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Item 7. Management’s Discussion and Analysis

2024-07-26 compared with 2023-04-11 · 322 added, 410 removed, 79 unchanged (90% 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

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

financial statements and related notes appearing elsewhere in this annual report on Form 10-K.

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.”

The discussion in this section has

been impacted by the restatement described in the Explanatory Note at the beginning of this Comprehensive Form 10-K and in Note 2 and

Note 4 of the consolidated financial statements of this Comprehensive Form 10-K.

Certain of the financial and other information provided

in this Management’s Discussion and Analysis of our financial condition and results of operations has been updated to reflect the

restatement adjustments.

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.

equipment and mobile 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 United States 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 that help customers effectively and efficiently protect, control, transfer, monitor and manage their electric

energy requirements.

operations are divided into two reportable segments:

Electrical Infrastructure segment and Critical Power segment.

Our Electrical Infrastructure

business provides equipment solutions that allow customers to effectively and efficiently protect, control, transfer, monitor and manage

their electric energy usage and requirements.

These solutions are marketed principally through our PCEP brand name.

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

of Estimates.

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

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 .

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 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.

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 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

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.

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.

In June 2018, the FASB issued ASU No.

2018-07, Compensation – Stock Compensation (Topic 718):

to Nonemployee Share-Based Payment Accounting.

The amendments in this update expand the scope of Topic 718 to include share-based

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 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.

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 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.

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.

Amounts may not

foot due to rounding.

Our Critical Power

business provides customers with our suite of mobile e-Boost© EV charging solutions, power generation equipment and all forms of

preventative maintenance, repairs, remote monitoring and other service on our customers’ equipment.

These products and services

are marketed by our operations headquartered in Minnesota, currently doing business under the Titan, Pioneer eMobility and Pioneer Critical

Power brand names.

Accounting Estimates

The preparation of financial statements and related disclosures are in

conformity with U.S.

These accounting principles require us to make estimates and judgments that can affect the reported amounts

of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expense during the

periods presented.

We believe that the estimates and judgments upon which we rely are reasonable based upon information available to us

at the time that we make these estimates and judgments.

To the extent that there are material differences between these estimates and

actual results, our financial results will be affected.

The accounting policies that reflect our more significant estimates and judgments

and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below.

We consider an accounting estimate to be critical

(i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate

was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that

we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

Management has identified certain critical

accounting estimates which are outlined below.

In addition, there are other items within our consolidated financial statements that

require estimation but are not deemed critical, as defined above.

Changes in estimates used in these and other items could have a

material impact on our financial statements.

Our significant accounting policies are more fully

described in Note 3 – Summary of Significant Accounting Policies, in our financial statements included elsewhere in this Annual

Revenue Recognition

A significant portion of our business is derived from

design and production contracts.

Revenue for these contracts is recognized proportionally over the term of the contract using an input

method based on the proportion of labor hours incurred as compared to the total estimated labor hours for the fixed-fee contract performance

obligations, which we consider the best available indicator of the pattern and timing in which contract performance obligations are fulfilled

and control transfers to the customer.

This percentage is multiplied by the contracted dollar amount of the project to determine the amount

of revenue to recognize in an accounting period.

There are situations where the number of hours to

complete projects may exceed our original estimate as a result of an increase in project scope or unforeseen events.

The related impact

on income is recognized using the cumulative catch-up method, which the Company recognizes in the current period.

Recognition of revenue on a contract requires estimates of the total labor

hours at completion and the measurement of progress towards completion.

Due to the long-term nature of many of our contracts, developing

the estimated total labor hours at completion often requires judgment.

Factors that must be considered in estimating the total labor hours

to be completed include the nature and complexity of the work to be performed and the risk and impact of delayed performance.

At the outset

of each contract, we gauge its complexity and perceived risks and establish an estimated total number of labor hours at completion in

line with these expectations.

We follow a standard contract review process in which we review the progress and performance on our ongoing

contracts at least quarterly.

OF OPERATIONS

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This information,

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:

as well as the selected financial data provided in Note 14 and our 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.

of operating results during the years ended 2023 and 2022 are as follows:

Year Ended December 31,

T&D Solutions

2022 (Restated)

Electrical Infrastructure

Critical Power Solutions

Cost of goods sold

T&D Solutions

Electrical Infrastructure

Critical Power Solutions

Selling, general and administrative expenses

Depreciation and amortization expense

Selling, general and administrative

Depreciation and amortization

Research and development

Total operating expenses

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Interest income

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

Other (income) expense

Loss before income taxes

Income tax expense

Revenue backlog, which consists of purchase orders and contracts from customers that we believe to be firm, reflects the amount of revenue

that we expect to realize in the future upon the satisfaction of customer orders for our products or services that are not yet complete

or for which work has not yet begun.

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

As of December 31, 2023, backlog from our E-Bloc power systems and related equipment was approximately $12,706, or 28.1%

of the total backlog.

revenue backlog at December 31, 2023 was $45,165, an increase of $6,887, or 18.0%, when compared to $38,278 at December 31, 2022.

the year ended December 31, 2023, we experienced a surge in orders and contracts for our mobile EV charging solutions, e-Boost, which was the primary driver for the increase in our revenue backlog.

The following table

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

2022 (Restated)

Electrical Infrastructure

Critical Power Solutions

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percentages):

T&D Solutions

Power Systems

2022 (Restated)

Electrical Infrastructure

Critical Power Solutions

Total revenue

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

the year ended December 31, 2023, our consolidated revenue increased by $15,615, or 60.3% to $41,493, up from $25,878 during the year

ended December 31, 2022, primarily due to an increase in sales of our power systems from our Electrical Infrastructure segment and an

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

Infrastructure .

During the year ended December 31, 2023, revenue from our equipment sales increased by $14,042 or 86.4%, as compared

to the year ended December 31, 2022, primarily due to increased sales of our E-Bloc power systems and related equipment, as well as medium

and low voltage circuit protective equipment.

For the year ended December 31, 2023, revenue for our Critical Power segment increased by $1,508, or 15.7%, as compared to

the year ended December 31, 2022, primarily due to an increase in sales of our new and refurbished generation equipment.

Profit and Margin

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

T&D Solutions

2022 (Restated)

Electrical Infrastructure

Gross margin %

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the year ended December 31, 2023, our gross margin percentage was 20.1% of revenues, compared to 10.9% during the year ended December

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.

Infrastructure.

For the year ended December 31, 2023, our gross margin increased by 12.7%, to 20.2%, from 7.5% for the year ended

December 31, 2022.

The increase was primarily due to the significant increase in sales of our E-Bloc power systems and related equipment

and medium and low voltage circuit protective equipment and improved productivity from our manufacturing

For the year ended December 31, 2023, our gross margin increased by 3.3%, to 20.0%, from 16.7% for the year ended December

The increase was also primarily 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):

Ended December 31,

T&D Solutions

Selling, general and administrative expense

Depreciation and amortization expense

Year Ended December 31,

Electrical Infrastructure

Selling, general and administrative

Depreciation and amortization

Segment operating expense

Critical Power Solutions

Selling, general and administrative expense

Depreciation and amortization expense

Selling, general and administrative

Depreciation and amortization

Research and development

Segment operating expense

Unallocated Corporate Overhead Expenses

Selling, general and administrative expense

Depreciation and amortization expense

Selling, general and administrative

Depreciation and amortization

Segment operating expense

Selling, general and administrative expense

Depreciation and amortization expense

Selling, general and administrative

Depreciation and amortization

Research and development

Consolidated operating expense

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.

General and Administrative Expense .

For the year ended December 31, 2023, consolidated selling, general and administrative expense,

before depreciation and amortization, increased by $1,451, or 17.2%, to $9,896, as compared to $8,445 during the year ended December

As a percentage of our consolidated revenue, selling, general and administrative expense decreased to 24.4% in the year ended

December 31, 2023, as compared to 33.4% in the year ended December 31, 2022.

selling, general and administrative expense in our Electrical Infrastructure segment increased by $510, or 42.6%, during the year ended

December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in payroll related costs and third party

commissions expense.

selling, general and administrative expense in our Critical Power segment increased by $215, or 6.2%, during the year ended December

31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in payroll related costs and business travel

related costs.

selling, general and administrative expense in our unallocated corporate overhead expenses increased by $726, or 19.2%, during the year

ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in payroll related costs, including

stock-based compensation, professional fees and business travel related costs.

and Amortization Expenses .

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 year ended December 31,

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

Depreciation and amortization expense included in selling, general and administrative expense in our consolidated

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

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 year ended December 31, 2023, consolidated depreciation and amortization

expense included in selling, general and administrative expense increased by $32, or 16.8%, as compared to the year ended December 31,

Research and development expenses in our Critical Power segment consists of costs incurred in performing research and development

activities, including salaries, benefits, overhead costs, depreciation, contract services and other related costs.

During the year ended

December 31, 2023, we incurred $885 of R&D expenses related to developing our mobile e-Boost EV charging solutions.

There were no

R&D expenses incurred during 2022.

Income (Loss)

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

Year Ended December 31,

T&D Solutions

2022 (Restated)

Electrical Infrastructure

Critical Power Solutions

Unallocated corporate overhead expenses

Total operating loss

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.

Loss from operations

Infrastructure .

Operating income from our Electrical Infrastructure segment was $4,380 during the year ended December 31, 2023,

as compared to essentially no operating income during the year ended December 31, 2022.

The increase is primarily due to the large increase in

sales of our power systems equipment and related equipment, reduced input costs and improved productivity from our manufacturing

facility during the year ended December 31, 2023.

Operating loss from our Critical Power segment increased by $512, or 25.6%, during the year ended December 31, 2023, primarily

due to an increase in payroll related costs and consulting, marketing and promotion fees 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 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.

the year ended December 31, 2023, our unallocated corporate overhead expense increased by $709, or 18.6%, as compared to the year ended

December 31, 2022, primarily due to an increase in payroll related costs, including stock-based compensation, professional fees and business

travel related costs.

Non-Operating

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$465 during the year ended December 31, 2022.

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

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

ended December 31, 2023, as compared to generating the majority of our interest income from the two subordinated promissory notes (the

“Seller Notes”) we received from the Equity Transaction, and our cash on hand, during the year ended December 31, 2022.

(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 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.

the year ended December 31, 2023, other non-operating income was $524, as compared to other non-operating expense of $67 during the year

ended December 31, 2022.

Included in other non-operating income during the year ended December 31, 2023, is a settlement gain of $525

related to a legal matter.

for Income Taxes .

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31, 2023, as compared to (0.1)% for the year ended December 31, 2022, as set forth below:

Year Ended December 31,

2022 (Restated)

Loss before income taxes

Income tax expense (benefit)

Income tax expense

Effective income tax rate %

Loss per Share

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,

Net Loss per Share

generated a net loss of $1,898 for the year ended December 31, 2023, as compared to a net loss of $5,419 during the year ended December

net loss per basic and diluted share for the year ended December 31, 2023 was $0.19, compared to a net loss per basic and diluted share

of $0.56 for the year ended December 31, 2022.

Quarterly Discussion and Analysis

The Company has restated the

unaudited condensed consolidated financial statements for the quarterly periods ended March 31, 2022 through September 30, 2023,

originally included in its Quarterly Reports on Form 10-Q for the periods ended March 31, 2023, June 30, 2023 and September 30, 2023

(“Affected Periods”).

During 2022 and 2023, we recognized

revenues associated with customer contracts with performance obligations satisfied over time (“Over Time Contracts”)

using labor hours as the measure of progress.

Our underlying estimates of total labor hours required to complete Over Time Contracts

were materially different from the actual labor hours required, which was determined to represent an error, and, as a result, the

percentage of completion used to recognize revenue in the Affected Periods is materially different from the percentage of completion

using actual labor hours incurred.

As a result, we restated revenues during the Affected Periods to adjust the percentage of

completion based upon the actual labor hours incurred to complete each Over Time Contract.

Additionally, we determined that costs

from Over Time Contracts should be recognized as incurred and, as a result, we recorded an adjustment during the Affected Periods as the Company was previously incorrectly deferring costs incurred to a future period.

The restatements of such unaudited

condensed consolidated quarterly financial statements are provided in Note 4, “Restatement of Previously Issued Unaudited Interim

Condensed Consolidated Financial Statements.” The above discussion should be read in conjunction with our accompanying restated

unaudited condensed interim consolidated financial statements disclosed in Part II, Item 8.

Financial Statements and Supplementary

Data, Note 4, “Restatement of Previously Issued Unaudited Interim Condensed Consolidated Financial Statements” of this Comprehensive

AND CAPITAL RESOURCES

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

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.

Used in Operating Activities .

Cash used in our operating activities was $5.8 million during the year ended December 31, 2022, as

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

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 .

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

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.

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 from time to time through Wainwright, acting as sales agent or principal

(the “ATM Program”).

At December 31, 2023, we had $3,582 of cash on hand generated primarily from the sale of common stock

under the ATM Program, payment of all unpaid principal and interest from the Seller Notes during the year ended December 31, 2022, and

cash flows from operating activities.

Since October 20, 2020, and through December 31, 2023, we sold an aggregate of 916,059 shares of

common stock for aggregate gross proceeds of approximately $8,904, before any sales agent fees and expenses payable by us under the ATM

During the year ended December 31, 2023, we sold an aggregate of 27,559 shares of common stock for an aggregate consideration

of approximately $184, before any sales agent fees and expenses payable by us under the ATM Program.

December 13, 2021, we filed a prospectus supplement to the prospectus which forms a part of our registration statement on Form S-3 (File

333-249569) (the “Prior Shelf Registration Statement”), that was declared effective by the SEC on October 27, 2020 (the

“Prior ATM Prospectus”), 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.

On August 30, 2023, we filed a new registration statement on Form S-3 (File

333-274266) to replace the Prior Shelf Registration Statement, including a base prospectus which covers the offering, issuance and

sale of up to $150,000 of common stock, preferred stock, warrants and/or units;

and a sales agreement prospectus covering the offering,

issuance and sale of up to a maximum aggregate offering price of $75,000 of common stock that may be issued and sold under the ATM Program

(the “New ATM Prospectus”).

The new registration statement was declared effective by the SEC on September 8, 2023.

December 31, 2023, $75,000 of common stock remained available for issuance under the New ATM Prospectus.

of the filing date of this Form 10-K, we became subject to the limitations of General Instruction I.B.6 of Form S-3, which limits

the amount of funds we can raise through primary public offerings of securities in any twelve-calendar month period using a

registration statement on Form S-3 to one-third of the aggregate market value of our common stock held by non-affiliates.

we will be limited in the amount of proceeds we are able to raise by selling our common stock using Form S-3, including under the

New ATM Prospectus, until such time as our public float held by non-affiliates exceeds $75,000.

continuing impacts of the rising interest rates, inflation, changes in foreign currency exchange rates and geopolitical developments,

such as the ongoing conflict between Russia and Ukraine, and the ongoing conflict between Israel and Hamas, 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 our 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, we are unable to predict the potential size and

duration of the impact on our revenue and our results of operations, if any.

The extent of the potential impact of these macroeconomic

factors on our operational and financial performance will depend on a variety of factors, including the extent of geopolitical disruption

and its impact on our clients, partners, industry, and employees, all of which are uncertain at this time and cannot be accurately predicted.

We continue to monitor the effects of these macroeconomic factors and intends to take steps deemed appropriate to limit the impact on

our business.

During the year ended December 31, 2023, we were able to operate substantially at capacity.

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

negatively affect our sales, marketing, and client service efforts, delay and lengthen our sales cycles, decrease our employees’,

clients’, or partners’ productivity, or create operational or other challenges, any of which could harm our business and

results of operations.

Cash Used in Operating Activities .

Cash used in our operating activities was $3,894 during the year ended December 31, 2023,

as compared to cash used in our operating activities of $5,772 during the year ended December 31, 2022.

decrease in cash used in operating activities is primarily due to working capital fluctuations and the significant reduction to net loss of $3,521 during

the year ended December 31, 2023.

Used in/Provided by Investing Activities.

Cash used in investing activities during the year ended December 31, 2023 was $2,497, as

compared to cash provided by our investing activities of $4,722 during the year ended December 31, 2022.

The decrease 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.

During the year ended December 31, 2023 and 2022, additions to our property and equipment were $2,497 and $1,512,

respectively.

Used in Financing Activities.

Cash used in our financing activities was $323 during the year ended December 31, 2023, as compared

to $353 during the year ended December 31, 2022.

The primary use of cash in financing activities for the year ended December 31, 2023

and 2022 was repayments of financing leases.

As of December 31, 2023, we had working capital of $9,421, including $3,582 of cash, compared to working capital of $12,293,

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

of Liquidity .

At December 31, 2023, we had $3,582 of cash on hand generated primarily from the sale of common stock under the ATM

Program, 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 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, sale of common stock under the ATM Program and collecting all unpaid principal and interest from the Seller

Historically, our cash requirements were generally for operating activities, debt repayment, capital improvements and acquisitions.

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

We expect that our cash balance is sufficient to fund operations for the next twelve months from the date our consolidated financial

statements are issued.

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

1 unchanged sentence

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.

additions to property and equipment were $2,497 during the year ended December 31, 2023, as compared to $1,512 additions during the year

ended December 31, 2022.

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

8 unchanged sentences

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.”

the consequences of the ongoing geopolitical conflicts, such as the ongoing conflict between Russia and Ukraine and the ongoing conflict

between Israel and Hamas, 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 “Special Note Regarding Forward-Looking Statements.”

Balance Sheet Transactions and Related Matters

3 unchanged sentences

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, 2022 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 consolidated

financial statements for the year ended December 31, 2023 included in this Annual Report on Form 10-K.

Accounting Pronouncements

have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on the Company’s

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 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.

have been no recent accounting pronouncements not yet adopted by us which would have a material impact on our consolidated financial

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

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.

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 consolidated financial statements.

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