PIONEER POWER SOLUTIONS, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed interim consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission on July 26, 2024. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “Pioneer,” “we,” “our” and “us” refer to Pioneer Power Solutions, Inc. and its subsidiaries. U.S. dollars are reported in thousands except for share and per share amounts . Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: ● General economic conditions and their effect on demand for electrical equipment, particularly in the commercial construction market, but also in the power generation, industrial production and infrastructure industries. ● The effects of fluctuations in sales on our business, revenues, expenses, net income (loss), income (loss) per share, margins and profitability. ● Many of our competitors are better established and have significantly greater resources and may subsidize their competitive offerings with other products and services, which may make it difficult for us to attract and retain customers. ● The potential loss or departure of key personnel, including Nathan J. Mazurek, our chairman, president and chief executive officer. ● Our ability to generate internal growth, maintain market acceptance of our existing products and gain acceptance for our new products. ● Unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect our profitability. ● Our ability to realize revenue reported in our backlog. ● Our ability to remediate the material weaknesses identified in our internal control over financial reporting in our Annual Report on Form 10-K for the year ended December 31, 2023, or inability to otherwise maintain an effective system of internal control. ● The effect that the restatement of the prior financial statements could have on investor confidence in us and raise reputational risk. ● Operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor or overhead cost increases, interest rate risk and commodity risk. ● Strikes or labor disputes with our employees may adversely affect our ability to conduct our business. ● The impact of geopolitical activity on the economy, changes in government regulations such as income taxes, climate control initiatives, the timing or strength of an economic recovery in our markets and our ability to access capital markets. ● Material weaknesses in internal controls. ● Future sales of large blocks of our common stock may adversely impact our stock price. ● The liquidity and trading volume of our common stock. ● Our business could be adversely affected by an outbreak of disease, epidemic or pandemic, such as the global coronavirus pandemic, or similar public threat, or fear of such an event. 15 ● Our ability to maintain compliance with the continued listing standards of Nasdaq. ● Risks associated with litigation and claims, which could impact our financial results and condition. The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. Moreover, new risks regularly emerge, and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should review carefully the risks and uncertainties described under the heading “Part II - Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q and in the Quarterly Reports on Form 10-Q for the periods ended March 31, 2024, and June 30, 2024, and “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock. Business Overview We 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 United States for manufacturing, service and maintenance, engineering, and sales and administration. Recent Developments Sale of Subsidiary On October 29, 2024, the Company entered into an Equity Contribution and Purchase Agreement (the “Equity Purchase Agreement”), by and among the Company, Pioneer Custom Electrical Products, LLC, a wholly owned subsidiary of the Company (“Pioneer Custom”), Voltaris Power LLC (the “Buyer”) and Pioneer Investment LLC (“Investment”). Pursuant to the terms of the Equity Purchase Agreement, the Company agreed to: (i) contribute 4% of all of the issued and outstanding equity interests of Pioneer Custom to Investment (the “Rollover Interests”) in exchange for Investment issuing $2,000 of common units (representing approximately 6% of Investment’s issued and outstanding common units on the Closing Date (as defined below)) (the “Rollover Units”) to the Company; and (ii) sell all of the issued and outstanding equity interests of Pioneer Custom other than the Rollover Interests to the Buyer ((i) and (ii) being, the “Equity Transaction”). The Equity Transaction included total consideration of (i) $48,000 in cash, subject to adjustment pursuant to the terms of the Equity Purchase Agreement, and (ii) $2,000 in equity pursuant to Investment’s issuance of the Rollover Units to the Company. Following the execution of the Equity Purchase Agreement, the Equity Transaction was consummated on October 29, 2024 (the “Closing Date”). In addition, upon the closing of the Equity Transaction, the Company and the Buyer entered into a transition services agreement, pursuant to which (i) the Company will provide certain transition services to the Buyer for various service periods ranging from 30 days to 12 months following the Closing Date and (ii) the Buyer will provide one specific transition service to the Company until October 31, 2025. Description of Business Segments As of September 30, 2024, we had two reportable segments: Electrical Infrastructure Equipment (“Electrical Infrastructure”) and Critical Power Solutions (“Critical Power”). ● 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 Pioneer Custom Electrical Products Corp. (“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 preventative maintenance, repairs, remote monitoring and other equipment service on our customers’ equipment. These products and services are marketed by our operations headquartered in Minnesota, currently doing business under our Pioneer eMobility (“e-Boost”), Titan Energy Systems Inc. (“Titan”) and Pioneer Critical Power brand names. ● On October 29, 2024, we closed on the sale of our Electrical Infrastructure segment. See “Recent Developments”. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the amounts and disclosures in the consolidated financial statements. Our estimates are based on our historical experience, knowledge of current events and actions we may undertake in the future, and on various other factors that we believe are reasonable under the circumstances. Our critical accounting policies and estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on July 26, 2024. There were no material changes to our accounting policies during the nine months ended September 30, 2024. 16 RESULTS OF OPERATIONS Overview of the Three and Nine Months Results Selected financial and operating data for our reportable business segments for the most recent reporting period is summarized below. This information, as well as the selected financial data provided in “Note 9 - Business Segment and Geographic Information” and in our unaudited condensed interim Consolidated Financial Statements and related notes included in this Quarterly Report on Form 10-Q, should be referred to when reading our discussion and analysis of results of operations below. Our summary of operating results during the three and nine months ended September 30, 2024, and 2023 are as follows: Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 (As Restated) 2024 2023 (As Restated) Revenues Electrical Infrastructure $ 4,495 $ 8,660 $ 12,715 $ 24,845 Critical Power Solutions 6,416 2,793 13,126 8,446 Consolidated 10,911 11,453 25,841 33,291 Cost of goods sold Electrical Infrastructure 3,951 5,401 10,967 16,051 Critical Power Solutions 4,894 2,354 10,427 6,831 Consolidated 8,845 7,755 21,394 22,882 Gross profit 2,066 3,698 4,447 10,409 Selling, general and administrative 2,881 2,726 8,176 7,816 Depreciation and amortization 26 32 69 188 Research and development 256 - 705 - Total operating expenses 3,163 2,758 8,950 8,004 Operating (loss) income from continuing operations (1,097 ) 940 (4,503 ) 2,405 Interest expense (income) 23 (60 ) (25 ) (192 ) Other expense (income) 1 (11 ) (39 ) (4 ) (Loss) income before income taxes (1,121 ) 1,011 (4,439 ) 2,601 Income tax expense - - - - Net (loss) income $ (1,121 ) $ 1,011 $ (4,439 ) $ 2,601 Backlog 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. As of September 30, 2024, backlog from our E-Bloc power systems and related equipment was approximately $13,236, or 20% of the total backlog. The following table represents the progression of our backlog, by reporting segment, as of the end of the last five quarters: September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 (As Restated) Electrical Infrastructure $ 42,112 $ 39,670 $ 30,889 $ 28,497 $ 25,368 Critical Power Solutions 24,038 27,251 15,022 16,668 8,027 Total order backlog $ 66,150 $ 66,921 $ 45,911 $ 45,165 $ 33,395 17 Revenue The following table represents our revenues by reporting segment and major product category for the periods indicated (in thousands, except percentages): Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 (As Restated) Variance % 2024 2023 (As Restated) Variance % Electrical Infrastructure Equipment $ 4,495 $ 8,585 $ (4,090 ) (47.6 ) $ 12,715 $ 24,770 $ (12,055 ) (48.7 ) Service - 75 (75 ) (100.0 ) - 75 (75 ) (100.0 ) 4,495 8,660 (4,165 ) (48.1 ) 12,715 24,845 (12,130 ) (48.8 ) Critical Power Solutions Equipment 3,961 805 3,156 392.0 6,448 2,507 3,941 157.2 Service 2,455 1,988 467 23.5 6,678 5,939 739 12.4 6,416 2,793 3,623 129.8 13,126 8,446 4,680 55.4 Total revenue $ 10,911 $ 11,453 $ (542 ) (4.7 ) $ 25,841 $ 33,291 $ (7,450 ) (22.4 ) For the three months ended September 30, 2024, our consolidated revenue decreased by $542, or 4.7%, to $10,911, down from $11,453 during the three months ended September 30, 2023, primarily due to a decrease in sales of equipment from our Electrical Infrastructure segment during the three months ended September 30, 2024. For the nine months ended September 30, 2024, our consolidated revenue decreased by $7,450 or 22.4%, to $25,841, down from $33,291 during the nine months ended September 30, 2023, primarily due to a decrease in sales of equipment from our Electrical Infrastructure segment during the nine months ended September 30, 2024. Electrical Infrastructure . During the three months ended September 30, 2024, revenue from our equipment sales decreased by $4,165, or 48.1%, to $4,495, down from $8,660 during the three months ended September 30, 2023, primarily due to a decrease in shipments and revenue recognized over time from our equipment sales during the three months ended September 30, 2024. During the nine months ended September 30, 2024, revenue from our Electrical Infrastructure segment decreased by $12,130, or 48.8%, to $12,715, down from $24,845 during the nine months ended September 30, 2023, primarily due to a decrease in shipments and revenue recognized over time from our equipment sales during the nine months ended September 30, 2024. Critical Power Solutions . For the three months ended September 30, 2024, revenue for our Critical Power segment increased by $3,623, or 129.8%, to $6,416, up from $2,793 during the three months ended September 30, 2023, primarily due to an increase in equipment and service sales during the three months ended September 30, 2024. For the three months ended September 30, 2024, revenue from our equipment sales increased by $3,156, or 392%, to $3,961, up from $805 during the three months ended September 30, 2023, primarily due to delivering $3,000 of e-Boost equipment during the third quarter of 2024 and no comparable shipments during the third quarter of 2023. For the nine months ended September 30, 2024, revenue for our Critical Power segment increased by $4,680, or 55.4%, to $13,126, up from $8,446 during the nine months ended September 30, 2023, primarily due to an increase in equipment and service sales during the nine months ended September 30, 2024. For the nine months ended September 30, 2024, revenue from our equipment sales increased by $3,941, or 157.2%, to $6,448, up from $2,507 during the nine months ended September 30, 2023, primarily due to delivering $3,000 of e-Boost equipment during the third quarter of 2024 and no comparable shipments during 2023. 18 Gross Profit and Margin The following table represents our gross profit by reporting segment for the periods indicated (in thousands, except percentages): Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 (As Restated) Variance % 2024 2023 (As Restated) Variance % Electrical Infrastructure Gross profit $ 544 $ 3,259 $ (2,715 ) (83.3 ) $ 1,748 $ 8,794 $ (7,046 ) (80.1 ) Gross margin % 12.1 37.6 (25.5 ) 13.7 35.4 (21.7 ) Critical Power Solutions Gross profit 1,522 439 1,083 246.7 2,699 1,615 1,084 67.1 Gross margin % 23.7 15.7 8.0 20.6 19.1 1.5 Consolidated gross profit $ 2,066 $ 3,698 $ (1,632 ) (44.1 ) $ 4,447 $ 10,409 $ (5,962 ) (57.3 ) Consolidated gross margin % 18.9 32.3 (13.4 ) 17.2 31.3 (14.1 ) For the three months ended September 30, 2024, our consolidated gross margin decreased to 18.9% of revenues, as compared to 32.3% during the three months ended September 30, 2023. For the nine months ended September 30, 2024, our consolidated gross margin decreased to 17.2% of revenues, as compared to 31.3% during the nine months ended September 30, 2023. Electrical Infrastructure. For the three months ended September 30, 2024, our gross margin percentage decreased by 25.5 percentage points, from 37.6% to 12.1%, as compared to the three months ended September 30, 2023. The decrease was primarily due to the decrease in sales of our power systems and switchgear equipment. For the nine months ended September 30, 2024, our gross margin percentage decreased by 21.7 percentage points, from 35.4% to 13.7%, as compared to the nine months ended September 30, 2023. The decrease was primarily due to the decrease in sales of our E-Bloc power systems and medium and low voltage switchgear equipment. Critical Power Solutions . For the three months ended September 30, 2024, our gross margin increased by 8 percentage points, from 15.7% to 23.7%, for the three months ended September 30, 2023. The increase was predominately due to the increase in sales of our e-Boost equipment from our Pioneer eMobility business in addition to an increase in service sales. For the nine months ended September 30, 2024, our gross margin increased by 1.5 percentage points, from 19.1% to 20.6%, for the nine months ended September 30, 2023. The increase was predominately due to the increase in sales of our equipment and service. 19 Operating Expenses The following table represents our operating expenses by reportable segment for the periods indicated (in thousands, except percentages): Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 Variance % 2024 2023 Variance % Electrical Infrastructure Selling, general and administrative $ 914 $ 585 $ 329 56.2 $ 2,037 $ 1,265 $ 772 61.0 Depreciation and amortization 12 9 3 33.3 40 26 14 53.8 Segment operating expense $ 926 $ 594 $ 332 55.9 $ 2,077 $ 1,291 $ 786 60.9 Critical Power Solutions Selling, general and administrative $ 1,044 $ 1,039 $ 5 0.5 $ 2,931 $ 3,024 $ (93 ) (3.1 ) Depreciation and amortization 11 21 (10 ) (47.6 ) 22 155 (133 ) (85.8 ) Research and development 256 - 256 - 705 - 705 - Segment operating expense $ 1,055 $ 1,060 $ (5 ) (0.5 ) $ 3,658 $ 3,179 $ 479 (89 ) Unallocated Corporate Overhead Expenses Selling, general and administrative $ 923 $ 1,102 $ (179 ) (16.2 ) $ 3,208 $ 3,527 $ (319 ) (9.0 ) Depreciation and amortization 3 2 1 50.0 7 7 - - Segment operating expense $ 926 $ 1,104 $ (178 ) (16.1 ) $ 3,215 $ 3,534 $ (319 ) (9.0 ) Consolidated Selling, general and administrative $ 2,881 $ 2,726 $ 155 5.7 $ 8,176 $ 7,816 $ 360 4.6 Depreciation and amortization 26 32 (6 ) (18.8 ) 69 188 (119 ) (63.3 ) Research and development 256 - 588 - 705 - 705 - Consolidated operating expense $ 3,163 $ 2,758 $ 737 14.7 $ 8,950 $ 8,004 $ 946 11.8 Selling, General and Administrative Expense . For the three months ended September 30, 2024, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $155, or 5.7%, to $2,881, as compared to $2,726 during the three months ended September 30, 2023, primarily due to an increase in professional fees. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, increased to 26.4% during the three months ended September 30, 2024, as compared to 23.8% in the three months ended September 30, 2023. For the nine months ended September 30, 2024, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $360, or 4.6%, to $8,176, as compared to $7,816 during the nine months ended September 30, 2023, primarily due to an increase in travel related costs. As a percentage of our consolidated revenue, selling, general and administrative expense, before depreciation and amortization, increased to 31.6% during the nine months ended September 30, 2024, as compared to 23.5% in the nine months ended September 30, 2023. Depreciation and Amortization Expense. Depreciation and amortization expense consists primarily of depreciation of fixed assets and amortization of right-of-use assets related to our finance leases, and excludes amounts included in cost of sales. For the three months ended September 30, 2024, consolidated depreciation and amortization expense decreased by $6, or 18.8%, to $26, as compared to $32 during the three months ended September 30, 2023. For the nine months ended September 30, 2024, consolidated depreciation and amortization expense decreased by $119, or 63.3%, to $69, as compared to $188 during the nine months ended September 30, 2023. 20 (Loss) Income from Operations The following table represents our operating (loss) income by reportable segment for the periods indicated (in thousands, except percentages): Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 (As Restated) Variance % 2024 2023 (As Restated) Variance % Electrical Infrastructure $ (382 ) $ 2,665 $ (3,047 ) (114.3 ) $ (329 ) $ 7,503 $ (7,832 ) (104.4 ) Critical Power Solutions 211 (621 ) 832 134.0 (959 ) (1,564 ) 605 38.7 Unallocated corporate overhead expenses (926 ) (1,104 ) 178 16.1 (3,215 ) (3,534 ) 319 9.0 (Loss) income from operations $ (1,097 ) $ 940 $ (2,037 ) (216.7 ) $ (4,503 ) $ 2,405 $ (6,908 ) 287.2 Electrical Infrastructure . Operating income from our Electrical Infrastructure segment decreased by $3,047 during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due to a decrease in sales of our electrical infrastructure equipment and an increase in selling, general and administrative expense. Operating income from our Electrical Infrastructure segment decreased by $7,832 during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to a decrease in sales of our electrical infrastructure equipment and an increase in selling, general and administrative expense. Critical Power Solutions . Operating income from our Critical Power segment increased by $832 during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due to an increase in sales of our e-Boost equipment from our Pioneer eMobility business in addition to an increase in service sales. Operating loss from our Critical Power segment decreased by $605 during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to an increase in sales of our e-Boost equipment from our Pioneer eMobility business in addition to an increase in service sales. General Corporate Expense . Our general corporate expenses consist primarily of executive management, corporate accounting and human resources personnel, corporate office expenses, financing and corporate development activities, payroll and benefits administration, treasury, tax compliance, legal, stock-based compensation, public reporting costs and costs not specifically allocated to reportable business segments. During the three months ended September 30, 2024, our unallocated corporate overhead expense decreased by $178, or 16.1%, as compared to the three months ended September 30, 2023, primarily due to a decrease in stock-based compensation expense. During the nine months ended September 30, 2024, our unallocated corporate overhead expense decreased by $319, or 9.0%, as compared to the nine months ended September 30, 2023, primarily due to a decrease in stock-based compensation expense. 21 Non-Operating Expense (Income) Interest Expense (Income) . For the three and nine months ended September 30, 2024, we had interest expense of approximately $23 and interest income of approximately $25, respectively, as compared to interest income of approximately $60 and $192, respectively, during the three and nine months ended September 30, 2023. We generated the majority of our interest income from our cash on hand during the nine months ended September 30, 2024, and 2023. Other Expense (Income) . Other expense (income) in the consolidated statements of operations reports certain gains and losses associated with activities not directly related to our core operations. For the three and nine months ended September 30, 2024, we had other non-operating expense of $1 and other non-operating income $39, respectively, as compared to other non-operating income of $11 and $4, respectively, during the three and nine months ended September 30, 2023. Provision for Income Taxes . Our effective income tax rate for the three and nine months ended September 30, 2024, and 2023 was 0.0%. Net Loss (Income) per Share We generated a net loss of $1,121 during the three months ended September 30, 2024, as compared to net income of $1,011 during the three months ended September 30, 2023. Our net loss per basic and diluted share for the three months ended September 30, 2024, was $0.10, as compared to net income per basic share of $0.10 for the three months ended September 30, 2023. We generated a net loss of $4,439 during the nine months ended September 30, 2024, as compared to net income of $2,601 during the nine months ended September 30, 2023. Our net loss per basic and diluted share for the nine months ended September 30, 2024, was $0.42, as compared to net income per basic share of $0.26 for the nine months ended September 30, 2023. LIQUIDITY AND CAPITAL RESOURCES General . 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”). As of September 30, 2024, the Company had $3,080 of cash on hand generated primarily from the sale of common stock under the ATM Program. Since October 20, 2020, and through September 30, 2024, the Company sold an aggregate of 1,835,616 shares of common stock for aggregate gross proceeds of approximately $14,051, before any sales agent fees and expenses payable by us under the ATM Program. During the nine months ended September 30, 2024, the Company sold an aggregate of 919,557 shares of common stock for an aggregate consideration of approximately $5,147, before any sales agent fees and expenses payable by the Company under the ATM Program. As of September 30, 2024, $69,853 of common stock remained available for issuance under the ATM Program. The 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 nine months ended September 30, 2024, we were able to operate substantially at capacity. There 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 $4,118 during the nine months ended September 30, 2024, as compared to $228 during the nine months ended September 30, 2023. The increase in cash used in operating activities is primarily due to the increase in our net loss and working capital fluctuations. 22 Cash Used in Investing Activities. Cash used in investing activities during the nine months ended September 30, 2024, was $1,277, as compared to $2,345 during the nine months ended September 30, 2023. Additions to property and equipment during the nine months ended September 30, 2024, were $1,277, as compared to $2,345 of additions during the nine months ended September 30, 2023. Cash Provided by/ (Used in) Financing Activities. Cash provided by our financing activities was $4,893 during the nine months ended September 30, 2024, as compared to cash used in financing activities of $142 during the nine months ended September 30, 2023. The increase in cash provided by financing activities is primarily due to the sale of common stock under the ATM Program. Working Capital . As of September 30, 2024, we had working capital of $9,103, including $3,080 of cash on hand, compared to working capital of $9,421, including $3,582 of cash on hand as of December 31, 2023. Assessment of Liquidity . As of September 30, 2024, we had $3,080 of cash on hand generated primarily from the sale of common stock under the ATM Program. We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings, the completion of the sale of the transformer business units in August 2019 and the sale of common stock under the ATM Program. Historically, our cash requirements were generally for operating activities, debt repayment, capital improvements and acquisitions. On October 29, 2024, we closed on the sale of our Pioneer Custom Electrical Products, LLC subsidiary for gross cash proceeds of $48,000. We 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 from the date our unaudited condensed interim consolidated financial statements are issued. As of September 30, 2024, we had no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that had, or that may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Capital Expenditures The Company had $1,277 of additions to property and equipment during the nine months ended September 30, 2024, as compared to $2,345 of additions to property and equipment during the nine months ended September 30, 2023. Known Trends, Events, Uncertainties and Factors That May Affect Future Operations We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the cyclical nature of the electrical equipment industry and the markets for our products and services. Our operating results could also be impacted by changing customer requirements and exposure to fluctuations in prices of important raw supplies, such as copper, steel and aluminum. We have various insurance policies, including cybersecurity, covering risks in amounts that we consider adequate. In addition to these measures, we attempt to recover other cost increases through improvements to our manufacturing efficiency and through increases in prices where competitively feasible. Lastly, other economic conditions we cannot foresee may affect customer demand. In addition, 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 “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K. 23 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.