What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-15 · 428 added, 390 removed, 63 unchanged (93% of the section changed)

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, 2021, which was filed with the Securities and Exchange

Commission on March 31, 2022.

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

“we,” “our” and “us” refer to Pioneer Power Solutions, Inc.

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis

of our financial condition and results of operations should be read in conjunction with the accompanying consolidated interim financial

statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for

the year ended December 31, 2021, which was filed with the Securities and Exchange Commission on March 31, 2022.

Unless the context requires otherwise,

references in this Quarterly Report on Form 10-Q to the “Company,” “Pioneer,” “we,” “our”

and “us” refer to Pioneer Power Solutions, Inc.

and its subsidiaries.

Note Regarding Forward-Looking Statements

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

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

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 (loss),

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.

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,

Special Note Regarding Forward-Looking

This Quarterly Report on Form 10-Q contains

“forward-looking statements,” which include information relating to future events, future financial performance, financial

projections, strategies, expectations, competitive environment and regulation.

Words such as “may,” “should,”

“could,” “would,” “predicts,” “potential,” “continue,” “expects,”

“anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,”

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

Forward-looking statements

should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance

or results will be achieved.

Forward-looking statements are based on information we have when those statements are made or management’s

good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual

performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

Important factors

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

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

the commercial construction market, but also in the power generation, industrial production, data center, oil and gas, marine and

infrastructure industries.

● The effects of fluctuations in sales on our business, revenues, expenses, net income (loss), income

(loss) per share, margins and profitability.

● Many of our competitors are better established and have significantly greater resources and may

subsidize their competitive offerings with other products and services, which may make it difficult for us to attract and retain

● 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.

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

in our markets and our ability to access capital markets.

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 - Item 1A.

Risk Factors” in our Annual

Report on Form 10-K for the year ended December 31, 2021 for a discussion of the foregoing and other risks that relate to our

business and investing in shares of our common stock.

design, manufacture, integrate, refurbish, service, distribute and sell electric power systems, distributed energy resources,

power generation equipment and mobile electric vehicle (“EV”) charging solutions.

Our products and services are sold

to a broad range of customers in the utility, industrial and commercial markets.

Our customers include, but are not limited to,

electric, gas and water utilities, data center developers and owners, EV charging infrastructure developers and owners, and distributed

energy developers.

We are headquartered in Fort Lee, New Jersey and operate from three (3) additional locations in the U.S.

manufacturing, service and maintenance, engineering, and 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 protect, control, transfer, monitor and manage their electric energy

requirements.

These solutions are marketed principally through our Pioneer Custom Electrical

Products Corp.

● 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

● Material weaknesses in internal controls.

● 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.

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

Risk Factors” in this

Quarterly Report on Form 10-Q and “Part I - Item 1A.

Risk Factors” in our Annual Report on Form 10-K for the year ended

December 31, 2021 for a discussion of the foregoing and other risks that relate to our business and investing in shares of our

common stock.

Business Overview

We design, manufacture, integrate, refurbish,

service, distribute and sell electric power systems, distributed energy resources, power generation equipment and mobile electric

vehicle (“EV”) charging solutions.

Our products and services are sold to a broad range of customers in the utility,

industrial and commercial markets.

Our customers include, but are not limited to, electric, gas and water utilities, data center

developers and owners, EV charging infrastructure developers and owners, and distributed energy developers.

We are headquartered

in Fort Lee, New Jersey and operate from three (3) additional locations in the U.S.

for manufacturing, service and maintenance,

engineering, and sales and administration.

Description of Business Segments

We have two reportable segments:

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

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

efficiently protect, control, transfer, monitor and manage their electric energy requirements.

These solutions are marketed principally

through our Pioneer Custom Electrical Products Corp.

(“PCEP”) brand name.

Critical Power business provides customers with our suite of mobile e-Boost© EV

charging solutions, power generation equipment and all forms of service and maintenance

on our customers’ power generation equipment.

These products and services are marketed

by our operations headquartered in Minnesota, currently doing business under both the

● Our Critical Power business provides customers with our suite of mobile e-Boost© EV charging

solutions, power generation equipment and all forms of service and maintenance on our customers’ power generation equipment.

These products and services are marketed by our operations headquartered in Minnesota, currently doing business under both the

Titan Energy Systems Inc.

(“Titan”) and Pioneer Critical Power brand names.

June 3, 2022, the Company and CleanSpark Inc., a Nevada corporation (“CleanSpark”), entered into a termination agreement

(the “Termination Agreement”) to terminate the Distribution Agreement dated May 31, 2021, by and between the Company

and CleanSpark (the “Distribution Agreement”), pursuant to which CleanSpark served as the Company’s exclusive

distributor of parallel switchgears, automatic transfer switches and related products (the “Products”).

the Termination Agreement, the Company agreed to, amongst others, (i) release CleanSpark from further liabilities due under the

Distribution Agreement, including for certain future amounts due under the Distribution Agreement and certain accounts payable

invoices, (ii) assume the responsibility of billing and collecting payment from Enchanted Rock Electric, LLC, a third party and

mutual client of both the Company and CleanSpark for all open sales orders amounts under its outstanding agreements for Products

that have or will be manufactured by the Company, and (iii) return portions of certain deposits advanced to the Company pursuant

to the Distribution Agreement.

additionally transferred the services and maintenance agreements and associated rights and liabilities it had related to switchgear

products manufactured by the Company, and the Company assumed all liability and responsibility for all claims of the Products

including, but not limited to, all repairs, defects, and warranty liability of the Products that were previously manufactured

by the Company and then distributed or sold by CleanSpark.

Accounting Policies and Estimates

financial statements have been prepared in accordance with U.S.

The preparation of our financial statements requires us

to make estimates and assumptions that affect the amounts and disclosures in the financial statements.

Our estimates are based

on our historical experience, knowledge of current events and actions we may undertake in the future, and on various other factors

that we believe are reasonable under the circumstances.

Our critical accounting policies and estimates are described in “Management’s

Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in our Annual Report

on Form 10-K filed with the SEC on March 31, 2022.

There were no material changes to our accounting policies during the six months

ended June 30, 2022.

OF OPERATIONS

of the Three and Six Months 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 11 - Business Segment and Geographic Information”

and in our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q, should

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

summary of operating results during the three and six months ended June 30, 2022 and 2021 are as follows:

Critical Accounting Policies and Estimates

Our financial statements have been prepared

in accordance with U.S.

The preparation of our financial statements requires us to make estimates and assumptions that affect

the amounts and disclosures in the financial statements.

Our estimates are based on our historical experience, knowledge of current

events and actions we may undertake in the future, and on various other factors that we believe are reasonable under the circumstances.

Our critical accounting policies and estimates are described in “Management’s Discussion and Analysis of Financial Condition

and Results of Operations - Critical Accounting Policies” in our Annual Report on Form 10-K filed with the SEC on March 31,

There were no material changes to our accounting policies during the nine months ended September 30, 2022.

RESULTS OF OPERATIONS

Overview of the Three and Nine Months

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, 2022 and 2021 are as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

8 unchanged sentences

Interest income

Other expense (income)

Other (income) expense

Loss income before taxes

Income tax expense (benefit)

Our backlog is based on firm orders from our customers

expected to be delivered in the future, most of which is expected to occur during the next twelve months.

Backlog may vary significantly

from reporting period to reporting period due to the timing of customer commitments.

Backlog reflects the amount of revenue we expect

to realize upon the shipment of customer orders for our products that are not yet complete or for which work has not yet begun.

30, 2022, backlog from our e-Bloc power systems solutions was approximately $15 million, or 60% of the total backlog.

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

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.

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

Backlog reflects the

amount of revenue we expect to realize upon the shipment of customer orders for our products that are not yet complete or for which

work has not yet begun.

At September 30, 2022, backlog from our E-Bloc power systems solutions was approximately $13.8 million,

or 49% of the total backlog.

The following table represents the progression

of our backlog, by reporting segment, as of the end of the last five quarters:

September 30,

2022 (Revised)

T&D Solutions

1 unchanged sentence

Total order backlog

following table represents our revenues by reporting segment and major product category for the periods indicated (in thousands,

except percentages):

The following table represents our revenues

by reporting segment and major product category for the periods indicated (in thousands, except percentages):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

2 unchanged sentences

Total revenue

the three months ended June 30, 2022, our consolidated revenue decreased by $1.3 million, or 23.8%, to $4.3 million, down from

$5.6 million during the three months ended June 30, 2021, primarily due to a decrease in sales of our power systems from our T&D

Solutions segment.

the six months ended June 30, 2022, our consolidated revenue increased by $1.2 million, or 13.1%, to $10.3 million, up from $9.1

million during the six months ended June 30, 2021, primarily due to an increase in sales of equipment from both the T&D Solutions

and Critical Power segments.

During the three months ended June 30, 2022, revenue for our power systems product lines decreased by $1.6 million,

or 45.2%, as compared to the three months ended June 30, 2021, primarily due to decreased sales of our medium and low voltage

power systems.

the six months ended June 30, 2022, revenue for our power systems product lines increased by $373, or 7.5%, as compared to the

six months ended June 30, 2021, primarily due to increased sales of our e-Bloc power systems and automatic transfer switches and

a decrease in sales of our medium voltage power systems.

For the three months ended June 30, 2022, revenue for our equipment sales increased by $304, or 191.2%, as compared

to the three months ended June 30, 2022, primarily due to increased sales of our refurbished generation equipment and the recognition

of $129 of sales from our suite of e-Boost products.

the three months ended June 30, 2022, our service revenue decreased by $13, or 0.7%, as compared to the three months ended June

the six months ended June 30, 2022, revenue for our equipment sales increased by $893, or 130.4%, as compared to the six months

ended June 30, 2021, mainly due to increased sales of our refurbished generation equipment and the recognition of $917 of revenue

from shipments of our suite of e-Boost products.

the six months ended June 30, 2022, our service revenue decreased by $78, or 2.3%, as compared to the six months ended June 30,

2021, primarily due to the cyclicality of our preventative maintenance schedules.

(Loss) Profit and Gross Margin

following table represents our gross (loss) profit by reporting segment for the periods indicated (in thousands, except percentages):

For the three months ended September 30,

2022, our consolidated revenue increased by $566, or 9.9%, to $6.3 million, up from $5.7 million during the three months ended

September 30, 2021, primarily due to an increase in sales of our power systems from our T&D Solutions segment and a reduction

in equipment sales from our Critical Power segment.

For the nine months ended September 30,

2022, our consolidated revenue increased by $2.7 million, or 18.0%, to $17.5 million, up from $14.8 million during the nine months

ended September 30, 2021, primarily due to an increase in sales of power systems and equipment from our T&D Solutions and Critical

Power segments, respectively.

T&D Solutions .

During the three

months ended September 30, 2022, revenue for our power systems product lines increased by $777, or 25.9%, as compared to the three

months ended September 30, 2021, primarily due to increased sales of our E-Bloc power systems and automatic transfer switches and

a decrease in sales of our medium and low voltage power systems.

During the nine months ended September

30, 2022, revenue for our power systems product lines increased by $2.0 million, or 25.7%, as compared to the nine months ended

September 30, 2021, primarily due to increased sales of our E-Bloc power systems, automatic transfer switches and low voltage power

systems and a decrease in sales of our medium voltage power systems.

Critical Power Solutions .

three months ended September 30, 2022, revenue from our Critical Power segment decreased by $211, or 7.9%, as compared to the three

months ended September 30, 2021, primarily due to decreased sales of our new and refurbished generation equipment.

For the nine months ended September 30,

2022, revenue from our Critical Power segment increased by $604, or 8.8%, as compared to the nine months ended September 30, 2021,

primarily due to the recognition of revenue from shipments of our e-Boost products during the nine months ended September 30, 2022

and no recognition of revenue from e-Boost shipments during the nine months ended September 30, 2021.

Gross Profit and Margin

The following table represents our gross

profit by reporting segment for the periods indicated (in thousands, except percentages):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

Gross (loss) profit

Gross margin %

3 unchanged sentences

Consolidated gross margin %

the three months ended June 30, 2022, our consolidated gross margin was 1.9% of revenues, compared to 8.8% during the three months

ended June 30, 2021.

the six months ended June 30, 2022, our consolidated gross margin was 9.3% of revenues, compared to 7.2% during the six months

ended June 30, 2021.

For the three months ended June 30, 2022, our gross margin percentage decreased by 12.5%, from 4.3% to (8.2)%,

as compared to the three months ended June 30, 2021.

The decrease was primarily due to decreased sales of our medium and low voltage

power systems and the sale of stock inventory at a loss.

the six months ended June 30, 2022, our gross margin percentage increased by 4.3%, from (0.3)% to 4.0%, as compared to the six

months ended June 30, 2021.

The increase in our gross margin percentage was primarily due to increased sales of our e-Bloc power

systems and automatic transfer switches, a favorable sales mix and improved productivity from our manufacturing facility.

For the three months ended June 30, 2022, our gross margin decreased by 6.4%, to 10.4%, from 16.8% for the three months

ended June 30, 2021, primarily due to an unfavorable sales mix and an increase in overhead costs.

the six months ended June 30, 2022, our gross margin decreased by 1.2%, to 14.9%, from 16.1% for the six months ended June 30,

following table represents our operating expenses by reportable segment for the periods indicated (in thousands, except percentages):

For the three months ended September 30,

2022, our consolidated gross margin increased to 13.8% of revenues, as compared to 12.5% during the three months ended September

For the nine months ended September 30,

2022, our consolidated gross margin increased to 10.6% of revenues, as compared to 9.2% during the nine months ended September

T&D Solutions.

For the three

months ended September 30, 2022, our gross margin percentage increased by 6.6%, from 6.2% to 12.8%, as compared to the three months

ended September 30, 2021.

The increase was primarily due to increased sales our E-Bloc power systems and automatic transfer switches

which generated higher gross profits and margins.

For the nine months ended September 30,

2022, our gross margin percentage increased by 5.0%, from 2.2% to 7.2%, as compared to the nine months ended September 30, 2021.

The increase in our gross margin percentage was primarily due to increased sales of our E-Bloc power systems and automatic transfer

switches, a favorable sales mix and improved productivity from our manufacturing facility.

Critical Power Solutions .

three months ended September 30, 2022, our gross margin decreased by 4.3%, to 15.3%, from 19.6% for the three months ended September

30, 2021, primarily due to increases in material and overhead costs.

For the nine months ended September 30,

2022, our gross margin decreased by 2.4%, to 15.1%, from 17.5% for the nine months ended September 30, 2021, primarily due to increases

in material and overhead costs.

Operating Expenses

The following table represents our operating

expenses by reportable segment for the periods indicated (in thousands, except percentages):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

Selling, general and administrative

Depreciation and amortization

Selling, general and administrative expense

Depreciation and amortization expense

Segment operating expense

1 unchanged sentence

Selling, general and administrative expense

Depreciation and amortization

Depreciation and amortization expense

Segment operating expense

1 unchanged sentence

Selling, general and administrative expense

Depreciation and amortization

Depreciation and amortization expense

Segment operating expense

Selling, general and administrative expense

Depreciation and amortization

Depreciation and amortization expense

Consolidated operating expense

General and Administrative Expense .

For the three months ended June 30, 2022, consolidated selling, general and administrative

expense, before depreciation and amortization, increased by approximately $1.3 million, or 110.5%, to $2.6 million, due to an

increase in payroll related costs, including stock-based compensation, and product development costs related to our e-Boost and

e-Bloc initiatives, as compared to $1.2 million during the three months ended June 30, 2021.

Selling, General and Administrative

For the three months ended September 30, 2022, consolidated selling, general and administrative expense, before

depreciation and amortization, increased by approximately $1.1 million, or 88.3%, to $2.3 million, due to an increase in payroll

related costs, including stock-based compensation, professional fees and product development costs related to our e-Boost and E-Bloc

initiatives, as compared to $1.2 million during the three months ended September 30, 2021.

As a percentage of our consolidated

revenue, selling, general and administrative expense, before depreciation and amortization, increased to 36.4% during the three

months ended June 30, 2021, as compared to 21.6% in the three months ended June 30, 2021.

the six months ended June 30, 2022, consolidated selling, general and administrative expense, before depreciation and amortization,

increased by approximately $1.8 million, or 71.1%, to $4.3 million, as compared to $2.5 million during the six months ended June

30, 2021, primarily due to an increase in payroll related costs, including stock-based compensation, and product development costs

months ended September 30, 2022, as compared to 21.2% in the three months ended September 30, 2021.

For the nine months ended September 30,

2022, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately

$2.9 million, or 78.8%, to $6.6 million, as compared to $3.7 million during the nine months ended September 30, 2021, primarily

due to an increase in payroll related costs, including stock-based compensation, professional fees and product development costs

related to our e-Boost and E-Bloc initiatives.

As a percentage of our consolidated revenue, selling, general and administrative

expense, before depreciation and amortization, increased to 41.4% during the six months ended June 30, 2022, as compared to 26.9%

during the six months ended June 30, 2021.

and Amortization Expense.

Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization

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

For the three months ended

June 30, 2022, consolidated depreciation and amortization expense increased by $3, or 12.0%, as compared to the three months ended

June 30, 2021.

the six months ended June 30, 2022, consolidated depreciation and amortization expense increased by $4, or 8.0%, as compared to

the six months ended June 30, 2021.

following table represents our operating loss by reportable segment for the periods indicated (in thousands, except percentages):

expense, before depreciation and amortization, increased to 37.5% during the nine months ended September 30, 2022, as compared

to 24.7% during the nine months ended September 30, 2021.

Depreciation and Amortization Expense.

Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of right-of-use assets

related to our finance leases and excludes amounts included in cost of sales.

For the three months ended September 30, 2022, consolidated

depreciation and amortization expense increased by $8, or 33.3%, as compared to the three months ended September 30, 2021.

For the nine months ended September 30,

2022, consolidated depreciation and amortization expense increased by $12, or 16.2%, as compared to the nine months ended September

Operating Income (Loss)

The following table represents our operating

income (loss) by reportable segment for the periods indicated (in thousands, except percentages):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

T&D Solutions

2 unchanged sentences

Total operating loss

Operating loss from our T&D Solutions segment increased by $299, or 239.2%, during the three months ended June

30, 2022, as compared to the three months ended June 30, 2021, primarily due a decrease in sales of our power systems, an increase

in product development costs related to our e-Bloc initiative and the sale of stock inventory at a loss during the three months

ended June 30, 2022.

the six months ended June 30, 2022, operating loss from our T&D Solutions segment decreased by $181, or 32.1%, as compared

to an operating loss of $564 during the six months ended June 30, 2021, primarily due to an increase in sales of our power systems,

a favorable sales mix and improved productivity from our manufacturing facility.

Operating loss for the Critical Power segment increased by $715, or 1,702.4% during the three months ended June 30,

2022, primarily due to recognizing product development and promotion fees related to our e-Boost initiative during the three months

ended June 30, 2022, as compared to no product development or promotion fees recognized during the three months ended June 30,

the six months ended June 30, 2022, operating loss from our Critical Power segment increased by $785, or 623.0% during the six

months ended June 30, 2022, primarily due to recognizing product development and promotion fees related to our e-Boost initiative

during the six months ended June 30, 2022, as compared to no product development or promotion fees recognized during the six months

ended June 30, 2021.

Corporate Expense .

Our general corporate expenses consist primarily of executive management, corporate accounting and human

resources personnel, corporate office expenses, financing and corporate development activities, payroll and benefits administration,

treasury, tax compliance, legal, stock-based compensation, public reporting costs and costs not specifically allocated to reportable

business segments.

the three months ended June 30, 2022, our unallocated corporate overhead expense increased by $745, or 128.9%, as compared to

the three months ended June 30, 2021, primarily due to an increase in payroll related expenses, including stock-based compensation,

and business travel related costs.

the six months ended June 30, 2022, our unallocated corporate overhead expense increased by $919, or 79.1%, as compared to the

six months ended June 30, 2021, primarily due to an increase in payroll related expenses, including stock-based compensation,

professional fees and business travel related costs.

Non-Operating

(Income) Expense

For the three and six months ended June 30, 2022, the Company had interest income of approximately $104 and $206,

respectively, as compared to interest income of approximately $95 and $189 during the three and six months ended June 30, 2021,

respectively.

We generate the majority of our interest income from the Seller Notes we received from the sale of the transformer

business units in August 2019 and our cash on hand.

Expense (Income).

Other expense (income) in the unaudited interim consolidated statements of operations reports certain gains

and losses associated with activities not directly related to our core operations.

During the three months ended June 30, 2022,

other expense was $117, as compared to other expense of $36 during the three months ended June 30, 2021.

the six months ended June 30, 2022, other expense was $129, as compared to other income of $1.3 million during the six months

ended June 30, 2021.

For the six months ended June 30, 2021, included in other income was a gain of $1.4 million for the extinguishment

and forgiveness of the PPP Loan.

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

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

situations to promote continued employment.

On April 13, 2020 after having determined that it met the qualifications for this

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

applying for relief, the Company received a loan under the SBA Paycheck Protection Program in the amount of $1.4 million.

Company made this assertion in good faith based upon all available guidance and accounted for the PPP Loan as a debt instrument

in accordance with FASB ASC 470, Debt.

The Company used the proceeds from the PPP Loan to retain employees, maintain payroll and

make lease, rent and utility payments.

the terms of the PPP Loan, the Company was eligible for full or partial loan forgiveness.

The Company received full forgiveness

of the PPP Loan during the six months ended June 30, 2021 and recognized a $1.4 million gain on extinguishment and forgiveness

of debt in other income.

Tax Expense (Benefit) .

Our effective income tax rate for the three months ended June 30, 2022 and 2021 was 0.0%.

the six months ended June 30, 2022, our effective income tax rate was (0.2)%, as compared to an income tax rate of 5.9% during

the six months ended June 30, 2021, as set forth below:

T&D Solutions .

income from our T&D Solutions segment increased by $271, or 271.0%, during the three months ended September 30, 2022, as compared

to the three months ended September 30, 2021, primarily due an increase in sales of our power systems, a favorable sales mix and

improved productivity from our manufacturing facility during the three months ended September 30, 2022.

For the nine months ended September 30,

2022, operating loss from our T&D Solutions segment decreased by $481, or 72.4%, as compared to an operating loss of $664 during

the nine months ended September 30, 2021, primarily due to an increase in sales of our power systems, a favorable sales mix and

improved productivity from our manufacturing facility.

Critical Power Solutions .

loss for the Critical Power segment increased by $925, or 578.1% during the three months ended September 30, 2022, primarily due

to an increase in material and overhead costs and recognizing product development and promotion fees related to our e-Boost initiative

during the three months ended September 30, 2022, as compared to lower material and overhead costs and no product development or

promotion fees recognized during the three months ended September 30, 2021.

For the nine months ended September 30,

2022, operating loss from our Critical Power segment increased by $1,710, primarily due to a decrease in gross margin and an increase

in consulting, marketing and promotion fees related to our e-Boost initiative, as compared to lower material and overhead costs

and no recognition of product development or promotion fees related to our e-Boost initiative during the nine months ended September

General Corporate Expense .

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

expenses, financing and corporate development activities, payroll and benefits administration, treasury, tax compliance, legal,

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

During the three months ended September

30, 2022, our unallocated corporate overhead expense increased by $272, or 47.1%, as compared to the three months ended September

30, 2021, primarily due to an increase in payroll related expenses, including stock-based compensation, professional fees and business

travel related costs.

During the nine months ended September

30, 2022, our unallocated corporate overhead expense increased by $1.2 million, or 68.4%, as compared to the nine months ended

September 30, 2021, primarily due to an increase in payroll related expenses, including stock-based compensation, professional

fees and business travel related costs.

Non-Operating (Income) Expense

Interest Income.

For the three and

nine months ended September 30, 2022, the Company had interest income of approximately $116 and $322, respectively, as compared

to interest income of approximately $99 and $288 during the three and nine months ended September 30, 2021, respectively.

the majority of our interest income from the Seller Notes we received from the sale of the transformer business units in August

2019 and our cash on hand.

Other (Income) Expense.

Other (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, 2022, other income was $17, as compared to

other expense of $13 during the three months ended September 30, 2021.

During the nine months ended September

30, 2022, other expense was $112, as compared to other income of $1.3 million during the nine months ended September 30, 2021.

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.

On March 27, 2020, then President Trump

signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things,

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

On April 13, 2020 after having determined that it met the qualifications for this loan program due to the impact that

COVID-19 would have on our financial condition, results of operations, and/or liquidity and applying for relief, the Company received

a loan under the SBA Paycheck Protection Program in the amount of $1.4 million.

The Company made this assertion in good faith based

upon all available guidance and accounted for the PPP Loan as a debt instrument in accordance with FASB ASC 470, Debt.

used the proceeds from the PPP Loan to retain employees, maintain payroll and make lease, rent and utility payments.

Under the terms of the PPP Loan, the Company

was eligible for full or partial loan forgiveness.

The Company received full forgiveness of the PPP Loan during the nine months

ended September 30, 2021 and recognized a $1.4 million gain on extinguishment and forgiveness of debt in other income.

Income Tax Expense (Benefit) .

effective income tax rate for the three months ended September 30, 2022 and 2021 was 0.0% and (0.5)%, respectively.

For the nine months ended September 30,

2022, our effective income tax rate was (0.2)%, as compared to an income tax rate of 2.4% during the nine months ended September

30, 2021, as set forth below:

Three Months Ended

Six Months Ended

Loss income before income taxes

Nine Months Ended

September 30,

Loss before income taxes

Income tax expense (benefit)

Effective income tax rate %

Loss per Share

generated a net loss of $2.5 million during the three months ended June 30, 2022, as compared to net loss of $686 during the three

months ended June 30, 2021.

net loss per basic and diluted share for the three months ended June 30, 2022 was $0.26, as compared to net loss per basic and

diluted share of $0.08 for the three months ended June 30, 2021.

generated a net loss of $3.3 million during the six months ended June 30, 2022, as compared to net loss of $335 during the six

months ended June 30, 2021.

net loss per basic and diluted share for the six months ended June 30, 2022 was $0.34, as compared to net loss per basic and diluted

share of $0.04 for the six months ended June 30, 2021.

AND CAPITAL RESOURCES

At June 30, 2022, we had $9.8 million of cash on hand generated primarily from the sale of common stock under the At The Market

Sale Agreement (the “ATM Program”).

We have met our cash needs through a combination of cash flows from operating

activities and bank borrowings, the completion of the Equity Transaction, proceeds from the sale of the CleanSpark Common Stock

and warrants to purchase CleanSpark Common Stock, proceeds from insurance, proceeds from the sale of common stock under the ATM

Program and funding from the Payroll Protection Program.

Our cash requirements historically were generally for operating activities,

debt repayment, capital improvements and acquisitions.

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:

Net Loss per Share

We generated a net loss of $1.3 million

during the three months ended September 30, 2022, as compared to net loss of $434 during the three months ended September 30, 2021.

Our net loss per basic and diluted share

for the three months ended September 30, 2022 was $0.13, as compared to net loss per basic and diluted share of $0.05 for the three

months ended September 30, 2021.

We generated a net loss of $4.6 million

during the nine months ended September 30, 2022, as compared to net loss of $769 during the nine months ended September 30, 2021.

Our net loss per basic and diluted share

for the nine months ended September 30, 2022 was $0.47, as compared to net loss per basic and diluted share of $0.09 for the nine

months ended September 30, 2021.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2022, we

had $7.2 million of cash on hand generated primarily from the sale of common stock under the At The Market Sale Agreement (the

“ATM Program”) during the year ended December 31, 2021.

We have met our cash needs through a combination of cash flows

from operating activities and bank borrowings, the completion of the sale of transformer business units in August 2019, proceeds

from the sale of the CleanSpark common stock and warrants to purchase CleanSpark common stock, proceeds from insurance, proceeds

from the sale of common stock under the ATM Program and funding from the Payroll Protection Program.

Our cash requirements

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

The following table provides a reconciliation

of cash and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown

in the unaudited interim consolidated statement of cash flows:

September 30,

Restricted cash

Total cash and restricted cash as shown in the statement of cash flows

The full impact of the ongoing COVID-19 pandemic continues to evolve as

the date of this report.

As such, it continues to be uncertain as to the full magnitude that the pandemic will have on the Company’s

financial condition, liquidity, and future results of operations.

The Company has been able to operate substantially at capacity during

the COVID-19 pandemic.

Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers,

industry, and workforce.

Given the daily evolution of the COVID-19 pandemic and the global responses to the continuing crisis, the Company

is not able to estimate the full effects of the COVID-19 pandemic at this time, however, if the pandemic continues, it may have an adverse

effect on the Company’s results of operations, financial condition, or liquidity.

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

(the “CARES Act”) The CARES Act, among other things, appropriates funds for the SBA Paycheck Protection Program loans

that are forgivable in certain situations to promote continued employment.

On April 13, 2020, after having determined that it

met the qualifications for this loan program due to the impact that COVID-19 would have on our financial condition, results of

operations, and/or liquidity and applying for relief, the Company received a loan under the SBA Paycheck Protection Program (the

“PPP Loan”) in the amount of $1.4 million.

The Company accounted for the PPP Loan as a debt instrument in accordance

with FASB ASC 470, Debt.

the terms of the PPP Loan, the Company was eligible for full or partial loan forgiveness.

During the six months ended June 30,

2021, the Company received full forgiveness of the PPP Loan and recognized a $1.4 million gain on extinguishment and forgiveness

of debt as other income in the audited consolidated statements of operations.

Used in Operating Activities .

Cash used in our operating activities was $1.6 million during the six months

ended June 30, 2022, as compared to cash used in our operating activities of $433 during the six months ended June 30, 2021.

The full impact of the COVID-19 pandemic

and its ongoing effects continues to evolve as the date of this report.

As such, it continues to be uncertain as to the full magnitude

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

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,

its ongoing effects, and the global responses to the continuing crisis, we are not able to estimate the full effects of the COVID-19

pandemic and its ongoing effects at this time, however, if the ongoing effects of the COVID-19 pandemic continue or worsen, it

may 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, the Company received a loan under the SBA Paycheck Protection Program (the “PPP Loan”) in the

amount of $1.4 million.

The Company accounted for the PPP Loan as a debt instrument in accordance with FASB ASC 470, Debt.

Under the terms of the PPP Loan, the Company

was eligible for full or partial loan forgiveness.

During the nine months ended September 30, 2021, the Company received full forgiveness

of the PPP Loan and recognized a $1.4 million gain on extinguishment and forgiveness of debt as other income in the audited consolidated

statements of operations.

Cash Used in Operating Activities .

Cash used in our operating activities was $3.9 million during the nine months ended September 30, 2022, as compared to cash used

in our operating activities of $991 during the nine months ended September 30, 2021.

increase in cash used in operating activities is primarily due to working capital fluctuations.

Used in Investing Activities.

Cash used in investing activities during the six months ended June 30, 2022 was $174, as compared

to $62 of cash used in investing activities during the six months ended June 30, 2021.

Additions to property and equipment during

the six months ended June 30, 2022 were $198, as compared to $62 additions to property and equipment during the six months ended

June 30, 2021.

Used in Financing Activities.

Cash used in our financing activities was $119 during the six months ended

June 30, 2022, as compared to $163 during the six months ended June 30, 2021.

The primary use of cash in financing activities for the

six months ended June 30, 2022 and 2021 was repayments of financing leases.

As of June 30, 2022, we had working capital of $15.4 million, including $9.8 million of cash, compared to working

capital of $18.6 million, including $9.9 million of cash and $1.8 million of restricted cash at December 31, 2021.

of Liquidity .

At June 30, 2022, we had $9.8 million of cash on hand generated primarily from the sale of common stock under

the ATM Program during the year ended December 31, 2021.

We have met our cash needs through a combination of cash flows from operating

activities and bank borrowings, the completion of the Equity Transaction, proceeds from the sale of the CleanSpark Common Stock

and warrants to purchase CleanSpark Common Stock, proceeds from insurance, proceeds from the sale of common stock under the ATM

Program and funding from the Payroll Protection Program.

Cash Used in Investing Activities.

Cash used in investing activities during the nine months ended September 30, 2022 was $391, as compared to $156 of cash used in

investing activities during the nine months ended September 30, 2021.

Additions to property and equipment during the nine months

ended September 30, 2022 were $391, as compared to $156 additions to property and equipment during the nine months ended September

Cash Used in Financing Activities.

Cash used in our financing activities was $162 during the nine months ended September 30, 2022, as compared to $1.3 million during

the nine months ended September 30, 2021.

The primary use of cash in financing activities for the nine months ended September 30,

2022 and 2021 was repayments of financing leases and a dividend paid to shareholders, respectively.

Working Capital .

As of September

30, 2022, we had working capital of $14.2 million, including $7.2 million of cash, compared to working capital of $18.6 million,

including $9.9 million of cash and $1.8 million of restricted cash at December 31, 2021.

Assessment of Liquidity .

30, 2022, we had $7.2 million of cash on hand generated primarily from the sale of common stock under the ATM Program during the

year ended December 31, 2021.

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

borrowings, the completion of the sale of transformer business units in August 2019, proceeds from the sale of the CleanSpark common

stock and warrants to purchase CleanSpark common stock, proceeds from insurance, proceeds from the sale of common stock under the

ATM Program and funding from the Payroll Protection Program.

Our cash requirements historically were generally for operating activities,

debt repayment, capital improvements and acquisitions.

June 1, 2021, our board of directors declared a special cash dividend of $0.12 per common share, payable to shareholders of record

as of June 22, 2021, to be paid on July 7, 2021.

The cash dividends were paid in July of 2021 and equaled $0.12 per share on the

$0.001 par value common stock resulting in an aggregate distribution of approximately $1.0 million representing a capital repayment

paid from APIC.

On November 8, 2021, we sold 888,500 shares of common stock under the ATM

Program, for total gross proceeds of approximately $9.0 million, at an average price of $10.1288 per share.

We incurred approximately

$273 of costs related to the common shares issued (including a placement fee of 3.0%, or approximately $270, to H.C.

Co., LLC), resulting in net proceeds of approximately $8.7 million.

On December 13, 2021, we filed a new sales agreement prospectus supplement

related to the Registration Statement, which covers the offering, issuance and sale of up to a maximum aggregate offering price of $8.6

million of common stock that may be issued and sold under the At The Market Sale Agreement.

We did not sell any shares of common stock

under the new sales agreement prospectus supplement during the six months ended June 30, 2022.

As of June 30, 2022, $8.6 million of common

stock remained available for issuance under the ATM Program.

During the year ended December 31, 2021, we executed

a cash collateral security agreement with a commercial bank, which agreement required us to pledge cash collateral as security for all

unpaid reimbursement obligations owing to the commercial bank for an irrevocable standby letter of credit in the amount of $1.8 million.

During the first quarter of 2022, we amended our agreement with the commercial bank to decrease the required amount of cash collateral

by $1.3 million.

On May 6, 2022, we received notice that the cash collateral security agreement we had executed with the commercial bank

was cancelled.

Upon cancellation of the cash collateral security agreement, any unpaid reimbursement obligations owing to the commercial

bank were also cancelled.

On May 11, 2022, the commercial bank released and transferred the remaining cash collateral of $505.

no restricted cash on the consolidated balance sheets at June 30, 2022.

We expect to meet our cash needs with our working

capital and cash flows from our operating activities.

We expect our cash requirements to be generally for operating activities, capital

improvements and product development.

We expect that product development and promotional activities related to our new initiatives will

continue in the near future and expect to continue to incur costs related to such activities.

We expect that our cash balance is sufficient

to fund operations for the next twelve months.

of June 30, 2022, we had no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other

relationships with unconsolidated entities or other persons that had, or that may have, a material effect on our financial condition,

changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Company had $198 of additions to property and equipment during the six months ended June 30, 2022, as compared to $62 of additions

to property and equipment during the six months ended June 30, 2021.

Trends, Events, Uncertainties and Factors That May Affect Future Operations

believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors,

including the cyclical nature of the electrical equipment industry and the markets for our products and services.

Our operating

results could also be impacted by changing customer requirements and exposure to fluctuations in prices of important raw supplies,

such as copper, steel and aluminum.

We have various insurance policies, including cybersecurity, covering risks in amounts that

we consider adequate.

In addition to these measures, we attempt to recover other cost increases through improvements to our manufacturing

efficiency and through increases in prices where competitively feasible.

Lastly, other economic conditions we cannot foresee may

affect customer demand.

The impact of the ongoing COVID-19 pandemic, including the Omicron variant of COVID-19, which appears

to be the most transmissible variant to-date, and the subvariant, BA.5, is currently indeterminable and rapidly evolving, and

has affected and may continue to affect our operations and the global economy.

In addition, the consequences of the ongoing conflict

between Russia and Ukraine, including related sanctions and countermeasures, are difficult to predict, and could adversely impact

geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn

adversely affect our business and operations.

We predominately sell to customers in the industrial production and commercial construction

Accordingly, changes in the condition of any of our customers may have a greater impact than if our sales were more evenly

distributed between different end markets.

For a further discussion of factors that may affect future operating results see the

sections entitled “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and “Part

Risk Factors” in our Annual Report on Form 10-K.

On June 1, 2021, our board of directors

declared a special cash dividend of $0.12 per common share, payable to shareholders of record as of June 22, 2021, to be paid on

July 7, 2021.

The cash dividends were paid in July of 2021 and equaled $0.12 per share on the $0.001 par value common stock resulting

in an aggregate distribution of approximately $1.0 million representing a capital repayment paid from APIC.

On November 8, 2021, we sold 888,500 shares

of common stock under the ATM Program, for total gross proceeds of approximately $9.0 million, at an average price of $10.1288

We incurred approximately $273 of costs related to the common shares issued (including a placement fee of 3.0%, or approximately

$270, to H.C.

Wainwright & Co., LLC), resulting in net proceeds of approximately $8.7 million.

On December 13, 2021, we filed

a new sales agreement prospectus supplement, which forms a part of our registration statement on Form S-3 (File No.

which covers the offering, issuance and sale of up to a maximum aggregate offering price of $8.6 million of common stock that may

be issued and sold under the ATM Program.

We did not sell any shares of common stock under the new sales agreement prospectus supplement

during the nine months ended September 30, 2022.

As of September 30, 2022, $8.6 million of common stock remained available for

issuance under the ATM Program.

During the year ended December 31, 2021,

we executed a cash collateral security agreement with a commercial bank, which agreement required us to pledge cash collateral

as security for all unpaid reimbursement obligations owing to the commercial bank for an irrevocable standby letter of credit in

the amount of $1.8 million.

During the first quarter of 2022, we amended our agreement with the commercial bank to decrease the

required amount of cash collateral by $1.3 million.

On May 6, 2022, we received notice that the cash collateral security agreement

we had executed with the commercial bank was cancelled.

Upon cancellation of the cash collateral security agreement, any unpaid

reimbursement obligations owing to the commercial bank were also cancelled.

On May 11, 2022, the commercial bank released and transferred

the remaining cash collateral of $505 to us.

We had no restricted cash on the consolidated balance sheets at September 30, 2022.

We expect to meet our cash needs with our

working capital and cash flows from our operating activities.

We expect our cash requirements to be generally for operating activities,

capital improvements and product development.

We expect that product development and promotional activities related to our new

initiatives will continue in the near future and expect to continue to incur costs related to such activities.

We expect that our

cash balance is sufficient to fund operations for the next twelve months.

As of September 30, 2022, we had no off-balance

sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities

or other persons that had, or that may have, a material effect on our financial condition, changes in financial condition, revenues

or expenses, results of operations, liquidity, capital expenditures or capital resources.

Capital Expenditures

The Company had $391 of additions to property

and equipment during the nine months ended September 30, 2022, as compared to $156 of additions to property and equipment during

the nine months ended September 30, 2021.

Known Trends, Events, Uncertainties

and Factors That May Affect Future Operations

We believe that our future operating results

will continue to be subject to quarterly variations based upon a wide variety of factors, including the cyclical nature of the

electrical equipment industry and the markets for our products and services.

Our operating results could also be impacted by changing

customer requirements and exposure to fluctuations in prices of important raw supplies, such as copper, steel and aluminum.

have various insurance policies, including cybersecurity, covering risks in amounts that we consider adequate.

In addition to these

measures, we attempt to recover other cost increases through improvements to our manufacturing efficiency and through increases

in prices where competitively feasible.

Lastly, other economic conditions we cannot foresee may affect customer demand.

of the COVID-19 pandemic, including the Omicron variant of COVID-19 and the subvariant, BA.5, and the ongoing effects of COVID-19,

are currently indeterminable and rapidly evolving, and has affected and may continue to affect our operations and the global economy.

In addition, the consequences of the ongoing conflict between Russia and Ukraine, including related sanctions and countermeasures,

and the effects of rising global inflation, are difficult to predict, and could adversely impact geopolitical and macroeconomic

conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business

and operations.

We predominately sell to customers in the industrial production and commercial construction markets.

changes in the condition of any of our customers may have a greater impact than if our sales were more evenly distributed between

different end markets.

For a further discussion of factors that may affect future operating results see the sections entitled “Special

Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and “Part I - Item 1A.

Risk Factors”

in our Annual Report on Form 10-K.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis