What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 219 added, 207 removed, 144 unchanged (75% of the section changed)

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and its subsidiaries.

dollars are reported in thousands except for share and per share amounts .

Note Regarding Forward-Looking Statements

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similar public threat, or fear of such an event.

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,

2022 for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock.

associated with litigation and claims, which could impact our financial results and condition.

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

statements contained herein or risk factors that we are faced with that may cause our actual

results to differ from those anticipated in our forward-looking statements.

Moreover, new

risks regularly emerge, and it is not possible for us to predict or articulate all risks

we face, nor can we assess the impact of all risks on our business or the extent to which

any risk, or combination of risks, may cause actual results to differ from those contained

in any forward-looking statements.

Except to the extent required by applicable laws or rules,

we undertake no obligation to publicly update or revise any forward-looking statement, whether

as a result of new information, future events or otherwise.

You should review carefully the

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

Risk Factors”

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

Risk Factors” in

our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of the

foregoing and other risks that relate to our business and investing in shares of our common

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

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filed with the SEC on April 11, 2023.

There were no material changes to our accounting policies during the three months ended March 31,

There were no material changes to our accounting policies during the six months ended June 30,

OF OPERATIONS

of the Three-Month Results

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.

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our discussion and analysis of results of operations below.

summary of operating results during the three months ended March 31, 2023 and 2022 are as follows:

Three Months Ended

2022 (Revised)

T&D Solutions

Critical Power Solutions

summary of operating results during the three and six months ended June 30, 2023 and 2022 are as follows:

Power Solutions

Cost of goods sold

T&D Solutions

Critical Power Solutions

Selling, general and administrative expenses

Depreciation and amortization expense

Total operating expenses

Operating income (loss) from continuing operations

Interest income

Other (income) expense

Income (loss) before income taxes

Income tax expense

Net income (loss)

Power Solutions

general and administrative expenses

and amortization expense

operating expenses

Operating loss from continuing

Loss before income taxes

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

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or for which work has not yet begun.

At March 31, 2023, backlog from our E-Bloc power systems solutions was approximately $24.4 million,

or 66% of the total backlog.

At June 30, 2023, backlog from our E-Bloc power systems solutions was approximately $15,300, or

46% of the total backlog.

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

Critical Power Solutions

Total order backlog

Power Solutions

order backlog

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

percentages):

Three Months Ended

2022 (Revised)

T&D Solutions

Power Systems

Critical Power Solutions

Total revenue

the three months ended March 31, 2023, our consolidated revenue increased by $2.1 million, or 33.7%, to $8.5 million, up from $6.4 million

during the three months ended March 31, 2022, primarily due to an increase in sales of our power systems from our T&D Solutions segment.

During the three months ended March 31, 2023, revenue from our power systems product lines increased by $2.0 million,

or 55.2%, as compared to the three months ended March 31, 2022, 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.

For the three months ended March 31, 2023, revenue for our Critical Power segment increased by $107, or 4.1%, as compared

to the three months ended March 31, 2022, primarily due to a reduction in sales of our equipment and an increase in service sales.

Profit and Margin

the three months ended June 30, 2023, our consolidated revenue increased by $7,267, or 149.4%, to $12,130, up from $4,863 during the

three months ended June 30, 2022, primarily due to an increase in sales of our power systems from our T&D Solutions segment and an

increase in sales of our equipment from our Critical Power Solutions segment.

the six months ended June 30, 2023, our consolidated revenue increased by $9,413, or 83.9%, to $20,638, up from $11,225 during the three

months ended June 30, 2022, primarily due to an increase in sales of our power systems from our T&D Solutions segment and an increase

in service sales from our Critical Power Solutions segment.

During the three months ended June 30, 2023, revenue from our power systems product lines increased by $6,681, or 262.7%,

as compared to the three months ended June 30, 2022, primarily due to increased sales of our E-Bloc power systems and automatic transfer

switches, in addition to an increase in sales of our medium and low voltage power systems.

the six months ended June 30, 2023, revenue from our power systems product lines increased by $8,719, or 139.1%, as compared to the six

months ended June 30, 2022, primarily due to increased sales of our E-Bloc power systems and automatic transfer switches, in addition

to an increase in sales of our medium and low voltage power systems.

For the three months ended June 30, 2023, revenue for our Critical Power segment increased by $586, or 25.2%, as compared

to the three months ended June 30, 2022, primarily due to an increase in sales of our new and refurbished generation equipment.

the six months ended June 30, 2023, revenue for our Critical Power segment increased by $694, or 14.0%, as compared to the six months

ended June 30, 2022, primarily due to an increase in sales of our new and refurbished generation equipment and the cyclicality of our

preventative maintenance schedules.

Profit (Loss) and Margin

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

Three Months Ended

2022 (Revised)

T&D Solutions

Gross margin %

profit (loss)

Critical Power Solutions

Gross margin %

Consolidated gross profit

Consolidated gross margin

the three months ended March 31, 2023, our consolidated gross margin increased to 26.0% of revenues, as compared to 14.5% during three

months ended March 31, 2022.

For the three months ended March 31, 2023, our gross margin percentage increased by 15.0%, from 11.4% to 26.4%, as compared

to the three months ended March 31, 2022.

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

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

the three months ended June 30, 2023, our consolidated gross margin increased to 22.3% of revenues, as compared to 1.3% during the three

months ended June 30, 2022.

the six months ended June 30, 2023, our consolidated gross margin increased to 23.9% of revenues, as compared to 8.8% during the three

months ended June 30, 2022.

For the three months ended June 30, 2023, our gross margin percentage increased by 31.1%, from (7.0)% to 24.1%, as compared

to the three months ended June 30, 2022.

The increase was primarily due to the significant increase in sales our E-Bloc solution and

medium and low voltage power systems, a favorable sales mix and improved productivity from our manufacturing facility.

the six months ended June 30, 2023, our gross margin percentage increased by 21.1%, from 3.9% to 25.0%, as compared to the six months

ended June 30, 2022.

The increase was also primarily due to the significant increase in sales our E-Bloc solution and medium and low

voltage power systems, a favorable sales mix and improved productivity from our manufacturing facility.

Power Solutions .

For the three months ended March 31, 2023, our gross margin increased by 6.2%, to 25.1%, from 18.9% for the three

months ended March 31, 2022.

For the three months ended June 30, 2023, our gross margin increased by 6.3%, to 16.7%, from 10.4% for the three

months ended June 30, 2022.

The increase was predominately due to a favorable sales mix and the acceptance of price increases from our

the six months ended June 30, 2023, our gross margin increased by 5.9%, to 20.8%, from 14.9% for the six months ended June 30, 2022.

The increase was also predominately due to a favorable sales mix and the acceptance of price increases from our customers.

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

Three Months Ended

2022 (Revised)

T&D Solutions

Selling, general and administrative expense

Depreciation and amortization expense

Segment operating expense

general and administrative expense

and amortization expense

operating expense

Critical Power Solutions

Selling, general and administrative expense

Depreciation and amortization expense

Segment operating expense

Unallocated Corporate Overhead Expenses

Selling, general and administrative expense

Depreciation and amortization expense

Segment operating expense

Selling, general and administrative expense

Depreciation and amortization expense

Consolidated operating expense

general and administrative expense

For the three months ended March 31, 2023, consolidated selling, general and administrative expense,

before depreciation and amortization, increased by approximately $314, or 18.3%, to $2.0 million, due to an increase in payroll related

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

initiative, as compared to $1.7 million during the three months ended March 31, 2022.

As a percentage of our consolidated revenue, selling,

general and administrative expense, before depreciation and amortization, decreased to 23.9% during the three months ended March 31,

2023, as compared to 27.0% in the three months ended March 31, 2022.

and amortization expense

operating expense

Unallocated Corporate Overhead

general and administrative expense

and amortization expense

operating expense

general and administrative expense

and amortization expense

operating expense

General and Administrative Expense .

For the three months ended June 30, 2023, consolidated selling, general and administrative expense,

before depreciation and amortization, increased by approximately $502, or 19.6%, to $3,059, due to an increase in payroll related costs,

including stock-based compensation, professional fees and product development costs related to our e-Boost initiative, as compared to

$2,557 during the three months ended June 30, 2022.

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

expense, before depreciation and amortization, decreased to 25.2% during the three months ended June 30, 2023, as compared to 52.6% in

the three months ended June 30, 2022.

the six months ended June 30, 2023, consolidated selling, general and administrative expense, before depreciation and amortization, increased

by approximately $813, or 19.0%, to $5,090, due to an increase in payroll related costs, including stock-based compensation, professional

fees and product development costs related to our e-Boost initiative, as compared to $4,277 during the six months ended June 30, 2022.

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

to 24.7% during the six months ended June 30, 2023, as compared to 38.1% during the six months ended June 30, 2022.

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 March

31, 2023, consolidated depreciation and amortization expense increased by $98, or 363.0%, as compared to the three months ended March

Income (Loss)

For the three months ended June

30, 2023, consolidated depreciation and amortization expense increased by $2, or 7.1%, as compared to the three months ended June 30,

the six months ended June 30, 2023, consolidated depreciation and amortization expense increased by $102, or 188.9%, as compared to the

six months ended June 30, 2022, primarily due to an increase in depreciation as a result of placing certain e-Boost assets into service.

From Operations

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

Three Months Ended

2022 (Revised)

T&D Solutions

Critical Power Solutions

Unallocated corporate overhead expenses

Total operating income (loss)

Operating income from our T&D Solutions segment increased by $1.2 million, or 1,280.0%, during the three months ended

March 31, 2023, as compared to the three months ended March 31, 2022, primarily due an increase in sales of our power systems, a favorable

sales mix and improved productivity from our manufacturing facility the three months ended March 31, 2023.

corporate overhead expenses

from operations

Operating income from our T&D Solutions segment increased by $2,250, or 509.0%, during the three months ended June

30, 2023, as compared to the three months ended June 30, 2022, primarily due to the significant increase in sales our E-Bloc solution

and medium and low voltage power systems, a favorable sales mix and improved productivity from our manufacturing facility during the

three months ended June 30, 2023.

income from our T&D Solutions segment increased by $3,403, or 964.0%, during the six months ended June 30, 2023, as compared to the

six months ended June 30, 2022, primarily due an increase in sales of our power systems equipment, a favorable sales mix and improved

productivity from our manufacturing facility the six months ended June 30, 2023.

Power Solutions .

Operating loss for the Critical Power segment increased by $282, or 181.9% during the three months ended March 31,

2023, primarily due to an increase in consulting, marketing and promotion fees related to our e-Boost initiative during the three months

ended March 31, 2023.

Operating loss for the Critical Power segment decreased by $251, or 33.2% during the three months ended June 30,

2023, primarily due to a favorable sales mix and the acceptance of price increases from our customers during the three months ended June

loss for the Critical Power segment increased by $32, or 3.5% during the six months ended June 30, 2023, as compared to the six months

ended June 30, 2022, primarily due to an increase in payroll related costs in addition to professional fees and depreciation expense

related to our e-Boost initiative.

Corporate Expense .

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

the three months ended March 31, 2023, our unallocated corporate overhead expense decreased by $8, or 1.1%, as compared to the three

months ended March 31, 2022.

the three months ended June 30, 2023, our unallocated corporate overhead expense increased by $357, or 27.0%, as compared to the three

months ended June 30, 2022, primarily due to an increase in payroll related costs, including stock-based compensation, and professional

the three six ended June 30, 2023, our unallocated corporate overhead expense increased by $348, or 16.7%, as compared to the six months

ended June 30, 2022, primarily due to an increase in payroll related costs, including stock-based compensation, and professional fees.

Non-Operating

(Income) Expense

For the three months ended March 31, 2023, we had interest income of approximately $54, as compared to interest income of

approximately $101 during the three months ended March 31, 2022.

We generated the majority of our interest income from our cash on hand.

During the three months ended March 31, 2022, we generated the majority of our interest income from the Seller Notes we received from

the sale of the transformer business units and our cash on hand.

(Income) Expense .

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

with activities not directly related to our core operations.

the three months ended March 31, 2023, other non-operating income was $13, as compared to other non-operating expense of $11 during the

three months ended March 31, 2022.

For the three and six months ended June 30, 2023, we had interest income of approximately $79 and $132, respectively, as

compared to interest income of approximately $104 and $206, respectively, during the three and six months ended June 30, 2022.

the majority of our interest income from our cash on hand.

During the six months ended June 30, 2022, we generated the majority of our

interest income from the Seller Notes we received from the sale of the transformer business units and our cash on hand.

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

directly related to our core operations.

the three and six months ended June 30, 2023, other non-operating expense was $20 and $7, respectively, as compared to other non-operating

expense of $117 and $129, respectively, during the three and six months ended June 30, 2022.

for Income Taxes .

Our provision reflects an effective tax rate on income before taxes of 0.0% for the three months ended March 31,

2023, as compared to (1.0)% for the three months ended March 31, 2022, as set forth below:

Three Months Ended

Income (loss) before income taxes

Our effective income tax rate for the three months ended June 30, 2023 and 2022 was 0.0%.

provision reflects an effective tax rate on income before taxes of 0.0% for the six months ended June 30, 2023, as compared to (0.2)%

for the six months ended June 30, 2022, as set forth below:

Loss before income

Income tax expense

Effective income tax rate %

Income (Loss) per Share

generated a net income of $122 during the three months ended March 31, 2023, as compared to a net loss of $740 during the three months

ended March 31, 2022.

net income per basic and diluted share for the three months ended March 31, 2023 was $0.01, as compared to a net loss per basic and diluted

share of $0.08 for the three months ended March 31, 2022.

income tax rate %

Loss per Share

generated a net loss of $319 during the three months ended June 30, 2023, as compared to a net loss of $2,535 during the three months

ended June 30, 2022.

net loss per basic and diluted share for the three months ended June 30, 2023 was $0.03, as compared to a net loss per basic and diluted

share of $0.26 for the three months ended June 30, 2022.

generated a net loss of $197 during the six months ended June 30, 2023, as compared to a net loss of $3,268 during the six months ended

June 30, 2022.

net loss per basic and diluted share for the six months ended June 30, 2023 was $0.02, as compared to a net loss per basic and diluted

share of $0.34 for the six months ended June 30, 2022.

AND CAPITAL RESOURCES

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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 March 31, 2023, we had $11.6

million of cash on hand generated primarily from the sale of common stock under the ATM Program during the year ended December 31, 2021,

payment of all unpaid principal and interest from the Seller Notes during the year ended December 31, 2022 and cash flows from operating

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

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

pursuant to which we may offer and sell our shares of common stock, preferred stock, warrants and/or units of up to $25,000 from time

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

As of June 30, 2023, we had $9,624 of

cash on hand generated primarily from the sale of common stock under the ATM Program during the year ended December 31, 2021, payment

of all unpaid principal and interest from the Seller Notes during the year ended December 31, 2022 and cash flows from operating activities.

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, 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.

December 13, 2021, we filed a prospectus supplement, which forms a part of our registration statement on Form S-3 (File No.

that was declared effective 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 Program.

We did not sell any shares of common stock under the

ATM Program during the three months ended March 31, 2023.

As of March 31, 2023, $8.6 million of common stock remained available for issuance

of $8,600 of common stock that may be issued and sold under the ATM Program.

We did not sell any shares of common stock under the ATM

Program during the three and six months ended June 30, 2023.

As of June 30, 2023, $8,600 of common stock remained available for issuance

under the ATM Program.

worldwide spread of the novel coronavirus (“COVID-19”), including the emergence of variants and subvariants, as well as rising

interest rates, inflation, changes in foreign currency exchange rates and geopolitical developments (including the war in Ukraine) have

resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods

and services, including those provided by the Company’s clients, while also disrupting supply channels, sales channels and advertising

and marketing activities for an unknown period of time until economic activity normalizes.

As a result of the current uncertainty in

economic activity, the Company is unable to predict the size and duration of the impact on its revenue and its results of operations.

The extent of the impact of these macroeconomic factors on the Company’s operational and financial performance will depend on a

variety of factors, including the duration and spread of COVID-19 and its variants and the duration and the extent of geopolitical disruption

and their respective impacts on the Company’s clients, partners, industry, and employees, all of which are uncertain at this time

and cannot be accurately predicted.

The Company continues to monitor the effects of the COVID-19 pandemic and take steps deemed appropriate

to limit the impact on its business.

During the three months ended March 31, 2023, the Company was able to operate substantially at capacity.

The World Health Organization recently determined that COVID-19 no longer

fit the definition of a public health emergency, and the U.S.

government has announced that the declaration of a public health emergency

associated with COVID-19 expired on May 11, 2023.

However, COVID-19 is expected to remain a serious endemic threat for an indefinite future

The economic uncertainty caused by the COVID-19 pandemic has made and may continue to make it difficult for the Company to forecast

revenue and operating results and to make decisions regarding operational cost structures and investments.

The Company has committed,

and the Company plans to continue to commit, resources to grow its business, employee base, and technology development, and such investments

may not yield anticipated returns, particularly if worldwide business activity continues to be impacted by the COVID-19 pandemic.

duration and extent of the impact from the COVID-19 pandemic depend on future developments that cannot be accurately predicted at this

time, and if the Company is not able to respond to and manage the impact of such events effectively, its business may be harmed.

World Health Organization determined that COVID-19 no longer fit the definition of a public health emergency and the U.S.

announced that the declaration of a public health emergency associated with COVID-19 expired on May 11, 2023.

However, COVID-19 has remained

and is expected to continue to remain as a serious endemic threat for an indefinite future period and may continue to adversely affect

the global economy.

The continuing impacts of the COVID-19 endemic, as well as rising interest rates, inflation, changes in foreign currency

exchange rates and geopolitical developments (including the war in Ukraine) have resulted, and may continue to result, in a global slowdown

of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by the Company’s

clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time.

As a result of the current uncertainty in economic activity, the Company is unable to predict the potential size and duration of the

impact on its revenue and its results of operations, if any.

The extent of the potential impact of these macroeconomic factors on the

Company’s operational and financial performance will depend on a variety of factors, including the continuing impacts of the COVID-19

endemic and the extent of geopolitical disruption and their respective impacts on the Company’s clients, partners, industry, and

employees, all of which are uncertain at this time and cannot be accurately predicted.

The Company continues to monitor the effects of

these macroeconomic factors and intends to take steps deemed appropriate to limit the impact on its business.

During the six months ended

June 30, 2023, the Company was able to operate substantially at capacity.

can be no assurance that precautionary measures, whether adopted by the Company or imposed by others, will be effective, and such measures

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results of operations.

Provided by Operating Activities .

Cash provided by our operating activities was $1.5 million during the three months ended March

31, 2023, as compared to $2.1 million during the three months ended March 31, 2022.

in cash provided by operating activities is primarily due to working capital fluctuations.

Provided by / (Used in) Operating Activities .

Cash provided by our operating activities was $366 during the six months ended June

30, 2023, as compared to cash used in operating activities of $1,621 during the six months ended June 30, 2022.

increase in cash provided by operating activities is primarily due to the decrease in our net loss and working capital fluctuations.

Used in Investing Activities.

Cash used in investing activities during the three months ended March 31, 2023 was $194, as compared

to cash used in our investing activities of $112 during the three months ended March 31, 2022.

Additions to property and equipment during

the three months ended March 31, 2023 were $194, as compared to $112 additions during the three months ended March 31, 2022.

Cash used in investing activities during the six months ended June 30, 2023 was $810, as compared to

$174 during the six months ended June 30, 2022.

Additions to property and equipment during the six months ended June 30, 2023 were $810,

as compared to $174 of additions during the six months ended June 30, 2022.

Used in Financing Activities.

Cash used in our financing activities was $71 during the three months ended March 31, 2023, as compared

to $31 during the three months ended March 31, 2022.

The primary use of cash in financing activities for the three months ended March

Cash used in our financing activities was $228 during the six months ended June 30, 2023, as compared

to $119 during the six months ended June 30, 2022.

The primary use of cash in financing activities for the six months ended June 30,

2023 and 2022 was repayments of financing leases.

As of March 31, 2023, we had working capital of $14.3 million, including $11.6 million of cash on hand, compared to working

capital of $14.1 million, including $10.3 million of cash on hand at December 31, 2022.

As of June 30, 2023, we had working capital of $14,363, including $9,624 of cash on hand, compared to working capital of

$14,074, including $10,296 of cash on hand at December 31, 2022.

of Liquidity .

At March 31, 2023, we had $11.6 million of cash on hand generated primarily from the sale of common stock under the

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

ended December 31, 2022 and cash flows from operating activities.

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, 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.

At June 30, 2023, we had $9,624 of cash on hand generated primarily from the sale of common stock under the ATM Program

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

31, 2022 and cash flows from operating activities.

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, 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.

expect to meet our cash needs with our working capital and cash flows from our operating activities.

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We expect that our cash balance is sufficient to fund operations for the next twelve months.

of March 31, 2023, we had no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships

of June 30, 2023, 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 $194 of additions to property and equipment during the three months ended March 31, 2023, as compared to $112 of additions

to property and equipment during the three months ended March 31, 2022.

Company had $810 of additions to property and equipment during the six months ended June 30, 2023, as compared to $174 of additions to

property and equipment during the six months ended June 30, 2022.

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.

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 COVID-19 pandemic, including the Omicron variant of COVID-19 and the subvariant,

BA.2, 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

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.

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 continuing

impacts of the COVID-19 endemic are currently indeterminable, and has affected and may continue to affect 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 “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