Walter Michalec | |
| Title: | Chief Financial Officer |
The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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