Flux Power(US:FLUX)2021-09-27 20:37Business Overview - The company designs and sells advanced lithium-ion energy storage solutions, targeting the material handling sector, which includes lift trucks and airport ground support equipment [18]. - The company estimates the market for lithium-ion battery solutions in the material handling sector to be a multi-billion dollar per year opportunity, driven by increasing demand [22]. - The company has experienced significant growth due to the advantages of lithium-ion technology over lead acid and propane-based solutions, including longer lifespan and reduced maintenance costs [20][34]. - The material handling sector is identified as a multi-billion dollar addressable market, driving the company's growth strategy [163]. Financial Performance - Revenues for Fiscal 2021 were $26,257,000, a 56% increase from $16,842,000 in Fiscal 2020 [182]. - Gross profit for Fiscal 2021 was $5,790,000, representing 22% of revenues, compared to 13% in Fiscal 2020 [182]. - Total operating expenses increased to $19,268,000 in Fiscal 2021, accounting for 73% of revenues, down from 87% in Fiscal 2020 [182]. - The net loss for Fiscal 2021 was $12,793,000, a 10.8% improvement compared to a net loss of $14,336,000 in Fiscal 2020 [182]. - Research and development expenses rose to $6,669,000, representing 25% of revenues, compared to 29% in Fiscal 2020 [182]. - Net cash used in operating activities for Fiscal 2021 was $18,358,000, reflecting the net loss and various non-cash items [201]. - Net cash provided by financing activities for Fiscal 2021 was $23,447,000, primarily from the issuance of common stock and other financing activities [206]. Capital Raising and Funding - The company raised approximately $15 million through a registered direct offering of 2,142,860 shares at a price of $7.00 per share, with net proceeds around $14 million after fees [26][28]. - The company sold 978,782 shares of common stock at an average price of $12.93 per share, raising approximately $12.7 million through its "At-The-Market" offering [168]. - As of June 30, 2021, the company had a cash balance of $4,713,000 and an accumulated deficit of $66,205,000, indicating a need for additional funding [199]. Research and Development - Research and development expenses increased to approximately $6.7 million for the fiscal year ended June 30, 2021, up from $5.0 million in the previous year, primarily due to new product development activities [61]. - The company anticipates that research and development will continue to be a substantial part of its strategic priorities, focusing on innovative products for cell and system management [62]. - The company filed three new patents related to lithium-ion battery technology aimed at optimizing battery life and performance [162]. - The company has two issued patents and is working on three additional patent applications related to its technology, including the next generation BMS 2.0 [66]. Operational Challenges - The company has faced supply chain and transportation issues due to the global pandemic, impacting its operations [56]. - The COVID-19 pandemic has the potential to disrupt manufacturing operations and supply chains, which could materially affect the company's ability to manufacture and ship products [91]. - The company does not have long-term contracts with customers, making it difficult to forecast sales and allocate resources effectively, which could adversely impact financial results [94]. - The company is dependent on a limited number of suppliers for battery cells, and any inability of these suppliers to deliver could have a material adverse effect on business operations [103]. - There is a risk of increased costs or supply shortages for raw materials, particularly lithium-ion phosphate cells, which could negatively impact financial performance [107]. - The company has faced challenges in developing new products and technologies, which are essential for maintaining competitiveness in the battery market [111]. Customer and Revenue Concentration - The company’s major customers represented approximately $16 million or 61% of total revenues for the year ended June 30, 2021, indicating strong customer reliance [46]. - The company relies on a limited number of customers, with three customers accounting for 61% of sales for the year ended June 30, 2021 [89]. Compliance and Regulatory Risks - The company may face significant costs related to environmental regulations for the storage and shipment of lithium-ion battery packs, which could adversely affect demand for its products [128]. - The company does not have an internal audit group and may need to hire additional accounting and financial staff to comply with Section 404 of Sarbanes-Oxley, which could incur substantial expenses [127]. - The company may face product liability claims if its products cause injury or property damage, which could result in significant costs and damage to reputation [98]. - The company is exposed to potential tariffs on lithium-ion batteries, which could increase costs and adversely affect gross margins [101]. Stock and Ownership - The company’s common stock commenced trading on The NASDAQ Capital Market under the symbol "FLUX" on August 14, 2020 [136]. - The company’s stock price has experienced volatility and is likely to continue to be highly volatile due to various factors, including earnings releases and changes in customer demand [136]. - The company has approximately 34.8% of its outstanding common stock owned by directors and executive officers, with Michael Johnson holding about 32.5% [139]. - The company has never declared or paid cash dividends on its common stock and does not anticipate doing so in the foreseeable future [140]. Facility and Production - The production facility is ISO 9001 certified and spans approximately 63,200 square feet, with total rent expenses of approximately $841,000 for the year ended June 30, 2021 [77]. - The production facility is ISO 9001 certified and consists of approximately 63,200 square feet, with a monthly rent of approximately $60,500, escalating by 3% per year until November 20, 2026 [146]. - The company’s leased property is believed to be in good condition and suitable for business operations [147].