PIONEER POWER SOLUTIONS, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated interim financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on March 30, 2021. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “Pioneer Power,” “we,” “our” and “us” refer to Pioneer Power Solutions, Inc. and its subsidiaries. Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: ● General economic conditions and their effect on demand for electrical equipment, particularly in the commercial construction market, but also in the power generation, industrial production, data center, oil and gas, marine and infrastructure industries. ● The effects of fluctuations in sales on our business, revenues, expenses, net income, income (loss) per share, margins and profitability. ● Many of our competitors are better established and have significantly greater resources and may subsidize their competitive offerings with other products and services, which may make it difficult for us to attract and retain customers. ● We depend on CleanSpark, Inc (“CleanSpark”) for a large portion of our business, and any change in the level of orders from CleanSpark could have a significant impact on results of operations. ● The potential loss or departure of key personnel, including Nathan J. Mazurek, our chairman, president and chief executive officer. ● Our ability to generate internal growth, maintain market acceptance of our existing products and gain acceptance for our new products. ● Unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect our profitability. ● Our ability to realize revenue reported in our backlog. ● Operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor or overhead cost increases, interest rate risk and commodity risk. ● Strikes or labor disputes with our employees may adversely affect our ability to conduct our business. ● The impact of geopolitical activity on the economy, changes in government regulations such as income taxes, climate control initiatives, the timing or strength of an economic recovery in our markets and our ability to access capital markets. ● Our chairman controls a majority of our voting power, and may have, or may develop in the future, interests that may diverge from yours. ● Future sales of large blocks of our common stock may adversely impact our stock price. ● The liquidity and trading volume of our common stock. ● Our business could be adversely affected by an outbreak of disease, epidemic or pandemic, such as the global coronavirus pandemic, or similar public threat, or fear of such an event. 15 The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. Moreover, new risks regularly emerge, and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should review carefully the risks and uncertainties described under the heading “Part II - Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q and “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock. Business Overview We manufacture, sell and service a broad range of specialty electrical infrastructure and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets. Our principal products and services include switchgear and engine-generator controls, complemented by a national field-service network to maintain and repair power generation assets. The Company is headquartered in Fort Lee, New Jersey and operates from three (3) additional locations in the U.S. for manufacturing, service and maintenance, engineering, sales and administration. Recent Developments On October 20, 2020, we entered into an At The Market Sale Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell our common shares having an aggregate price of up to $9.0 million from time to time through Wainwright, acting as agent or principal (the “ATM Program”). Shares of common stock are offered pursuant to a sales agreement prospectus included in the Company’s shelf registration on Form S-3 filed with the Securities and Exchange Commission on October 20, 2020, which was declared effective on October 27, 2020. On November 8, 2021, we sold 888,500 shares of common stock under the ATM Program, for total gross proceeds of approximately $9.0 million, at an average price of $10.1288 per share. We incurred approximately $273 of costs related to the common shares issued (including a placement fee of 3.0%, or approximately $270, to Wainwright), resulting in net proceeds of approximately $8.7 million. Description of Business Segments We have two reportable segments: Transmission & Distribution Solutions (“T&D Solutions”) and Critical Power Solutions (“Critical Power”). ● Our T&D Solutions business provides equipment solutions that help customers effectively and efficiently manage their electrical power distribution systems to desired specifications. These solutions are marketed principally through our Pioneer Custom Electrical Products Corp. (“PCEP”) brand name. ● Our Critical Power business performs service and maintenance on our customers’ sophisticated power generation equipment and also provides customers with new and used power generation equipment intended to ensure smooth, uninterrupted power to operations during times of emergency. These solutions are marketed by our operations headquartered in Minnesota, currently doing business under the Titan Energy Systems Inc. (“Titan”) brand name. Distribution Agreement As previously reported, on January 22, 2019, we entered into a Contract Manufacturing Agreement, dated as of January 22, 2019 (the “Contract Manufacturing Agreement”), by and among us and CleanSpark. Pursuant to the terms of the Contract Manufacturing Agreement, the Company manufactured parallel switchgears, automatic transfer switches and related products (collectively, “Products”) exclusively for purchase by CleanSpark. The Contract Manufacturing Agreement had a term of 18 months and expired on the 18-month anniversary of the execution of the Contract Manufacturing Agreement. In connection with the expiry of the Contract Manufacturing Agreement, we entered into a Distribution Agreement with CleanSpark (the “Distribution Agreement”), dated as of May 31, 2021, pursuant to which CleanSpark will serve as our exclusive distributor of the Products within any geographic region in which CleanSpark conducts its business (the “Sales Channel”). We will serve as CleanSpark’s sole source of the Products, and of any similar goods or products that would reasonably be deemed as interchangeable with such Products for sale within the Sales Channel. CleanSpark will purchase the Products via written purchase orders to us. The price for the Products sold under the Distribution Agreement will be determined on a job-by-job basis, provided that CleanSpark shall pay us 97% of the contract sales price of the Products to all end-use customers. The Distribution Agreement terminates on December 31, 2023 and may be extended by mutual agreement of us and CleanSpark. 16 Critical Accounting Policies There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020. RESULTS OF OPERATIONS Overview of the Three and Nine Months Results Selected financial and operating data for our reportable business segments for the most recent reporting period is summarized below. This information, as well as the selected financial data provided in Note 12 - Business Segment and Geographic Information and in our unaudited Consolidated Financial Statements and related notes included in this Quarterly Report on Form 10-Q, should be referred to when reading our discussion and analysis of results of operations below. Our summary of operating results during the three and nine months ended September 30, 2021 and 2020 are as follows: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Revenues T&D Solutions $ 2,996 $ 1,507 $ 7,980 $ 7,370 Critical Power Solutions 2,689 2,544 6,833 6,768 Consolidated 5,685 4,051 14,813 14,138 Cost of goods sold T&D Solutions 2,810 1,199 7,807 7,639 Critical Power Solutions 2,162 2,113 5,638 5,881 Consolidated 4,972 3,312 13,445 13,520 Gross profit 713 739 1,368 618 Selling, general and administrative expenses 1,207 1,157 3,664 3,890 Depreciation and amortization expense 24 33 74 111 Total operating expenses 1,231 1,190 3,738 4,001 Operating loss from continuing operations (518 ) (451 ) (2,370 ) (3,383 ) Interest income (99 ) (55 ) (288 ) (242 ) Other expense (income) 13 (1,735 ) (1,294 ) (904 ) (Loss) income before taxes (432 ) 1,339 (788 ) (2,237 ) Income tax expense (benefit) 2 – (19 ) 5 Net (loss) income $ (434 ) $ 1,339 $ (769 ) $ (2,242 ) Backlog Our backlog is based on firm orders from our customers expected to be delivered in the future, most of which is expected to occur during the next twelve months. Backlog may vary significantly from reporting period to reporting period due to the timing of customer commitments. The time between receipt of an order and actual delivery, or completion, of our products and services varies from one or more days, in the case of inventoried standard products, to three to nine months, in the case of certain custom engineered equipment solutions, and up to one year or more under our service contracts. The following table represents the progression of our backlog, by reporting segment, as of the end of the last five quarters: September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 T&D Solutions $ 5,032 $ 6,501 $ 10,210 $ 5,881 $ 3,872 Critical Power Solutions 5,823 6,225 6,934 6,792 7,472 Total order backlog $ 10,855 $ 12,726 $ 17,144 $ 12,673 $ 11,344 17 Revenue The following table represents our revenues by reporting segment and major product category for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 Variance % 2021 2020 Variance % T&D Solutions Switchgear $ 2,996 $ 1,507 $ 1,489 98.8 $ 7,980 $ 7,370 $ 610 8.3 2,996 1,507 1,489 98.8 7,980 7,370 610 8.3 Critical Power Solutions Equipment 694 411 283 68.9 1,379 891 488 54.8 Service 1,995 2,133 (138 ) (6.5 ) 5,454 5,877 (423 ) (7.2 ) 2,689 2,544 145 5.7 6,833 6,768 65 1.0 Total revenue $ 5,685 $ 4,051 $ 1,634 40.3 $ 14,813 $ 14,138 $ 675 4.8 For the three months ended September 30, 2021, our consolidated revenue increased by $1.6 million, or 40.3%, to $5.7 million, up from $4.1 million during the three months ended September 30, 2020, primarily due to an increase in sales of our switchgear from our T&D Solutions segment. For the nine months ended September 30, 2021, our consolidated revenue increased by $675, or 4.8%, to $14.8 million, up from $14.1 million during the nine months ended September 30, 2020, primarily due to an increase in sales of our switchgear from our T&D Solutions segment. T&D Solutions . During the three months ended September 30, 2021, revenue from our switchgear product lines increased by $1.5 million, or 98.8%, as compared to the three months ended September 30, 2020, as a result of increased sales of our automatic transfer switches and medium voltage switchgear. During the nine months ended September 30, 2021, revenue from our switchgear product lines increased by $610, or 8.3%, as compared to the nine months ended September 30, 2020, as a result of increased sales of medium voltage switchgear, offset by a reduction in sales of our automatic transfer switches and low voltage switchgear. Critical Power . For the three months ended September 30, 2021, revenue for our equipment sales increased by $283, or 68.9%, as compared to the same period in the prior year due to the shipment of two large equipment jobs during the three months ended September 30, 2021 and no comparable shipments being recognized during the three months ended September 30, 2020. Revenue for our service sales decreased by $138, or 6.5%, as compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, revenue for our equipment sales increased by $488, or 54.8%, as compared to the same period in the prior year due to the shipment of two large equipment jobs during the nine months ended September 30, 2021 and no comparable shipments being recognized during the nine months ended September 30, 2020. Revenue for our service sales decreased by $423, or 7.2%, as compared to the nine months ended September 30, 2020. 18 Gross Profit (Loss) and Gross Margin The following table represents our gross profit (loss) by reporting segment for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 Variance % 2021 2020 Variance % T&D Solutions Gross profit (loss) $ 186 $ 308 $ (122 ) 39.6 $ 173 $ (269 ) $ 442 164.3 Gross margin % 6.2 20.4 (14.2 ) 2.2 (3.6 ) 5.8 Critical Power Solutions Gross profit 527 431 96 22.3 1,195 887 308 34.7 Gross margin % 19.6 16.9 2.7 17.5 13.1 4.4 Consolidated gross profit (loss) $ 713 $ 739 $ (26 ) (3.5 ) $ 1,368 $ 618 $ 750 121.4 Consolidated gross margin % 12.5 18.2 (5.7 ) 9.2 4.4 4.8 For the three months ended September 30, 2021, our consolidated gross margin was 12.5% of revenues, compared to 18.2% during the three months ended September 30, 2020. For the nine months ended September 30, 2021, our consolidated gross margin was 9.2% of revenues, compared to 4.4% during the nine months ended September 30, 2020. T&D Solutions. For the three months ended September 30, 2021, our gross margin decreased by 14.2%, to 6.2%, down from 20.4% for the three months ended September 30, 2020 due to an increase in the cost of manufacturing supplies and labor. Furthermore, shipments of our low-voltage switchgear, which have historically generated lower margins, increased during the three months September 30, 2021 as compared to the same period last year. For the nine months ended September 30, 2021, our gross margin increased by 5.8%, to 2.2%, up from (3.6)% for the nine months ended September 30, 2020 due to recognizing a one-time $546 write down of inventory during the nine months ended September 30, 2020. Critical Power . For the three months ended September 30, 2021, our gross margin increased by 2.7%, to 19.6%, up from 16.9% for the three months ended September 30, 2020, predominately due to a reduction in overhead costs and the acceptance of price increases from our customers. For the nine months ended September 30, 2021, our gross margin increased by 4.4%, to 17.5%, up from 13.1% for the nine months ended September 30, 2020, predominately due to a reduction in overhead costs and the acceptance of price increases from our customers. 19 Operating Expenses The following table represents our operating expenses by reportable segment for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 Variance % 2021 2020 Variance % T&D Solutions Selling, general and administrative expense $ 283 $ 247 $ 36 14.6 $ 823 $ 1,044 $ (221 ) (21.2 ) Depreciation and amortization expense 3 11 (8 ) (72.7 ) 14 40 (26 ) (65.0 ) Segment operating expense $ 286 $ 258 $ 28 10.9 $ 837 $ 1,084 $ (247 ) (22.8 ) Critical Power Solutions Selling, general and administrative expense $ 353 $ 380 $ (27 ) (7.1 ) $ 1,122 $ 1,204 $ (82 ) (6.8 ) Depreciation and amortization expense 14 14 — — 39 46 (7 ) (15.2 ) Segment operating expense $ 367 $ 394 $ (27 ) (6.9 ) $ 1,161 $ 1,250 $ (89 ) (7.1 ) Unallocated Corporate Overhead Expenses Selling, general and administrative expense $ 571 $ 530 $ 41 7.7 $ 1,719 $ 1,642 $ 77 4.7 Depreciation and amortization expense 7 8 (1 ) (12.5 ) 21 25 (4 ) (16.0 ) Segment operating expense $ 578 $ 538 $ 40 7.4 $ 1,740 $ 1,667 $ 73 4.4 Consolidated Selling, general and administrative expense $ 1,207 $ 1,157 $ 50 4.3 $ 3,664 $ 3,890 $ (226 ) (5.8 ) Depreciation and amortization expense 24 33 (9 ) (27.3 ) 74 111 (37 ) (33.3 ) Consolidated operating expense $ 1,231 $ 1,190 $ 41 3.4 $ 3,738 $ 4,001 $ (263 ) (6.6 ) Selling, General and Administrative Expense . For the three months ended September 30, 2021, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $50, or 4.3%, to $1.2 million, as compared to $1.2 million during the same period last year. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, decreased to 21.2% during the three months ended September 30, 2021, as compared to 28.6% in the three months ended September 30, 2020. For the nine months ended September 30, 2021, consolidated selling, general and administrative expense, before depreciation and amortization, decreased by approximately $226, or 5.8%, to $3.7 million, as compared to $3.9 million during the nine months ended September 30, 2020, primarily due to a reduction in professional fees related to the then-pending case titled Myers Power Products, Inc. v. Pioneer Power Solutions, Inc., Pioneer Custom Electrical Products, Corp., et al., Los Angeles County Superior Court Case No. BC606546, which was settled on November 20, 2020. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, decreased to 24.7% during the nine months ended September 30, 2021, as compared to 27.5% in the nine months ended September 30, 2020. Depreciation and Amortization Expense. Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of definite-lived intangible assets and right-of-use assets related to our finance leases, and excludes amounts included in cost of sales. For the three and nine months ended September 30, 2021, consolidated depreciation and amortization expense decreased by $9, or 27.3%, and $37, or 33.3%, respectively, as compared to the three and nine months ended September 30, 2020. Operating (Loss) Income The following table represents our operating (loss) income by reportable segment for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 Variance % 2021 2020 Variance % T&D Solutions $ (100 ) $ 50 $ (150 ) 300.0 $ (664 ) $ (1,353 ) $ 689 50.9 Critical Power Solutions 160 37 123 (332.4 ) 34 (363 ) 397 109.4 Unallocated corporate overhead expenses (578 ) (538 ) (40 ) (7.4 ) (1,740 ) (1,667 ) (73 ) (4.4 ) Total operating loss $ (518 ) $ (451 ) $ (67 ) 14.9 $ (2,370 ) $ (3,383 ) $ 1,013 29.9 T&D Solutions . During the three and nine months ended September 30, 2021, our T&D Solutions segment generated an operating loss of $100 and $664, respectively, as compared to an operating income of $50 and an operating loss of $1.4 million for the same respective periods in 2020. 20 Critical Power . During the three and nine months ended September 30, 2021, our Critical Power segment generated an operating income of $160 and $34, respectively, as compared to operating income of $37 and an operating loss of $363 during the three and nine months ended September 30, 2020, respectively. The increase in operating income for the three and nine months ended September 30, 2021 is due primarily to a reduction in overhead costs and the acceptance of price increases from our customers. General Corporate Expense . Our general corporate expense is comprised primarily of executive management, corporate accounting and human resources personnel, office expenses, financing and corporate development activities, payroll and benefits administration, treasury, tax compliance, legal, stock-based compensation and public reporting costs, and costs not specifically allocated to reportable business segments. During the three and nine months ended September 30, 2021, our unallocated corporate overhead expense increased by $39, or 7.2%, to $577, and by $73, or 4.4%, to $1.7 million, as compared to the three and nine months ended September 30, 2020, primarily due to an increase in stock-based compensation expense offset by a reduction in professional fees. Non-Operating (Income) Expense Interest Income. For the three and nine months ended September 30, 2021, we had interest income of approximately $99 and $288, respectively, as compared to interest income of approximately $55 and $242 during the three and nine months ended September 30, 2020, respectively. The Company generates the majority of its interest income from the Seller Notes it received from the sale of the transformer business units in August 2019 and its cash on hand. Other Expense (Income). For the three months ended September 30, 2021, other expense was $13, as compared to other income of $1.7 million during the three months ended September 30, 2020. For the three months ended September 30, 2020, included in other income was a gain of $1.7 million related to the sale of CleanSpark Common Stock and warrants. For the nine months ended September 30, 2021, other income was $1.3 million, as compared to other income of $904 during the nine months ended September 30, 2020. For the nine months ended September 30, 2021, included in other income was a gain of $1.4 million for the extinguishment and forgiveness of the PPP Loan. For the nine months ended September 30, 2020, included in other income was a gain of $968 related to the sale and mark to market adjustment on the fair value of the CleanSpark Common Stock and warrants. Income Tax Expense (Benefit) . Our effective income tax rate was (0.5)% for the three months ended September 30, 2021, compared to 0.0% during the three months ended September 30, 2020. For the nine months ended September 30, 2021, our effective income tax rate was 2.4%, as compared to an income tax rate of (0.2)% during the nine months ended September 30, 2020, as set forth below: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 Variance 2021 2020 Variance (Loss) income before income taxes $ (432 ) $ 1,339 $ (1,771 ) $ (788 ) $ (2,237 ) $ 1,449 Income tax expense (benefit) 2 — 2 (19 ) 5 (24 ) Effective income tax rate % (0.5 ) — (0.5 ) 2.4 (0.2 ) 2.6 Net (Loss) Income per Share We generated a net loss of $434 during the three months ended September 30, 2021, as compared to net income of $1.3 million during the three months ended September 30, 2020. Our net loss per basic and diluted share for the three months ended September 30, 2021 was $0.05, as compared to net income per basic and diluted share of $0.15 for the three months ended September 30, 2020. We generated a net loss of $769 during the nine months ended September 30, 2021, as compared to a net loss of $2.2 million during the nine months ended September 30, 2020. Our net loss per basic and diluted share for the nine months ended September 30, 2021 was $0.09, as compared to a net loss per basic and diluted share of $0.26 for the nine months ended September 30, 2020. 21 LIQUIDITY AND CAPITAL RESOURCES General . At September 30, 2021, we had $3.4 million of cash on hand. We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings. Our cash requirements have been generally applied toward operating activities, debt repayment, capital improvements and acquisitions. The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited interim consolidated statement of cash flows: September 30, December 31, 2021 2020 Cash $ 3,372 $ 7,567 Restricted cash 1,775 — Total cash and restricted cash as shown in the statement of cash flows $ 5,147 $ 7,567 We have restricted cash of approximately $1.8 million as a result of executing a cash collateral security agreement with a commercial bank which required us to pledge cash collateral as security for all unpaid reimbursement obligations owing to the commercial bank for an irrevocable standby letter of credit. On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic (the “COVID-19 pandemic”), based on the rapid increase in exposure globally. The full impact of the COVID-19 pandemic continues to evolve as the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. During the three months ended September 30, 2021, we experienced an impact to productivity as a result of following social distancing guidelines and practicing personal protective measures. Notwithstanding, the Company has been able to operate substantially at capacity during the COVID-19 pandemic. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 pandemic and the global responses to contain its spread, we are not able to estimate the full effects of the COVID-19 pandemic at this time, however, if the pandemic continues, it may continue to have an adverse effect on our results of operations, financial condition, or liquidity. On March 27, 2020, then President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act” (the “CARES Act”) The CARES Act, among other things, appropriates funds for the SBA Paycheck Protection Program loans that are forgivable in certain situations to promote continued employment. On April 13, 2020, after having determined that it met the qualifications for this loan program due to the impact that COVID-19 would have on our financial condition, results of operations, and/or liquidity and applying for relief, we received a loan under the SBA Paycheck Protection Program (the “PPP Loan”) in the amount of $1.4 million. Under the terms of the PPP Loan, we were eligible for full or partial loan forgiveness. During the first quarter of 2021, the Company received full forgiveness of the PPP Loan and recognized a $1.4 million gain on extinguishment and forgiveness of debt in other expense (income). Cash Provided by/ (Used in) Operating Activities . Cash provided by our operating activities was $839 during the nine months ended September 30, 2021, as compared to cash used in our operating activities of $1.3 million during the nine months ended September 30, 2020. The decrease in cash used in operating activities is primarily due to recognizing a gain of $968 related to the sale and mark to market adjustment on the fair value of CleanSpark Common Stock and warrants during the nine months ended September 30, 2020, and there was no comparable gain during the nine months ended September 30, 2021. Cash (Used in)/ Provided by Investing Activities. Cash used in investing activities during the nine months ended September 30, 2021 was $156, as compared to cash provided by investing activities of $2.6 million during the nine months ended September 30, 2020. The increase in cash used in investing activities in the comparable periods is primarily due to recognizing $2.4 million of proceeds from the sale of the CleanSpark Common Stock and warrants during the nine months ended September 30, 2020, and there were no comparable proceeds recognized during the nine months ended September 30, 2021. Cash (Used in)/ Provided by Financing Activities. Cash used in our financing activities was $3.1 million during the nine months ended September 30, 2021, as compared to cash provided by financing activities of $116 during the nine months ended September 30, 2020. The primary use of cash in financing activities for the nine months ended September 30, 2021 was repayments of financing leases. The increase in cash used in financing activities for the comparable periods is due to recognizing a dividend paid to shareholders and a gain on the extinguishment and forgiveness of the PPP Loan during the nine months ended September 30, 2021, and there were no comparable payments or gain during the nine months ended September 30, 2020. 22 Working Capital . As of September 30, 2021, we had working capital of $5.7 million, including $3.4 million of cash and $1.8 million of restricted cash, compared to working capital of $8.4 million, including $7.6 million of cash at December 31, 2020. At September 30, 2021 and December 31, 2020, we no longer had a revolving credit facility, as it was paid in full in August 2019 with the proceeds from the sale of the transformer business units. Assessment of Liquidity . At September 30, 2021, we had $3.4 million of cash on hand, generated primarily from the completion of the August 2019 sale of (i) all of the issued and outstanding equity interests of Electrogroup Canada, Inc., a wholly owned subsidiary of the Company, and (ii) all of the issued and outstanding equity interests of Jefferson Electric, Inc., a wholly owned subsidiary of the Company, and JE Mexican Holdings, Inc., a wholly owned subsidiary of the Company, the sale of the CleanSpark Common Stock and warrants to purchase CleanSpark Common Stock, proceeds from insurance and the PPP Loan. We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings. Our cash requirements historically were generally for operating activities, debt repayment, capital improvements and acquisitions. On June 1, 2021, our board of directors declared a special cash dividend of $0.12 per common share, payable to shareholders of record as of June 22, 2021, to be paid on July 7, 2021. The cash dividends were paid in July of 2021 and equaled $0.12 per share on the $0.001 par value common stock resulting in an aggregate distribution of approximately $1.0 million representing a capital repayment paid from APIC. As all outstanding amounts under our credit facilities have been paid in full with the proceeds from the sale of the transformer business units during the year ended December 31, 2019, and the credit facilities terminated, we expect to meet our cash needs with our working capital and cash flows from our operating activities. We expect our cash requirements to be generally for operating activities and capital improvements. We expect that our cash balance is sufficient to fund operations for the next twelve months. Capital Expenditures Our additions to property, plant and equipment were $156 during the nine months ended September 30, 2021 as compared to no additions during the nine months ended September 30, 2020. At September 30, 2021 and 2020, we no longer had a revolving credit facility as it was paid in full and terminated in August 2019 with the proceeds from the sale of the transformer business units. 23 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.