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Item 7. Management’s Discussion and Analysis

2023-04-11 compared with 2022-03-31 · 386 added, 433 removed, 103 unchanged (89% of the section changed)

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

should read the following discussion and analysis of our financial condition and results of operations together with our financial

statements and related notes appearing elsewhere in this prospectus.

In addition to historical financial information, the following

discussion contains forward-looking statements that reflect our plans, estimates and beliefs.

Our actual results could differ

materially from those discussed in the forward-looking statements.

Factors that could cause or contribute to these differences

include those discussed below and elsewhere in this prospectus, particularly in the sections entitled “Risk Factors”

and “Cautionary Note Regarding Forward-Looking Statements.”

We design, manufacture, integrate, refurbish,

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

mobile EV charging solutions.

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

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.

The Company intends to grow its business

through continued internal product development and expansion of our engineering, sales and marketing personnel.

operations are divided into two reportable segments:

should read the following discussion and analysis of our financial condition and results of operations together with our financial statements

and related notes appearing elsewhere in this prospectus.

In addition to historical financial information, the following discussion contains

forward-looking statements that reflect our plans, estimates and beliefs.

Our actual results could differ materially from those discussed

in the forward-looking statements.

Factors that could cause or contribute to these differences include those discussed below and elsewhere

in this prospectus, particularly in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking

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.

intend to grow our business through continued internal investments in product development and expansion of our manufacturing, engineering,

sales and marketing personnel.

Our operations are divided into two reportable segments:

T&D Solutions segment and Critical Power segment.

Our T&D Solutions

business provides equipment solutions, including e-Bloc, that help customers effectively and efficiently protect, control, transfer,

monitor and manage their electric energy requirements.

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 PCEP brand name.

Critical Power business provides customers with our suite of mobile E-BOOST© EV charging solutions, new and refurbished 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 and Pioneer

Critical Power brand names.

On October 20, 2020, we entered into an

At the Market Offering Agreement (the “ATM Agreement”) with H.C.

Wainwright & Co., LLC (“Wainwright”),

pursuant to which we may offer and sell our shares of common stock, preferred stock, warrants and/or units of up to $25.0 million

from time to time through Wainwright, acting as sales agent or principal (the “ATM Program”).

On October 20, 2020,

we filed a registration statement on Form S-3, including a base prospectus (the “Base Prospectus”), which covers the

offering, issuance and sale by us of up to $25.0 million of our common stock, preferred stock, warrants and/or units, and a sales

agreement prospectus (the “Sales Agreement Prospectus” and, together with the Base Prospectus, the “Registration

Statement”) which covered the offering, issuance and sale by us of up to a maximum aggregate offering price of $9.0 million

of our common stock under the ATM Program.

The Registration Statement 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.

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 up to $8.6 million of common stock that may be issued and sold

under the ATM Agreement.

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 and Pioneer Critical Power brand names.

Accounting Policies

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The preparation of financial statements in accordance with generally accepted accounting principles in the U.S.

requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent

assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting

The financial statements include estimates based on currently available information and our judgment as to the outcome

of future conditions and circumstances.

Significant estimates in these financial statements include, inventory provisions, useful

lives and impairment of long-lived assets, income tax provision, stock-based compensation, and allowance for

doubtful accounts.

Changes in the status of certain facts or circumstances could result in material changes to the estimates used

in the preparation of the financial statements and actual results could differ from the estimates and assumptions.

us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets

and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions

and circumstances.

Significant estimates in these financial statements include, inventory provisions, useful lives and impairment of

long-lived assets, income tax provision, stock-based compensation, and allowance for doubtful accounts.

Changes in the status of certain

facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual

results could differ from the estimates and assumptions.

Recognition .

recognized when (1) a contract with a customer exists, (2) performance obligations promised in a contract are identified based

on the products or services that will be transferred to the customer, (3) the transaction price is determined based on the consideration

to which the Company will be entitled in exchange for transferring products or services to the customer, (4) the transaction price

is allocated to the performance obligations in the contract and (5) the Company satisfies performance obligations.

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

Revenue is recognized when (1) a contract with a customer exists, (2) performance obligations promised in a contract

are identified based on the products or services that will be transferred to the customer, (3) the transaction price is determined based

on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer, (4) the

transaction price is allocated to the performance obligations in the contract and (5) the Company satisfies performance obligations.

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

Revenue is recognized at the time the related performance

obligation is satisfied by transferring a promised product or service to a customer.

Revenue from the sale of our products is predominantly

recognized at a point in time.

Revenues are recognized at the point in time that the customer obtains control of the good which

is when it has taken title to the products and has assumed the risks and rewards of ownership specified in the purchase order or

sales agreement.

Certain sales of highly customized large equipment are recognized over time when such equipment has no alternative

use and the Company has an enforceable right to payment for performance completed to date.

Revenue for such agreements is recognized

under the input method based on cost incurred relative to the estimated cost expected to be consumed to complete the project.

revenues include maintenance contracts that are recognized over time based on the contract term and repair services which are recognized

as services are delivered.

of a products requires that the buyer obtain permission in writing from the Company.

If products are returned without such permission, the

buyer authorizes the Company, in addition to such other remedies as it may have, to hold the returned products at the buyer’s

Revenue from the sale of our electric power systems

is recognized either over time or at a point in time and substantially all of our revenue from the sale of power generation equipment

is recognized at a point in time.

Revenues are recognized at the point in time that the customer obtains control of the good which is

when it has taken title to the products and has assumed the risks and rewards of ownership specified in the purchase order or sales agreement.

Certain sales of highly customized electrical power systems are recognized over time when such equipment has no alternative use and the

Company has an enforceable right to payment for performance completed to date.

Revenue for such agreements is recognized under the input

method based on either cost or direct labor hours incurred relative to the estimated cost or direct labor hours expected to be consumed

to complete the project.

Service revenues include maintenance contracts that are recognized over time based on the contract term and

repair services which are recognized as services are delivered.

of a product requires that the buyer obtain permission in writing from the Company.

If products are returned without such permission,

the buyer authorizes the Company, in addition to such other remedies as it may have, to hold the returned products at the buyer’s

sole risk and expense.

When the buyer requests authorization to return material for reasons of their own, the buyer will be charged

for placing the returned goods in saleable condition, restocking charges and for any outgoing and incoming transportation paid by

The Company warrants title to the products, and also warrants the products on date of shipment to the buyer, to be of

the kind and quality described in the contract, merchantable, and free of defects in workmanship and material.

warranties during the years ended December 31, 2021 and 2020 were insignificant.

When the buyer requests authorization to return material for reasons of their own, the buyer will be charged for

placing the returned goods in saleable condition, restocking charges and for any outgoing and incoming transportation paid by the Company.

The Company warrants title to the products, and also warrants the products on date of shipment to the buyer, to be of the kind and quality

described in the contract, merchantable, and free of defects in workmanship and material.

Returns and warranties during the years ended

December 31, 2022 and 2021 were insignificant.

Inventories .

A substantial portion of the Company’s inventory includes raw materials and parts utilized to support the manufacturing

process at PCEP and equipment sales and service offerings at Titan.

We value inventories at the lower of cost or net realizable

If a write down to the current market value is necessary, the market value cannot be greater than the net realizable value,

which is defined as selling price less costs to complete and dispose, and cannot be lower than the net realizable value less a

normal profit margin.

We also continually evaluate the composition of our inventory and identify obsolete, slow-moving and excess

Inventory items identified as obsolete, slow-moving or excess are evaluated to determine if reserves are required.

If we were not able to achieve our expectations of the net realizable value of the inventory at current market value, we would

have to adjust our reserves accordingly.

We attempt to accurately estimate future product demand to properly adjust inventory

levels for our standard products.

However, significant unanticipated changes in demand could have a significant impact on the

value of inventory and of operating results.

A substantial portion of the Company’s inventory includes raw materials and parts utilized to support the manufacturing process

at PCEP and equipment sales and service offerings at Titan.

We value inventories at the lower of cost or net realizable value.

down to the current market value is necessary, the market value cannot be greater than the net realizable value, which is defined as

selling price less costs to complete and dispose, and cannot be lower than the net realizable value less a normal profit margin.

continually evaluate the composition of our inventory and identify obsolete, slow-moving and excess inventories.

Inventory items identified

as obsolete, slow-moving or excess are evaluated to determine if reserves are required.

If we were not able to achieve our expectations

of the net realizable value of the inventory at current market value, we would have to adjust our reserves accordingly.

We attempt to

accurately estimate future product demand to properly adjust inventory levels for our standard products.

However, significant unanticipated

changes in demand could have a significant impact on the value of inventory and of operating results.

of Long-Lived Assets .

We review long-lived assets for impairment including intangible assets with determinable useful lives

whenever events or changes in circumstances indicate that the carrying value of the corresponding asset group may not be realizable.

If an evaluation is required, the estimated future undiscounted cash flows associated with the asset group are compared to the

asset group’s carrying amount to determine if an impairment of such asset is necessary.

This requires us to make long-term

forecasts of the future revenues and costs related to the assets groups subject to review.

Forecasts require assumptions about

demand for our products and future market conditions.

Estimating future cash flows requires significant judgment, and our projections

may vary from cash flows eventually realized.

Future events and unanticipated changes to assumptions could require a provision

for impairment in a future period.

The effect of any impairment would be reflected in operating income in the Consolidated Statements

of Operations.

In addition, we estimate the useful lives of our long-lived assets and other intangibles and periodically review

these estimates to determine whether these lives are appropriate.

We review long-lived assets for impairment including intangible assets with determinable useful lives whenever

events or changes in circumstances indicate that the carrying value of the corresponding asset group may not be realizable.

If an evaluation

is required, the estimated future undiscounted cash flows associated with the asset group are compared to the asset group’s carrying

amount to determine if an impairment of such asset is necessary.

This requires us to make long-term forecasts of the future revenues

and costs related to the assets groups subject to review.

Forecasts require assumptions about demand for our products and future market

Estimating future cash flows requires significant judgment, and our projections may vary from cash flows eventually realized.

Future events and unanticipated changes to assumptions could require a provision for impairment in a future period.

The effect of any

impairment would be reflected in operating income in the Consolidated Statements of Operations.

In addition, we estimate the useful lives

of our long-lived assets and other intangibles and periodically review these estimates to determine whether these lives are appropriate.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016-02, Leases (Topic 842) , which requires, among other things, a lessee to recognize a liability representing

future lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term.

For operating

leases, a lessee will be required to recognize at inception a right-of-use asset and a lease liability equal to the net present

value of the lease payments, with lease expense recognized over the lease term on a straight-line basis.

For leases with a term

of twelve months or less, ASU 2016-02 allows a reporting entity to make an accounting policy election to not recognize a right-of-use

asset and a lease liability, and to recognize lease expense on a straight-line basis.

2016-02 is effective for fiscal

years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.

adoption, a reporting entity should apply the provisions of ASU 2016-02 at the beginning of the earliest period presented using

a modified retrospective approach, which includes certain optional practical expedients that an entity may elect to apply.

adopted this standard in our first quarter of 2018 using the modified retrospective approach.

2016-02, Leases (Topic 842) , which requires, among other things, a lessee to recognize a liability representing future lease

payments and a right-of-use asset representing its right to use the underlying asset for the lease term.

For operating leases, a lessee

will be required to recognize at inception a right-of-use asset and a lease liability equal to the net present value of the lease payments,

with lease expense recognized over the lease term on a straight-line basis.

For leases with a term of twelve months or less, ASU 2016-02

allows a reporting entity to make an accounting policy election to not recognize a right-of-use asset and a lease liability, and to recognize

lease expense on a straight-line basis.

2016-02 is effective for fiscal years beginning after December 15, 2018, including interim

periods within those fiscal years, with early adoption permitted.

Upon adoption, a reporting entity should apply the provisions of ASU

2016-02 at the beginning of the earliest period presented using a modified retrospective approach, which includes certain optional practical

expedients that an entity may elect to apply.

We adopted this standard in our first quarter of 2018 using the modified retrospective

Compensation.

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payment transactions for acquiring goods and services from nonemployees.

An entity should apply the requirements of Topic 718

to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is,

the period of time over which share-based payment awards vest and the pattern of cost recognition over that period).

The amendments

specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used

or consumed in a grantor’s own operations by issuing share-based payment awards.

The amendments also clarify that Topic

718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction

with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers.

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

Early adoption of the new guidance is permitted, but no earlier than an entity’s adoption date of Topic 606.

adopted this guidance on January 1, 2019.

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

Value Measurement.

In August 2018, the FASB issued ASU No.

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

Disclosure Framework

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

for fair value measurements.

The ASU is effective for all annual and interim periods beginning January 1, 2020, with early adoption

An entity should apply the requirements of Topic 718 to nonemployee

awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over

which share-based payment awards vest and the pattern of cost recognition over that period).

The amendments specify that Topic 718 applies

to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own

operations by issuing share-based payment awards.

The amendments also clarify that Topic 718 does not apply to share-based payments used

to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as

part of a contract accounted for under Topic 606, Revenue from Contracts with Customers.

The updated standard is effective for the Company

beginning after December 15, 2018, including interim periods within that fiscal year.

Early adoption of the new guidance is permitted,

but no earlier than an entity’s adoption date of Topic 606.

The Company adopted this guidance on January 1, 2019.

The adoption of this ASU did not have a material impact on the

consolidated financial statements.

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

of Credit Losses on Financial Instrument.

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

2016-13, Financial

Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments that changes the impairment

model for most financial assets and certain other instruments.

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

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

replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for

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

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

This amended guidance for small reporting companies

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

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

effective reporting period.

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

financial statements and related disclosures.

We account for income

taxes under the asset and liability method, based on the income tax laws and rates in the countries in which operations are conducted

and income is earned.

This approach requires the recognition of deferred tax assets and liabilities for the expected future tax

consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities using expected rates

in effect for the tax year in which the differences are expected to reverse.

Developing the provision for income taxes requires

significant judgment and expertise in federal, international and state income tax laws, regulations and strategies, including the

determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred

2016-13, Financial Instruments

– Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments that changes the impairment model for most

financial assets and certain other instruments.

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

entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred

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

For available-for-sale debt securities

with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized

as an allowance.

This amended guidance for small reporting companies is effective for fiscal years beginning after December 15, 2022,

including interim periods within those fiscal years.

Entities will apply the standard’s provisions as a cumulative-effect adjustment

to retained earnings as of the beginning of the first effective reporting period.

The Company does not expect that the amended guidance

will have a material effect on our consolidated financial statements and related disclosures.

We account for income taxes under the asset and liability method, based on the income tax laws and rates in the countries

in which operations are conducted and income is earned.

This approach requires the recognition of deferred tax assets and liabilities

for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities

using expected rates in effect for the tax year in which the differences are expected to reverse.

Developing the provision for income

taxes requires significant judgment and expertise in federal, international and state income tax laws, regulations and strategies, including

the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred

The Company has recorded a valuation allowance in the current and prior years to reduce deferred tax assets to zero.

If we were to subsequently determine that we would be able to realize deferred tax assets in the future in excess of its net recorded

amount, an adjustment to deferred tax assets would increase net income for the period in which such determination was made.

will continue to assess the adequacy of the valuation allowance on a quarterly basis.

Our judgments and tax strategies are subject

to audit by various taxing authorities.

were to subsequently determine that we would be able to realize deferred tax assets in the future in excess of its net recorded amount,

an adjustment to deferred tax assets would increase net income for the period in which such determination was made.

We will continue

to assess the adequacy of the valuation allowance on a quarterly basis.

Our judgments and tax strategies are subject to audit by various

taxing authorities.

dollar amounts (except share and per share data) presented are stated in thousands of dollars, unless otherwise noted.

may not foot due to rounding.

Amounts may not

foot due to rounding.

OF OPERATIONS

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This information,

as well as the selected financial data provided in Note 15 and our audited Consolidated Financial Statements and related

notes included in this Annual Report on Form 10-K, should be referred to when reading our discussion and analysis of results of

operations below.

Our summary of operating results during the years ended 2021 and 2020 are as follows:

For the Year Ended

as well as the selected financial data provided in Note 13 and our audited Consolidated Financial Statements and related notes included

in this Annual Report on Form 10-K, should be referred to when reading our discussion and analysis of results of operations below.

summary of operating results during the years ended 2022 and 2021 are as follows:

Year Ended December 31,

T&D Solutions

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Interest income

Loss before taxes

Income tax (benefit) expense

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

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.

order backlog at December 31, 2021 was $22.8 million, an increase of $10.1 million, or 80%, when compared to $12.7 million at

December 31, 2020.

During the year ended December 31, 2021, the Company experienced a surge in orders for its e-Bloc power system

of almost $13 million.

This was the primary driver of the 80% increase in the Company’s year over year ending backlog.

The following table represents the progression of our backlog, by reporting segment, for the periods ended as indicated:

Other expense (income)

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 or been completed.

order backlog at December 31, 2022 was $37.2 million, an increase of $14.4 million, or 63%, when compared to $22.8 million at December

During the year ended December 31, 2022, the Company experienced a surge in orders for its E-Bloc power system which was the

primary driver for the increase in the Company’s year over year ending backlog.

The following table represents the progression

of our backlog, by reporting segment, for the periods ended as indicated:

T&D Solutions

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Total order backlog

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

except percentages):

For the Year Ended

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

percentages):

T&D Solutions

Switchgear and e-Bloc power system

Power Systems

Critical Power Solutions

Total revenue

the year ended December 31, 2021, our consolidated revenue decreased by $1.2 million, or 6.0% to $18.3 million, down from $19.5

million during the year ended December 31, 2020.

During the year

ended December 31, 2021, revenue from our switchgear and e-Bloc power system product lines decreased by $773, or 7.5%, as compared

to the year ended December 31, 2020, due to a reduction in sales of our automatic transfer switches and low voltage switchgear

partially caused by delays in shipments of equipment at the end of 2021 as a result of supply chain disruptions, offset by an increase

in sales of our medium voltage switchgear.

Additionally, approximately 37% of our sales in the year ended December 31, 2021 were made to a large international

container shipping company in Hawaii.

For the year ended December 31, 2021, revenue for our equipment sales increased by $317, or 20.1%, as compared to the

prior year, mainly due to an increase in shipments and completions of larger equipment projects by our Florida division and increased

sales of our refurbished power generation equipment during the year ended December 31, 2021.

the year ended December 31, 2021, our service revenue decreased by $723, or 9.4%, as compared to the same period in the prior

year, primarily due to the cyclicality of our preventative maintenance schedules and the loss of Verizon preventive maintenance

Profit (Loss) and Gross Margin

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

For the Year Ended

For the year ended December 31, 2022, our consolidated revenue increased by $8.7 million, or 47.5% to $27.0 million, up from $18.3 million

during the year ended December 31, 2021, primarily due to an increase in sales of our power systems from our T&D Solutions segment.

During the year ended December 31, 2022, revenue from our switchgear and E-Bloc power system product lines increased by

$7.9 million, or 83.3%, as compared to the year ended December 31, 2021, primarily due to increased sales of our E-Bloc power systems,

automatic transfer switches and low voltage power systems offset by a decrease in sales of our medium voltage power systems.

Critical Power .

For the year ended December

31, 2022, revenue from our equipment sales increased by $338, or 17.9%, as compared to the year ended December 31, 2021, primarily due

to increased sales of our refurbished generation equipment.

the year ended December 31, 2022, our service revenue increased by $443, or 6.4%, as compared to the year ended December 31, 2021, primarily

due to the cyclicality of our preventative maintenance schedules.

Profit and Gross Margin

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

T&D Solutions

Gross profit (loss)

Gross margin %

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the year ended December 31, 2022, our gross margin percentage was 17.1% of revenues, compared to 7.6% during the year ended December

For the year ended December 31, 2021, our gross margin increased by 4.2%, as compared to the year ended December 31,

This increase was primarily due to the $546 write down of inventory recognized during the year ended December 31, 2020 as a

result of management’s strategic decisions to rationalize its traditional product offerings and no comparable write down of

inventory being recognized during the year ended December 31, 2021.

For the year ended December 31, 2021, our gross margin increased by 1.6%, to 15.2%, from 13.6% for the prior year,

predominately due to a reduction in overhead costs and the acceptance of price increases from our customers.

the year ended December 31, 2021, we experienced an increase in raw material and labor costs which applied downward pressure on

our consolidated gross margin.

For the year ended December 31, 2022, our gross margin increased by 16.6%, to 17.2%, from 0.6% for the year ended December

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 year ended December 31, 2022, our gross margin increased by 1.5%, to 16.7%, from 15.2% for the year ended December

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

For the Year Ended

Ended December 31,

T&D Solutions

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Consolidated operating expense

General and Administrative Expense .

For the year ended December 31, 2021, consolidated selling, general and administrative

expense, before depreciation and amortization, increased by approximately $120, or 2.4%, to $5.1 million, as compared to $5.0

million during the year ended December 31, 2020.

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

expense increased to 28.1% in 2021, as compared to 25.8% in the year ended December 31, 2020.

selling, general and administrative expense in our T&D Solutions segment decreased by $417, or 27.5%, during the year ended

December 31, 2021, as compared to the year ended December 31, 2020, primarily due to a reduction in professional fees related

to the Myers Power Case, which was settled during the year ended December 31, 2020, offset by an increase in payroll related expenses,

product development fees, bad debt expense and third party commissions during the year ended December 31, 2021.

selling, general and administrative expense in our Critical Power segment increased by $36, or 2.2%, during the year ended December

31, 2021, as compared to the year ended December 31, 2020, primarily due to product development fees recording during the year

ended December 31, 2021 and no product development fees being recognized during the year ended December 31, 2020.

selling, general and administrative expense in our unallocated corporate overhead expenses increased by $501, or 26.5%,

during the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to an increase in

stock-based compensation and payroll related expenses, investor relations and public reporting fees and business travel

related costs.

Additionally, we recognized a recovery of a receivable that was previously written off during the year ended

December 31, 2020, and no comparable recovery of a receivable was recognized during the year ended December 31,

Depreciation and amortization expense included in selling, general and administrative expense in the Company’s consolidated statement

of operations have been disclosed as a separate component of operating expense in the tables above.

Selling, General and Administrative Expense .

For the year ended December 31, 2022, consolidated selling, general and administrative expense, before depreciation and amortization,

increased by approximately $3.4 million, or 64.3%, to $8.6 million, as compared to $5.3 million during the year ended December 31, 2021.

As a percentage of our consolidated revenue, selling, general and administrative expense increased to 31.3% in the year ended December

31, 2022, as compared to 28.1% in the year ended December 31, 2021.

selling, general and administrative expense in our T&D Solutions segment increased by $98, or 8.9%, during the year ended December

31, 2022, as compared to the year ended December 31, 2021, primarily due to an increase in payroll related costs and product development

costs related to our E-Bloc initiative.

selling, general and administrative expense in our Critical Power segment increased by $1.8 million, or 108.7%, during the year ended

December 31, 2022, as compared to the year ended December 31, 2021, primarily due to an increase in payroll related costs and product

development and promotional costs related to our e-Boost initiative.

selling, general and administrative expense in our unallocated corporate overhead expenses increased by $1.4 million, or 58.4%, during

the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to an increase in stock-based compensation

and payroll related costs, commercial insurance premiums and business travel related costs.

and Amortization Expenses .

2 unchanged sentences

For the year ended December 31,

2021, consolidated depreciation and amortization expense decreased by $30, or 21.9%, as compared to the year ended December 31, 2020

primarily due to a reduction in depreciation expense as a result of fixed assets having become fully depreciated during the year

ended December 31, 2021, while such assets incurred depreciation expense for the full year ended December 31, 2020.

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

For the Year Ended

2022, consolidated depreciation and amortization expense increased by $84, or 78.5%, as compared to the year ended December 31, 2021.

Income (Loss)

following table represents our operating income (loss) by reportable segment for the periods indicated:

Year Ended December 31,

T&D Solutions

2 unchanged sentences

Total operating loss

Operating loss from our T&D Solutions segment decreased by $874, or 45.2%, in the year ended December

31, 2021, as compared to the year ended December 31, 2020, primarily due to the $546 write down of inventory recognized during

the year ended December 31, 2020 and no write down of inventory being recognized during the year ended December 31, 2021, and

a reduction in professional fees related to the Myers Power Case, which was settled during the year ended December 31, 2020.

Operating loss from our Critical Power segment decreased by $45, or 10.5%, during the year ended December 31, 2021,

primarily due to the acceptance of price increases from our customers and a reduction in overhead costs which strengthened our

margins on sales of equipment and service.

Operating income from our T&D Solutions segment increased by $2.8 million, or 268.3%, during the year ended December

31, 2022, as compared to the year ended December 31, 2021, primarily due an increase in sales of our power systems, a favorable sales

mix and improved productivity from our manufacturing facility during the year ended December 31, 2022.

Operating loss from our Critical Power segment increased by $1.6 million, or 420.3%, during the year ended December 31, 2022,

primarily due to 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 year ended

December 31, 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.

During the year ended December 31, 2021, our unallocated

corporate overhead expense increased by $497, or 25.9%, as compared to the year ended December 31, 2020, primarily due to an

increase in stock-based compensation and payroll related expenses, investor relations and public reporting fees and business

travel related costs.

Additionally, we recognized a recovery of a receivable that was previously written off during the year

ended December 31, 2020, and no comparable recovery of a receivable was recognized during the year ended December 31,

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 year ended December 31, 2022, our unallocated corporate overhead expense increased by $1.4 million, or 57.6%, as compared to the

year ended December 31, 2021, primarily due to an increase in payroll related expenses, including stock-based compensation, commercial

insurance premiums and business travel related costs.

Non-Operating

Interest Income .

For the year ended

December 31, 2021, we had interest income of approximately $387, as compared to interest income of approximately $334 during the

year ended December 31, 2020.

We generate the majority of our interest income from the Seller

Notes received from the sale of the transformer business units in August 2019 and our cash on hand.

Other income in the consolidated statements of operations reports certain gains and losses associated with activities not

directly related to our core operations.

For the year ended December 31, 2021, other non-operating income was $1.3 million, as compared

to $969 during the year ended December 31, 2020.

(Income) Expense

For the year ended December 31, 2022, we had interest income of approximately $465, as compared to interest income of approximately

$387 during the year ended December 31, 2021.

We generated 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 consolidated statements of operations reports certain gains and losses associated

with activities not directly related to our core operations.

the year ended December 31, 2022, other non-operating expense was $67, as compared to other non-operating income of $1.3 million

during the year ended December 31, 2021.

For the year ended December 31, 2021, included in other income was a gain of $1.4 million

for the extinguishment and forgiveness of the PPP Loan, and for the year ended December 31, 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 right to receive 175,000 shares of CleanSpark Common

Stock converted from the issued and outstanding shares of PCPI, and warrants to purchase CleanSpark Common Stock.

for the extinguishment and forgiveness of the PPP Loan.

for Income Taxes .

1 unchanged sentence

as compared to 0.7% for the year ended December 31, 2021, as set forth below:

For the Year Ended

Year Ended December 31,

Loss before income taxes

Income tax (benefit) expense

Income tax expense (benefit)

Effective income tax rate %

Loss per Share

generated a net loss of $2.2 million for the year ended December 31, 2021, as compared to a net loss of $3.0 million

during the year ended December 31, 2020.

generated a net loss of $3.6 million for the year ended December 31, 2022, as compared to a net loss of $2.2 million during the year

ended December 31, 2021.

net loss per basic and diluted share for the year ended December 31, 2022 was $0.37, compared to $0.24 for the year ended December 31,

AND CAPITAL RESOURCES

As of December 31, 2021,

we had $9.9 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 historically 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 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 consolidated statement of cash flows:

On October 20, 2020, we entered into

an At the Market Sale Agreement with H.C.

Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell

our shares of common stock, preferred stock, warrants and/or units of up to $25.0 million from time to time through Wainwright, acting

as sales agent or principal (the “ATM Program”).

As of December 31, 2022, we had $10.3 million of cash on hand generated primarily

from the sale of common stock under the ATM Program during the year ended December 31, 2021 and payment of all unpaid principal and interest

from the Seller Notes during the year ended December 31, 2022.

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

activities and bank borrowings, proceeds from the sale of the CleanSpark Common Stock and warrants to purchase CleanSpark Common Stock,

proceeds from insurance, the sale of common stock under the ATM Program, funding from the Payroll Protection Program and collecting all

unpaid principal and interest from the Seller Notes.

Our cash requirements historically were generally for operating activities, 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 consolidated statement of cash flows:

Restricted cash

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

the first quarter of 2021, the Company 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.

As a result of executing the cash collateral security agreement, the Company

recognized approximately $1.8 million of restricted cash within the consolidated balance sheet at December 31, 2021.

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

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

point of origin.

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

based on the rapid increase in exposure globally.

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

As such, it is uncertain as to the full magnitude

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

year ended December 31, 2021, the Company 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, 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 continue to 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.

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.

We were 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, 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.

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 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

as other income in the audited consolidated statements of operations.

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 as other income

in the audited consolidated statements of operations.

Used in Operating Activities .

1 unchanged sentence

compared to cash used in our operating activities of $3.2 million during the year ended December 31, 2021.

decrease in cash used in operating activities is primarily due to working capital fluctuations and a one-time settlement payment (in

an amount that did not differ significantly from the $1.2 million of expected costs the Company had recognized as a legal contingency

during the year ended December 31, 2018) that was made during the year ended December 31, 2020, and a one-time $1.4 million gain on the

extinguishment and forgiveness of the PPP Loan recognized during the year ended December 31, 2021.

Cash Used in / Provided by Investing

Cash used in investing activities during the year ended December 31, 2021 was $237, as compared to cash provided

by our investing activities of $2.6 million during the year ended December 31, 2020.

The decrease in cash provided by investing

activities is primarily due to the recognition of $2.4 million of proceeds from the sale of the CleanSpark Common Stock and warrants

during the year ended December 31, 2020, and no comparable proceeds being recognized during the year ended December 31, 2021.

the year ended December 31, 2021, additions to our property, plant and equipment were $237.

Cash Provided by Financing Activities.

Cash provided by our financing activities was $6.7 million during the year

ended December 31, 2021, as compared to cash provided by our financing activities of $337 during the year ended December 31, 2020.

primary source of cash provided by financing activities for the year ended December 31, 2021 were the net proceeds from the issuance of

common stock in November 2021 under the ATM Program, offset by cash used in financing activities as a result of recognizing a dividend

paid to shareholders of $1.0 million.

As of December 31, 2021, we had working capital of $18.6 million, including $9.9 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.

31, 2021 and December 31, 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.

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

Provided by/ Used in Investing Activities.

Cash provided by investing activities during the year ended December 31, 2022 was $4.7

million, as compared to cash used in our investing activities of $237 during the year ended December 31, 2021.

The increase in cash provided

by investing activities is primarily due to collecting all unpaid principal and interest from the Seller Notes.

During the year ended

December 31, 2022 and 2021, additions to our property and equipment were $1.5 million and $237, respectively.

Used in/ Provided by Financing Activities.

Cash used in our financing activities was $353 during the year ended December 31, 2022,

as compared to cash provided by our financing activities of $7.6 million during the year ended December 31, 2021.

The primary source

of cash provided by financing activities for the year ended December 31, 2021 was the net proceeds from the issuance of common stock

in November 2021 under the ATM Program, offset by cash used in financing activities as a result of recognizing a dividend paid to shareholders

of $1.0 million.

As of December 31, 2022, we had working capital of $14.1 million, including $10.3 million of cash, compared to working capital

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

At December 31, 2022

and December 31, 2021, 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.

Assessment of Liquidity .

31, 2021, we had $9.9 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 historically 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 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.

At December 31, 2022,

we had $10.3 million of cash on hand generated primarily from the sale of common stock under the ATM Program during the year ended December

31, 2021 and payment of all unpaid principal and interest from the Seller Notes during the year ended December 31, 2022.

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, sale

of common stock under the ATM Program, funding from the Payroll Protection Program and collecting all unpaid principal and interest from

the Seller Notes.

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

$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 net proceeds of approximately $8.7 million.

Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments”.

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.

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

On November 10, 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.

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.

On December 13, 2021, we filed a prospectus supplement, which forms a part of

our registration statement on Form S-3 (File No.

333-249569), that was declared effected by the SEC on October 27, 2020, in connection

with the offer and sale of up to an aggregate offering amount of $8.6 million of common stock that may be issued and sold under the ATM

We did not sell any shares of common stock under the ATM Program during the year ended December 31, 2022.

As of December 31,

2022, $8.6 million of common stock remained available for issuance under the ATM Program.

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 December 31, 2022.

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 we 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.

January 1, 2022, in the next 12 months, we have contractual lease obligations representing approximately $920.

We have historically funded

these obligations by a combination of cash flow from operations and the raising of capital through additional debt or equity.

In addition, beginning in January 2023, we have contractual

lease obligations representing an aggregate of approximately $908.

We intend to fund the majority of these obligations by a combination

of cash flow from operations, as well as the raising of capital through additional debt or equity.

additions to property, plant and equipment were $237 during the year ended December 31, 2021 as compared to no additions during

the year ended December 31, 2020.

Known 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.

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

“Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

of December 31, 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.

additions to property and equipment were $1.5 million during the year ended December 31, 2022 as compared to $237 additions during the

year ended December 31, 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.

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 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.

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.

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 “Risk Factors” and “Cautionary Note Regarding

Forward-Looking Statements.”

Balance Sheet Transactions and Related Matters

have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with

unconsolidated entities or other persons that have, or 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.

have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated

entities or other persons that have, or 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.

Accounting Pronouncements

information required by this Item is provided in “Note 2 - Summary of Significant Accounting Policies” to our audited

financial statements for the year ended December 31, 2021 included in this Annual Report on Form 10-K.

information required by this Item is provided in “Note 2 - Summary of Significant Accounting Policies” to our audited financial

statements for the year ended December 31, 2022 included in this Annual Report on Form 10-K.

Accounting Pronouncements

1 unchanged sentence

financial statements.

In December 2019, the FASB issued ASU No.

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

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

guidance to improve consistent application.

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

with early adoption permitted.

The Company adopted this guidance on January 1, 2021.

The adoption of this ASU did not have a material

impact on the consolidated financial statements.

Value Measurement.

In August 2018, the FASB issued ASU No.

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

Disclosure Framework

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

for fair value measurements.

The Company adopted this guidance on January 1, 2020.

The adoption of this ASU did not have a material

impact on the consolidated financial statements.

of Credit Losses on Financial Instrument.

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

2016-13, Financial

Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments that changes the impairment

model for most financial assets and certain other instruments.

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

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

replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for

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

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

This amended guidance for small reporting companies

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

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

effective reporting period.

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

financial statements and related disclosures.

2016-13, Financial Instruments

- Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments that changes the impairment model for most financial

assets and certain other instruments.

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

entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred

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

For available-for-sale debt securities

with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized

as an allowance.

This amended guidance for small reporting companies is effective for fiscal years beginning after December 15, 2022,

including interim periods within those fiscal years.

Entities will apply the standard’s provisions as a cumulative-effect adjustment

to retained earnings as of the beginning of the first effective reporting period.

The Company does not expect that the amended guidance

will have a material effect on our consolidated financial statements and related disclosures.

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-K

Item 7. Management’s Discussion and Analysis