PIONEER POWER SOLUTIONS INC

Previous wording

Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the amounts and disclosures in the consolidated 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 Securities and Exchange Commission (the “SEC”) on July 26, 2024. There were no material changes to our accounting policies during the three months ended March 31, 2024.

Current wording

Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the amounts and disclosures in the consolidated 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 Securities and Exchange Commission (the “SEC”) on July 26, 2024. There were no material changes to our accounting policies during the six months ended June 30, 2024.

Previous wording

Overview of the Three Months Results

Current wording

Overview of the Three and Six Months Results

Previous wording

Our summary of operating results during the three months ended March 31, 2024, and 2023 are as follows:

Current wording

Our summary of operating results during the three and six months ended June 30, 2024, and 2023 are as follows:

Previous wording

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. As of March 31, 2024, backlog from our E-Bloc power systems and related equipment was approximately $11,347, or 25% of the total backlog.

Current wording

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. As of June 30, 2024, backlog from our E-Bloc power systems and related equipment was approximately $12,523, or 19% of the total backlog.

Previous wording

For the three months ended March 31, 2024, our consolidated revenue decreased by $965, or 10.1%, to $8,590, down from $9,555 during the three months ended March 31, 2023, primarily due to a decrease in sales of equipment from our Electrical Infrastructure segment during the three months ended March 31, 2024.

Current wording

For the three months ended June 30, 2024, our consolidated revenue decreased by $5,942, or 48.4%, to $6,340, down from $12,282 during the three months ended June 30, 2023, primarily due to a decrease in sales of equipment from our Electrical Infrastructure segment during the three months ended June 30, 2024.

Previous wording

Electrical Infrastructure. During the three months ended March 31, 2024, revenue from equipment sales decreased by $1,534, or 22.5%, to $5,275, down from $6,809 during the three months ended March 31, 2023, primarily due to a decrease in revenue recognized over time from our equipment sales during the three months ended March 31, 2024.

Current wording

Electrical Infrastructure. During the three months ended June 30, 2024, revenue from our equipment sales decreased by $6,431, or 68.6%, to $2,945, down from $9,376 during the three months ended June 30, 2023, primarily due to a decrease in shipments and revenue recognized over time from our equipment sales during the three months ended June 30, 2024.

Previous wording

Critical Power. For the three months ended March 31, 2024, revenue for our Critical Power segment increased by $569, or 20.7%, to $3,315, up from $2,746 during the three months ended March 31, 2023, primarily due to an increase in sales of our e-Boost equipment from our Pioneer eMobility business during the three months ended March 31, 2024.

Current wording

Critical Power Solutions. For the three months ended June 30, 2024, revenue for our Critical Power segment increased by $489, or 16.8%, to $3,395, up from $2,906 during the three months ended June 30, 2023, primarily due to an increase in service sales during the three months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2024, our consolidated gross margin decreased to 20.1% of revenues, as compared to 29.6% during the three months ended March 31, 2023.

Current wording

For the three months ended June 30, 2024, our consolidated gross margin decreased to 10.3% of revenues, as compared to 31.6% during the three months ended June 30, 2023.

Previous wording

Electrical Infrastructure. For the three months ended March 31, 2024, our gross margin percentage decreased by 8.9%, from 31.5% to 22.6%, as compared to the three months ended March 31, 2023. The decrease was primarily due to the decrease in sales our E-Bloc power systems and medium and low voltage equipment.

Current wording

For the six months ended June 30, 2024, our gross margin percentage decreased by 19.5%, from 34.2% to 14.7%, as compared to the six months ended June 30, 2023. The decrease was primarily due to the decrease in sales of our E-Bloc power systems and medium and low voltage switchgear equipment.

Previous wording

Critical Power Solutions. For the three months ended March 31, 2024, our gross margin decreased by 9.0%, from 25.1% to 16.1%, for the three months ended March 31, 2023. The decrease was primarily due to an unfavorable sales mix.

Current wording

For the six months ended June 30, 2024, our gross margin decreased by 3.3%, from 20.8% to 17.5%, for the six months ended June 30, 2023. The decrease was primarily due to an unfavorable sales mix.

Previous wording

Selling, General and Administrative Expense. For the three months ended March 31, 2024, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $574, or 28.2%, to $2,607, as compared to $2,033 during the three months ended March 31, 2023, primarily due to an increase in payroll related costs, including stock-based compensation. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, increased to 30.3% during the three months ended March 31, 2024, as compared to 21.3% in the three months ended March 31, 2023.

Current wording

Selling, General and Administrative Expense. For the three months ended June 30, 2024, consolidated selling, general and administrative expense, before depreciation and amortization, decreased by approximately $370, or 12.1%, to $2,689, as compared to $3,059 during the three months ended June 30, 2023, primarily due to a decrease in stock-based compensation expense. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, increased to 42.4% during the three months ended June 30, 2024, as compared to 24.9% in the three months ended June 30, 2023.

Previous wording

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 March 31, 2024, consolidated depreciation and amortization expense decreased by $109, or 87.2%, to $16, as compared to $125 during the three months ended March 31, 2023.

Current wording

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, 2024, consolidated depreciation and amortization expense decreased by $4, or 13.3%, to $26, as compared to $30 during the three months ended June 30, 2023.

Previous wording

Electrical Infrastructure. Operating income from our Electrical Infrastructure segment decreased by $1,243 during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to a decrease in sales of our electrical infrastructure equipment and an increase in selling, general and administrative expense.

Current wording

Electrical Infrastructure. Operating income from our Electrical Infrastructure segment decreased by $3,540 during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to a decrease in sales of our electrical infrastructure equipment and an increase in selling, general and administrative expense.

Previous wording

Critical Power Solutions. Operating loss from our Critical Power segment increased by $123 during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to an unfavorable sales mix in the service business.

Current wording

Critical Power Solutions. Operating loss from our Critical Power segment increased by $105 during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to an increase research and development costs related to our e-Boost equipment from Pioneer eMobility business and an unfavorable sales mix in the service business.

Previous wording

During the three months ended March 31, 2024, our unallocated corporate overhead expense increased by $415, or 55.3%, as compared to the three months ended March 31, 2023, primarily due to an increase in payroll related costs, including stock-based compensation, professional fees and costs related to investor relations.

Current wording

During the three months ended June 30, 2024, our unallocated corporate overhead expense decreased by $556, or 33.1%, as compared to the three months ended June 30, 2023, primarily due to a decrease in stock-based compensation expense.

Previous wording

Interest Income. For the three months ended March 31, 2024, we had interest income of approximately $31, as compared to interest income of approximately $54 during the three months ended March 31, 2023. We generated the majority of our interest income from our cash on hand during the three months ended March 31, 2024, and 2023.

Current wording

Interest Income. For the three and six months ended June 30, 2024, we had interest income of approximately $17 and $48, respectively, as compared to interest income of approximately $79 and $132, respectively, during the three and six months ended June 30, 2023. We generated the majority of our interest income from our cash on hand during the six months ended June 30, 2024, and 2023.

Previous wording

Other Income. Other income in the consolidated statements of operations reports certain gains and losses associated with activities not directly related to our core operations.

Current wording

Other Expense (Income). Other expense (income) in the consolidated statements of operations reports certain gains and losses associated with activities not directly related to our core operations.

Previous wording

For the three months ended March 31, 2024, other non-operating income was $40, as compared to other non-operating income of $13 during the three months ended March 31, 2023.

Current wording

For the three and six months ended June 30, 2024, other non-operating income was $0 and $40, respectively, as compared to other non-operating expense of $20 and $7, respectively, during the three and six months ended June 30, 2023.

Previous wording

Provision for Income Taxes. Our effective income tax rate for the three months ended March 31, 2024, and 2023 was 0.0%.

Current wording

Provision for Income Taxes. Our effective income tax rate for the three and six months ended June 30, 2024, and 2023 was 0.0%.

Previous wording

We generated a net loss of $1,035 during the three months ended March 31, 2024, as compared to a net income of $742 during the three months ended March 31, 2023.

Current wording

We generated a net loss of $2,283 during the three months ended June 30, 2024, as compared to net income of $848 during the three months ended June 30, 2023.

Previous wording

Our net loss per basic and diluted share for the three months ended March 31, 2024, was $0.10, as compared to net income per basic and diluted share of $0.07 for the three months ended March 31, 2023.

Current wording

Our net loss per basic and diluted share for the three months ended June 30, 2024, was $0.21, as compared to net income per basic share of $0.09 and net income per diluted share of $0.08 for the three months ended June 30, 2023.

Previous wording

General. On October 20, 2020, we entered into an At the Market Sale Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell our shares of common stock from time to time through Wainwright, acting as sales agent or principal (the “ATM Program”). As of March 31, 2024, we had $6,227 of cash on hand generated primarily from the sale of common stock under the ATM Program. Since October 20, 2020, and through March 31, 2024, we sold an aggregate of 1,807,897 shares of common stock for aggregate gross proceeds of approximately $13,901, before any sales agent fees and expenses payable by us under the ATM Program. During the three months ended March 31, 2024, we sold an aggregate of 891,838 shares of common stock for an aggregate consideration of approximately $4,997, before any sales agent fees and expenses payable by us. As of March 31, 2024, $70,003 of common stock remained available for issuance under the ATM Program.

Current wording

General. On October 20, 2020, we entered into an At the Market Sale Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell our shares of common stock from time to time through Wainwright, acting as sales agent or principal (the “ATM Program”). As of June 30, 2024, the Company had $6,512 of cash on hand generated primarily from the sale of common stock under the ATM Program. Since October 20, 2020, and through June 30, 2024, the Company sold an aggregate of 1,835,616 shares of common stock for aggregate gross proceeds of approximately $14,051, before any sales agent fees and expenses payable by us under the ATM Program. During the six months ended June 30, 2024, the Company sold an aggregate of 919,557 shares of common stock for an aggregate consideration of approximately $5,147, before any sales agent fees and expenses payable by the Company under the ATM Program. As of June 30, 2024, $69,853 of common stock remained available for issuance under the ATM Program.

Previous wording

The continuing impacts of the rising interest rates, inflation, changes in foreign currency exchange rates and geopolitical developments, such as the ongoing conflict between Russia and Ukraine, and the ongoing conflict between Israel and Hamas, have resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by our clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time. As a result of the current uncertainty in economic activity, we are unable to predict the potential size and duration of the impact on our revenue and our results of operations, if any. The extent of the potential impact of these macroeconomic factors on our operational and financial performance will depend on a variety of factors, including the extent of geopolitical disruption and its impact on our clients, partners, industry, and employees, all of which are uncertain at this time and cannot be accurately predicted. We continue to monitor the effects of these macroeconomic factors and intends to take steps deemed appropriate to limit the impact on our business. During the three months ended March 31, 2024, we were able to operate substantially at capacity.

Current wording

The continuing impacts of the rising interest rates, inflation, changes in foreign currency exchange rates and geopolitical developments, such as the ongoing conflict between Russia and Ukraine, and the ongoing conflict between Israel and Hamas, have resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by our clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time. As a result of the current uncertainty in economic activity, we are unable to predict the potential size and duration of the impact on our revenue and our results of operations, if any. The extent of the potential impact of these macroeconomic factors on our operational and financial performance will depend on a variety of factors, including the extent of geopolitical disruption and its impact on our clients, partners, industry, and employees, all of which are uncertain at this time and cannot be accurately predicted. We continue to monitor the effects of these macroeconomic factors and intends to take steps deemed appropriate to limit the impact on our business. During the six months ended June 30, 2024, we were able to operate substantially at capacity.

Previous wording

Cash (Used in)/ Provided by Operating Activities. Cash used in our operating activities was $1,950 during the three months ended March 31, 2024, as compared to cash provided by $1,525 during the three months ended March 31, 2023. The increase in cash used in operating activities is primarily due to the increase in our net loss and working capital fluctuations.

Current wording

Cash (Used in)/ Provided by Operating Activities. Cash used in our operating activities was $1,379 during the six months ended June 30, 2024, as compared to cash provided by operating activities of $366 during the six months ended June 30, 2023. The increase in cash used in operating activities is primarily due to the increase in our net loss and working capital fluctuations.

Previous wording

Cash Used in Investing Activities. Cash used in our investing activities during the three months ended March 31, 2024, was $213, as compared to $194 during the three months ended March 31, 2023. Additions to property and equipment during the three months ended March 31, 2024, were $213, as compared to $194 of additions during the three months ended March 31, 2023.

Current wording

Cash Used in Investing Activities. Cash used in investing activities during the six months ended June 30, 2024, was $614, as compared to $810 during the six months ended June 30, 2023. Additions to property and equipment during the six months ended June 30, 2024, were $614, as compared to $810 of additions during the six months ended June 30, 2023.

Previous wording

Cash Provided by/ (Used in) Financing Activities. Cash provided by our financing activities was $4,808 during the three months ended March 31, 2024, as compared to cash used in our financing activities of $71 during the three months ended March 31, 2023. The increase in cash provided by financing activities is primarily due to the sale of common stock under the ATM Program.

Current wording

Cash Provided by/ (Used in) Financing Activities. Cash provided by our financing activities was $4,923 during the six months ended June 30, 2024, as compared to cash used in financing activities of $228 during the six months ended June 30, 2023. The increase in cash provided by financing activities is primarily due to the sale of common stock under the ATM Program.

Previous wording

Working Capital. As of March 31, 2024, we had working capital of $13,508, including $6,227 of cash on hand, compared to working capital of $9,421, including $3,582 of cash on hand as of December 31, 2023.

Current wording

Working Capital. As of June 30, 2024, we had working capital of $11,140, including $6,512 of cash on hand, compared to working capital of $9,421, including $3,582 of cash on hand as of December 31, 2023.

Previous wording

Assessment of Liquidity. As of March 31, 2024, we had $6,227 of cash on hand generated primarily from the sale of common stock under the ATM Program. We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings, the completion of the sale of the transformer business units in August 2019, sale of common stock under the ATM Program and collecting all unpaid principal and interest from the Seller Notes. Historically, our cash requirements were generally for operating activities, debt repayment, capital improvements and acquisitions.

Current wording

Assessment of Liquidity. As of June 30, 2024, we had $6,512 of cash on hand generated primarily from the sale of common stock under the ATM Program. We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings, the completion of the sale of the transformer business units in August 2019, sale of common stock under the ATM Program and collecting all unpaid principal and interest from the Seller Notes. Historically, our cash requirements were generally for operating activities, debt repayment, capital improvements and acquisitions.

Previous wording

The Company had $213 of additions to property and equipment during the three months ended March 31, 2024, as compared to $194 of additions to property and equipment during the three months ended March 31, 2023.

Current wording

The Company had $614 of additions to property and equipment during the six months ended June 30, 2024, as compared to $810 of additions to property and equipment during the six months ended June 30, 2023.