Flux Power(FLUX) - 2022 Q1 - Quarterly Report

PART I - Financial Information Condensed Consolidated Financial Statements (Unaudited) Q1 FY2022 unaudited financials show asset and equity growth from financing, revenue increase, and continued net losses Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | June 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash | $15,737 | $4,713 | +234% | | Inventories | $13,846 | $10,513 | +32% | | Total Current Assets | $35,120 | $21,740 | +62% | | Total Assets | $39,609 | $26,262 | +51% | | Liabilities & Equity | | | | | Accounts Payable | $9,298 | $7,175 | +29% | | Total Current Liabilities | $12,110 | $10,390 | +17% | | Total Liabilities | $14,855 | $13,256 | +12% | | Total Stockholders' Equity | $24,754 | $13,006 | +90% | - The significant increase in cash and stockholders' equity was primarily driven by proceeds from stock offerings during the quarter[18][23] Quarterly Statement of Operations (in thousands, except per share data) | Metric | Q1 FY2022 (Ended Sep 30, 2021) | Q1 FY2021 (Ended Sep 30, 2020) | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | $6,271 | $4,499 | +39.4% | | Gross Profit | $1,338 | $873 | +53.3% | | Gross Margin | 21.3% | 19.4% | +1.9 p.p. | | Operating Expenses | $5,465 | $4,427 | +23.4% | | Operating Loss | $(4,127) | $(3,554) | +16.1% | | Net Loss | $(4,130) | $(3,984) | +3.7% | | Net Loss Per Share | $(0.30) | $(0.42) | +28.6% | - Revenue growth and improved gross margin were offset by higher operating expenses, leading to a slightly larger net loss compared to the prior year[20] Quarterly Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,416) | $(5,670) | | Net cash used in investing activities | $(238) | $(214) | | Net cash provided by financing activities | $15,678 | $11,308 | | Net change in cash | $11,024 | $5,424 | - Financing activities were the primary source of cash, with $15.7 million provided in the quarter, mainly from a registered direct offering and ATM sales. This influx of capital significantly boosted the company's cash position despite negative operating cash flow[27][130] Notes to Condensed Consolidated Financial Statements - The company designs, develops, manufactures, and sells advanced lithium-ion energy storage solutions for the material handling sector, including lift trucks and airport ground support equipment (GSE)[31] - On September 27, 2021, the company closed a registered direct offering (RDO) for gross proceeds of approximately $15.0 million through the sale of 2,142,860 shares of common stock and warrants[63] - As a subsequent event, on October 29, 2021, the company amended its loan agreement with Silicon Valley Bank to increase its revolving line of credit from $4.0 million to $6.0 million and extend the maturity date to November 7, 2022[97] - For the three months ended September 30, 2021, four major customers accounted for 57% of total revenues[87] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses revenue growth, improved gross margin, increased expenses, significant backlog growth, and sufficient liquidity Business Overview and Backlog - The company's long-term strategy is to meet the growing demand for lithium-ion solutions, targeting large fleets of forklifts and airport ground support equipment (GSEs)[103] Quarterly Backlog Growth (in thousands) | Quarter Ended | Beginning Backlog | New Orders | Shipments | Ending Backlog | | :--- | :--- | :--- | :--- | :--- | | Mar 31, 2021 | $2,759 | $9,977 | $6,826 | $5,910 | | Jun 30, 2021 | $5,910 | $15,053 | $8,339 | $12,624 | | Sep 30, 2021 | $12,624 | $13,122 | $6,313 | $19,433 | - The order backlog continued to grow post-quarter, reaching approximately $28.4 million as of November 10, 2021[105] Results of Operations - Revenues increased by 39% to $6.3 million for the quarter ended September 30, 2021, compared to the prior year, driven by higher unit volume and sales of higher-priced packs[116] - Gross profit rose 53% to $1.3 million, with gross margin expanding to 21% from 19% year-over-year, reflecting improved cost efficiencies despite higher costs for steel and electronic parts[119] - Selling and administrative expenses increased by 20% to $3.5 million due to higher personnel costs, insurance, and sales & marketing expenses[120] - Research and development expenses grew 31% to $2.0 million, primarily due to new product development and UL certification activities[121] Liquidity and Capital Resources - As of September 30, 2021, the company had a cash balance of $15.7 million[124] - Net cash provided by financing activities was $15.7 million for the quarter, primarily from a registered direct offering and sales under the ATM program[130] - Management believes that existing cash, combined with the recently expanded $6.0 million revolving line of credit, is sufficient to fund planned operations for the next twelve months[124][133] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing detailed market risk disclosures - As a smaller reporting company, Flux Power is exempt from providing detailed disclosures about market risk[137] Controls and Procedures Management concluded disclosure controls and procedures were effective with no material changes to internal controls - Based on an evaluation as of the end of the period, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective[138] - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control[141] PART II - Other Information Legal Proceedings No material legal proceedings are pending against the company - To the best of management's knowledge, there are no material legal proceedings pending against the Company[143] Risk Factors The company refers to its Annual Report on Form 10-K for risk factors, with no material changes reported - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed on September 27, 2021[144] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported for the period[145] Exhibits This section lists filed exhibits, including financing agreements and Sarbanes-Oxley certifications - Exhibits filed include the Form of Registered Direct Offering Warrant, Securities Purchase Agreement, the First Amendment to the Loan and Security Agreement with Silicon Valley Bank, and Sarbanes-Oxley certifications[149]