Flux Power Holdings, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2022. Flux designs, manufactures, and sells lithium-ion energy storage systems, primarily for material handling and airport ground support equipment. Figures are unaudited.
Financial performance
| Metric | Three months ended Dec. 31, 2022 | Prior-year quarter | Six months ended Dec. 31, 2022 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $17.158 million | $7.690 million | $34.998 million | $13.961 million |
| Gross profit / margin | $4.108 million / 24% | $1.042 million / 14% | $8.056 million / 23% | $2.380 million / 17% |
| Operating loss | $(1.304) million | $(5.046) million | $(3.115) million | $(9.173) million |
| Net loss | $(1.681) million | $(5.077) million | $(3.820) million | $(9.207) million |
| Loss per share, basic and diluted | $(0.10) | $(0.32) | $(0.24) | $(0.62) |
Quarterly revenue rose 123%, and six-month revenue rose 151%, reflecting higher unit volumes, higher average selling prices, and sales to new and existing customers. Gross margin improved year over year, while the company remained loss-making. Six-month adjusted EBITDA, a non-GAAP measure, was a loss of $2.432 million versus a loss of $8.465 million.
Quarterly operating expenses were $5.412 million, down from $6.088 million; six-month expenses were $11.171 million, down from $11.553 million. Lower research and development expense was partly offset by higher selling and administrative costs. Six-month interest expense increased to $713,000 from $34,000, principally due to higher borrowing balances, higher rates, and amortization of debt issuance costs.
Cash, liquidity, and debt
- At December 31, 2022, cash was $157,000; current assets were $31.015 million and current liabilities were $22.623 million. The accumulated deficit was $85.634 million.
- For the six months, operating cash use was $1.892 million, investing cash use was $336,000, and financing provided $1.900 million. Cash declined by $328,000 from June 30, 2022.
- Inventory was $19.507 million, up from $16.262 million at June 30; accounts payable increased to $12.797 million from $6.645 million.
- The SVB revolving facility balance was approximately $6.8 million at December 31. A January 10, 2023 amendment increased the facility commitment from $8 million to $14 million and removed a liquidity-ratio covenant. The facility was scheduled to mature May 7, 2023, absent renewal or extension.
- As of February 6, 2023, the company reported $964,000 of cash, $5.7 million available under the SVB facility, $4.0 million available under the subordinated line, and $5.7 million remaining under its ATM offering. The subordinated line carries 15% interest on advances; no related-party debt balance was outstanding at December 31.
Business developments, outlook, and risks
- Backlog was $30.352 million at December 31, compared with $35.020 million at June 30, 2022; it was approximately $29.8 million as of February 6, 2023. New orders totaled approximately $62.4 million over the twelve months ended December 31. Management cautions that orders can be cancelled or changed and backlog depends on parts availability and timely production and delivery.
- Management’s stated near-term priority is achieving cash-flow breakeven. Initiatives include cost reduction, supplier diversification, pricing actions, product redesign, lean manufacturing, and improved sourcing and shipping costs. Management expects revenue and gross-margin improvement over the next 12 months and believes available cash and financing can fund planned operations during that period, subject to execution and access to credit.
- Supply-chain delays and higher steel, component, and shipping costs remain risks. Inventory was increased to mitigate disruption; the company says there is no assurance that pricing and other actions will offset costs.
- Liquidity remains a significant risk: the company has historically not generated sufficient cash to fund operations. If backlog conversion, margin improvement, or access to financing falls short, it may need additional capital, potentially dilutive equity or convertible debt, or reductions in planned investment.
- Customer concentration is substantial: three customers represented 67% of quarterly revenue and 64% of six-month revenue. One supplier represented 32% of quarterly purchases and 29% of six-month purchases.
- No material legal proceedings were reported. Management stated disclosure controls were effective at December 31 and believes a previously identified internal-control material weakness related to oversight and warranty-reserve support was remediated; it plans continued monitoring.
Important facts for investors to verify
- Whether the SVB facility was renewed or extended beyond its May 7, 2023 maturity, and whether the company can satisfy borrowing conditions.
- Whether reported backlog converts into shipments, revenue, and cash, given customer cancellation rights and supply-chain dependencies.
- Whether gross-margin and cash-flow improvement initiatives deliver sustained progress despite input-cost pressures.
- Whether customer and supplier concentration changes, and whether working-capital needs—especially inventory and receivables—remain manageable.
- Whether the reported remediation of the internal-control weakness is sustained and independently supported in subsequent filings.