Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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, 2025, which was filed with the Securities and Exchange Commission on April 8, 2026.

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 subsidiary.

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 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 ongoing material weaknesses identified in our internal control over financial reporting, or inability to otherwise maintain an effective system of internal control.
	●	The effect that the identified material weaknesses and failure to establish and maintain effective internal control over financial reporting 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 tariff policies and regulations, income taxes, climate control initiatives, the timing or strength of an economic recovery in our markets and our ability to access capital markets.
	●	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, or similar public threat, or fear of such an event.
	●	Our ability to maintain compliance with the continued listing standards of the Nasdaq Capital Market.
	●	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 "Part I - Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, 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, service and sell distributed energy resources, on-site power generation 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, federal and state government entities, package delivery businesses, school bus fleet operations, EV charging infrastructure developers and owners, and distributed energy developers. We are headquartered in Fort Lee, New Jersey and operate from two (2) additional locations in the United States 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.

U.S. dollars are reported in thousands, except for share and per share amounts (unless otherwise noted).

Description of Business Segment

We currently have one reportable segment - Critical Power Solutions ("Critical Power").

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Our Critical Power business provides customers with our suite of mobile EV charging solutions, mobile on-site power systems, power generation equipment and all forms of services, including but not limited to, preventative maintenance, repairs, fuel polishing, and remote monitoring. These products and services are marketed by our operations headquartered in Minnesota, currently doing business under our Pioneer eMobility ("e-Boost") and Pioneer Critical Power ("Titan") brand names.

Critical Accounting Estimates

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts and disclosures in the unaudited condensed 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 April 8, 2026. There were no material changes to our critical accounting estimates during the three months ended March 31, 2026.

RESULTS OF OPERATIONS

Overview of March 31, 2026, and 2025, Operating Results

Selected financial and operating data for our reportable business segment for the most recent reporting period as compared to the comparable period in the prior year 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 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 months ended March 31, 2026, and 2025, are as follows:

		For the Three Months Ended
		March 31,
		2026				2025
Revenues		$	4,266			$	6,740
Cost of goods sold			3,684				6,592
Gross profit			582				148
Selling, general and administrative			2,446				2,414
Research and development			156				80
Total operating expenses			2,602				2,494
Operating loss from continuing operations			(2,020	)			(2,346	)
Interest income, net			156				247
Other (expense) income, net			(644	)			23
Loss before income taxes			(2,508	)			(2,076	)
Income tax expense (benefit)			-				-
Net loss from continuing operations			(2,508	)			(2,076	)
Income from discontinued operations, net of income taxes			-				1,147
Net loss		$	(2,508	)		$	(929	)

Backlog

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 commitments.

Our revenue backlog as of March 31, 2026, from our Critical Power business was $13,949, a decrease of $9,282, or 40.0%, when compared to $23,231 as of March 31, 2025.

The following table represents the progression of our backlog as of the end of the last five quarters:

		March 31,				December 31,				September 30,				June 30,				March 31,
		2026				2025				2025				2025				2025
Critical Power Solutions backlog		$	13,949			$	12,617			$	15,362			$	17,885			$	23,231

Revenue

The following table represents our revenues by major product category for the periods indicated (in thousands, except percentages):

		For the Three Months Ended
		March 31,
		2026				2025				Variance				%
Critical Power Solutions
Equipment, including operating leases		$	1,849			$	4,296			$	(2,447	)			(57.0	)
Service			2,417				2,444				(27	)			(1.1	)
Total revenue		$	4,266			$	6,740			$	(2,474	)			(36.7	)

For the three months ended March 31, 2026, our revenue decreased by $2,474, or 36.7% to $4,266, down from $6,740 during the three months ended March 31, 2025, primarily due to a decrease in sales and rentals of our suite of mobile EV charging solutions, e-Boost.

Gross Profit and Margin

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

		For the Three Months Ended
		March 31,
		2026				2025				Variance				%
Critical Power Solutions
Gross profit		$	582			$	148			$	434				293.2
Gross margin %			13.6				2.2				11.4

For the three months ended March 31, 2026, our gross margin increased to 13.6% of revenues, as compared to 2.2% during the three months ended March 31, 2025, primarily driven by improved operating efficiencies associated with the sale of our mobile EV charging solutions, e-Boost.

Operating Expenses

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

		For the Three Months Ended
		March 31,
		2026				2025				Variance				%
Selling, general and administrative		$	2,446			$	2,414			$	32				1.3
Research and development			156				80				76				95.0
Total operating expense		$	2,602			$	2,494			$	108				4.3

Selling, General and Administrative Expense. For the three months ended March 31, 2026, consolidated selling, general and administrative expense increased by approximately $32, or 1.3%, to $2,446, as compared to $2,414 during the three months ended March 31, 2025. As a percentage of our consolidated revenue, selling, general and administrative expense increased to 57.3% during the three months ended March 31, 2026, as compared to 35.8% during the three months ended March 31, 2025, primarily due to the decrease in total revenue during the three-month period ended March 31, 2026.

R&D Expenses. Research and development expenses consist of costs incurred in performing research and development activities, including salaries, benefits, overhead costs, contract services and other related costs. During the three months ended March 31, 2026, we incurred $156 of R&D expenses related to developing our mobile EV charging and power generation equipment as compared to $80 during the three months ended March 31, 2025.

Operating Loss from Continuing Operations

The following table represents our operating loss from continuing operations for the periods indicated (in thousands):

		For the Three Months Ended
		March 31,
		2026				2025				Variance				%
Operating loss from continuing operations		$	(2,020	)		$	(2,346	)		$	326				13.9

During the three months ended March 31, 2026, our operating loss from continuing operations decreased by approximately $326, or 13.9%, to $2,020, as compared to $2,346 during the three months ended March 31, 2025, primarily due to the increase in our gross profit.

Non-Operating Income (Expense) from Continuing Operations

Interest Income. For the three months ended March 31, 2026, we had interest income of approximately $156, as compared to interest income of approximately $247 during the three months ended March 31, 2025. We generated the majority of our interest income from our cash on hand during the three-month periods ended March 31, 2026, and 2025.

Other Income (Expense). Other income (expense) in the unaudited condensed consolidated statements of operations reports certain gains and losses associated with activities not directly related to our core operations.

For the three-month period ended March 31, 2026, other non-operating expense was $644, as compared to non-operating income of $23 during the three-month period ended March 31, 2025, primarily due to the loss on our equity method investment.

Provision for Income Taxes. For the three months ended March 31, 2026 and 2025, the Company recorded no income tax provision, resulting in an effective tax rate (ETR) of 0%.

Net Loss per Share from Continuing Operations

We generated a net loss from continuing operations of $2,508 during the three months ended March 31, 2026, as compared to $2,076 during the three months ended March 31, 2025.

Our net loss from continuing operations per basic and diluted share during the three months ended March 31, 2026, was $0.23, compared to a net loss from continuing operations per basic and diluted share of $0.19 during the three months ended March 31, 2025.

Income from Discontinued Operations

Income from discontinued operations, net of tax was $0 during the three months ended March 31, 2026, as compared to $1,147 during the three months ended March 31, 2025. The $1,147 of income recognized during the three months ended March 31, 2025, was due to finalizing the net working capital adjustment with the buyer of the Company's former wholly owned subsidiary, Pioneer Custom Electrical Products Corp. ("PCEP") to Voltaris Power, LLC (the "PCEP Sale").

LIQUIDITY AND CAPITAL RESOURCES

General. As of March 31, 2026, we had $13,583 of cash on hand generated primarily from the PCEP Sale. On October 29, 2024, we closed on the PCEP Sale for gross cash proceeds of $48,000 and $2,000 in equity. On January 7, 2025, we paid a one-time special cash dividend of an aggregate of $16,665. As of December 31, 2024, the Company recorded a consideration due to the buyer of the PCEP Sale of $3,347 related to a net working capital adjustment. On April 16, 2025, we and the buyer from the PCEP Sale finalized the net working capital adjustment and as a result, we recorded a $1,147 adjustment to the consideration due to the buyer of the PCEP Sale. During the year ended December 31, 2025, we paid the $2,200 consideration to the buyer of the PCEP Sale.

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 in the Middle East, 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. Additionally, the shutdown of the U.S. federal government, recent changes to U.S. policy implemented by the U.S. Congress, the Trump administration or any new administration have impacted and may in the future impact, among other things, the U.S. and global economy, tariff policies and regulations, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. 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 intend to take steps deemed appropriate to limit the impact on our business. During the three months ended March 31, 2026, 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/ Provided by Operating Activities. Cash used in our operating activities was $887 during the three months ended March 31, 2026, as compared to cash provided by our operating activities of $1,502 during the three months ended March 31, 2025. The increase in cash used in operating activities is primarily due to the increase in net loss during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, in addition to working capital fluctuations.

Cash Used in Investing Activities. Cash used in investing activities during the three months ended March 31, 2026, was $459, as compared to cash used in our investing activities of $595 during the three months ended March 31, 2025. During the three-month periods ended March 31, 2026, and 2025, additions to our property and equipment were $233 and $595, respectively. During the three months ended March 31, 2026, we invested $226 in our equity-method investment.

Cash Used in Financing Activities. Cash used in our financing activities was $30 during the three months ended March 31, 2026, as compared to cash used in our financing activities of $16,689 during the three months ended March 31, 2025. The decrease in cash used in financing activities is primarily due to the payment of a one-time special cash dividend during the three months ended March 31, 2025.

Working Capital. As of March 31, 2026, we had working capital of $18,657, including $13,583 of cash on hand, compared to working capital of $20,659, including $14,959 of cash on hand as of December 31, 2025.

Assessment of Liquidity. As of March 31, 2026, we had $13,583 of cash on hand generated primarily from the PCEP Sale. 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 our wholly owned business units and the sale of common stock. Historically, our cash requirements were generally for operating activities, debt repayment, capital improvements and acquisitions.

We expect to meet our cash needs with our working capital and cash flows from 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 consolidated financial statements are issued.

As of March 31, 2026, 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.

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 in the Middle East, 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. Additionally, recent changes to U.S. policy implemented by the U.S. Congress, the Trump administration or any new administration have impacted and may in the future impact, among other things, the U.S. and global economy, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business. We predominately sell to customers in the industrial production 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.