Pioneer Power : 2022 Annual Report

PS

ǡ I Ǥ

2022

PIONEER POWER SOLUTIONS, INC.

Form 10-K

For the Fiscal Year Ended December 31, 2022

TABLE OF CONTENTS

PageSpecial Note Regarding Forward-Looking Statements .............................................................................................

2

PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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, data center, oil and gas, marine 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.

• ● Operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor or overhead cost increases, inflation, 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.

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 "Item 1A. Risk Factors" in this Annual Report on Form 10-K for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock.

PART I

ITEM 1. BUSINESS.

Overview

Pioneer Power Solutions, Inc. and its wholly owned subsidiaries (referred to herein as the "Company," "Pioneer," "Pioneer Power," "we," "our" and "us") design, manufacture, integrate, refurbish, service, distribute and sell electric power systems, distributed energy resources, power generation equipment and mobile electric vehicle ("EV") charging solutions. Our products and services are sold to a broad range of customers in the utility, industrial and commercial markets. Our customers include, but are not limited to, electric, gas and water utilities, data center developers and owners, EV charging infrastructure developers and owners, and distributed energy developers. 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.

We intend to grow our business through continued internal investments in product development and expansion of our manufacturing, engineering, sales and marketing personnel.

Description of Business Segments

We have two reportable segments: Transmission & Distribution Solutions ("T&D Solutions") and Critical Power Solutions ("Critical Power").

• ● Our T&D Solutions business provides equipment solutions that help customers effectively and efficiently protect, control, transfer, monitor and manage their electric energy requirements. These solutions are marketed principally through our 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 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 Energy Systems Inc. ("Titan") and Pioneer Critical Power brand names.

T&D Solutions Segment

We design, manufacture, integrate and sell a wide range of distribution and transmission equipment. Our focus since approximately 2020 has been to address the Distributed Generation ("DG") and Electric Vehicle Charging Infrastructure ("EVCI") markets. We primarily compete in these markets with our E-Bloc product. E-Bloc combines an automatic transfer switch, circuit protection and special programmable controls into an integrated, compact outdoor system. We believe that demand for our solutions is driven primarily by new installations, customer growth and the global transition to lower carbon emissions.

In addition, we distinguish ourselves by producing a wide range of highly engineered power solutions, sold either directly to end users, engineering, procurement and construction ("EPC") firms, or through electrical distributors. We serve customers in a variety of industries including, but not limited to, utilities, EV charging infrastructure, data center developers and owners, distributed energy resource developers, EPC contractors and renewable energy developers and producers.

Our focus, nevertheless, has been on expanding the sales of our E-Bloc power solution, and as a result, in December 2021, we received a $12 million order for use by one of the largest mass merchandise retailers in the world. This order was secured through one of our distributed energy resource developers and was approximately 75% completed in 2022. The balance of the contract is expected to be completed and recognized in the first quarter of 2023.

Summary of T&D Solutions Segment Offerings

Product Category

Solutions

Power Systems

• ▪ Integrated Power Centers ("IPC"): indoor and outdoor power systems integrating any combinations of the following, but not limited to: switchgear, controls, engine generator sets, energy storage, fuel cells, solar power and EV charging solutions marketed and internally designated as "E-Bloc" power solutions.

Circuit Protective Equipment▪ Low and medium voltage switchgear, switchboards and automatic transfer switches.

We engineer, manufacture and integrate these offerings at our facility in Southern California.