PIONEER POWER SOLUTIONS INC

(in thousands, except for share and per share amounts)

1. BUSINESS ORGANIZATION, NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES

Pioneer Power Solutions, Inc. and its wholly owned subsidiary (referred to herein as the “Company” or “Pioneer”) design, manufacture, service and integrate 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, federal and state government entities, package delivery business’, school bus fleet operations, EV charging infrastructure developers and owners, and distributed energy developers. We are headquartered in Fort Lee, New Jersey and operate from two (2) additional locations in the United States for manufacturing, service and maintenance, engineering, and sales and administration.

Segments

In determining operating and reportable segments in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, Segment Reporting (“ASC 280”), the Company concluded that it hasone reportable segment: Critical Power Solutions (“Critical Power”). Financial information about the Company’s segment is presented in Note 13 - Business Segment, Geographic and Customer Information.

Basis of Presentation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company believes 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 consolidated financial statements have been included.

These consolidated financial statements include the accounts of Pioneer and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Liquidity

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, as of December 31, 2024, the Company had $41,622 of cash on hand and working capital of $26,679. The cash on hand was generated primarily from the sale of the Company’s former wholly owned subsidiary, Pioneer Custom Electrical Products Corp. (“PCEP”) and the sale of common stock under the ATM Program (as defined below). On October 29, 2024, the Company closed on the sale of PCEP for gross cash proceeds of $48,000. 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”). During the year ended December 31, 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 December 31, 2024, $69,853 of common stock remained available for issuance under the ATM Program.

The Company has historically met its 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, the completion of the sale of the PCEP business unit in October 2024, and the sale of common stock under the ATM program. Historically, the Company’s cash requirements were generally for operating activities, debt repayment, capital improvements and acquisitions. The Company expects to meet its cash needs with the working capital and cash flows from the Company’s operating activities. The Company expects its 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 from the date our consolidated financial statements are issued.

Risks and Uncertainties

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 the Company’s clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time. Additionally, recent changes to U.S. policy implemented by the U.S. Congress, the Trump administration or any new administration have impacted and may in the future impact, among other things, the U.S. and global economy, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. As a result of the current uncertainty in economic activity, the Company is unable to predict the potential size and duration of the impact on its revenue and its results of operations, if any. The extent of the potential impact of these macroeconomic factors on the Company’s operational and financial performance will depend on a variety of factors, including the extent of geopolitical disruption and its impact on the Company’s clients, partners, industry, and employees, all of which are uncertain at this time and cannot be accurately predicted. The Company continues to monitor the effects of these macroeconomic factors and intends to take steps deemed appropriate to limit the impact on its business.

There can be no assurance that precautionary measures, whether adopted by the Company or imposed by others, will be effective, and such measures could negatively affect its sales, marketing, and client service efforts, delay and lengthen its sales cycles, decrease its employees’, clients’, or partners’ productivity, or create operational or other challenges, any of which could harm its business and results of operations.

Rounding

All dollar amounts (except share and per share data) presented are stated in thousands of dollars, unless otherwise noted. Amounts may not foot due to rounding.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The consolidated financial statements include estimates based on currently available information and management’s judgment as to the outcome of future conditions and circumstances. Significant estimates in these consolidated financial statements include, but are not limited to, measurement of revenue for contracts accounted for over time, allowance for expected credit losses, inventory valuation, useful lives and impairment of long-lived assets, equity-method investment, consideration to buyer, stock-based compensation and the valuation allowance related to the Company’s deferred tax assets. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the consolidated financial statements and actual results could differ from the estimates and assumptions.

Revenue Recognition

Revenue is recognized when (1) a contract with a customer exists, (2) performance obligations promised in a contract are identified based on the products or services that will be transferred to the customer, (3) the transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer, (4) the transaction price is allocated to the performance obligations in the contract and (5) the Company satisfies its performance obligation. The Company satisfies its performance obligations and, therefore, recognizes revenue, either over time or at a point in time, which is when the customer has obtained control of the good or service.

The Company’s principal source of revenue is derived from sales of products and fees for services. The Company measures revenue based upon the consideration specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement are satisfied. Changes in deferred revenue are generally as a result of the Company’s normal operating cycle and the effect of cumulative catch-up adjustments arising from a change in the measure of progress or a contract modification identified at each reporting period.

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 the Company’s 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 the Company expects to receive in exchange for those products or services. To achieve this core principle, 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. 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.

The Company satisfies its performance obligations and, therefore, recognizes revenue, either over time or at a point in time, which is when the customer has obtained control of the good or service.

Shipping and handling costs incurred after control of a product has transferred to the customer are treated as fulfillment costs and, therefore, are not accounted for as separate performance obligations.

Certain sales of highly customized electrical equipment under the Company’s Electrical Infrastructure segment (included in discontinued operations; see Note 11 – Discontinued Operations for details) were recognized over time when such equipment had no alternative use and the Company had an enforceable right to payment for performance completed to date. The Company’s measure of progress for such contracts was evaluated under the input method based on direct labor hours incurred relative to the estimated total direct labor hours required in order to complete the project. Any anticipated losses on contracts were fully recognized in the period in which the losses become evident. Service revenues include maintenance contracts that are recognized over time based on the contract term and repair services that are recognized as services are delivered.

Contract Estimates (discontinued operations)

Revenue from over time contracts for the Company’s Electrical Infrastructure segment (included in discontinued operations; see Note 11 – Discontinued Operations for details) was recognized proportionally over the term of the contract using an input method based on the proportion of labor hours incurred as compared to the total estimated labor hours for the fixed-fee contract performance obligations, which the Company considered the best available indicator of the pattern and timing in which contract performance obligations were fulfilled and control transferred to the customer. This percentage was multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period.

There were situations where the number of hours to complete projects may have exceeded the original estimate as a result of an increase in project scope or unforeseen events. The related impact on income was recognized using the cumulative catch-up method in an accounting period.

Recognition of revenue on a contract requires estimates of the total labor hours at completion and the measurement of progress towards completion. Due to the long-term nature of many of the Company’s contracts, developing the estimated total labor hours at completion often requires judgment. Factors that must be considered in estimating the total labor hours to be completed include the nature and complexity of the work to be performed and the risk and impact of delayed performance.

At the outset of each contract, the Company gauges its complexity and perceived risks and establish an estimated total number of labor hours at completion in line with these expectations. The Company follows a standard contract review process in which the Company reviews the progress and performance on its ongoing contracts at least quarterly.

Cost of Goods Sold

Cost of goods sold primarily includes charges for materials, direct labor and related benefits, freight (inbound and outbound), direct supplies and tools, depreciation and amortization, purchasing and receiving costs, inspection costs, internal transfer costs, warehousing costs and utilities related to production facilities and, where appropriate, an allocation of overhead. Cost of goods sold also includes indirect labor and infrastructure cost related to the provision of field services.

Fair Value of Financial Instruments

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured using inputs in one of the following three categories:

Level 1 measurements are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation of these items does not entail a significant amount of judgment.

Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities.

Level 3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable and accrued liabilities. The carrying values of these financial instruments approximate their respective fair values due to the relatively short period of time between their origination and their expected realization or payment.

Concentrations

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, as follows:

As of December 31, 2024, one customer represented approximately 72% of the Company’s accounts receivable. As of December 31, 2023, two customers represented approximately 22% and 12% of the Company’s accounts receivable.

For the year ended December 31, 2024, two customers represented approximately 22% and 13% of the Company’s revenue. For the year ended December 31, 2023, one customer represented approximately 14% of the Company’s revenue.

As of December 31, 2024, one of the Company’s suppliers represented approximately 25% of the Company’s accounts payable. As of December 31, 2023, one of the Company’s suppliers represented approximately 14% of the Company’s accounts payable.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents in the consolidated financial statements. As of December 31, 2024, and 2023, the Company did not have any cash equivalents. The Company has cash on deposits in several financial institutions which may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. As of December 31, 2024, and 2023, the Company had balances of $41,372 and $3,332 in excess of the FDIC insured limits, respectively. The Company reduces exposure to credit risk by maintaining cash deposits with major financial institutions. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. The Company reduces its credit risk by placing its cash and cash equivalents with major financial institutions.

Accounts Receivable

On January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” using a modified retrospective approach. The standard amends several aspects of the measurement of credit losses related to certain financial instruments, including the replacement of the existing incurred credit loss model and other models with the current expected credit losses model. The cumulative effect of adoption did not result in an adjustment to the allowance for credit loss, and accordingly, the Company’s accumulated deficit as of January 1, 2023.

The Company accounts for trade receivables at original invoice amount less an estimate made for expected credit losses. The Company’s allowance for expected credit losses on accounts receivable reflects management’s estimate of credit losses over the remaining expected life of such assets, measured primarily using historical experience, as well as current conditions and forecasts that affect the collectability of the reported amount. There was $13 of reserves for expected credit losses as of December 31, 2024, and the Company didnot have any reserves for expected credit losses as of December 31, 2023.

Long-Lived Assets

Depreciation and amortization for property and equipment is computed and included in cost of goods sold and in selling and administrative expense, as appropriate. Long-lived assets, consisting primarily of property and equipment, are stated at cost less accumulated depreciation. Property and equipment are depreciated using the straight-line method, based on the estimated useful lives of the assets (buildings -25 years, machinery and equipment -5 to 15 years, computer hardware and software -3 to 5 years, furniture & fixtures -5 to 7 years, leasehold improvements – term of lease). Depreciation commences in the year the assets are ready for their intended use.

The Company reviews all long-lived assets such as property and equipment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Recoverability of the assets that are held and used is measured by a comparison of the carrying amount of an asset to the estimated future cash flows expected to be generated by the asset or asset group. Impairment is measured by the amount by which the carrying value of the asset(s) exceed the fair value. There were no triggering events that would indicate impairment of long-lived assets as of December 31, 2024 and 2023.

Held for Sale and Discontinued Operations

The Company classifies assets and liabilities to be sold (disposal group) as held for sale in the period when all of the applicable criteria are met, including: (i) management commits to a plan to sell, (ii) the disposal group is available to sell in its present condition, (iii) there is an active program to locate a buyer, (iv) the disposal group is being actively marketed at a reasonable price in relation to its fair value, (v) significant changes to the plan to sell are unlikely, and (vi) the sale of the disposal group is generally probable of being completed within one year. Management performs an assessment at least quarterly or when events or changes in business circumstances indicate that a change in classification may be necessary.

Assets and liabilities held for sale are presented separately within the consolidated balance sheets with any adjustments necessary to measure the disposal group at the lower of its carrying value or fair value less costs to sell. Depreciation of property and equipment and amortization of right-of-use assets are not recorded while these assets are classified as held for sale. For each period the disposal group remains classified as held for sale, its recoverability is reassessed and any necessary adjustments are made to its carrying value.

The Company reports the results of operations of a business as discontinued operations if a disposal represents a strategic shift that will have a major effect on its operations and financial results. The results of discontinued operations are reported as income or loss from discontinued operations, net of tax in the consolidated statements of comprehensive income for the current and prior periods commencing in the period in which the held for sale criteria are met. Income or loss from discontinued operations, net of tax includes direct costs attributable to the divested business and excludes any cost allocations associated with any shared or corporate functions unless otherwise dedicated to the divested business. Income or loss from discontinued operations, net of tax will include any gain or loss recognized upon disposition or from adjustment of the carrying amount to fair value less costs to sell while classified as held for sale.

Transactions between the businesses held for sale and businesses held for use that are expected to continue after the disposal are not eliminated in order to appropriately reflect the continuing operations as well as the activity to be disposed of.

Equity-Method Investments

The Company accounts for investments in LLCs in which the Company has more than virtually no influence, but does not control, under the equity method of accounting. Under the equity method of accounting, the Company’s initial investment is recorded at fair value in accordance with ASC 810-10-40-5 as its equity method investment arose from a deconsolidation event. See Note 11- Discontinued Operations and Note 12 – Equity Method Investment.

The carrying amount is adjusted for the Company’s share of the earnings or losses, and dividends received from the investee. When the Company’s share of losses in an investee equals or exceeds the carrying value of the investment plus any advances, no further losses are recognized unless the Company has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee.

The Company periodically assesses if impairment indicators exist at equity method investments. When an impairment indicator is observed, any excess of the carrying amount over its estimated fair value is recognized as impairment expense when the loss in value is deemed other-than-temporary and included in income or loss from equity method investments in the consolidated statements of operations.

In relation to the Company’s investment in the Investment, the Company elected to recognize its proportional share of the income or loss from the equity method investment on a financial reporting lag of one fiscal quarter due to the timing and availability of financial information. There were no earnings recognized from the Investment during the year ended December 31, 2024.

Leases

Lessee Accounting

The Company leases offices, facilities and equipment under operating and financing leases. The Company determines whether an arrangement is, or contains, a lease at contract inception. An arrangement contains a lease if the Company has the right to direct the use of and obtain substantially all of the economic benefits of an identified asset. Right-of-use assets and lease liabilities are recognized at lease commencement based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recognized on the balance sheet and are recorded as short-term lease expense. The discount rate used to calculate present value is the Company’s incremental borrowing rate based on the lease term and the economic environment of the applicable country or region.

Certain leases contain renewal options or options to terminate prior to lease expiration, which are included in the measurement of right-of-use assets and lease liabilities when it is reasonably certain they will be exercised. The Company has elected to account for lease and non-lease components as a single lease component for its offices and manufacturing facilities. Some lease arrangements include payments that are adjusted periodically based on actual charges incurred for common area maintenance, utilities, taxes and insurance, or changes in an index or rate referenced in the lease. The fixed portion of these payments is included in the measurement of right-of-use assets and lease liabilities at lease commencement, while the variable portion is recorded as variable lease expense. The Company’s leases typically do not contain material residual value guarantees or restrictive covenants.

Lessor Accounting

The Company leases electric generators and mobile electric vehicle charging equipment to certain of its customers. The Company accounts for such rentals as operating leases. The lease terms are included in the Company’s contracts and the determination of whether the Company’s contracts contain leases generally does not require significant assumptions or judgments. Leasing revenues do not include material amounts of variable payments. The Company does not generally provide an option for the lessee to purchase the rented equipment at the end of the lease. Leasing revenues are recognized on a straight-line basis over the duration of the contractual agreement. Lessees do not provide residual value guarantees on rented equipment.

Deferred Financing Costs

Certain legal, accounting and other third-party fees that are directly associated with equity financings are capitalized as deferred financing costs and included as a non-current asset on the balance sheet until such financings are consummated. After consummation of the equity financing, these costs will be recorded in the stockholders’ equity section of the consolidated balance sheets as a reduction of additional paid-in capital generated as a result of the offering, to the extent there are sufficient proceeds. Should the equity financing no longer be considered probable of being consummated, all deferred financing costs would be charged to operating expenses in the consolidated statements of operations.

Income Taxes

The Company accounts for income taxes under the asset and liability method, based on the income tax laws and rates in the countries in which operations are conducted and income is earned. For the year ended December 31, 2024 and 2023, the Company operated primarily in the United States. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Developing the provision for income taxes requires significant judgment and expertise in federal, international and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets. The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. The Company believes that the deferred asset, net recorded as of December 31, 2024, and 2023 is realizable through future reversals of existing taxable temporary differences and future taxable income. If the Company was to subsequently determine that it would be able to realize deferred tax assets in the future in excess of its net recorded amount, an adjustment to deferred tax assets would increase net income for the period in which such determination was made. The Company will continue to assess the adequacy of the valuation allowance on a quarterly basis. The Company’s tax filings are subject to audit by various taxing authorities.

The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences or events that have been recognized in the Company’s consolidated financial statements or tax returns. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position (see “Unrecognized Tax Benefits” below).

Income tax related interest and penalties are grouped with interest expense on the consolidated statement of operations.

Unrecognized Tax Benefits

The Company accounts for unrecognized tax benefits in accordance with FASB ASC “Income Taxes” (“ASC 740”). ASC 740 prescribes a recognition threshold that a tax position is required to meet before being recognized in the consolidated financial statements and provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. ASC 740 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon ultimate settlement with a taxing authority, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

Additionally, ASC 740 requires the Company to accrue interest and related penalties, if applicable, on all tax positions for which reserves have been established consistent with jurisdictional tax laws. The Company’s policy is to recognize interest and penalties related to income tax matters as interest expense.

Advertising and Promotional Costs

We expense advertising and promotional costs as incurred. Total advertising and promotional expenses were $311 and $414 for the years ended December 31, 2024 and 2023, respectively.

Share-Based Payments

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period, using the straight-line attribution approach. Upon the exercise of an award, the Company issues new shares of common stock out of its authorized shares.

The Company computes the fair value of stock options granted using the Black-Scholes option pricing model. Award forfeitures are accounted for at the time of occurrence. The expected term used for options is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method under ASC 718 to develop an estimate of the expected term of “plain vanilla” option grants. The Company does not currently have a sufficient trading history to fully support its historical volatility calculations. Accordingly, the Company is utilizing an expected volatility figure based on a review of the historical volatility on a blended basis of its own stock as well as of comparable entities over a period of time equivalent to the expected life of the instrument being valued. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

Inventory

Inventory is stated at the lower of cost or net realizable value using a weighted average cost method and includes the cost of materials, labor and manufacturing overhead. The Company uses estimates in determining the level of reserves required to state inventory at the lower of cost or net realizable value. The Company estimates are based on market activity levels, production requirements, the physical condition of products and technological innovation. Changes in any of these factors may result in adjustments to the carrying value of inventory.

Income (Loss) Per Share

Basic income (loss) per share is computed by dividing the income or loss for the period by the weighted average number of vested common shares outstanding during the period. Diluted income (loss) per share is computed by dividing the income or loss for the period by the weighted average number of vested common shares outstanding, plus the number of additional common shares that would have been outstanding if the common share equivalents had been issued (computed using the treasury stock or if converted method), if dilutive.

Research and Development

Research and development include expenses incurred by the Company’s Critical Power segment related to developing the Company’s mobile e-Boost electric vehicle charging solutions. Research and development expenses are charged to operations as incurred. During the years ended December 31, 2024 and 2023, the Company incurred $1,050 and $885, respectively, of research and development expenses.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued an accounting standards update ASU 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures” related to improvements to reportable segment disclosures. The amendments in this update require additional disclosure of significant expenses related to our reportable segments, additional segment disclosures on an interim basis, and qualitative disclosures regarding the decision making process for segment resources. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. These updates resulted in expanded disclosures. See Note 13 – Business Segment, Geographic and Customer Information for additional information.

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” related to improvements to income tax disclosures. The amendments in this update require enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. These updates will not have a significant impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03 “Disaggregation of Income Statement Expenses”, which requires public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The amendments in ASU 2024-03 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently assessing the impact that adoption of this new accounting guidance will have on its consolidated financial statements and footnote disclosures.

3. REVENUES

Nature of the Company’s products and services

The Company’s principal products and services include electric power systems and equipment, distributed energy resources, power generation equipment and mobile electric vehicle charging solutions. The Company’s principal products and services are primarily sold in the United States. See Note 13 – Business Segment, Geographic and Customer Information, for additional information.

Products

The Company’s Electrical Infrastructure business (included in discontinued operations; see Note 11 – Discontinued Operations for details) provided electric power systems and equipment and distributed energy resources that helped customers effectively and efficiently protect, control, transfer, monitor and manage their electric energy needs.

The Company’s Critical Power business provides customers with power generation equipment and the Company’s suite of mobile e-Boost electric vehicle charging solutions.

Services

Power generation systems represent considerable investments that require proper maintenance and service in order to operate reliably during a time of emergency. The Company’s power maintenance programs provide preventative maintenance, repair and support service for the Company’s customers’ power generation systems.

The timing of revenue recognition, customer billings and cash collections results in accounts receivable, contract assets and deferred revenue at the end of each reporting period. Contract assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing an input method based on the proportion of labor hours incurred as compared to the total estimated labor hours for the fixed-fee contract performance obligations. The Company bills customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries.

Revenue Recognition

During the years ended December 31, 2024, and 2023, the Company recognized $558 and $343 of equipment revenue over time, respectively, from its Critical Power segment. Additionally, the Company recognized $11,704 and $3,070 of revenue at a point in time from the sale of its products, which is typically recognized upon delivery, from its Critical Power segment during the years ended December 31, 2024, and 2023, respectively.

Service revenues include maintenance contracts that are recognized over time based on the contract term and repair services which are recognized as services are delivered. The Company recognized $8,690 and $7,703 of service revenue during the years ended December 31, 2024, and 2023, respectively. Under its continuing operations, the Company recognizes revenue as services are provided. Amounts billed and due from customers, as well as the value of unbilled account receivables, are generally classified within current assets in the consolidated balance sheets. The customer payments are generally due in 30 days.

Under certain contracts, the Company may be entitled to invoice the customer and receive payments in advance of performing the related contract work. In those instances, the Company recognizes a liability for advance billings in excess of revenue recognized, which is referred to as deferred revenue. Payments received from customers in advance of revenue recognition are not considered a significant financing component because they are utilized to pay for contract costs within a one-year period or are requested by the Company to ensure the customers meet their payment obligations.

The change in deferred revenue as of December 31, 2024, was driven primarily by ordinary course contract activity. As of January 1, 2023, the Company had a deferred revenue balance of $808. For the years ended December 31, 2024, and 2023, the Company recognized revenue of $162 and $670 respectively, related to amounts that were included in deferred revenue as of December 31, 2023, and 2022, respectively, resulting primarily from the progress made on the various active contracts during the respective reporting periods. As of December 31, 2024, the Company had $991 related to contract liabilities where performance obligations have not yet been satisfied, which has been included within deferred revenue on the consolidated balance sheet.

Unbilled receivables include amounts for work performed for which the Company has an unconditional right to receive payment and that are not subject to the completion of any other specific task, other than the billing itself.

Concentration of Risk

For the year ended December 31, 2024, the Company derived 22% and 13% of its revenue from two customers. For the year ended December 31, 2023, the Company derived 14% of its revenue from one customer. As of December 31, 2024, one customer’s outstanding receivable balance equaled 72% of the total outstanding receivable balance. As of December 31, 2023, two customers’ outstanding receivable balance equaled 22% and 12% of the total outstanding receivable balance.

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 the year ended December 31, 2024 were $295. Returns and warranties during the year ended December 31, 2023, were insignificant.

Disaggregated Revenue

The following table presents the Company’s revenues disaggregated by revenue discipline:

Lease Revenues

There wereno leasing revenues arising from variable lease payments during the years ended December 31, 2024, and 2023.

The following table presents future operating lease payments to be received as of December 31, 2024:

4. INVENTORIES

The components of inventories are summarized below:

5. PROPERTY AND EQUIPMENT, NET

Property and equipment are summarized below:

Depreciation expense was $716 and $397 for the years ended December 31, 2024, and 2023, respectively.

6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The components of accounts payable and accrued liabilities are summarized below:

Accrued liabilities primarily consist of accrued insurance, accrued compensation and benefits and accrued legal settlement costs. As of December 31, 2024, and 2023, accrued insurance was $462 and $795, respectively. Accrued compensation and benefits as of December 31, 2024, and 2023 were $453 and $95, respectively. There wereno accrued legal settlement costs as of December 31, 2024, as compared to $5,000 as of December 31, 2023 (See Note 7 - Commitments and Contingencies for additional information). The remainder of accrued liabilities are comprised of several insignificant accruals in connection with normal business operations.

7. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain offices, facilities and equipment under operating and financing leases. The Company’s leases have remaining terms ranging from less than 1 year to 5 years, some of which contain options to extend up to 5 years. As of December 31, 2024, and 2023, assets recorded under finance leases were $455 and $638, respectively, and accumulated amortization associated with finance leases were $234 and $235, respectively.

As of December 31, 2024, and 2023, assets recorded under operating leases were $995 and $830, respectively, and accumulated amortization associated with operating leases were $465 and $405, respectively. During the fourth quarter of 2024, the Company executed an extension of its operating lease in Miami, Florida. After adjusting for a weighted average discount rate, the Company recognized a right-of-use asset and lease liability of approximately $330 within the consolidated balance sheets.

The components of the lease expense were as follows:

Other information related to leases was as follows:

Supplemental cash flows information:

Weighted average remaining lease term:

Weighted average discount rate:

Future minimum lease payments under non-cancellable leases as of December 31, 2024, were as follows:

Reported as of December 31, 2024:

Litigation and Claims

From time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

On June 15, 2023, Terrence and Kay Mimick (the “Plaintiffs”) filed a complaint in the U.S. District Court, District of Nebraska naming the Company, its wholly-owned subsidiary, Pioneer Critical Power, Inc., and an individual acting in his capacity as an employee of the Company, collectively as defendants. Plaintiffs filed an amended complaint on July 7, 2023, alleging negligent driving, negligent entrustment, and negligent hiring, training and supervision, as a result of a car accident that occurred on September 9, 2019, and seeking special damages related to the injuries allegedly sustained by Plaintiffs. The amended complaint also named Titan Energy Systems, Inc. as a defendant instead of Pioneer Critical Power, Inc. On July 27, 2023, the defendants filed an Answer to Plaintiff’s Amended Complaint. On October 6, 2023, a mediation was held, but the parties did not reach a settlement. As of December 31, 2023, the Company recognized a liability of $5,000 related to this matter, with a corresponding insurance receivable of $5,000 related to the loss recovery, which was included within prepaid expenses and other current assets on the consolidated balance sheet. In June 2024, another mediation was held and the parties reached a settlement for all of the Plaintiffs’ claims. The case was dismissed with prejudice on July 23, 2024. As of December 31, 2024, the Company did not recognize a liability, or a corresponding insurance receivable, related to the loss recovery.

8. STOCKHOLDERS’ EQUITY

Common Stock

The Company had 11,120,266 and 9,930,022 shares of common stock, $0.001 par value per share, outstanding as of December 31, 2024, and 2023, respectively.

On November 12, 2024, the board of directors declared a one-time special cash dividend of $1.50 per share, or $16,665 in the aggregate, to shareholders of record as of December 17, 2024, which is included in “Dividends payable” on the consolidated balance sheet as of December 31, 2024. The dividend was paid on January 7, 2025.

Preferred Stock

The board of directors is authorized, subject to any limitations prescribed by law, without further vote or action by the shareholders, to issue from time to time up to 5,000,000 shares of preferred stock, $0.001 par value, in one or more series. Each such series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

9. STOCK-BASED COMPENSATION

Stock-Based Compensation

On October 13, 2021, the Company’s board of directors adopted the 2021 Long-Term Incentive Plan (the “2021 Plan”), subject to stockholder approval, which was obtained on November 11, 2021. The 2021 Plan supplemented the 2011 Plan, which expired on May 11, 2021, and which replaced and superseded the 2009 Plan, as noted above. The Company’s outside directors and its employees, including the principal executive officer, principal financial officer and other named executive officers, and certain contractors are all eligible to participate in the 2021 Plan. The 2021 Plan allows for the granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other awards, which may be granted singly, in combination, or in tandem, and upon such terms as are determined by the Board or a committee of the board that is designated to administer the 2021 Plan. Subject to certain adjustments, the maximum number of shares of the Company’s common stock that may be delivered pursuant to awards under the 2021 Plan is 900,000 shares plus any increase by any Prior Plan Awards (as defined in the 2021 Plan) eligible for reuse (700,000 shares) as of December 31, 2024, of which one hundred percent (100%) may be delivered pursuant to incentive stock options. As of December 31, 2024, there were 279,354 shares available for future grants under the Company’s 2021 Plan. The 2021 Plan was initially administered by the Company’s board of directors, but it has been administered by the compensation committee following the creation of such committee in the first quarter of 2022.

The fair value of the stock options granted was measured using the Black-Scholes valuation model with the following assumptions:

A summary of stock option activity for the year ended December 31, 2024, is presented below:

A summary of the weighted-average grant-date fair value of options, total intrinsic value of options exercised, and cash receipts from options exercised is shown below:

The following table presents information related to stock options as of December 31, 2024:

A summary of restricted stock unit (“RSU”) activity during the year ended December 31, 2024, and 2023 is as follows:

During the years ended December 31, 2024 and 2023, RSUs vested with an aggregate vest date fair value of $780 and $1,251, respectively.

2024

During the year ended December 31, 2024, the Company issued 10,000 shares of its common stock for consulting services with a fair value of $59.

During the year ended December 31, 2024, the Company issued 175,000 shares of common stock to its Chief Financial Officer (“CFO”) in connection with the vesting of 125,000 RSUs on May 1, 2024, and 50,000 RSUs on December 5, 2024.

During the year ended December 31, 2024, the CFO agreed to surrender shares of common stock to the Company, totaling an aggregate of 62,281 shares (57,541 shares on June 7, 2024, with a fair value of $220 and 4,740 shares on October 22, 2024, with a fair value of $29) in connection with income and payroll tax obligations paid by the Company in connection with the exercising of options and vesting of RSUs. The shares were cancelled and retired by the Company.

On November 12, 2024, the board of directors declared a one-time special cash dividend of $1.50 per share to shareholders of record as of December 17, 2024. All stock options that were outstanding as of the record date were modified to reduce the exercise price pursuant to the nondiscretionary anti-dilution provisions in the Company’s 2021 Plan. There was no incremental compensation expense related to the modification.

Stock based compensation expense recorded for the years ended December 31, 2024, and 2023 was approximately $1,055 and $1,471, respectively. As of December 31, 2024, there was $80 of stock-based compensation expense remaining to be recognized in the consolidated statements of operations over a weighted average remaining period of 1.6 years.

2023

During the year ended December 31, 2023, the Company issued 10,000 shares of its common stock for consulting services with a fair value of $65.

During the year ended December 31, 2023, the Company issued 100,000 shares of common stock to its Chief Executive Officer (“CEO”) in connection with the vesting of 100,000 RSUs on May 11, 2023. The fair value of the RSUs on the date of grant was $575, which was recognized immediately.

During the year ended December 31, 2023, the Company issued 250,000 shares of common stock to its CFO in connection with the vesting of 125,000 RSUs on May 1, 2022, and 125,000 RSUs on May 1, 2023. The fair value of the RSUs on the date of grant was $544, which was recognized immediately.

During the year ended December 31, 2023, the CEO and CFO each individually agreed to surrender shares of common stock to the Company, totaling an aggregate of 117,082 shares with a fair value of $720 in connection with income and payroll tax obligations paid by the Company in connection with the vesting of the above mentioned RSUs. The shares were cancelled and retired by the Company.

10. INCOME TAXES

The components of loss before income taxes related to continuing operations are summarized below:

The components of the income tax benefit related to continuing operations were as follows**:**

A reconciliation from the statutory U.S. income tax rate and the Company’s effective income tax rate for continuing operations, as computed on loss before taxes, is as follows:

The Company’s provision for income taxes reflects an effective tax rate on loss before income taxes of 29.7% in 2024, as compared to 0.0% in 2023. The increase in the Company’s effective tax rate during 2024 primarily reflects the reduction of the valuation allowance and the utilization of its net operating losses.

The net deferred income tax asset (liability) was comprised of the following:

The tax effect of temporary differences between GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows:

As of December 31, 2024, The Company had $6,756 of deferred tax assets on which it is taking a $6,007 valuation allowance. The total valuation allowance of $6,007 as of December 31, 2024, represents a decrease of $922 from December 31, 2023.

A valuation allowance is established when it is determined that it is more likely than not that the deferred tax assets will not be realized. In evaluating the need for a valuation allowance, management assessed all available positive and negative evidence, including historical operating results, cumulative losses, projections of future taxable income, and sources of taxable income such as future reversals of existing taxable temporary differences, tax-planning strategies, and the realization of the gain from the subsidiary sale. Significant judgment is required in assessing the weight of both positive and negative evidence, particularly in determining the likelihood and timing of future taxable income.

During the year ended December 31, 2024, the Company recognized pre-tax income from the divestiture of PCEP Subsidiary, resulting in a tax gain of approximately $37 million. This gain enabled the Company to fully recognize its existing tax attributes, net operating losses (NOLs), §163(j) interest expense limitations, and R&D credits available at the time of the divestiture. Despite this positive evidence, the Company determined that it was insufficient to overcome substantial negative evidence. This negative evidence includes cumulative losses incurred over recent years, continued uncertainty regarding sustained future taxable income, and the expectation of continued accumulation of new tax attributes due to ongoing operating results. Furthermore, the anticipated annual generation of NOLs upon reversal of deferred tax liabilities significantly reduces the reliability of future taxable income as a viable source for realizing deferred tax assets.

Considering the significant judgment required in assessing the likelihood, timing, and magnitude of future taxable income, and given the relative weight and persuasiveness of the available evidence, management concluded that the negative evidence continues to outweigh the positive evidence. As a result, the Company has determined that the continuation of a full valuation allowance remains appropriate as of December 31, 2024. This includes a full valuation allowance for the Company’s foreign tax credits (“FTCs”) as the Company does not anticipate generating any foreign source income to realize this benefit. As of December 31, 2024, the remaining balance of the Company’s FTCs was $3,581.

The Company has state net operating loss (“NOLs”) carryforwards of approximately $16,431 as of December 31, 2024. Certain of these amounts are subject to annual limitations under applicable tax law. If not utilized, a portion of these losses will expire in varying amounts between 2030 and 2043.

Internal Revenue Code Section 382 imposes an annual limitation on the utilization of net operating loss (NOL) carryforwards and certain other tax attributes following a change in ownership. An ownership change generally occurs if the percentage of stock owned by 5-percent shareholders increases by more than 50 percentage points during a rolling three-year period. As of December 31, 2024, the Company conducted an analysis under Section 382 and determined that no ownership change occurred during the year. Therefore, there is no annual limitation imposed on the utilization of the Company’s federal NOL carryforwards. Furthermore, the sale of a subsidiary completed prior to year-end is expected to allow the Company to fully utilize these NOL carryforwards. The Company has also evaluated the implications of Section 382 limitations at the state level. Given that state conformity to federal Section 382 provisions varies significantly, additional state-specific considerations may apply. The Company will continue to monitor any future ownership changes, legislative updates, or interpretive guidance related to Section 382, as such changes could impact the Company’s ability to realize these deferred tax assets.

The following table summarizes the Company’s state losses by jurisdiction, as well as the expiration date:

The Company incurs research and development expenses as part of its ongoing operations. These expenditures generate a research and development credit for tax purposes. All research and development tax credits have been fully utilized and the Company has $0 of research and development credits remaining on December 31, 2024.

Under the provisions of the Tax Cuts and Jobs Act (TCJA) and as further modified by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Internal Revenue Code Section 163(j) generally limits our deductible business interest expense to the sum of (i) our business interest income, (ii) 30% of adjusted taxable income (ATI), and (iii) floor plan financing interest expense. Adjusted taxable income is defined as taxable income with adjustments for interest, depreciation, amortization, and depletion through 2021. Beginning in 2022, depreciation, amortization, and depletion deductions are no longer added back when calculating ATI. The limitation imposed by Section 163(j) may create interest expense carryforwards, which can be utilized indefinitely in future tax periods subject to the same limitation. For the year ended December 31, 2024, due to the gain realized on the sale of PCEP, the Company generated sufficient adjusted taxable income to support interest expense deductions, resulting in an interest expense deduction of $2,897 from prior year carryforwards. The amount available for carryover to future periods of IRC 163(j) as of December 31, 2024 is $0. The Company expects the interest limitation will continue to apply in future years.

The Company has determined there are no uncertain tax positions requiring recognition or disclosure, including positions related to the sale of PCEP. The Company regularly assesses the adequacy of its provisions for income tax contingencies in accordance with ASC 740-10. As a result, the Company may adjust the reserves for unrecognized tax benefits for the impact of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities, and lapses of statutes of limitations. Management has concluded that the current reserves are appropriate. The Company continues to monitor and evaluate uncertain tax positions that may arise from future developments in tax law interpretations, regulations, or audit outcomes. The Company’s tax returns remain subject to examination by the U.S. Internal Revenue Service and most state jurisdictions include the years 2021 and forward.

11. DISCONTINUED OPERATIONS

Sale of Electrical Infrastructure Segment

On October 29, 2024, the Company entered into an Equity Contribution and Purchase Agreement (the “Equity Purchase Agreement”), by and among the Company, PCEP, Voltaris Power LLC (the “Buyer”) and Pioneer Investment LLC (“Investment”). Pursuant to the terms of the Equity Purchase Agreement, the Company agreed to:

The Equity Transaction included total consideration of (i) $48,000 in cash, subject to adjustment pursuant to the terms of the Equity Purchase Agreement, and (ii) $2,000 in equity pursuant to Investment’s issuance of the Rollover Units to the Company (See Note 2 – Summary of Significant Accounting Policies and Note 12 – Equity Method Investment). The Equity Transaction contains customary terms and conditions and are subject to working capital adjustments. Negotiations between the parties are ongoing, and the Company’s estimate of the range of adjustments resulting in a lower recognized gain is approximately $1,349 to $5,344, with the midpoint equal to $3,347. The Company determined that the midpoint appears to be a better estimate than any other amount within the range, and, accordingly, has recorded a consideration due to buyer of $3,347 on December 31, 2024, related to anticipated net working capital adjustments. It is at least reasonably possible that the estimate will change in the near term and the effect of the change may be material.

Following the execution of the Equity Purchase Agreement, the Equity Transaction was consummated on October 29, 2024 (the “Closing Date”). PCEP represents the entirety of the Company’s Electrical Infrastructure segment.

As a result, the assets and liabilities of PCEP have been presented separately under the captions “Current assets held for sale”, “Noncurrent assets held for sale” and “Current liabilities held for sale” in the consolidated balance sheet as of December 31, 2023. The results of operations of PCEP, as well as the gain realized on the sale of $35,044, have been presented under the caption “Income from discontinued operations, net of tax” in the consolidated statements of operations for the years ended December 31, 2024, and 2023.

Summarized Held for Sale and Discontinued Operation Financial Information

A summary of the carrying amounts of major classes of assets and liabilities, which are included in assets and liabilities held for sale in the consolidated balance sheet, is as follows:

The income tax (benefit/expense) associated with discontinued operations in 2024 primarily reflects the tax effects of disposal gains along with the utilization of previously unrecognized tax attributes and valuation allowance reversals. The previous valuation allowance established on these deferred tax assets were reversed when the Company entered into a definitive sale agreement during the year. The closing of the transaction provided certainty related to the amounts realized and the resulting gain for tax purposes allowed the company to utilize the deferred tax assets. The determination whether it was more likely than not that the deferred tax assets were not going to be realized was no longer applicable.

The tax effect of temporary differences between GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities from discontinued operations were as follows:

Income tax expense associated with discontinued operations totaled $5,497 in 2024 and $0 in 2023, reflecting tax disposal gains, offset by utilization of tax attributes and related valuation allowance reversals.

The following table summarizes the results from discontinued operations, net of tax included in the consolidated statements of operations for the years ended December 31, 2024, and 2023:

The cash flows related to the discontinued operations have not been segregated and are included in the consolidated statements of cash flows.

Furthermore, the below table illustrates certain cash flows from discontinued operations:

Continuing Involvement

As a result of the Company’s investment in Rollover Units of Investment, which is accounted for as an equity method investment (see Note 2 - Summary of Significant Accounting Policies – Equity-Method Investment), the Company determined that it has continuing involvement with the discontinued operation, which is expected to continue for as long as the Company retains its investment in Rollover Units. There are no revenues or expenses presented in continuing operations after the disposal transaction that before the disposal transaction were eliminated in the Company’s consolidated financial statements as intra-entity transactions. The equity method investment did not result in any pretax income or losses reported on the Company’s consolidated statements of operations for the years ended December 31, 2024 or 2023. Prior to the disposal transaction, the Company owned 100% of the discontinued operation, PCEP.

In addition, upon the closing of the Equity Transaction, the Company and the Buyer entered into a transition services agreement, pursuant to which (i) the Company will provide certain transition services to the Buyer for various service periods ranging from 30 days to 12 months following the Closing Date and (ii) the Buyer will provide one specific transition service to the Company until October 31, 2025.

12. EQUITY-METHOD INVESTMENT

As disclosed in Note 11 – Discontinued Operations, on October 29, 2024, the Company deconsolidated its subsidiary, PCEP. As part of the transaction, the Company retained an equity interest in PCEP via the issuance of Rollover Units. The Company estimated the fair value of the retained equity interest on the date of deconsolidation, which was determined to be $2,000 based on the Company’s proportionate share of Investment, which was calculated using the market approach based on the Equity Transaction.

13. BUSINESS SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION

The CEO, as the Chief Operating Decision Maker (“CODM”), organizes the Company, manages resource allocations and measures performance of the Company’s single operating segment, Critical Power Solutions. The Critical Power Solutions reportable segment is the Company’s Titan Energy Systems, Inc. business unit. The Critical Power Solutions segment provides mobile high capacity charging equipment, power generation equipment and aftermarket field-services in order to help customers secure fast vehicle charging where fixed charging infrastructure does not exist, and additionally to ensure smooth, uninterrupted power to operations during times of emergency.

The CODM assesses the Company’s performance and decides how to allocate resources based on consolidated net income (loss) in the consolidated statements of operations, which is assessed to be the segment measure of profit or loss. This measure is used to monitor actual results to evaluate the performance of the segment versus the forecasted targets. The segment assets are equal to the assets presented in the consolidated balance sheets.

The significant expenses that are regularly provided to the CODM, which include costs of goods sold, selling, general and administrative expenses and research and development expenses, are disclosed in the consolidated statements of operations as a part of the consolidated net income (loss). The other segment item that is regularly provided to the CODM includes other income (expense) which is disclosed as a separate line item in the consolidated statements of operations. Other income and expenses consist of interest income and interest expense, which are disclosed as separate line items in the consolidated statements of operations.

On October 29, 2024, the Company sold its Electrical Infrastructure segment to Mill Point Capital. Prior to the sale of the Electrical Infrastructure segment, the Company’s CODM assessed performance and allocated resources amongst its two reportable segments. See Note 11- Discontinued Operations for additional information.

Revenues are attributable to countries based on the location of the Company’s customers:

Approximately 22% and 13% of the Company’s revenues during the year ended December 31, 2024, were made to INF Associates, LLC and British Columbia Hydro and Power Authority, respectively. Approximately 14% of the Company’s sales during the year ended December 31, 2023, were made to Target Corporation.

The distribution of the Company’s property and equipment by geographic location is approximately as follows:

14. BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share data for each period presented is computed using the weighted average number of shares of common stock outstanding during each such period. Diluted earnings (loss) per share data is computed using the weighted average number of common and dilutive common equivalent shares outstanding during each period. Dilutive common equivalent shares consist of shares that would be issued upon the exercise of stock options and vesting of restricted stock units, computed using the treasury stock method.

A reconciliation of basic and diluted earnings (loss) per share is as follows (in thousands, except per share data):

The following securities were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive:

15. SUBSEQUENT EVENTS

On January 7, 2025, the Company paid a one-time special cash dividend of an aggregate of $16,665.