What changed in this filing

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Item 1. Financial Statements

2020-11-13 compared with 2020-08-14 · 1012 added, 531 removed, 294 unchanged (84% of the section changed)

FINANCIAL STATEMENTS

PIONEER POWER SOLUTIONS, INC.

Consolidated Statements of Operations

(In thousands, except per share data)

POWER SOLUTIONS, INC.

Statements of Operations

thousands, except per share data)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of goods sold

2 unchanged sentences

Total cost of goods sold

Gross (loss) profit

Operating expenses

Selling, general and administrative

Foreign exchange loss

Total operating expenses

3 unchanged sentences

Other (income) expense

(Loss) income before taxes

Income tax expense (benefit)

Net (loss) income from continuing operations

Income (loss) before taxes

Income tax (benefit) expense

Net income (loss) from continuing operations

Discontinued operations

Income from operations of discontinued business units

Loss from operations of discontinued business units

Gain on sale of discontinued subsidiaries

Income tax expense

Income from discontinued operations, net of income taxes

Net (loss) income

Net income (loss)

Earnings (loss) per share:

(Loss) income from continuing operations

Income (loss) from continuing operations

Income from discontinued operations

Net (loss) income

(Loss) income from continuing operations

Net income (loss)

Income (loss) from continuing operations

Income from discontinued operations

Net (loss) income

Net income (loss)

Weighted average common shares outstanding:

The accompanying notes are an integral part of these consolidated financial statements.

PIONEER POWER SOLUTIONS, INC.

Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

accompanying notes are an integral part of these consolidated financial statements.

POWER SOLUTIONS, INC.

Statements of Comprehensive Income (Loss)

Three Months Ended

Six Months Ended

Net (loss) income

Nine Months Ended

September 30,

Net income (loss)

Other comprehensive income

2 unchanged sentences

Other comprehensive income

Comprehensive (loss) income

The accompanying notes are an integral part of these consolidated financial statements.

PIONEER POWER SOLUTIONS, INC.

Consolidated Balance Sheets

(In thousands, except share data)

Comprehensive income (loss)

accompanying notes are an integral part of these consolidated financial statements.

POWER SOLUTIONS, INC.

Balance Sheets

thousands, except share data)

September 30,

(Revised See Note #6)

9 unchanged sentences

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’

Current liabilities

2 unchanged sentences

Deferred revenue

Current maturities of long-term debt

Income taxes payable

3 unchanged sentences

Total liabilities

Stockholders’

Preferred stock, $0.001 par value, 5,000,000 shares authorized;

Common stock, $0.001 par value, 30,000,000 shares authorized;

8,726,045 shares issued and outstanding on June 30, 2020 and December 31, 2019

8,726,045 shares issued and outstanding on September 30, 2020 and December 31, 2019

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

The accompanying notes are an integral part of these consolidated financial statements.

PIONEER POWER SOLUTIONS, INC.

Consolidated Statements of Cash Flows

(In thousands)

Six Months Ended

Total stockholders’

Total liabilities and stockholders’

accompanying notes are an integral part of these consolidated financial statements.

POWER SOLUTIONS, INC.

Statements of Cash Flows

Nine Months Ended

September 30,

Operating activities

8 unchanged sentences

Change in inventory reserves

Write down of inventory

Inventory write-off from flood damage

2 unchanged sentences

Change in insurance receivable

Unrealized loss on investments

(Gain) loss on investments

Accrued pension

Stock-based compensation

Payroll tax deferral

Foreign currency remeasurement gain

Changes in current operating assets and liabilities:

3 unchanged sentences

Deferred revenue

Net cash (used in)/provided by operating activities

Net cash used in operating activities

Investing activities

Additions to property, plant and equipment

Proceeds from sale of subsidiaries, net

Proceeds from sale of investments

Change in note receivable

Net cash provided by/(used in) investing activities

Net cash provided by investing activities

Financing activities

4 unchanged sentences

Payment of deferred purchase price

Write-off of notes receivable

Principal repayments of financing leases

Net cash provided by/(used in) financing activities

(Decrease) increase in cash and cash equivalents

Increase in cash and cash equivalents

Effect of foreign exchange on cash and cash equivalents

2 unchanged sentences

End of period

The accompanying notes are an integral part of these consolidated financial statements.

PIONEER POWER SOLUTIONS, INC.

Consolidated Statement of Stockholders’

(In thousands)

other compre-

stockholders'

accompanying notes are an integral part of these consolidated financial statements.

POWER SOLUTIONS, INC.

Statement of Stockholders’

comprehensive

stockholders’

income (loss)

Balance - March 31, 2019

Balance - June 30, 2019

Stock-based compensation

1 unchanged sentence

Pension adjustment, net of taxes

Balance - June 30, 2019

Balance - March 31, 2020 (Revised)

Cash dividend declared

Balance - September 30, 2019

Balance - June 30, 2020

Stock-based compensation

Balance - September 30, 2020

comprehensive

stockholders’

income (loss)

3 unchanged sentences

Pension adjustment, net of taxes

Balance - June 30, 2019

Cash dividend declared

Balance - September 30, 2019

Balance - January 1, 2020 (Revised)

Stock-based compensation

Balance - June 30, 2020

The accompanying notes are an integral part of these consolidated financial statements.

PIONEER POWER SOLUTIONS, INC.

Notes to Consolidated Financial Statements

June 30, 2020 (unaudited)

Balance - September 30, 2020

accompanying notes are an integral part of these consolidated financial statements.

POWER SOLUTIONS, INC.

to Consolidated Financial Statements

30, 2020 (unaudited)

BASIS OF PRESENTATION

Pioneer Power Solutions, Inc.

and its wholly owned subsidiaries (referred to herein as the “Company,”

“Pioneer,”

“Pioneer Power,”

“we,”

“our”

and “us”) manufacture, sell and service a broad range of specialty electrical transmission, distribution and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets.

The Company is headquartered in Fort Lee, New Jersey and operates from five (5) additional locations in the U.S.

for manufacturing, centralized distribution, engineering, sales and administration.

We have two reportable segments as defined in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2020:

Transmission and Distribution Solutions (“T&D Solutions”) and Critical Power Solutions (“Critical Power”).

Sale of Transformer Business Units

On June 28, 2019, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”), by and among the Company, Electrogroup Canada, Inc., a wholly owned subsidiary of the Company (“Electrogroup”), Jefferson Electric, Inc., a wholly owned subsidiary of the Company (“Jefferson”), JE Mexican Holdings, Inc., a wholly owned subsidiary of the Company (“JE Mexico,”

and together with Electrogroup and Jefferson, the “Disposed Companies”), Nathan Mazurek (Chief Executive Officer of the Company), Pioneer Transformers L.P.

(the “US Buyer”) and Pioneer Acquireco ULC (the “Canadian Buyer,”

and together with the US Buyer, the “Buyer”).

Pursuant to the terms of the Stock Purchase Agreement, the Company agreed to sell (i) all of the issued and outstanding equity interests of Electrogroup to the Canadian Buyer and (ii) all of the issued and outstanding equity interests of Jefferson and JE Mexico to the US Buyer (the “Equity Transaction”), for a purchase price of $68.0 million.

Included in the purchases price, the Company received two subordinated promissory notes, issued by the Buyer, in the aggregate principal amount of $5.0 million and $2.5 million, for a total aggregate principal amount of $7.5 million (the “Seller Notes”).

During the fourth quarter of 2019, the Company and the Buyer, pursuant to the Stock Purchase Agreement, completed the net working capital adjustment, which resulted in the Company paying the Buyer $1.8 million in cash and reducing the principal amount of the $5.0 million Seller Note to $3.2 million.

The Company recognized an additional reduction to the principal amount of the Seller Note of $194 for a valid claim paid by the Buyer on behalf of the Company during the three months ended June 30, 2020.

The Company has revalued the notes for an appropriate imputed interest rate, resulting in a change to the value of the notes at June 30, 2020 of $40, for a carrying value of $5.1 million, which is included within other long term assets (see Note 11 - Other Assets).

The transaction was consummated on August 16, 2019.

Pioneer sold to the Buyer all of the assets and liabilities associated with its liquid-filled transformer and dry-type transformer manufacturing businesses within the Company’s T&D Solutions segment.

Pioneer Power retained its switchgear manufacturing business within the T&D Solutions segment, as well as all of the operations associated with its Critical Power segment.

For presentation within these statements, the Disposed Companies are being presented as discontinued operations for all periods presented.

The accompanying unaudited consolidated financial statements of the Company have been prepared pursuant to the rules of the SEC and reflect the accounts of the Company as of June 30, 2020.

Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”), have been condensed or omitted pursuant to those rules and regulations.

We believe that the disclosures made are adequate to make the information presented not misleading to the reader.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included.

The results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year.

The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S.

Power Solutions, Inc.

and its wholly owned subsidiaries (referred to herein as the “Company,”

“Pioneer,”

“Pioneer Power,”

“we,”

“our”

and “us”) manufacture, sell and service a broad range

of specialty electrical transmission, distribution and on-site power generation equipment for applications in the utility, industrial,

commercial and backup power markets.

The Company is headquartered in Fort Lee, New Jersey and operates from four (4) additional

locations in the U.S.

for manufacturing, service, engineering, sales and administration.

have two reportable segments as defined in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with

the Securities and Exchange Commission (the “SEC”) on March 30, 2020:

Transmission and Distribution Solutions (“T&D

Solutions”) and Critical Power Solutions (“Critical Power”).

of Transformer Business Units

June 28, 2019, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”), by and among

the Company, Electrogroup Canada, Inc., a wholly owned subsidiary of the Company (“Electrogroup”), Jefferson Electric,

Inc., a wholly owned subsidiary of the Company (“Jefferson”), JE Mexican Holdings, Inc., a wholly owned subsidiary

of the Company (“JE Mexico,”

and together with Electrogroup and Jefferson, the “Disposed Companies”),

Nathan Mazurek (Chief Executive Officer of the Company), Pioneer Transformers L.P.

(the “US Buyer”) and Pioneer Acquireco

ULC (the “Canadian Buyer,”

and together with the US Buyer, the “Buyer”).

Pursuant to the terms of the

Stock Purchase Agreement, the Company agreed to sell (i) all of the issued and outstanding equity interests of Electrogroup to

the Canadian Buyer and (ii) all of the issued and outstanding equity interests of Jefferson and JE Mexico to the US Buyer (the

“Equity Transaction”), for a purchase price of $68.0 million.

Included in the purchase price, the Company received

two subordinated promissory notes, issued by the Buyer, in the aggregate principal amount of $5.0 million and $2.5 million, for

a total aggregate principal amount of $7.5 million (the “Seller Notes”).

During the fourth quarter of 2019, the Company

and the Buyer, pursuant to the Stock Purchase Agreement, completed the net working capital adjustment, which resulted in the Company

paying the Buyer $1.8 million in cash and reducing the principal amount of the $5.0 million Seller Note to $3.2 million.

the second quarter of 2020, the Company recognized an additional reduction to the principal amount of the Seller Note of $194

for a valid claim paid by the Buyer on behalf of the Company.

Including the reduction to the principal amount for the valid claim,

the Company has revalued the Seller Notes for an appropriate imputed interest rate, resulting in a change to the value of the

Seller Notes at September 30, 2020 of $147, for a carrying value of $5.2 million, which is included within other long term assets

(see Note 11 - Other Assets).

transaction was consummated on August 16, 2019.

Pioneer sold to the Buyer all of the assets and liabilities associated with its

liquid-filled transformer and dry-type transformer manufacturing businesses within the Company’s T&D Solutions segment.

Pioneer Power retained its switchgear manufacturing business within the T&D Solutions segment, as well as all of the operations

associated with its Critical Power segment.

presentation within these statements, the Disposed Companies are being presented as discontinued operations for all periods presented.

accompanying unaudited consolidated financial statements of the Company have been prepared pursuant to the rules of the SEC and

reflect the accounts of the Company as of September 30, 2020.

Certain information and footnote disclosures, normally included

in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”), have been condensed or omitted pursuant to those rules and regulations.

We believe that the disclosures made are

adequate to make the information presented not misleading to the reader.

In the opinion of management, all adjustments, consisting

only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with

respect to the interim consolidated financial statements have been included.

The results of operations for the interim period

are not necessarily indicative of the results for the entire fiscal year.

The year-end balance sheet data was derived from audited

financial statements but does not include all disclosures required by U.S.

GAAP for a year-end balance sheet.

All dollar amounts (except share and per share data) presented in the notes to our unaudited consolidated financial statements are stated in thousands of dollars, unless otherwise noted.

dollar amounts (except share and per share data) presented in the notes to our unaudited consolidated financial statements are

stated in thousands of dollars, unless otherwise noted.

Amounts may not foot due to rounding.

These unaudited consolidated financial statements include the accounts of Pioneer and its wholly-owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Operating results of liquid-filled and dry-type transformer manufacturing businesses have been previously included in the T&D Segment, which have now been reclassified as discontinued operations for all periods presented.

See Note 8 - Discontinued Operations in Notes to Consolidated Financial Statements in Part I of this Form 10-Q.

Discussions in these notes pertain to our continuing operations unless noted otherwise.

These unaudited consolidated financial statements should be read in conjunction with the risk factors under the heading “Part II - Item 1A.

Risk Factors”

and the risk factors and the audited consolidated financial statements and notes thereto of the Company and its subsidiaries included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The accompanying financial statements have been prepared on a basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

As shown in the accompanying financial statements as of the six months ended June 30, 2020, the Company had $7.5 million of cash and cash equivalents on hand, generated primarily from the completion of the Equity Transaction, and working capital of $8.3 million.

We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings.

Our cash requirements historically were generally for operating activities, debt repayment, capital improvements and acquisitions.

As all outstanding amounts under our credit facilities have been paid in full with the proceeds from the Equity Transaction during the year ended December 31, 2019, we expect to meet our cash needs with our working capital and cash flows from our operating activities.

We expect our cash requirements to be generally for operating activities and capital improvements.

There are two appeals pending in the California Court of Appeals for the Second Appellate District in connection with the litigation with Myers Power Products, Inc., which includes an appeal of an order modifying a previously issued preliminary injunction and an order enjoining the Company to obtain and post a $12 million bond.

While the Company intends to defend itself vigorously, due to the uncertainties of litigation, the Company can give no assurance that it will prevail on the appeals which could have an adverse impact on the Company’s financial position.

These appeals are currently scheduled to be heard later in calendar year 2021.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin.

In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The full impact of the COVID-19 outbreak continues to evolve as the date of this report.

As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations.

During the three months ended June 30, 2020, the Company experienced a decline in market demand for its products and services.

Additionally, we have experienced an impact to productivity as a result of implementing social distancing guidelines and personal protective measures.

Notwithstanding, the Company has been able to operate substantially at capacity during the COVID-19 outbreak.

Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.

Given the daily evolution of the COVID-19 outbreak and the global responses to contain its spread, the Company is not able to estimate the full effects of the COVID-19 outbreak at this time, however, if the pandemic continues, it may have an adverse effect on the Company’s results of operations, financial condition, or liquidity for fiscal year 2020.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.”

The CARES Act, among other things, appropriates funds for the SBA Paycheck Protection Program loans that are forgivable in certain situations to promote continued employment.

On April 13, 2020, the Company received funding in the amount of $1.4 million from the Paycheck Protection Program (the “PPP Loan”) after determining we met the qualifications for this loan program due to the impact that COVID-19 will have on our financial condition, results of operations, and/or liquidity.

While the full magnitude of the pandemic’s effect on the Company’s future results of operations is uncertain, the Company had experienced certain declines in service sales and commitments to purchase equipment.

The Company made this assertion in good faith based upon all available guidance, however management will continue to assess the Company’s continued qualification if and when updated guidance is released by the Treasury Department.

The Company intends to use all proceeds from the PPP Loan to retain employees, maintain payroll and make lease, rent and utility payments.

Under the terms of the PPP Loan, the Company may be eligible for full or partial loan forgiveness, however, no assurance is provided that the Company will apply for, or obtain forgiveness for, any portion of the PPP Loan.

The Company has accounted for the PPP Loan as a debt instrument in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470, Debt.

At June 30, 2020, $1.4 million of principal payments due starting in the third quarter of 2021 have been recorded as long-term debt in accordance with the enactment of the Paycheck Protection Program Flexibility Act of 2020.

The Company does not expect to incur any material interest expense under the PPP Loan.

unaudited consolidated financial statements include the accounts of Pioneer and its wholly-owned subsidiaries.

All significant

intercompany accounts and transactions have been eliminated in consolidation.

results of liquid-filled and dry-type transformer manufacturing businesses have been previously included in the T&D Segment,

which have now been reclassified as discontinued operations for all periods presented.

See Note 8 - Discontinued Operations in

Notes to Consolidated Financial Statements in Part I of this Form 10-Q.

Discussions in these notes pertain to our continuing operations

unless noted otherwise.

unaudited consolidated financial statements should be read in conjunction with the risk factors under the heading “Part

II - Item 1A.

Risk Factors”

and the risk factors and the audited consolidated financial statements and notes thereto of

the Company and its subsidiaries included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

accompanying financial statements have been prepared on a basis, which contemplates the realization of assets and the satisfaction

of liabilities in the normal course of business.

As shown in the accompanying financial statements as of the nine months ended

September 30, 2020, the Company had $9.6 million of cash and cash equivalents on hand, generated primarily from the completion

of the Equity Transaction, and working capital of $9.7 million.

We have historically met our cash needs through a combination

of cash flows from operating activities and bank borrowings.

Our cash requirements historically were for operating activities,

debt repayment and capital improvements.

As all outstanding amounts under our credit facilities have been paid in full with the

proceeds from the Equity Transaction during the year ended December 31, 2019, we expect to meet our cash needs with our working

capital and cash flows from our operating activities.

We expect our cash requirements to be generally for operating activities

and capital improvements.

are two appeals pending in the California Court of Appeal for the Second Appellate District in connection with the litigation

with Myers Power Products, Inc., which includes an appeal of an order modifying a previously issued preliminary injunction and

an order enjoining the Company to obtain and post a $12 million bond.

While the Company intends to defend itself vigorously, due

to the uncertainties of litigation, the Company can give no assurance that it will prevail on the appeals which could have an

adverse impact on the Company’s liquidity and financial position.

January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain

of coronavirus originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its

point of origin.

In March 2020, the WHO classified the COVID-19 outbreak as a pandemic (the “COVID-19 pandemic”),

based on the rapid increase in exposure globally.

full impact of the COVID-19 pandemic continues to evolve as the date of this report.

As such, it is uncertain as to the full magnitude

that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations.

nine months ended September 30, 2020, the Company experienced a decline in market demand for its products and services.

Additionally,

the Company experienced an impact to productivity as a result of implementing social distancing guidelines and personal protective

Notwithstanding, the Company has been able to operate substantially at capacity during the COVID-19 pandemic.

is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.

Given the daily evolution of the COVID-19 pandemic and the global responses to contain its spread, the Company is not able to

estimate the full effects of the COVID-19 pandemic at this time, however, if the pandemic continues, it may have an adverse effect

on the Company’s results of operations, financial condition, or liquidity for fiscal year 2020.

March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.”

The CARES Act, among other things, appropriates funds for the SBA Paycheck Protection Program loans that are forgivable in certain

situations to promote continued employment.

On April 13, 2020, the Company received funding in the amount of $1.4 million from

the Paycheck Protection Program (the “PPP Loan”) after determining we met the qualifications for this loan program

due to the impact that COVID-19 will have on our financial condition, results of operations, and/or liquidity.

While the full

magnitude of the pandemic’s effect on the Company’s future results of operations is uncertain, the Company has experienced

certain declines in service sales and commitments to purchase equipment.

The Company made this assertion in good faith based upon

all available guidance, however management will continue to assess the Company’s continued qualification if and when updated

guidance is released by the Treasury Department.

The Company intends to use all proceeds from the PPP Loan to retain employees,

maintain payroll and make lease, rent and utility payments.

Under the terms of the PPP Loan, the Company may be eligible for full

or partial loan forgiveness in the fourth quarter of 2020, however, no assurance is provided that the Company will apply for,

or obtain forgiveness for, any portion of the PPP Loan.

Company has accounted for the PPP Loan as a debt instrument in accordance with Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification (“ASC”) 470, Debt.

At September 30, 2020, $1.1 million of principal payments due

starting in the third quarter of 2021 have been recorded as long-term debt and $303 as current debt in accordance with the enactment

of the Paycheck Protection Program Flexibility Act of 2020.

The Company does not expect to incur any material interest expense

under the PPP Loan.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

There have been no significant changes in the Company’s accounting policies during this fiscal quarter of 2020.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on the Company’s financial statements.

Income Taxes.

Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements included

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

There have been no significant changes

in the Company’s accounting policies during this fiscal quarter of 2020.

Accounting Pronouncements

have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on the Company’s

financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740) , which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

The ASU is effective for all annual and interim periods beginning December 15, 2020, with early adoption permitted.

The Company is currently evaluating the potential impact but does not anticipate there will be a material impact to the consolidated financial statements once implemented.

Stock Compensation.

In June 2018, the FASB issued ASU No.

2018-07, Compensation –

Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting.

The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.

An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period).

The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards.

The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers.

The updated standard became effective for the Company beginning after December 15, 2018, including interim periods within that fiscal year.

The Company adopted this guidance on January 1, 2019.

The adoption of this ASU did not have a material impact on the consolidated financial statements.

Fair Value Measurement.

2019-12, Income Taxes (Topic 740) , which simplifies the accounting

for income taxes by removing certain exceptions to the general principles in Topic 740 and also clarifies and amends existing

guidance to improve consistent application.

The ASU is effective for all annual and interim periods beginning December 15, 2020,

with early adoption permitted.

The Company is currently evaluating the potential impact but does not anticipate there will be

a material impact to the consolidated financial statements once implemented.

Value Measurement.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement that eliminates, amends, and adds certain disclosure requirements for fair value measurements.

Disclosure Framework

- Changes to the Disclosure Requirements for Fair Value Measurement that eliminates, amends, and adds certain disclosure requirements

for fair value measurements.

The Company adopted this guidance on January 1, 2020.

The adoption of this ASU did not have a material impact on the consolidated financial statements.

Measurement of Credit Losses on Financial Instrument.

The adoption of this ASU did not have a material

impact on the consolidated financial statements.

of Credit Losses on Financial Instruments.

In June 2016, the FASB issued amended guidance to ASU No.

2016-13, Financial Instruments –

2016-13, Financial

Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments that changes the impairment model for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss”

model that will replace today’s “incurred loss”

model and generally will result in the earlier recognition of allowances for losses.

For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance.

This amended guidance for small reporting companies is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period.

We do not expect that the amended guidance will have a material effect on our consolidated financial statements and related disclosures.

On January 22, 2019, Pioneer Critical Power, Inc., a Delaware corporation (“PCPI”), a wholly-owned subsidiary of the Company within the T&D Solutions segment, CleanSpark and CleanSpark Acquisition, Inc., a Delaware corporation (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other things, Merger Sub merged with and into PCPI, with PCPI becoming a wholly-owned subsidiary of the CleanSpark and the surviving company of the merger (the “Merger”).

At the effective date of the Merger, all of the issued and outstanding shares of common stock of PCPI, par value $0.01 per share, were converted into the right to receive (i) 175,000 shares of common stock, par value $0.001 per share (“CleanSpark Common Stock”), of CleanSpark, (ii) a five-year warrant to purchase 50,000 shares of CleanSpark Common Stock at an exercise price of $16.00 per share, and (iii) a five-year warrant to purchase 50,000 shares of CleanSpark Common Stock at an exercise price of $20.00 per share.

The share quantities and exercise prices of warrants reflect the 10:1 reverse stock split completed by CleanSpark in December 2019.

In connection with the Merger Agreement, the Company, CleanSpark and PCPI entered into an Indemnity Agreement (the “Indemnity Agreement”), dated January 22, 2019, pursuant to which the Company agreed to assume the liabilities and obligations related to the claims made by Myers Powers Products, Inc.

Measurement of Credit Losses on Financial Instruments that changes the impairment

model for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt securities,

loans and other instruments, entities will be required to use a new forward-looking “expected loss”

model that will

replace today’s “incurred loss”

model and generally will result in the earlier recognition of allowances for

For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar

to current practice, except that the losses will be recognized as an allowance.

This amended guidance for small reporting companies

is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first

effective reporting period.

The Company does not expect that the amended guidance will have a material effect on our consolidated

financial statements and related disclosures.

January 22, 2019, Pioneer Critical Power, Inc., a Delaware corporation (“PCPI”), a wholly-owned subsidiary of the

Company within the T&D Solutions segment, CleanSpark and CleanSpark Acquisition, Inc., a Delaware corporation (“Merger

Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other

things, Merger Sub merged with and into PCPI, with PCPI becoming a wholly-owned subsidiary of the CleanSpark and the surviving

company of the merger (the “Merger”).

the effective date of the Merger, all of the issued and outstanding shares of common stock of PCPI, par value $0.01 per share,

were converted into the right to receive (i) 175,000 shares of common stock, par value $0.001 per share (“CleanSpark Common

Stock”), of CleanSpark, (ii) a five-year warrant to purchase 50,000 shares of CleanSpark Common Stock at an exercise price

of $16.00 per share, and (iii) a five-year warrant to purchase 50,000 shares of CleanSpark Common Stock at an exercise price of

$20.00 per share.

The share quantities and exercise prices of warrants reflect the 10:1 reverse stock split completed by CleanSpark

in December 2019.

During the three months ended September 30, 2020, the Company sold

all of the CleanSpark Common Stock and warrants to purchase CleanSpark Common Stock it received in connection with the Merger Agreement

and recorded proceeds of $2.4 million.

The gain from the sale was partially offset by a mark to market adjustment of $700 and $1.4

million resulting in a net gain of $1.7 million and $968 for the three and nine months ended September 30, 2020, respectively,

to other (income) expense in the accompanying statements of operations.

Warrants at fair value were previously recorded at inception

as long term within other assets.

connection with the Merger Agreement, the Company, CleanSpark and PCPI entered into an Indemnity Agreement (the “Indemnity

Agreement”), dated January 22, 2019, pursuant to which the Company agreed to assume the liabilities and obligations related

to the claims made by Myers Powers Products, Inc.

in the case titled Myers Power Products, Inc.

Pioneer Power Solutions, Inc., Pioneer Custom Electrical Products, Corp., et al.

Pioneer Power Solutions,

Inc., Pioneer Custom Electrical Products, Corp., et al.

, Los Angeles County Superior Court Case No.

BC606546 (the “Myers Power Case”) as they may relate to PCPI or CleanSpark after the closing of the Merger.

In addition, the Company agreed to indemnify and hold harmless CleanSpark and the surviving company of the Merger and their respective officers, directors, agents, members and employees, and the heirs successors and assigns of the foregoing from and against all losses incurred by reason of claims made by Myers Power Products, Inc.

as presented or substantially similar to that presented in the Myers Powers Case that are brought against CleanSpark or the surviving company of the Merger after the closing of the Merger.

The Indemnity Agreement expires five years from the date of the Indemnity Agreement.

In connection with entry into the Merger Agreement, the Company and CleanSpark entered into a Contract Manufacturing Agreement (the “Contract Manufacturing Agreement”), dated as of January 22, 2019, pursuant to which the Company will manufacture paralleling switchgear, automatic transfer switches and related control and circuit protective equipment (collectively, “Products”) exclusively for purchase by CleanSpark.

CleanSpark will purchase the Products via purchase orders issued to the Company at any time and from time to time.

The price for the Products payable by CleanSpark to the Company will be negotiated on a case by case basis, but all purchases of Products will have a target price of 91% of the CleanSpark customer’s purchase order price and will not be more than 109% of the Company’s cost.

The Contract Manufacturing Agreement has a term of 18 months and may be extended by mutual agreement of the Company and CleanSpark.

The Merger resulted in the deconsolidation of PCPI and a gain of $4.2 million in the first quarter of 2019.

The fair value of the investment in the common stock of CleanSpark was determined using quoted market prices and warrants were established using a Black Scholes model.

At June 30, 2020, the estimated fair value of the warrants and CleanSpark common stock amounted to $708 and an unrealized mark to market gain of $384 and an unrealized mark to market loss of $759 was recognized within other expense for the three and six months ended June 30, 2020, respectively.

The PCPI entity was a dormant business unit at the time of this sale;

therefore this sale has no impact to the discontinued operations presented within the financial statements.

BC606546 (the “Myers

Power Case”) as they may relate to PCPI or CleanSpark after the closing of the Merger.

In addition, the Company agreed to

indemnify and hold harmless CleanSpark and the surviving company of the Merger and their respective officers, directors, agents,

members and employees, and the heirs successors and assigns of the foregoing from and against all losses incurred by reason of

claims made by Myers Power Products, Inc.

as presented or substantially similar to that presented in the Myers Powers Case that

are brought against CleanSpark or the surviving company of the Merger after the closing of the Merger.

The Indemnity Agreement expires on January 22, 2024.

connection with entry into the Merger Agreement, the Company and CleanSpark entered into a Contract Manufacturing Agreement (the

“Contract Manufacturing Agreement”), dated as of January 22, 2019, pursuant to which the Company will manufacture

paralleling switchgear, automatic transfer switches and related control and circuit protective equipment (collectively, “Products”)

exclusively for purchase by CleanSpark.

CleanSpark will purchase the Products via purchase orders issued to the Company at any

time and from time to time.

The price for the Products payable by CleanSpark to the Company will be negotiated on a case by case

The Contract Manufacturing Agreement had a term of 18 months and expired during the third quarter of 2020.

Merger resulted in the deconsolidation of PCPI and a gain of $4.2 million in the first quarter of 2019.

The fair value of the

investment in the CleanSpark Common Stock was determined using quoted market prices and warrants were established using a Black

Scholes model.

PCPI entity was a dormant business unit at the time of this sale;

therefore this sale has no impact to the discontinued operations

presented within the financial statements.

FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.

The fair value standard also establishes a three level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the price that would be received

to sell an asset, or paid to transfer a liability, in the principal or most advantageous market in an orderly transaction between

market participants on the measurement date.

The fair value standard also establishes a three level hierarchy, which requires

an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

The three levels are defined as follows:

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.

Level 2 - inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.

At June 30, 2020, the Company’s financial instruments included the right to receive (i) 175,000 shares of common stock, par value $0.001 per share, of CleanSpark Common Stock, (ii) a five-year warrant to purchase 50,000 shares of CleanSpark Common Stock at an exercise price of $16.00 per share, and (iii) a five-year warrant to purchase 50,000 shares of CleanSpark Common Stock at an exercise price of $20.00 per share.

The carrying amounts reported in the accompanying financial statements for cash and cash equivalents, receivables, inventories, accounts payable and accrued expenses and other current liabilities approximate their respective fair values because of the short-term nature of these accounts.

The share quantities and exercise prices of warrants reflect the 10:1 reverse stock split which was completed by CleanSpark in December 2019.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s assets that are measured at fair value on a recurring basis:

June 30, 2020

Fair Value Measurements Using

Quoted prices in

Significant other

active markets for

identical assets

Common shares

Level 3 Valuation

The warrant asset (which relates to warrants to purchase shares of common stock) is marked-to-market each reporting period with the change in fair value recorded to other income (expense) in the accompanying statements of operations until the warrants are exercised.

The fair value of the warrant asset is estimated using a Black-Scholes option-pricing model.

The significant assumptions used in preparing the option pricing model for valuing the warrant asset as of June 30, 2020, include (i) volatility of 290%, (ii) risk free interest rate of 0.24%, (iii) strike price ($16.00 and $20.00), (iv) fair value of common stock ($2.59), and (v) expected life of 3.6 years.

The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the CleanSpark warrants for the six months ended June 30, 2020:

Balance at December 31, 2019

Issuance of warrants

Change in fair value

Balance at June 30, 2020

No other changes in valuation techniques or inputs occurred during the six months ended June 30, 2020.

No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the six months ended June 30, 2020.

Nature of our products and services

Our principal products and services include custom-engineered engine-generator sets and controls, complemented by a national field-service network to maintain and repair power generation assets.

We provide switchgear that helps customers effectively and efficiently manage their electrical power distribution systems to desired specifications.

Power generation systems represent considerable investments that require proper maintenance and service in order to operate reliably during a time of emergency.

Our power maintenance programs provide preventative maintenance, repair and support service for our customers’

1 - inputs to the valuation methodology are quoted prices (unadjusted) for an identical

asset or liability in an active market.

2 - inputs to the valuation methodology include quoted prices for a similar asset or

liability in an active market or model derived valuations in which all significant inputs

are observable for substantially the full term of the asset or liability.

3 - inputs to the valuation methodology are unobservable and significant to the fair

value measurement of the asset or liability.

January 22, 2019, we entered into an Agreement and Plan of Merger with the Merger Sub which resulted in the Company receiving

financial instruments that included the right to receive (i) 175,000 shares of common stock, par value $0.001 per share, of CleanSpark

Common Stock, (ii) a five-year warrant to purchase 50,000 shares of CleanSpark Common Stock at an exercise price of $16.00 per

share, and (iii) a five-year warrant to purchase 50,000 shares of CleanSpark Common Stock at an exercise price of $20.00 per share.

The share quantities and exercise prices of warrants reflect the 10:1 reverse stock split which was completed by CleanSpark in

December 2019.

During the three months ended September 30, 2020, the Company sold

all of the CleanSpark Common Stock and warrants to purchase CleanSpark Common Stock it received in connection with the Merger Agreement

and recorded proceeds of $2.4 million.

The gain from the sale was partially offset by a mark to market adjustment of $700 and $1.4

million resulting in a net gain of $1.7 million and $968 for the three and nine months ended September 30, 2020, respectively,

to other (income) expense in the accompanying statements of operations.

Warrants at fair value were previously recorded at inception

as long term within other assets.

other changes in valuation techniques or inputs occurred during the nine months ended September 30, 2020.

No transfers of assets

between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the nine months ended September 30, 2020.

of our products and services

principal products and services include switchgear and engine-generator controls, complemented by a national field-service network

to maintain and repair power generation assets.

provide switchgear that helps customers effectively and efficiently manage their electrical power distribution systems to desired

specifications.

Additionally,

we provide our customers with new and used sophisticated power generation equipment intended to ensure smooth, uninterrupted power

to operations during times of emergency.

generation systems represent considerable investments that require proper maintenance and service in order to operate reliably

during a time of emergency.

Our power maintenance programs provide preventative maintenance, repair and support service

for our customers’

power generation systems.

Our principal source of revenue is derived from sales of products and fees for services.

We measure revenue based upon the consideration specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement are satisfied.

principal source of revenue is derived from sales of products and fees for services.

We measure revenue based upon the consideration

specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement

are satisfied.

A performance obligation is a promise in a contract to transfer a distinct product or service to the customer.

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation.

Customers typically receive the benefit of our products when the risk of loss or control for the product transfers to the customer and for services as they are performed.

Under ASC 606, revenue is recognized when a customer obtains control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services.

To achieve this core principal, the Company applies the following five steps:

1) Identify the contract with a customer

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the products or services to be transferred and identifies the payment terms related to these products or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for products or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the products or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products or services is separately identifiable from other promises in the contract.

To the extent a contract includes multiple promised products or services, the Company must apply judgment to determine whether promised products or services are capable of being distinct and distinct in the context of the contract.

If these criteria are not met the promised products or services are accounted for as a combined performance obligation.

3) Determine the transaction price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer.

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as,

the customer receives the benefit of the performance obligation.

Customers typically receive the benefit of our products when

the risk of loss or control for the product transfers to the customer and for services as they are performed.

Under ASC 606, revenue

is recognized when a customer obtains control of promised products or services in an amount that reflects the consideration we

expect to receive in exchange for those products or services.

To achieve this core principal, the Company applies the following

the contract with a customer

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.

the performance obligations in the contract

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.

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.

the transaction price

transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring

products or services to the customer.

The customer payments are generally due in 30 days.

4) Allocate the transaction price to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis or cost of the product or service.

The Company determines standalone selling price based on the price at which the performance obligation is sold separately.

If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

5) Recognize revenue when or as the Company satisfies a performance obligation

The Company satisfies performance obligations either over time or at a point in time.

Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised product or service to a customer.

Substantially all of our revenue from the sale of switchgear and power generation equipment is recognized at a point of time.

Revenues are recognized at the point in time that the customer obtains control of the good which is when it has taken title to the products and has assumed the risks and rewards of ownership specified in the purchase order or sales agreement.

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 following table presents our revenues disaggregated by revenue discipline:

the transaction price to performance obligations in the contract

the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation

based on a relative standalone selling price basis or cost of the product or service.

The Company determines standalone selling

price based on the price at which the performance obligation is sold separately.

If the standalone selling price is not observable

through past transactions, the Company estimates the standalone selling price taking into account available information such as

market conditions and internally approved pricing guidelines related to the performance obligations.

revenue when or as the Company satisfies a performance obligation

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.

Substantially

all of our revenue from the sale of switchgear and power generation equipment is recognized at a point of time.

Revenues are recognized

at the point in time that the customer obtains control of the good which is when it has taken title to the products and has assumed

the risks and rewards of ownership specified in the purchase order or sales agreement.

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.

following table presents our revenues disaggregated by revenue discipline:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total revenue

See Note 15 - Business Segment and Geographic Information in Notes to Consolidated Financial Statements in Part I of this Form 10-Q.

Note 15 - Business Segment and Geographic Information in Notes to Consolidated Financial Statements in Part I of this Form 10-Q.

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

In connection with the preparation of our consolidated interim financial statements for the quarter ended June 30, 2020, we identified a revision as of December 31, 2019 in the calculation of the tax expense related to the Equity Transaction.

The revision resulted in a net loss for tax purposes and created additional deferred tax assets related to these tax losses, as well as a reduction in the income tax expense, all recorded as part of discontinued operations.

The recognition of additional deferred tax assets requires an increase to the valuation allowance as at December 31, 2019, consistent with the Company’s position on the future realization of these assets.

In accordance with Staff Accounting Bulletin (“SAB”) No.

connection with the preparation of our consolidated interim financial statements for the quarter ended June 30, 2020, we identified

a revision as of December 31, 2019 in the calculation of the tax expense related to the Equity Transaction.

The revision resulted

in a net loss for tax purposes and created additional deferred tax assets related to these tax losses, as well as a reduction

in the income tax expense, all recorded as part of discontinued operations.

The recognition of additional deferred tax assets

requires an increase to the valuation allowance as at December 31, 2019, consistent with the Company’s position on the future

realization of these assets.

accordance with Staff Accounting Bulletin (“SAB”) No.

99, Materiality, and SAB No.

108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the revision and determined that the related impact was not material to our results of operations or financial position for any prior annual or interim period, but that correcting the $407 cumulative impact of the revision would be material to our results of operations for the three months ended June 30, 2020.

Accordingly, we have corrected the consolidated balance sheets and consolidated statement of operations as of December 31, 2019.

The impact to the consolidated balance sheets and consolidated statements of operations as of December 31, 2019 is as follows:

108, Considering the Effects of

Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the revision and determined

that the related impact was not material to our results of operations or financial position for any prior annual or interim period,

but that correcting the $407 cumulative impact of the revision would be material to our results of operations for the three months

ended June 30, 2020.

Accordingly, we have corrected the consolidated balance sheets and consolidated statement of operations as

of December 31, 2019.

impact to the consolidated balance sheets and consolidated statements of operations as of December 31, 2019 is as follows:

As of December 31, 2019

6 unchanged sentences

Accumulated deficit

Total stockholders’

Consolidated Statements of Operations

4 unchanged sentences

Basic and diluted net loss

Subsequent to the December 31, 2019 revision described above, the March 31, 2020 consolidated balance sheet was also revised to reflect an increase in other currents assets of $360 to $16,533, a decrease in other current liabilities of $47 to $8,698, and an increase to stockholders’

to the December 31, 2019 revision described above, the March 31, 2020 consolidated balance sheet was also revised to reflect an

increase in other currents assets of $360 to $16,533, a decrease in other current liabilities of $47 to $8,698, and an increase

to stockholders’

equity of $407 to $13,923.

The identified adjustment does not impact any other prior periods.

identified adjustment does not impact any other prior periods.

OTHER (INCOME) EXPENSE

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

For the three months ended June 30, 2020, other income was $449, as compared to other expense of $3.8 million during the three months ended June 30, 2019.

For the three months ended June 30, 2020, included in other income was a gain of $384 related to the mark to market adjustment on the fair value of common stock and warrants received in connection with the Merger of PCPI, CleanSpark and the Merger Sub, as compared to a loss of $3.7 million for the three months ended June 30, 2019.

For the six months ended June 30, 2020, other expense was $832, as compared to $465 during the six months ended June 30, 2019.

For the six months ended June 30, 2020, included in other expense was a loss of $759 related to the mark to market adjustment on the fair value of common stock and warrants received in connection with the Merger of PCPI, CleanSpark and the Merger Sub, as compared to a loss of $325 for the six months ended June 30, 2019.

(income) expense in the unaudited consolidated statements of operations reports certain gains and losses associated with activities

not directly related to our core operations.

During the three months ended September 30, 2020, we recognized a gain of $1.7 million

in other income related to the sale of CleanSpark Common Stock and warrants.

For the three months ended September 30, 2019, included

in other expense was a loss of $1.9 million related to the mark to market adjustment on the fair value of the common stock and

the nine months ended September 30, 2020, included in other income was a gain of $968 related to the sale and mark to market adjustment

on the fair value of CleanSpark Common Stock and warrants, as compared to a loss of $2.2 million for the nine months ended September

30, 2019, related to the mark to market adjustment on the fair value of the common stock and warrants.

DISCONTINUED OPERATIONS

A discontinued operation is a component of the Company’s business that represents a separate major line of business that had been disposed of or is held for sale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier.

When an operation is classified as a discontinued operation, the comparative Consolidated Statement of Operations, Consolidated Statement of Cash Flows, and Consolidated Balance Sheets are presented as if the operation had been discontinued from the start of the comparative year.

Based upon the authoritative guidance, the Company concluded that the operations of the liquid-filled and dry-type transformer business should be presented as discontinued operations for the three and six months ended June 30, 2019.

On August 16, 2019, the Company completed the Equity Transaction pursuant to the Stock Purchase Agreement, by and among the Company, the Disposed Companies, Nathan Mazurek, and the Buyer.

Pursuant to the terms of the Stock Purchase Agreement, the Company sold (i) all of the issued and outstanding equity interests of Electrogroup to the Canadian Buyer and (ii) all of the issued and outstanding equity interests of Jefferson and JE Mexico to the US Buyer.

Upon completion of the Equity Transaction, Pioneer Power sold to the Buyer all of the assets and liabilities associated with its liquid-filled transformer and dry-type transformer manufacturing businesses within the Company’s T&D Segment.

Pioneer Power retained its switchgear manufacturing business within the T&D Solutions segment, as well as all of the operations associated with its Critical Power Segment.

discontinued operation is a component of the Company’s business that represents a separate major line of business that had

been disposed of or is held for sale.

Classification as a discontinued operation occurs upon disposal or when the operation meets

the criteria to be classified as held for sale, if earlier.

When an operation is classified as a discontinued operation, the comparative

Consolidated Statement of Operations, Consolidated Statement of Comprehensive Income (Loss), Consolidated Statement of Cash Flows,

Consolidated Statement of Stockholders’

Equity and Consolidated Balance Sheets are presented as if the operation had been

discontinued from the start of the comparative year.

Based upon the authoritative guidance, the Company concluded that the operations

of the liquid-filled and dry-type transformer business should be presented as discontinued operations for the three and nine months

ended September 30, 2019.

August 16, 2019, the Company completed the Equity Transaction pursuant to the Stock Purchase Agreement, by and among the Company,

the Disposed Companies, Nathan Mazurek, and the Buyer.

Pursuant to the terms of the Stock Purchase Agreement, the Company sold

(i) all of the issued and outstanding equity interests of Electrogroup to the Canadian Buyer and (ii) all of the issued and outstanding

equity interests of Jefferson and JE Mexico to the US Buyer.

completion of the Equity Transaction, Pioneer Power sold to the Buyer all of the assets and liabilities associated with its liquid-filled

transformer and dry-type transformer manufacturing businesses within the Company’s T&D Segment.

Pioneer Power retained

its switchgear manufacturing business within the T&D Solutions segment, as well as all of the operations associated with its

Critical Power Segment.

Consideration

The consideration paid by the Buyer in the Equity Transaction is a base cash purchase price of $60.5 million, as well as the issuance by the Buyer of two subordinated promissory notes to Pioneer Power in the principal amounts of $5.0 million and $2.5 million, for a total aggregate principal amount of $7.5 million, in each case subject to adjustment pursuant to the terms of the Stock Purchase Agreement.

Pursuant to the terms of the Stock Purchase Agreement, the Seller Notes will bear interest at an annualized rate of 4.0%, to be paid-in-kind annually, and will have a maturity date of December 31, 2022.

In addition, pursuant to the terms of the Stock Purchase Agreement, as amended, the Buyer may set-off on a dollar-for-dollar basis any indemnifiable losses the Buyer suffers as a result of certain actions or omissions by Pioneer Power or the Disposed Companies against the first Seller Note in the aggregate principal amount of $5.0 million, and such right of set-off is the Buyer’s sole source of recovery with respect to losses resulting from inaccuracies or breaches of the Company’s representations and warranties, except for breaches of certain fundamental warranties, claims of fraud and breaches of representations, warranties or covenants relating to taxes, and claims for certain specific indemnities.

Operating results of the liquid-filled and dry-type transformer manufacturing businesses previously included in the T&D Solutions segment, have now been reclassified as discontinued operations for all periods presented.

During the quarter ended June 30, 2019 the Company’s Reynosa Facility was damaged by a flood resulting in damages to inventory.

This loss has been partially offset by $2.4 million of insurance proceeds that the Company expects to receive.

The Company received $600 of these insurance proceeds during the year ended December 31, 2019, and $1.8 million of these insurance proceeds were received during the six months ended June 30, 2020.

While the net loss on inventory damaged amounting to approximately $782 has been reflected within the cost of goods sold in discontinued operations during the year ended December 31, 2019, the corresponding insurance receivable amounting to $1.8 million and $33 has been recognized as an asset from continuing operations as of December 31, 2019 and June 30, 2020, respectively.

The amount of damaged inventory and insurance proceeds are based upon management’s best estimate, and the actual amount of damaged inventory and insurance proceeds may differ from such estimates.

The following table presents the discontinued operations of the liquid-filled and dry-type transformer manufacturing businesses in the Consolidated Statement of Operations:

Three Months Ended June 30,

Six Months Ended June 30,

consideration paid by the Buyer in the Equity Transaction is a base cash purchase price of $60.5 million, as well as the issuance

by the Buyer of two subordinated promissory notes to Pioneer Power in the principal amounts of $5.0 million and $2.5 million,

for a total aggregate principal amount of $7.5 million, in each case subject to adjustment pursuant to the terms of the Stock

Purchase Agreement.

Pursuant to the terms of the Stock Purchase Agreement, the Seller Notes will bear interest at an annualized

rate of 4.0%, to be paid-in-kind annually, and will have a maturity date of December 31, 2022.

In addition, pursuant to the terms

of the Stock Purchase Agreement, as amended, the Buyer may set-off on a dollar-for-dollar basis any indemnifiable losses the Buyer

suffers as a result of certain actions or omissions by Pioneer Power or the Disposed Companies against the first Seller Note in

the aggregate principal amount of $5.0 million, and such right of set-off is the Buyer’s sole source of recovery with respect

to losses resulting from inaccuracies or breaches of the Company’s representations and warranties, except for breaches of

certain fundamental warranties, claims of fraud and breaches of representations, warranties or covenants relating to taxes, and

claims for certain specific indemnities.

the fourth quarter of 2019, the Company and the Buyer, pursuant to the Stock Purchase Agreement, completed the net working capital

adjustment, which resulted in the Company paying the Buyer $1.8 million in cash and reducing the principal amount of the $5.0

million Seller Note to $3.2 million.

During the second quarter of 2020, the Company recognized an additional reduction to the

principal amount of the Seller Note of $194 for a valid claim paid by the Buyer on behalf of the Company.

Including the reduction

to the principal amount for the valid claim, the Company has revalued the Seller Notes for an appropriate imputed interest rate,

resulting in a change to the value of the Seller Notes at September 30, 2020 of $147, for a carrying value of $5.2 million, which

is included within other long term assets (see Note 11 - Other Assets).

results of the liquid-filled and dry-type transformer manufacturing businesses previously included in the T&D Solutions segment

have now been reclassified as discontinued operations for all periods presented.

the quarter ended June 30, 2019 the Company’s Reynosa Facility was damaged by a flood resulting in damages to inventory.

This loss has been partially offset by $2.4 million of insurance proceeds that the Company received.

The Company received $600

of these insurance proceeds during the year ended December 31, 2019 and $1.8 million of these insurance proceeds were received

during the nine months ended September 30, 2020.

While the net loss on inventory damaged amounting to approximately $782 has been

reflected within the cost of goods sold in discontinued operations during the year ended December 31, 2019, the corresponding

insurance receivable amounting to $1.8 million and $33 has been recognized as an asset from continuing operations as of December

31, 2019 and September 30, 2020, respectively.

The amount of damaged inventory and insurance proceeds are based upon management’s

best estimate, and the actual amount of damaged inventory and insurance proceeds may differ from such estimates.

following table presents the discontinued operations of the liquid-filled and dry-type transformer manufacturing businesses in

the Consolidated Statement of Operations:

Three Months Ended September 30,

Nine Months Ended September 30,

Costs and expenses

1 unchanged sentence

Selling, general and administrative

Foreign exchange loss (gain)

Foreign exchange gain

Interest expense

Other expense

Other (income) expense

Total costs and expenses

Gain on sale of discontinued subsidiaries

Income before provision for income taxes

1 unchanged sentence

Income from discontinued operations, net of income taxes

Depreciation, capital expenditures, and significant non cash items of the discontinued operations by period were as follows:

Six Months Ended June 30,

Depreciation, capital expenditures, and

significant non cash items of the discontinued operations by period were as follows:

Nine Months Ended September 30,

Depreciation and amortization

Capital expenditures

The components of inventories are summarized below:

The components of inventories are summarized

September 30,

Raw materials

3 unchanged sentences

Total inventories

Inventories are stated at the lower of cost or a net realizable value determined on a FIFO method.

A negative net realizable value adjustment of $349 was recognized in cost of goods sold of the T&D Solutions segment during the six months ended June 30, 2020.

Additionally, a $546 write down of inventory was recognized in cost of goods sold of the T&D Solutions segment during the three months ended June 30, 2020 as a result of management’s strategic decisions to rationalize its traditional product offerings and focus on higher margin equipment sales.

Inventories are stated at the lower of

cost or a net realizable value determined on a FIFO method.

A negative net realizable value adjustment of $316 was recognized in

cost of goods sold of the T&D Solutions segment during the nine months ended September 30, 2020.

Additionally, the Company

recognized a $546 write down of inventory in cost of goods sold of the T&D Solutions segment during the second quarter of 2020

as a result of management’s strategic decisions to rationalize its traditional product offerings and focus on higher margin

equipment sales.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are summarized below:

September 30,

Machinery and equipment

4 unchanged sentences

Total property, plant and equipment, net

Depreciation expense for the three months ended June 30, 2020 and 2019 was $57 and $72, respectively.

Depreciation expense for the six months ended June 30, 2020 and 2019 was $115 and $142, respectively.

Included in other assets at June 30, 2020 and December 31, 2019 are right-of-use assets, net, of $1.5 million and $1.8 million, respectively, related to our lease obligations.

As a result of the Company entering into the Stock Purchase Agreement on June 28, 2019, as amended (see Note 3 - Divestitures), we have received two subordinated promissory notes in the aggregate principal amount of $7.5 million, subject to certain adjustments.

The subordinated promissory notes accrue interests at a rate of 4.0% per annum with a final payment of all unpaid principal and interest becoming fully due and payable at December 31, 2022.

Depreciation expense for the three months

ended September 30, 2020 and 2019 was $50 and $69, respectively.

Depreciation expense for the nine months

ended September 30, 2020 and 2019 was $164 and $211, respectively.

Included in other assets at September 30,

2020 and December 31, 2019 are right-of-use assets, net, of $1.3 million and $1.8 million, respectively, related to our lease obligations.

As a result of the Company entering into

the Stock Purchase Agreement on June 28, 2019, as amended (see Note 3 - Divestitures), we have received two subordinated promissory

notes in the aggregate principal amount of $7.5 million, subject to certain adjustments.

The subordinated promissory notes accrue

interests at a rate of 4.0% per annum with a final payment of all unpaid principal and interest becoming fully due and payable

at December 31, 2022.

The Company determined the fair value of the notes based on market conditions and prevailing interest rates.

The Company has revalued the notes for an appropriate imputed interest rate, resulting in a change to the value of the notes at June 30, 2020 of $40, for a carrying value of $5.1 million.

During the fourth quarter of 2019, the Company and the Buyer, pursuant to the Stock Purchase Agreement, completed the net working

capital adjustment, which resulted in the Company paying the Buyer $1.8 million in cash and reducing the principal amount of the

$5.0 million Seller Note to $3.2 million.

During the second quarter of 2020, the Company recognized an additional reduction to

the principal amount of the Seller Note of $194 for a valid claim paid by the Buyer on behalf of the Company.

Including the reduction

to the principal amount for the valid claim, the Company has revalued the Seller Notes for an appropriate imputed interest rate,

resulting in a net change to the value of the Seller Notes at September 30, 2020 of $147, for a carrying value of $5.2 million.

Other assets are summarized below:

September 30,

Right of use assets

1 unchanged sentence

CleanSpark warrants

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.”

The CARES Act, among other things, appropriates funds for the SBA Paycheck Protection Program loans that are forgivable in certain situations to promote continued employment.

On April 13, 2020, the Company received the PPP Loan in the amount of $1.4 million after determining we met the qualifications for this loan program due to the impact that COVID-19 will have on our financial condition, results of operations, and/or liquidity.

While it is uncertain as to the full magnitude that the pandemic will have on the Company’s future results of operations, the Company experienced a decline in market demand for its products and services during the three months ended June 30, 2020.

Additionally, we have experienced an impact to productivity as a result of implementing social distancing guidelines and personal protective measures.

The Company has made this assertion in good faith based upon all available guidance, however management will continue to assess the Company’s continued qualification if and when updated guidance is released by the Treasury Department.

The Company intends to use all proceeds from the PPP Loan to retain employees, maintain payroll and make lease, rent and utility payments.

Under the terms of the PPP Loan, the Company may be eligible for full or partial loan forgiveness in the fourth quarter of 2020, however, no assurance is provided that the Company will apply for, or obtain forgiveness for, any portion of the PPP Loan.

The Company has accounted for the PPP Loan as a debt instrument in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470, Debt.

On March 27, 2020, President Trump signed

into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.”

The CARES Act, among other things, appropriates

funds for the SBA Paycheck Protection Program loans that are forgivable in certain situations to promote continued employment.

On April 13, 2020, the Company received the PPP Loan in the amount of $1.4 million after determining we met the qualifications

for this loan program due to the impact that COVID-19 will have on our financial condition, results of operations, and/or liquidity.

While it is uncertain as to the full magnitude that the pandemic will have on the Company’s future results of operations,

the Company experienced a decline in market demand for its products and services during the three months ended September 30, 2020.

Additionally, we have experienced an impact to productivity as a result of implementing social distancing guidelines and personal

protective measures.

The Company has made this assertion in good faith based upon all available guidance, however management will

continue to assess the Company’s continued qualification if and when updated guidance is released by the Treasury Department.

The Company intends to use all proceeds from the PPP Loan to retain employees, maintain payroll and make lease, rent and utility

Under the terms of the PPP Loan, the Company may be eligible for full or partial loan forgiveness in the fourth quarter

of 2020, however, no assurance is provided that the Company will apply for, or obtain forgiveness for, any portion of the PPP Loan.

The Company has accounted for the PPP Loan

as a debt instrument in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification

(“ASC”) 470, Debt.

At September 30, 2020, $1.1 million of principal payments due starting in the third quarter of 2021

have been recorded as long-term debt and $303 as current debt in accordance with the enactment of the Paycheck Protection Program

Flexibility Act of 2020.

The Company does not expect to incur any material interest expense under the PPP Loan.

STOCKHOLDERS’

The Company had 8,726,045 shares of common stock, $0.001 par value per share, outstanding as of June 30, 2020 and December 31, 2019.

September 30,

current portion

Total long-term obligations

STOCKHOLDERS’

The Company had 8,726,045 shares of common

stock, $0.001 par value per share, outstanding as of September 30, 2020 and December 31, 2019.

Stock-Based Compensation

A summary of stock option activity under the 2011 Long-Term Incentive Plan as of June 30, 2020, and changes during the six months ended June 30, 2020, are presented below:

A summary of stock option activity under

the 2011 Long-Term Incentive Plan as of September 30, 2020, and changes during the nine months ended September 30, 2020, are presented

Weighted average

4 unchanged sentences

Outstanding as of January 1, 2020

Outstanding as of June 30, 2020

Exercisable as of June 30, 2020

As of June 30, 2020, there were 225,867 shares available for future grants under the Company’s 2011 Long-Term Incentive Plan.

Stock-based compensation expense recorded for the three and six months ended June 30, 2020 and 2019 was insignificant.

As of June 30, 2020, the Company had total stock-based compensation expense remaining to be recognized in the consolidated statements of operations of approximately $1.

BASIC AND DILUTED (LOSS) INCOME PER COMMON SHARE

Basic and diluted (loss) income per common share is calculated based on the weighted average number of shares outstanding during the period.

The Company’s employee and director stock option awards, as well as incremental shares issuable upon exercise of warrants, are not considered in the calculations if the effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted (loss) income per share (in thousands, except per share data):

Outstanding as of September 30, 2020

Exercisable as of September 30, 2020

As of September 30, 2020, there were 233,267

shares available for future grants under the Company’s 2011 Long-Term Incentive Plan.

Stock-based compensation expense recorded

for the three and nine months ended September 30, 2020 and 2019 was insignificant.

As of September 30, 2020, the Company had total

stock-based compensation expense remaining to be recognized in the consolidated statements of operations that was also insignificant.

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE

Basic and diluted income (loss) per common

share is calculated based on the weighted average number of shares outstanding during the period.

The Company’s employee

and director stock option awards, as well as incremental shares issuable upon exercise of warrants, are not considered in the calculations

if the effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted income (loss) per share

(in thousands, except per share data):

Three Months Ended

Six Months Ended

Net (loss) income

Nine Months Ended

September 30,

Net income (loss)

Income from discontinued operations, net of income taxes

Net (loss) income

Net income (loss)

Weighted average basic shares outstanding

Effect of dilutive securities - equity based compensation plans

Denominator for diluted net (loss) income per common share

(Loss) income per share:

(Loss) income from continuing operations

Denominator for diluted net income (loss) per common share

Income (loss) per share:

Income (loss) from continuing operations

Income from discontinued operations

Net (loss) income

(Loss) income from continuing operations

Net income (loss)

Income (loss) from continuing operations

Income from discontinued operations

Net (loss) income

Net income (loss)

BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company follows ASC 280 Segment Reporting in determining its reportable segments.

The Company considered the way its management team, most notably its chief operating decision maker, makes operating decisions and assesses performance and considered which components of the Company’s enterprise have discrete financial information available.

As the Company makes decisions using a manufactured products vs.

distributed products and services group focus, its analysis resulted in two reportable segments:

The Company follows ASC 280 Segment Reporting in determining its

reportable segments.

The Company considered the way its management team, most notably its chief operating decision maker,

makes operating decisions and assesses performance and considered which components of the Company’s enterprise have discrete

financial information available.

The Company makes decisions based on manufactured products vs.

distributed products in addition

to services, and its analysis resulted in two reportable segments:

T&D Solutions and Critical Power.

The Critical Power reportable segment is the Company’s Titan Energy Systems Inc.

The Critical Power

reportable segment is the Company’s Titan Energy Systems, Inc.

business unit.

The T&D Solutions reportable segment is the Company’s Pioneer Custom Electrical Products, Inc.

business unit, together with sales and expenses attributable to strategic sales group for its T&D Solutions marketing activities.

The T&D Solutions segment is involved in the design, manufacture and distribution of switchgear used primarily by large industrial and commercial operations to manage their electrical power distribution needs.

The Critical Power segment provides aftermarket field-services primarily to help customers ensure smooth, uninterrupted power to operations during times of emergency.

The following tables present information about segment income and loss:

The T&D Solutions reportable segment is

the Company’s Pioneer Custom Electrical Products Corp.

business unit, together with sales and expenses attributable to the

strategic sales group for its T&D Solutions marketing activities.

The T&D Solutions segment is involved

in the design, manufacture and distribution of switchgear used primarily by large industrial and commercial operations to manage

their electrical power distribution needs.

The Critical Power segment provides new and used power generation equipment and aftermarket

field-services primarily to help customers ensure smooth, uninterrupted power to operations during times of emergency.

The following tables present information

about segment income and loss:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Depreciation and amortization

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating (loss) income

2 unchanged sentences

Unallocated corporate overhead expenses

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

Three Months Ended

Six Months Ended

United States

The Company leases certain offices, facilities and equipment under operating and financing leases.

Our leases have remaining terms of 1 year to 2 years some of which contain options to extend up to 10 years.

As of June 30, 2020 and 2019, assets recorded under finance leases were $1.4 million and $1.0 million, respectively, and accumulated amortization associated with finance leases were $648 and $475, respectively.

As of June 30, 2020 and 2019, assets recorded under operating leases were $2.1 million and $2.1 million, respectively, and accumulated amortization associated with operating leases were $1.4 million and $748, respectively.

Such amounts are included within other assets.

The components of the lease expense were as follows:

The Company leases certain offices, facilities

and equipment under operating and financing leases.

Our leases have remaining terms of 1 year to 2 years some of which contain

options to extend up to 10 years.

As of September 30, 2020 and 2019, assets recorded under finance leases were $1.4 million and

$1.0 million, respectively, and accumulated amortization associated with finance leases were $711 and $507, respectively.

September 30, 2020 and 2019, assets recorded under operating leases were $2.1 million and $2.1 million, respectively, and accumulated

amortization associated with operating leases were $1.5 million and $899, respectively.

Such amounts are included within other

The components of the lease expense were

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating lease cost

5 unchanged sentences

Supplemental Cash Flows Information

September 30,

Cash paid for amounts included in the measurement of lease liabilities

6 unchanged sentences

Weighted Average Remaining Lease Term

September 30,

Operating leases

1 unchanged sentence

Weighted Average Discount Rate

September 30,

Operating leases

Finance leases

Future minimum lease payments under non-cancellable leases as of June 30, 2020 were as follows:

Future minimum lease payments under non-cancellable leases as

of September 30, 2020 were as follows:

Total future minmum lease payments

1 unchanged sentence

Total future minmum lease payments

Reported as of June 30, 2020:

Reported as of September 30, 2020:

Accounts payable and accrued liabilities

Other long-term liabilities

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated interim financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 30, 2020.

Unless the context requires otherwise, references in this Form 10-Q to the “Company,”

“Pioneer,”

“we,”

“our”

and “us”

SUBSEQUENT EVENTS

In October 2020, the Company filed a registration

statement including a base prospectus which covers the offering, issuance and sale of up to $25 million of common stock, preferred

stock, warrants and/or units;

and a sales agreement prospectus covering the offering, issuance and sale of up to a maximum aggregate

offering price of $9 million of common stock that may be issued and sold under the At The Market Offering Agreement (the “sales

agreement”) with H.C.

Wainwright & Co., LLC (“Wainwright”), from time to time in an at-the-market offering.

Wainwright will offer the Company’s common stock at prevailing market prices subject to the terms and conditions of the sales

agreement as agreed upon by the Company and Wainwright.

The Company will designate the number of shares which it desires to sell,

the time period during which sales are requested to be made, any limitation on the number of shares that may be sold in one day

and any minimum price below which sales may not be made.

Subject to the terms and conditions of the sales agreement, Wainwright

will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell on the Company’s

behalf all of the shares of common stock requested to be sold by the Company.

The Company has not sold any shares of common stock

under the sales agreement and can give no assurance that it will sell any shares of common stock in the future .

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion and analysis of our financial condition and results of operations should be read in conjunction with the

accompanying consolidated interim financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q

and with our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange

Commission on March 30, 2020.

the context requires otherwise, references in this Form 10-Q to the “Company,”

“Pioneer,”

“we,”

“our”

and “us”

refer to Pioneer Power Solutions, Inc.

and its subsidiaries.

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains “forward-looking statements,”

which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation.

Words such as “may,”

“should,”

“could,”

“would,”

“predicts,”

“potential,”

“continue,”

“expects,”

“anticipates,”

“future,”

“intends,”

“plans,”

“believes,”

“estimates,”

Note Regarding Forward-Looking Statements

Form 10-Q contains “forward-looking statements,”

which include information relating to future events, future financial

performance, financial projections, strategies, expectations, competitive environment and regulation.

Words such as “may,”

“should,”

“could,”

“would,”

“predicts,”

“potential,”

“continue,”

“expects,”

“anticipates,”

“future,”

“intends,”

“plans,”

“believes,”

“estimates,”

and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved.

Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications

of when such performance or results will be achieved.

Forward-looking statements are based on information we have when those statements

are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties

that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking

Important factors that could cause such differences include, but are not limited to:

General economic conditions and their effect on demand for electrical equipment, particularly in the commercial construction market, but also in the power generation, industrial production, data center, oil and gas, marine and infrastructure industries.

The effects of fluctuations in sales on our business, revenues, expenses, net income, income (loss) per share, margins and profitability.

Many of our competitors are better established and have significantly greater resources and may subsidize their competitive offerings with other products and services, which may make it difficult for us to attract and retain customers.

We depend on CleanSpark, Inc (“CleanSpark”) for a large portion of our business, and any change in the level of orders from CleanSpark could have a significant impact on results of operations.

The potential loss or departure of key personnel, including Nathan J.

Mazurek, our chairman, president and chief executive officer.

Our ability to generate internal growth, maintain market acceptance of our existing products and gain acceptance for our new products.

Unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect our profitability.

Our ability to realize revenue reported in our backlog.

Operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor or overhead cost increases, interest rate risk and commodity risk.

Strikes or labor disputes with our employees may adversely affect our ability to conduct our business.

The impact of geopolitical activity on the economy, changes in government regulations such as income taxes, duties and tariffs on the importation of products we sell into the United States, climate control initiatives, the timing or strength of an economic recovery in our markets and our ability to access capital markets.

Our chairman controls a majority of our voting power, and may have, or may develop in the future, interests that may diverge from yours.

Future sales of large blocks of our common stock may adversely impact our stock price.

The liquidity and trading volume of our common stock.

Our business could be adversely affected by an outbreak of disease, epidemic or pandemic, such as the global coronavirus pandemic, or similar public threat, or fear of such an event.

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements.

Moreover, new risks regularly emerge, and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements.

Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

You should review carefully the risks and uncertainties described under the heading “Part II - Item 1A.

Risk Factors”

in this Quarterly Report on Form 10-Q and “Part I –

Risk Factors”

in our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock.

Business Overview

We manufacture, sell and service a broad range of specialty electrical transmission, distribution and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets.

Our principal products and services include switchgear and engine-generator controls, complemented by a national field-service network to maintain and repair power generation assets.

We are headquartered in Fort Lee, New Jersey and operate from five (5) additional locations in the U.S.

for manufacturing, service, centralized distribution, engineering, sales and administration.

Description of Business Segments

We have two reportable segments:

Transmission & Distribution Solutions (“T&D Solutions”) and Critical Power Solutions (“Critical Power”).

Our T&D Solutions business provides equipment solutions that help customers effectively and efficiently manage their electrical power distribution systems to desired specifications.

These solutions are marketed principally through our Pioneer Custom Electrical Products, Inc.

(“PCEP”) brand name.

Our Critical Power business performs service on our customer’s sophisticated power generation equipment.

These solutions are marketed by our operations headquartered in Minnesota, currently doing business under the Titan Energy Systems Inc.

(“Titan”) brand name.

economic conditions and their effect on demand for electrical equipment, particularly

in the commercial construction market, but also in the power generation, industrial production,

data center, oil and gas, marine and infrastructure industries.

effects of fluctuations in sales on our business, revenues, expenses, net income, income

(loss) per share, margins and profitability.

of our competitors are better established and have significantly greater resources and

may subsidize their competitive offerings with other products and services, which may

make it difficult for us to attract and retain customers.

depend on CleanSpark, Inc (“CleanSpark”) for a large portion of our business,

and any change in the level of orders from CleanSpark could have a significant impact

on results of operations.

potential loss or departure of key personnel, including Nathan J.

Mazurek, our chairman,

president and chief executive officer.

ability to generate internal growth, maintain market acceptance of our existing products

and gain acceptance for our new products.

● Unanticipated

increases in raw material prices or disruptions in supply could increase production costs

and adversely affect our profitability.

ability to realize revenue reported in our backlog.

margin risk due to competitive pricing and operating efficiencies, supply chain risk,

material, labor or overhead cost increases, interest rate risk and commodity risk.

or labor disputes with our employees may adversely affect our ability to conduct our

impact of geopolitical activity on the economy, changes in government regulations such

as income taxes, duties and tariffs on the importation of products we sell into the United

States, climate control initiatives, the timing or strength of an economic recovery in

our markets and our ability to access capital markets.

chairman controls a majority of our voting power, and may have, or may develop in the

future, interests that may diverge from yours.

sales of large blocks of our common stock may adversely impact our stock price.

liquidity and trading volume of our common stock.

business could be adversely affected by an outbreak of disease, epidemic or pandemic,

such as the global coronavirus pandemic, or similar public threat, or fear of such an

foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein

or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking

Moreover, new risks regularly emerge, and it is not possible for us to predict or articulate all risks we face, nor

can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual

results to differ from those contained in any forward-looking statements.

Except to the extent required by applicable laws or

rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information,

future events or otherwise.

You should review carefully the risks and uncertainties described under the heading “Part II

Risk Factors”

in this Quarterly Report on Form 10-Q and “Part I –

Risk Factors”

our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the foregoing and other risks that relate

to our business and investing in shares of our common stock.

manufacture, sell and service a broad range of specialty electrical transmission, distribution and on-site power generation equipment

for applications in the utility, industrial, commercial and backup power markets.

Our principal products and services include

switchgear and engine-generator controls, complemented by a national field-service network to maintain and repair power generation

We are headquartered in Fort Lee, New Jersey and operate from four (4) additional locations in the U.S.

for manufacturing,

service, engineering, sales and administration.

of Business Segments

have two reportable segments:

Transmission & Distribution Solutions (“T&D Solutions”) and Critical Power Solutions

(“Critical Power”).

T&D Solutions business provides equipment solutions that help customers effectively

and efficiently manage their electrical power distribution systems to desired specifications.

These solutions are marketed principally through our Pioneer Custom Electrical Products

(“PCEP”) brand name.

Critical Power business performs service on our customer’s sophisticated power

generation equipment and also provides customers with new and used power generation equipment

intended to ensure smooth, uninterrupted power to operations during times of emergency.

These solutions are marketed by our operations headquartered in Minnesota, currently

doing business under the Titan Energy Systems Inc.

(“Titan”) brand name.

Discontinued Operations

Operating results for our liquid-filled transformer and dry-type transformer manufacturing businesses, which have been previously included in the T&D Solutions segment, have now been reclassified as discontinued operations for all periods presented.

See Note 8 - Discontinued Operations in Notes to Consolidated Financial Statements in Part I of this Form 10-Q.

Critical Accounting Policies

There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

RESULTS OF OPERATIONS

Overview of the Three and Six Month Results

Selected financial and operating data for our reportable business segments for the most recent reporting period is summarized below.

This information, as well as the selected financial data provided in Note 15 - Business Segment and Geographic Information and in our unaudited Consolidated Financial Statements and related notes included in this Quarterly Report on Form 10-Q, should be referred to when reading our discussion and analysis of results of operations below.

Our summary of operating results during the three and six months ended June 30, 2020 and 2019 are as follows:

results for our liquid-filled transformer and dry-type transformer manufacturing businesses, which have been previously included

in the T&D Solutions segment, have now been reclassified as discontinued operations for all periods presented.

- Discontinued Operations in Notes to Consolidated Financial Statements in Part I of this Form 10-Q.

October 2020, we filed a registration statement including a base prospectus which covers the offering, issuance and sale of up

to $25 million of common stock, preferred stock, warrants and/or units;

and a sales agreement prospectus covering the offering,

issuance and sale of up to a maximum aggregate offering price of $9 million of common stock that may be issued and sold under

the At The Market Offering Agreement (the “sales agreement”) with H.C.

Wainwright & Co., LLC (“Wainwright”),

from time to time in an at-the-market offering.

Wainwright will offer our common stock at prevailing market prices subject to

the terms and conditions of the sales agreement as agreed upon by us and Wainwright.

We will designate the number of shares which

it desires to sell, the time period during which sales are requested to be made, any limitation on the number of shares that may

be sold in one day and any minimum price below which sales may not be made.

Subject to the terms and conditions of the sales agreement,

Wainwright will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell on our

behalf all of the shares of common stock requested to be sold by us.

We have not sold any shares of common stock under the sales

Accounting Policies

have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year

ended December 31, 2019.

OF OPERATIONS

of the Three and Nine Month Results

financial and operating data for our reportable business segments for the most recent reporting period is summarized below.

information, as well as the selected financial data provided in Note 15 - Business Segment and Geographic Information and in our

unaudited Consolidated Financial Statements and related notes included in this Quarterly Report on Form 10-Q, should be referred

to when reading our discussion and analysis of results of operations below.

summary of operating results during the three and nine months ended September 30, 2020 and 2019 are as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

3 unchanged sentences

Critical Power Solutions

Gross (loss) profit

Selling, general and administrative expenses

Depreciation and amortization expense

Foreign exchange loss

Total operating expenses

3 unchanged sentences

Other (income) expense

(Loss) income before taxes

Income tax expense (benefit)

Net (loss) income from continuing operations

Income (loss) before taxes

Income tax (benefit) expense

Net income (loss) from continuing operations

Discontinued operations

Income from operations of discontinued business units

Loss from operations of discontinued business units

Gain on sale of discontinued business units

Income tax expense

Income from discontinued operations, net of income taxes

Net (loss) income

Our backlog is based on firm orders from our customers expected to be delivered in the future, most of which is expected to occur during the next twelve months.

Backlog may vary significantly from reporting period to reporting period due to the timing of customer commitments.

The time between receipt of an order and actual delivery, or completion, of our products and services varies from one or more days, in the case of inventoried standard products, to three to nine months, in the case of certain custom engineered equipment solutions, and up to one year or more under our service contracts.

The following table represents the progression of our backlog, by reporting segment, as of the end of the last five quarters:

Net income (loss)

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

The time between receipt of an order and actual delivery, or completion, of our products and services varies from

one or more days, in the case of inventoried standard products, to three to nine months, in the case of certain custom engineered

equipment solutions, and up to one year or more under our service contracts.

full impact of the COVID-19 pandemic continues to evolve as the date of this report.

As such, it is uncertain as to the full magnitude

that the pandemic will have on the Company’s order backlog.

During the three and nine months ended September 30, 2020, the

Company experienced a decline in market demand for its products and services.

Notwithstanding, the Company has been able to operate

substantially at capacity during the COVID-19 pandemic.

Management is actively monitoring the global situation on its overall

financial condition and order backlog.

following table represents the progression of our backlog, by reporting segment, as of the end of the last five quarters:

September 30,

T&D Solutions

3 unchanged sentences

Total order backlog

The following table represents our revenues by reporting segment and major product category for the periods indicated:

following table represents our revenues by reporting segment and major product category for the periods indicated:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

1 unchanged sentence

Total revenue

For the three months ended June 30, 2020, our consolidated revenue decreased by $273, or 5.1%, to $5.1 million, down from $5.4 million during the three months ended June 30, 2019.

For the six months ended June 30, 2020, our consolidated revenue increased by $1.7 million, or 20.4%, to $10.1 million, up from $8.4 million during the six months ended June 30, 2019.

T&D Solutions.

During the three months ended June 30, 2020, revenue from our switchgear product lines increased by $250, or 9.1%, as compared to the three months ended June 30, 2019, as a result of increased sales of our transfer switches offset by decreased sales of our low and medium voltage switchgear.

During the six months ended June 30, 2020, revenue from our switchgear product lines increased by $2.1 million, or 53.9% as compared to the six months ended June 30, 2019, as result of increased sales of our transfer switches offset by decreased sales of our low and medium voltage switchgear.

Critical Power.

For the three months ended June 30, 2020, revenue for our equipment sales decreased by $42, or 15.7%, as compared to the same period in the prior year.

For the six months ended June 30, 2020, equipment sales increased by $39, or 8.8%, as compared to the same period in 2019.

For the three and six months ended June 30, 2020, our service revenue decreased by $481, or 20.4%, and $383, or 9.3%, respectively, as compared to the same periods in the prior year due to the loss of the Verizon preventative maintenance business.

Gross (Loss) Profit and Gross Margin

The following table represents our gross profit by reporting segment for the periods indicated:

the three months ended September 30, 2020, our consolidated revenue decreased by $1.5 million, or 27.3%, to $4.1 million, down

from $5.6 million during the three months ended September 30, 2019.

For the nine months ended September 30, 2020, our consolidated

revenue increased by $191, or 1.4%, to $14.1 million, up from $13.9 million during the nine months ended September 30, 2019.

During the three months ended September 30, 2020, revenue from our switchgear product lines decreased by $1.1 million,

or 42.0%, as compared to the three months ended September 30, 2019.

We made a one-time shipment of a large medium voltage switchgear

product for $1.1 million during the three months ended September 30, 2019, and there was no comparable sale during the three months

ended September 30, 2020.

the nine months ended September 30, 2020, revenue from our switchgear product lines increased by $962, or 15.0% as compared to

the nine months ended September 30, 2019, as a result of increased sales of our transfer switches offset by decreased sales of

our low and medium voltage switchgear.

For the three months ended September 30, 2020, revenue for our equipment sales increased by $112, or 37.5%, as compared

to the same period in the prior year.

For the nine months ended September 30, 2020, equipment sales increased by $152, or 20.6%,

as compared to the same period in 2019.

the three and nine months ended September 30, 2020, our service revenue decreased by $540, or 20.2%, and $923, or 13.6%, respectively,

as compared to the same periods in the prior year due to the loss of the Verizon preventative maintenance business.

Profit and Gross Margin

following table represents our gross profit by reporting segment for the periods indicated:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

Gross profit (loss)

Gross margin %

1 unchanged sentence

Gross margin %

Consolidated gross (loss) profit

Consolidated gross profit

Consolidated gross margin %

For the three months ended June 30, 2020, our consolidated gross margin was (5.8%) of revenues, compared to 9.7% during the three months ended June 30, 2019.

The 15.5% reduction in our consolidated gross margin percentage is predominantly due to the reduction in our T&D Solutions gross margin.

For the six months ended June 30, 2020, our gross margin was (1.2%) of revenues, compared to 9.3% for the six months ended June 30, 2019.

The 10.5% reduction in our consolidated gross margin percentage is predominantly due to the reduction in our T&D Solutions gross margin.

the three months ended September 30, 2020, our consolidated gross margin was 18.2% of revenues, compared to 4.6% during the three

months ended September 30, 2019.

The 13.6% increase in our consolidated gross margin percentage is predominantly due to the increase

in our T&D Solutions gross margin compared to the T&D Solutions gross margin during the three months ended September 30,

the nine months ended September 30, 2020, our gross margin was 4.4% of revenues, compared to 7.4% for the nine months ended September

The 3.0% reduction in our consolidated gross margin percentage is due to the reduction in our T&D Solutions due

to a write down of inventory recognized during the second quarter of 2020 and the reduction in our Critical Power gross margin.

T&D Solutions .

The reduction in our T&D Solutions gross margin resulted primarily from the shipment of lower margin orders, providing customer discounts and an increase to the segment’s obsolescence reserve of $546 as a result of management’s strategic decisions to rationalize its traditional product offerings and focus on higher margin equipment sales.

For the three

months ended September 30, 2020, our gross margin increased by 23.5% as compared to the same period in the prior year due to management’s

strategic decisions to focus on higher margin equipment sales.

For the nine months ended September 30, 2020, our gross margin decreased

by 2.1% primarily due to the $546 write down of inventory recognized during the second quarter of 2020 as a result of management’s

strategic decisions to rationalize its traditional product offerings.

Critical Power.

During the three and six months ended June 30, 2020, the gross margin decreased by 17.8% and 6.6%, respectively, as compared to the same period in 2019, primarily due to the loss of the Verizon preventative maintenance business which historically has provided higher gross margins.

During the three

months ended September 30, 2020, our gross margin increased by 5.6% as compared to the same period in 2019, primarily due to the

segment’s increase in equipment sales.

For the nine months ended September 30, 2020, our gross margin decreased by 1.9% predominately

due to the loss of the Verizon preventative maintenance business which historically has resulted in higher gross margins.

Operating Expenses

The following table represents our operating expenses by reportable segment for the periods indicated:

The following table represents our operating

expenses by reportable segment for the periods indicated:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

8 unchanged sentences

Selling, general and administrative expense

Depreciation expense

Foreign exchange gain

Depreciation and amortization expense

Segment operating expense

1 unchanged sentence

Depreciation and amortization expense

Foreign exchange gain

Consolidated operating expense

Selling, General and Administrative Expense .

For the three months ended June 30, 2020, consolidated selling, general and administrative expense, before depreciation and amortization, decreased by $1.2 million, or 58.2%, to $839, due to fewer payroll related costs and a reduction in professional fees, as compared to $2.0 million during the three months ended June 30, 2019.

As a percentage of our consolidated revenue, selling, general and administrative expense before depreciation and amortization decreased to 16.5% in the three months ended June 30, 2020, as compared to 37.4% in the three months ended June 30, 2019.

During the six months ended June 30, 2020, consolidated selling, general and administrative expense, before depreciation and amortization, decreased by $911, or 25.0%, to $2.7 million due to a reduction in professional fees, as compared to $3.6 million during the six months ended June 30, 2019.

As a percentage of our consolidated revenue, selling, general and administrative expense before depreciation and amortization decreased to 27.1% in the six months ended June 30, 2020, as compared to 43.5% in the six months ended June 30, 2019.

Selling, General and Administrative

For the three months ended September 30, 2020, consolidated selling, general and administrative expense, before

depreciation and amortization, decreased by $2.6 million, or 69.4%, to $1.2 million, due to fewer payroll related costs and a reduction

in professional fees, as compared to $3.8 million during the three months ended September 30, 2019.

As a percentage of our consolidated

revenue, selling, general and administrative expense before depreciation and amortization decreased to 28.6% in the three months

ended September 30, 2020, as compared to 67.9% in the three months ended September 30, 2019.

the nine months ended September 30, 2020, consolidated selling, general and administrative expense, before depreciation and amortization,

decreased by $3.5 million, or 47.6%, to $3.9 million due to fewer payroll related costs, a reduction in professional fees and

a decrease in our allowance for doubtful accounts, as compared to $7.4 million during the nine months ended September 30, 2019.

As a percentage of our consolidated revenue, selling, general and administrative expense before depreciation and amortization

decreased to 27.5% in the nine months ended September 30, 2020, as compared to 53.2% in the nine months ended September 30, 2019.

Depreciation and Amortization Expenses.

Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of definite-lived intangible assets and right-of-use assets related to our finance leases and excludes amounts included in cost of sales.

For the three and six months ended June 30, 2020, depreciation and amortization expense decreased by $26, or 40.6%, and $48, or 38.1%, respectively, as compared to the same periods in 2019 primarily due to an intangible asset becoming fully amortized in our Critical Power segment during 2019.

Operating Loss

The following table represents our operating loss by reportable segment for the periods indicated:

Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of definite-lived intangible

assets and right-of-use assets related to our finance leases and excludes amounts included in cost of sales.

For the three and

nine months ended September 30, 2020, consolidated depreciation and amortization expense decreased by $27, or 45.0%, and $76, or

40.6%, respectively, as compared to the same periods in 2019 primarily due to an intangible asset becoming fully amortized in our

Critical Power segment during 2019.

Operating Income (Loss)

The following table represents our operating

income (loss) by reportable segment for the periods indicated:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

3 unchanged sentences

T&D Solutions .

During the three and six months ended June 30, 2020, our T&D Solutions segment generated an operating loss of $626 and $1.4 million, respectively, as compared to $543 and $777 for the same respective periods in 2019.

The increase in the operating loss for the three and six months ended June 30, 2020, as compared to the same period in 2019, is primarily due to an increase in the segment’s obsolescence reserve, offset by lower legal fees related to ongoing litigation.

three and nine months ended September 30, 2020, our T&D Solutions segment generated operating income of $50 and operating loss

of $1.4 million, respectively, as compared to operating loss of $1.2 million and $1.9 million for the same respective periods in

The increase in the operating income for the three and nine months ended September 30, 2020, as compared to the same period

in 2019, is primarily due to lower legal fees related to ongoing litigation and management’s strategic decisions to focus

on higher margin equipment sales.

Critical Power .

During the three and six months ended June 30, 2020, our Critical Power segment generated an operating loss of $199 and $399, respectively, as compared to operating income of $251 and an operating loss of $149 during the three and six months ended June 30, 2019, respectively.

The increase in the operating loss for the three and six months ended June 30, 2020 is due primarily to the loss of the Verizon preventative maintenance business which has historically generated higher operating income.

three and nine months ended September 30, 2020, our Critical Power segment generated operating income of $37 and operating loss

of $363, respectively, as compared to operating loss of $162 and $310 during the three and nine months ended September 30, 2019,

respectively.

The increase in operating income for the three months ended September 30, 2020 is primarily due to performing several

high margin service repair jobs during the second quarter of 2020 which were not completed in the prior year period.

General Corporate Expense.

Our general corporate expense consists primarily of executive management, corporate accounting and human resources personnel, office expenses, financing and corporate development activities, payroll and benefits administration, treasury, tax compliance, legal, stock-based compensation and public reporting costs, and costs not specifically allocated to reportable business segments.

During the three and six months ended June 30, 2020, our unallocated corporate overhead expense decreased by $899, or 71.5%, and by $937, or 45.3%, as compared to the same periods in 2019, primarily due to a reduction in professional fees related to the Equity Transaction that was entered into in 2019.

corporate expense consists primarily of executive management, corporate accounting and human resources personnel, office expenses,

financing and corporate development activities, payroll and benefits administration, treasury, tax compliance, legal, stock-based

compensation and public reporting costs, and costs not specifically allocated to reportable business segments.

During the three

and nine months ended September 30, 2020, our unallocated corporate overhead expense decreased by $1.7 million, or 76.3%, and by

$2.7 million, or 61.6%, as compared to the same periods in 2019, primarily due to one-time executive bonuses that were recorded

during the three months ended September 30, 2019.

Non-Operating (Income) Expense

Interest (Income) Expense .

For the three and six months ended June 30, 2020, the Company had interest income of approximately $77 and $188, respectively, as compared to interest expense of $240 and $463, respectively, during the three and six months ended June 30, 2019.

The net decrease in our interest expense was due to the retirement of our bank indebtedness with the proceeds from the sale of the transformer business units in August 2019.

Other Expense (Income).

For the three months ended June 30, 2020, other non-operating income was $449, as compared to other non-operating expense of $3.8 million during the three months ended June 30, 2019.

For the three months ended June 30, 2020, included in other non-operating income was a gain of $384 related to the mark to market adjustment on the fair value of common stock and warrants received in connection with the Merger of PCPI, CleanSpark and the Merger Sub, as compared to a loss of $3.7 million during the three months ended June 30, 2019.

For the six months ended June 30, 2020, other non-operating expense was $832, as compared to $465 during the six months ended June 30, 2019.

For the six months ended June 30, 2020 and 2019, included in other non-operating expense was a loss of $759 and $325, respectively, related to the mark to market adjustment on the fair value of common stock and warrants received in connection with the Merger of PCPI, CleanSpark and the Merger Sub.

Income Tax Expense (Benefit) .

Our effective income tax expense rate was (0.3%) for the three months ended June 30, 2020, compared to an income tax benefit rate of 25.8% during the same period in 2019.

For the six months ended June 30, 2020, our effective income tax expense rate was (0.1%), as compared to an income tax expense rate of 36.4% during the same period in 2019, as set forth below:

three and nine months ended September 30, 2020, we had interest income of approximately $55 and $242, respectively, as

compared to interest expense of $84 and $548 during the three and nine months ended September 30, 2019, respectively.

in our interest expense was due to the retirement of our bank indebtedness with the proceeds from the sale of the transformer business

units in August 2019.

Other (Income) Expense.

three months ended September 30, 2020, other non-operating income was $1.7 million, as compared to other non-operating expense

of $2.1 million during the three months ended September 30, 2019.

During the three months ended September 30, 2020, we recognized

a gain of $1.7 million in other non-operating income related to the sale of CleanSpark Common Stock and warrants, as compared to

recognizing a mark to market loss of $1.9 million on the fair value of the CleanSpark Common Stock and warrants during the three

months ended September 30, 2019.

For the nine months ended September 30,

2020, other non-operating income was $904, as compared to other non-operating expense of $2.6 million during the nine months ended

September 30, 2019.

For the nine months ended September 30, 2020, included in other non-operating income was a gain of $968 related

to the sale and mark to market adjustment on the fair value of CleanSpark Common Stock and warrants, as compared to a non-operating

loss of $2.2 million for the nine months ended September 30, 2019, related to the mark to market adjustment on the fair value of

the common stock and warrants.

Income Tax (Benefit) Expense .

effective income tax rate was 0.0% for the three months ended September 30, 2020, compared to an income tax rate of 44.1%

during the same period in 2019.

For the nine months ended September 30, 2020, our effective income tax rate was (0.2%), as compared

to an income tax rate of 44.5% during the same period in 2019, as set forth below:

Three Months Ended

Six Months Ended

(Loss) income before income taxes

Income tax expense (benefit)

Nine Months Ended

September 30,

Income (loss) before income taxes

Income tax (benefit) expense

Effective income tax rate %

Net (Loss) Income per Share from Continuing Operations

We generated a net loss from continuing operations of $660 and $3.6 million during the three and six months ended June 30, 2020, respectively, as compared to net loss from continuing operations of $4.2 million and net income from continuing operations $182 during the three and six months ended June 30, 2019, respectively.

Our net loss from continuing operations per basic and diluted share for the three months ended June 30, 2020, and June 30, 2019 was $0.08 and $0.48, respectively.

Our net loss from continuing operations per basic and diluted share for the six months ended June 30, 2020 was $0.41, as compared to an income from continuing operations per basic and diluted share of $0.02 for the six months ended June 30, 2019.

Net Income (Loss) per Share from

Continuing Operations

We generated a net income from continuing

operations of $1.3 million and a net loss from continuing operations of $2.2 million during the three and nine months ended

September 30, 2020, respectively, as compared to a net loss from continuing operations of $3.3 million and $3.1 million during

the three and nine months ended September 30, 2019, respectively.

Our net income from continuing operations

per basic and diluted share for the three months ended September 30, 2020 was $0.15, as compared to a loss from continuing operations

per basic and diluted share of $0.37 for the three months ended September 30, 2019.

Our net loss from continuing operations

per basic and diluted share for the nine months ended September 30, 2020 was $0.26 compared to $0.35 for the nine months ended

September 30, 2019.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2020, we had $7.5 million of cash and cash equivalents on hand.

We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings.

Our cash requirements have been generally applied toward operating activities, debt repayment, capital improvements and acquisitions.