PIONEER POWER SOLUTIONS, INC. 10-Q

ITEM 1A. RISK FACTORS A description of the risks associated with our business, financial condition and results of operations is set forth in “Item 1A. Risk Factors” of our annual report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 31, 2022, and are supplemented with the following additional and revised risk factors: We currently derive a significant portion of our revenues from a few customers. Material or significant loss of business from these customers could have an adverse effect on our business, financial condition and operating results. We currently derive a large portion of our revenues from a few customers, and material or significant loss of business from these customers could have a significant impact on our results of operations. As of September 30, 2022, three customers accounted for approximately 51% of our sales: CleanSpark accounted for approximately 8%, which were revenues recorded prior to the termination of the Distribution Agreement on June 3, 2022; Enchanted Rock, LLC became one of our largest customers following the termination of the Distribution Agreement and accounted for approximately 31%; and a utility company based in California accounted for approximately 12%. Enchanted Rock, LLC constitutes a large portion of our business, and material or significant loss of business from this customer could have an adverse effect on our business, financial condition and operating results. We have identified a material weakness in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting or effective disclosure controls, this could have a material adverse effect on our business . As discussed in Item 4 “Controls and Procedures”, we concluded there is a material weakness of our internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. We cannot assure you that we will be able to remediate our existing material weakness in a timely manner, if at all, or that in the future additional material weaknesses will not exist, reoccur or otherwise be discovered, a risk that is significantly increased in light of the complexity of our business. If our efforts to remediate these material weaknesses, as described in Item 4 “Controls and Procedures”, are not successful or if other deficiencies occur, our ability to accurately and timely report our financial position, results of operations, cash flows or key operating metrics could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements or other corrective disclosures. Additional impacts could include a decline in our stock price, suspension of trading or delisting of our common stock by the Nasdaq Capital Market, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity. Furthermore, if we continue to have this existing material weakness, other material weaknesses or significant deficiencies in the future, it could create a perception that our financial results do not fairly state our financial condition or results of operations. Any of the foregoing could have an adverse effect on the value of our stock. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. 29 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.