PIONEER POWER SOLUTIONS, INC. 10-Q

Item 1. FINANCIAL STATEMENTS PIONEER POWER SOLUTIONS, INC. Consolidated Statements of Operations (In thousands, except for share and per share amounts) (Unaudited) 2023 2022 (Revised) 2023 2022 (Revised) Three Months Ended Six Months Ended June 30, June 30, 2023 2022 (Revised) 2023 2022 (Revised) Revenues $ 12,130 $ 4,863 $ 20,638 $ 11,225 Cost of goods sold 9,419 4,800 15,714 10,239 Gross profit 2,711 63 4,924 986 Operating expenses Selling, general and administrative 3,089 2,585 5,246 4,331 Total operating expenses 3,089 2,585 5,246 4,331 Loss from operations ( 378 ) ( 2,522 ) ( 322 ) ( 3,345 ) Interest income ( 79 ) ( 104 ) ( 132 ) ( 206 ) Other expense, net 20 117 7 129 Loss before income taxes ( 319 ) ( 2,535 ) ( 197 ) ( 3,268 ) Income tax expense - - - 7 Net loss $ ( 319 ) $ ( 2,535 ) $ ( 197 ) $ ( 3,275 ) Loss per share: Basic $ ( 0.03 ) $ ( 0.26 ) $ ( 0.02 ) $ ( 0.34 ) Diluted $ ( 0.03 ) $ ( 0.26 ) $ ( 0.02 ) $ ( 0.34 ) Weighted average common shares outstanding: Basic 9,908,434 9,727,878 9,838,989 9,684,610 Diluted 9,908,434 9,727,878 9,838,989 9,684,610 The accompanying notes are an integral part of these consolidated financial statements. 1 PIONEER POWER SOLUTIONS, INC. Consolidated Balance Sheets (In thousands, except for share amounts) 2023 2022 June 30, December 31, 2023 2022 (Unaudited) ASSETS Current assets Cash $ 9,624 $ 10,296 Accounts receivable, net 5,835 11,139 Inventories 8,457 8,748 Prepaid expenses and other current assets 2,625 2,853 Total current assets 26,541 33,036 Property and equipment, net 2,383 1,800 Operating lease right-of-use assets 1,110 1,450 Financing lease right-of-use assets 523 727 Other assets 138 162 Total assets $ 30,695 $ 37,175 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued liabilities $ 6,791 $ 7,239 Current portion of operating lease liabilities 733 703 Current portion of financing lease liabilities 192 355 Deferred revenue 4,462 10,665 Total current liabilities 12,178 18,962 Operating lease liabilities, non-current portion 423 797 Financing lease liabilities, non-current portion 353 418 Other long-term liabilities 57 65 Total liabilities 13,011 20,242 Stockholders’ equity Preferred stock, $ 0.001 par value, 5,000,000 shares authorized; none issued - - Common stock, $ 0.001 par value, 30,000,000 shares authorized; 9,994,545 and 9,644,545 shares issued and outstanding on June 30, 2023 and December 31, 2022, respectively 10 10 Additional paid-in capital 33,821 32,859 Accumulated other comprehensive income - 14 Accumulated deficit ( 16,147 ) ( 15,950 ) Total stockholders’ equity 17,684 16,933 Total liabilities and stockholders’ equity $ 30,695 $ 37,175 The accompanying notes are an integral part of these consolidated financial statements. 2 PIONEER POWER SOLUTIONS, INC. Consolidated Statements of Cash Flows (In thousands) (Unaudited) 2023 2022 (Revised) Six Months Ended June 30, 2023 2022 (Revised) Operating activities Net loss $ ( 197 ) $ ( 3,275 ) Adjustments to reconcile net loss to net cash provided by/ (used in) operating activities: Depreciation 227 73 Amortization of right-of-use financing leases 205 124 Amortization of imputed interest - ( 214 ) Amortization of right-of-use operating leases 340 328 Change in receivable reserves 44 ( 141 ) Stock-based compensation 962 716 Other ( 13 ) - Changes in current operating assets and liabilities: Accounts receivable 5,283 ( 2,642 ) Inventories 291 ( 3,987 ) Prepaid expenses and other assets 224 ( 67 ) Income taxes ( 4 ) 27 Accounts payable and accrued liabilities ( 449 ) 1,796 Deferred revenue ( 6,204 ) 5,966 Operating lease liabilities ( 343 ) ( 325 ) Net cash provided by/ (used in) operating activities 366 ( 1,621 ) Investing activities Purchases of property and equipment ( 810 ) ( 174 ) Net cash used in investing activities ( 810 ) ( 174 ) Financing activities Net proceeds from the exercise of options for common stock - 17 Principal repayments of financing leases ( 228 ) ( 136 ) Net cash used in financing activities ( 228 ) ( 119 ) Decrease in cash ( 672 ) ( 1,914 ) Cash, beginning of period 10,296 11,699 Cash, end of period $ 9,624 $ 9,785 Non-cash investing and financing activities: Acquisition of right-of-use assets and lease liabilities $ - $ 551 The accompanying notes are an integral part of these consolidated financial statements. 3 PIONEER POWER SOLUTIONS, INC. Consolidated Statements of Stockholders’ Equity (In thousands, except for share amounts) (Unaudited) Shares Amount capital income deficit equity Accumulated Common Stock Additional paid-in other compre- hensive Accumulated Total stockholders’ Shares Amount capital income deficit equity Balance - March 31, 2022 (revised) 9,644,545 $ 10 $ 31,914 $ 14 $ ( 13,052 ) $ 18,886 Net loss - - - - ( 2,535 ) ( 2,535 ) Stock-based compensation - - 659 - - 659 Balance - June 30, 2022 (revised) 9,644,545 $ 10 $ 32,573 $ 14 $ ( 15,587 ) $ 17,010 Balance - March 31, 2023 9,769,545 $ 10 $ 33,002 $ - $ ( 15,828 ) $ 17,184 Net loss - - - - ( 319 ) ( 319 ) Stock-based compensation 225,000 - 819 - - 819 Balance - June 30, 2023 9,994,545 $ 10 $ 33,821 $ - $ ( 16,147 ) $ 17,684 Accumulated Common Stock Additional paid-in other compre- hensive Accumulated Total stockholders’ Shares Amount capital income deficit equity Balance - January 1, 2022 9,640,545 $ 10 $ 31,840 $ 14 $ ( 12,312 ) $ 19,552 Net loss - - - - ( 3,275 ) ( 3,275 ) Stock-based compensation - - 716 - - 716 Exercise of stock options 4,000 - 17 - - 17 Balance - June 30, 2022 (revised) 9,644,545 $ 10 $ 32,573 $ 14 $ ( 15,587 ) $ 17,010 Balance - January 1, 2023 9,644,545 $ 10 $ 32,859 $ 14 $ ( 15,950 ) $ 16,933 Balance 9,644,545 $ 10 $ 32,859 $ 14 $ ( 15,950 ) $ 16,933 Net loss - - - - ( 197 ) ( 197 ) Stock-based compensation 350,000 - 962 - - 962 Other - - - ( 14 ) - ( 14 ) Balance - June 30, 2023 9,994,545 $ 10 $ 33,821 $ - $ ( 16,147 ) $ 17,684 Balance 9,994,545 $ 10 $ 33,821 $ - $ ( 16,147 ) $ 17,684 The accompanying notes are an integral part of these consolidated financial statements. 4 PIONEER POWER SOLUTIONS, INC. Notes to Unaudited Consolidated Financial Statements for the Quarterly Period Ended June 30, 2023 (in thousands, except for share and per share amounts) 1. BUSINESS ORGANIZATION, NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES Pioneer Power Solutions, Inc. and its wholly owned subsidiaries (referred to herein as the “Company,” “Pioneer,” “we,” “our” and “us”) 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. The Company is headquartered in Fort Lee, New Jersey and operates from three ( 3 ) additional locations in the U.S. for manufacturing, service and maintenance, engineering, sales and administration. We have two reportable segments as defined in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on April 11, 2023: Transmission and Distribution Solutions (“T&D Solutions”) and Critical Power Solutions (“Critical Power”). Presentation The accompanying unaudited interim consolidated financial statements of the Company have been prepared pursuant to the rules of the SEC and reflect the accounts of the Company as of June 30, 2023. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), have been condensed or omitted pursuant to those rules and regulations. We believe that the disclosures made are adequate to make the information presented not misleading to the reader. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included. The results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year. The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP for a year-end balance sheet. All dollar amounts (except share and per share data) presented in the notes to our unaudited interim consolidated financial statements are stated in thousands of dollars, unless otherwise noted. Amounts may not foot due to rounding. ASC 740-270 requires the use of an estimated annual effective tax rate to compute the tax provision during an interim period unless certain exceptions are met. We have used a discrete-period computation method to calculate taxes for the fiscal three and six-month period ended June 30, 2023. The Company anticipates that its annual effective tax rate will be 0 % for the year ending December 31, 2023. As of June 30, 2023, the Company continues to provide a 100 % valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized. These unaudited interim consolidated financial statements include the accounts of Pioneer and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These unaudited interim consolidated financial statements should be read in conjunction with the risk factors under the heading “Part II - Item 1A. Risk Factors” and the risk factors and the audited consolidated financial statements and notes thereto of the Company and its subsidiaries included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Liquidity The accompanying financial statements have been prepared on a basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, as of June 30, 2023, the Company had $ 9,624 of cash on hand and working capital of $ 14,363 . The cash on hand was generated primarily from the sale of common stock under the ATM Program (as defined below) during the year ended December 31, 2021 and payment of all unpaid principal and interest from the two subordinated promissory notes we received in connection with the sale of the transformer business units in August 2019 for an aggregate principal amount of $ 7,500 (the “Seller Notes”) during the year ended December 31, 2022. 5 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, 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. 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, product development and capital improvements. The Company expects that its current cash balance is sufficient to fund operations for the next twelve months. 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 effective by the SEC on October 27, 2020, in connection with the offer and sale of up to an aggregate offering amount 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 six months ended June 30, 2023. As of June 30, 2023, $ 8,600 of common stock remained available for issuance under the ATM Program. Risks and Uncertainties The World Health Organization determined that COVID-19 no longer fit the definition of a public health emergency and the U.S. government 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes in the Company’s accounting policies during the second quarter of 2023. Recent Accounting Pronouncements There have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on the Company’s financial statements. Accounting Standards Update (“ASU”) 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force (“EITF”) Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock.” ASU 2023-03 amends the ASC for SEC updates pursuant to SEC Staff Accounting Bulletin No. 120; SEC Staff Announcement at the March 24, 2022 EITF Meeting; and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. These updates were immediately effective and did not have a significant impact on our financial statements. 6 Accounts Receivable On January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” using a modified retrospective approach. The standard amends several aspects of the measurement of credit losses related to certain financial instruments, including the replacement of the existing incurred credit loss model and other models with the current expected credit losses model. The cumulative effect of adoption did not result in an adjustment to the allowance for credit loss, and accordingly, the Company’s accumulated deficit as of January 1, 2023. The Company accounts for trade receivables at original invoice amount less an estimate made for expected credit losses. The Company’s allowance for expected credit losses on accounts receivable reflects management’s estimate of credit losses over the remaining expected life of such assets, measured primarily using historical experience, as well as current conditions and forecasts that affect the collectability of the reported amount. There were no allowances for expected credit losses as of June 30, 2023 and December 31, 2022. 3. REVENUES Nature of our products and services Our principal products and services include electric power systems, distributed energy resources, power generation equipment and mobile EV charging solutions. Products Our T&D Solutions business provides electric power systems and distributed energy resources that help customers effectively and efficiently protect, control, transfer, monitor and manage their electric energy requirements. Our Critical Power business provides customers with our suite of mobile e-Boost electric vehicle charging solutions and power generation equipment. Services Power generation systems represent considerable investments that require proper maintenance and service in order to operate reliably during a time of emergency. Our power maintenance programs provide preventative maintenance, repair and support service for our customers’ power generation systems. Our principal source of revenue is derived from sales of products and fees for services. We measure revenue based upon the consideration specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Customers typically receive the benefit of our products when the risk of loss or control for the product transfers to the customer and for services as they are performed. Under ASC 606, revenue is recognized when a customer obtains control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services. 7 During the three months ended June 30, 2023, the Company recognized $ 2,467 of revenue over time and incurred costs of $ 2,103 . During the three months ended June 30, 2022, the Company recognized $ 574 of revenue over time and incurred costs of $ 592 . Additionally, the Company recognized $ 7,773 and $ 2,432 of revenue at a point in time from the sale of our products during the three months ended June 30, 2023 and 2022, respectively. 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. The Company recognized $ 1,890 and $ 1,857 of service revenue during the three months ended June 30, 2023 and 2022, respectively. During the six months ended June 30, 2023, the Company recognized $ 3,128 of revenue over time and incurred costs of $ 2,652 . During the six months ended June 30, 2022, the Company recognized $ 900 of revenue over time and incurred costs of $ 870 . Additionally, the Company recognized $ 13,558 and $ 6,934 of revenue at a point in time from the sale of our products during the six months ended June 30, 2023 and 2022, respectively. 8 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. The Company recognized $ 3,952 and $ 3,391 of service revenue during the six months ended June 30, 2023 and 2022, respectively. During the three months ended June 30, 2023, the Company recognized approximately $ 3,285 of revenue that was recognized as deferred revenue at December 31, 2022, as compared to $ 214 of revenue during the three months ended June 30, 2022 that was recognized as deferred revenue at December 31, 2021. During the six months ended June 30, 2023, the Company recognized approximately $ 7,794 of revenue that was recognized as deferred revenue at December 31, 2022, as compared to $ 2,056 of revenue during the six months ended June 30, 2022 that was recognized as deferred revenue at December 31, 2021. The Company manages its accounts receivable credit risk by performing credit evaluations and monitoring amounts due from the Company’s customers. The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable. As of June 30, 2023, two customers represented approximately 60 % and 16 % of the Company’s accounts receivable. At December 31, 2022, three customers represented approximately 57 %, 13 % and 11 % of the Company’s accounts receivable. For the three months ended June 30, 2023, one customer represented approximately 63 % of the Company’s revenue. For the three months ended June 30, 2022, two customers represented approximately 35 % and 11 % of the Company’s revenue. For the six months ended June 30, 2023, two customers represented approximately 57 % and 10 % of the Company’s revenue. For the six months ended June 30, 2022, three customers represented approximately 18 %, 16 % and 13 % of the Company’s revenue. Return of a product requires that the buyer obtain permission in writing from the Company. 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 three and six months ended June 30, 2023 and 2022 were insignificant. The following table presents our revenues disaggregated by revenue discipline: SCHEDULE OF REVENUE DISAGGREGATED 2023 2022 (Revised) 2023 2022 (Revised) Three Months Ended Six Months Ended June 30, June 30, 2023 2022 (Revised) 2023 2022 (Revised) Products $ 10,240 $ 3,006 $ 16,686 $ 7,834 Services 1,890 1,857 3,952 3,391 Total revenue $ 12,130 $ 4,863 $ 20,638 $ 11,225 See “Note 10 - Business Segment and Geographic Information”. 9 4. REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS In connection with the preparation of our consolidated interim financial statements for the quarter ended September 30, 2022, we completed an analysis of one of our customer contracts under ASC 606 and, as a result, we determined that the performance obligations are satisfied over time. See “Note 3 – Revenues in Notes to Consolidated Financial Statements” in Part I of this Quarterly Report on Form 10-Q. As a result of the analysis, we identified additional revenues to be recognized of $ 574 and $ 900 related to the three and six months ended June 30, 2022, respectively, along with the additional related cost of revenues of $ 592 and $ 870 , respectively. The following tables reconcile the balances as previously reported in the Quarterly Reports on Form 10-Q as of and for the three and six months ended June 30, 2022 to the as revised balances: SCHEDULE OF PRIOR PERIOD FINANCIAL STATEMENTS Condensed Consolidated Statements of Operations (Unaudited) As Reported Adjustment As Revised For The Three Months Ended June 30, 2022 Condensed Consolidated Statements of Operations (Unaudited) As Reported Adjustment As Revised Revenues $ 4,289 $ 574 $ 4,863 Cost of goods sold $ 4,208 $ 592 $ 4,800 Gross profit $ 81 $ ( 18 ) $ 63 Net loss $ ( 2,517 ) $ ( 18 ) $ ( 2,535 ) Loss per share - basic and diluted $ ( 0.26 ) - $ ( 0.26 ) Weighted average common shares outstanding - basic and diluted 9,728 - 9,728 Condensed Consolidated Statements of Operations (Unaudited) As Reported Adjustment As Revised For The Six Months Ended June 30, 2022 Condensed Consolidated Statements of Operations (Unaudited) As Reported Adjustment As Revised Revenues $ 10,325 $ 900 $ 11,225 Cost of goods sold $ 9,369 $ 870 $ 10,239 Gross profit $ 956 $ 30 $ 986 Net loss $ ( 3,305 ) $ 30 $ ( 3,275 ) Loss per share - basic and diluted $ ( 0.34 ) - $ ( 0.34 ) Weighted average common shares outstanding - basic and diluted 9,685 - 9,685 Condensed Consolidated Balance Sheet (Unaudited) As Reported Adjustment As Revised June 30, 2022 Condensed Consolidated Balance Sheet (Unaudited) As Reported Adjustment As Revised Total current assets $ 31,080 $ ( 870 ) $ 30,210 Total assets $ 34,116 $ ( 870 ) $ 33,246 Total current liabilities $ 15,696 $ ( 900 ) $ 14,796 Total liabilities $ 17,136 $ ( 900 ) $ 16,236 Total stockholders’ equity $ 16,980 $ 30 $ 17,010 Condensed Consolidated Statements of Operations (Unaudited) As Reported Adjustment As Revised For The Six Months Ended June 30, 2022 Cash Flows From Operating Activities (Unaudited) As Reported Adjustment As Revised Net loss $ ( 3,305 ) $ 30 $ ( 3,275 ) Changes in current operating assets and liabilities: Inventories $ ( 4,857 ) $ 870 $ ( 3,987 ) Deferred revenue $ 6,866 $ ( 900 ) $ 5,966 Net cash used in operating activities $ ( 1,621 ) $ - $ ( 1,621 ) Condensed Consolidated Statements of Operations (Unaudited) As Reported Adjustment As Revised For The Six Months Ended June 30, 2022 Consolidated Statement of Stockholders’ Equity (Unaudited) As Reported Adjustment As Revised Accumulated deficit $ ( 15,617 ) $ 30 $ ( 15,587 ) Total stockholders’ equity $ 16,980 $ 30 $ 17,010 In accordance with SEC Staff Accounting Bulletin No. 108, we evaluated this revision based on an analysis of quantitative and qualitative factors as to whether it was material to the consolidated statements of operations for the three and six months ended June 30, 2022 and if amendments of previously filed financial statements with the SEC are required. We determined that the adjustment is neither quantitatively nor qualitatively material and, therefore, the revision does not have a material impact to the consolidated statements of operations for the three and six months ended June 30, 2022 or other prior periods. 10 5. INVENTORIES The components of inventories are summarized below: SCHEDULE OF INVENTORIES June 30, December 31, 2023 2022 Raw materials $ 5,705 $ 2,962 Work in process 2,752 5,786 Total inventories $ 8,457 $ 8,748 Inventories are stated at the lower of cost or a net realizable value determined on a weighted average method. 6. PROPERTY AND EQUIPMENT, NET Property and equipment are summarized below: SCHEDULE OF PROPERTY AND EQUIPMENT June 30, December 31, 2023 2022 Machinery, vehicles and equipment $ 2,765 $ 2,308 Furniture and fixtures 208 208 Computer hardware and software 612 591 Leasehold improvements 368 368 Construction in progress 831 499 4,784 3,974 Less: accumulated depreciation ( 2,401 ) ( 2,174 ) Total property and equipment, net $ 2,383 $ 1,800 Depreciation expense was $ 97 and $ 37 for the three months ended June 30, 2023 and 2022, respectively. Depreciation expense was $ 227 and $ 73 for the six months ended June 30, 2023 and 2022, respectively. 11 7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The components of accounts payable and accrued liabilities are summarized below: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES June 30, December 31, 2023 2022 Accounts payable $ 5,542 $ 5,615 Accrued liabilities 1,249 1,624 Total accounts payable and accrued liabilities $ 6,791 $ 7,239 Accrued liabilities primarily consist of accrued sales commissions, accrued compensation and benefits, accrued sales and use taxes and accrued insurance. At June 30, 2023 and December 31, 2022, accrued sales commissions were $ 250 and $ 278 , respectively. Accrued compensation and benefits at June 30, 2023 and December 31, 2022 were $ 345 and $ 213 , respectively. Accrued sales and use taxes at June 30, 2023 and December 31, 2022 were $ 108 and $ 258 , respectively, and there was $ 157 of accrued insurance at June 30, 2023 as compared to $ 559 at December 31, 2022. The remainder of accrued liabilities are comprised of several insignificant accruals in connection with normal business operations. At June 30, 2023, one supplier represented approximately 15 % of the Company’s accounts payable. At December 31, 2022, none of the Company’s suppliers represented more than 10 % of the Company’s accounts payable. 12 8. STOCK-BASED COMPENSATION Stock-Based Compensation A summary of stock option activity during the six months ended June 30, 2023 is as follows: SCHEDULE OF STOCK OPTION ACTIVITY Stock Options Weighted average exercise price Weighted average remaining contractual term Aggregate intrinsic value Outstanding as of January 1, 2023 670,667 $ 5.45 Granted 77,500 5.52 Exercised - - Forfeited ( 35,000 ) 5.60 Outstanding as of June 30, 2023 713,167 $ 5.45 5.90 $ 2,216 Exercisable as of June 30, 2023 638,167 $ 5.45 5.50 $ 1,995 A summary of RSU activity during the six months ended June 30, 2023 is as follows: SUMMARY OF RESTRICTED STOCK ACTIVITY Number of units Weighted-average grant-date fair value per share Weighted-average grant-date fair value Unvested restricted stock units as of January 1, 2023 250,000 $ 4.35 $ 1,087 Units granted 100,000 5.75 575 Units vested ( 225,000 ) 4.97 ( 1,118 ) Units forfeited - - - Unvested restricted stock units as of June 30, 2023 125,000 $ 4.35 $ 544 Stock-based compensation expense recorded for the three and six months ended June 30, 2023 was approximately $ 819 and $ 962 , respectively. Stock-based compensation expense recorded for the three and six months ended June 30, 2022 was approximately $ 659 and $ 716 , respectively. At June 30, 2023, there was $ 719 of stock-based compensation expense remaining to be recognized in the consolidated statements of operations over a weighted average remaining period of 0.9 years. 9. BASIC AND DILUTED LOSS PER COMMON SHARE Basic and diluted loss per common share is calculated based on the weighted average number of vested shares outstanding during the period. The Company’s employee and director equity awards, as well as incremental shares issuable upon exercise of warrants, are not considered in the calculations if the effect would be anti-dilutive. As of June 30, 2023 and 2022, diluted loss per share excludes potentially dilutive common shares related to 713,167 and 670,667 shares underlying stock options, respectively, and 125,000 and 250,000 shares underlying nonvested RSUs, respectively, as their effect was anti-dilutive. 13 10. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION The Company follows ASC 280 - Segment Reporting in determining its reportable segments. The Company considered the way its management team, most notably its chief operating decision maker, makes operating decisions and assesses performance and considered which components of the Company’s enterprise have discrete financial information available. As the Company makes decisions using a manufactured products vs. distributed products and services group focus, its analysis resulted in two reportable segments: T&D Solutions and Critical Power. The Critical Power reportable segment is the Company’s Titan Energy Systems, Inc. business unit. The T&D Solutions reportable segment is the Company’s Pioneer Custom Electrical Products Corp. business unit. The T&D Solutions segment is involved in the design, manufacture and sale of circuit protection and controls equipment used primarily by large industrial and commercial operations to manage their electrical power distribution needs. The Critical Power segment provides mobile high capacity charging equipment, power generation equipment and aftermarket field-services in order to help customers secure fast vehicle charging where fixed charging infrastructure does not exist, and additionally to ensure smooth, uninterrupted power to operations during times of emergency. The following tables present information about segment income and loss: SCHEDULE OF SEGMENT INCOME AND LOSS 2023 2022 (Revised) 2023 2022 (Revised) Three Months Ended Six Months Ended June 30, June 30, 2023 2022 (Revised) 2023 2022 (Revised) Revenues T&D Solutions Power Systems $ 9,224 $ 2,543 $ 14,985 $ 6,256 Service - - - 10 9,224 2,543 14,985 6,266 Critical Power Solutions Equipment 1,016 463 1,701 1,578 Service 1,890 1,857 3,952 3,381 2,906 2,320 5,653 4,959 Consolidated $ 12,130 $ 4,863 $ 20,638 $ 11,225 2023 2022 2023 2022 Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Depreciation and amortization T&D Solutions $ 17 $ 11 $ 33 $ 21 Critical Power Solutions 209 92 395 162 Unallocated corporate overhead expenses 2 7 4 14 Consolidated $ 228 $ 110 $ 432 $ 197 2023 2022 (Revised) 2023 2022 (Revised) Three Months Ended Six Months Ended June 30, June 30, 2023 2022 (Revised) 2023 2022 (Revised) Operating income (loss) T&D Solutions $ 1,808 $ ( 442 ) $ 3,050 $ ( 353 ) Critical Power Solutions ( 506 ) ( 757 ) ( 943 ) ( 911 ) Unallocated corporate overhead expenses ( 1,680 ) ( 1,323 ) ( 2,429 ) ( 2,081 ) Consolidated $ ( 378 ) $ ( 2,522 ) $ ( 322 ) $ ( 3,345 ) Revenues are attributable to countries based on the location of the Company’s customers: SCHEDULE OF REVENUES ARE ATTRIBUTABLE TO COUNTRIES BASED ON THE LOCATION Three Months Ended Six Months Ended June 30, June 30, 2023 2022 (Revised) 2023 2022 (Revised) Revenues United States $ 12,130 $ 4,863 $ 20,638 $ 11,225 14