UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Quarterly Period Ended
or
For the transition period from ________________ to ______________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(zip code) |
Registrant’s telephone number, including
area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol (s) | Name of each exchange on which registered |
Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
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Emerging growth company
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If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐
The number of shares outstanding of Common Stock, par value $0.001 per share, as of February 7, 2025, was shares.
NEOVOLTA, INC.
FORM 10-Q
DECEMBER 31, 2024
INDEX
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We make forward-looking statements under the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Report. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Report.
You should read the matters described in, and incorporated by reference in, “Risk Factors” and the other cautionary statements made in this Report, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements.
All forward-looking statements speak only at the date of the filing of this Quarterly Report. You should not rely upon forward-looking statements as predictions of future events. The reader should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we provide no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended June 30, 2024, as filed with the SEC on September 27, 2024. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. We do not undertake any obligation to update or revise publicly any forward-looking statements except as required by law, including the securities laws of the United States and the rules and regulations of the SEC.
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PART I. FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
NEOVOLTA, INC.
Balance Sheets
(Unaudited)
| December 31, | June 30, | |||||||
| 2024 | 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid insurance and other current assets | ||||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Short-term notes payable | ||||||||
| Total current liabilities | ||||||||
| Payable to line of credit lender | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 4) | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $ par value, shares authorized, and shares, respectively, issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to unaudited financial statements.
| 4 |
NEOVOLTA, INC.
Statements of Operations
(Unaudited)
| Three Months Ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues from contracts with customers | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | ( | ) | ||||||
| Interest income | ||||||||
| Total other income (expense) | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding - basic and diluted | ||||||||
| Net loss per share - basic and diluted | $ | ) | $ | ) | ||||
See accompanying notes to unaudited financial statements.
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NEOVOLTA, INC.
Statements of Operations
(Unaudited)
| Six Months Ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues from contracts with customers | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | ( | ) | ||||||
| Interest income | ||||||||
| Total other income (expense) | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding - basic and diluted | ||||||||
| Net loss per share - basic and diluted | $ | ) | $ | ) | ||||
See accompanying notes to unaudited financial statements.
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NEOVOLTA, INC.
Statements of Stockholders’ Equity
Three and Six Months Ended December 31, 2024 and 2023
(Unaudited)
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock compensation expense | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at September 30, 2024 | ( | ) | ||||||||||||||||||
| Stock compensation expense | ||||||||||||||||||||
| Exercise of common stock warrants | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock compensation expense | – | |||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at September 30, 2023 | ( | ) | ||||||||||||||||||
| Stock compensation expense | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to unaudited financial statements.
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NEOVOLTA, INC.
Statements of Cash Flows
(Unaudited)
| Six Months Ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Stock compensation expense | ||||||||
| Provision for expected credit losses/bad debt expense | ||||||||
| Changes in current assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Prepaid insurance and other current assets | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Borrowings under line of credit | ||||||||
| Repayments of line of credit | ( | ) | ||||||
| Borrowings under short-term notes payable | ||||||||
| Repayments of short-term notes payable | ( | ) | ||||||
| Proceeds from exercise of common stock warrants | ||||||||
| Net cash flows provided by financing activities | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | ||||||||
See accompanying notes to unaudited financial statements.
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NEOVOLTA, INC.
Notes to Financial Statements
(Unaudited)
(1) Business and Summary of Significant Accounting Policies
Description of Business – NeoVolta Inc. (“we”, “our” or the “Company”) is a Nevada corporation, which was formed on March 5, 2018. The Company is a designer, seller and manufacturer of Energy Storage Systems (ESS) which can store and use energy via batteries and an inverter at residential and commercial sites. The Company sells its proprietary ESS units through wholesale customers, primarily in California, and in an expanding number of other states. In August 2022, the Company completed an underwritten public offering of its equity securities resulting in its common stock and warrants becoming listed on a national exchange (see Note 3).
Interim Financial Information – The Company has prepared the accompanying financial statements, without audit, in accordance with accounting principles generally accepted in the Unites States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, these financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the Company’s financial position as of December 31, 2024, the results of its operations for the three and six month periods ended December 31, 2024 and 2023, the changes in its stockholders’ equity for the three and six month periods ended December 31, 2024 and 2023, and cash flows for the six month periods ended December 31, 2024 and 2023. The balance sheet as of June 30, 2024 has been derived from the Company’s June 30, 2024 financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, 2024, as filed with the SEC on September 27, 2024.
Cash and Cash Equivalents – The Company considers all highly liquid accounts with original maturities of three months or less at the date of acquisition to be cash equivalents. Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000, per bank. At December 31, 2024, the Company maintained all of its accounts at one bank and the combined balances of all accounts at this bank was in excess of the FDIC insurance limit by $78,746.
Inventory – Inventory consists of batteries and inverters purchased from Asian suppliers and delivered to a location near the Company’s offices, for assembly into ESS units. Inventory is stated at the lower of cost or net realizable value, cost being determined using the first-in, first out (FIFO) method. The Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value of inventory to the lower of cost or net realizable value based on its assessment of market conditions, inventory turnover and current stock levels. Inventory write-downs are charged to cost of goods sold. The following table presents the components of inventory (net of prior year reserve for obsolescence on assembly parts of $90,000) as of December 31, 2024 and June 30, 2024:
| Schedule of inventory | December 31, 2024 | June 30, 2024 | ||||||
| Raw materials, consisting of assembly parts, batteries and inverters | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
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Revenue Recognition – The Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). Revenues are recognized when control of the promised goods is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. Revenue is recognized based on the following five step model:
| · | Identification of the contract with a customer | |
| · | Identification of the performance obligations in the contract | |
| · | Determination of the transaction price | |
| · | Allocation of the transaction price to the performance obligations in the contract | |
| · | Recognition of revenue when, or as, the Company satisfies a performance obligation |
The Company generates revenues
from contracts with customers, consisting of a relatively small number of wholesale dealers and installers, primarily in California. Two
such dealers represented approximately
Allowance for Expected
Credit Losses – The Company recognizes an allowance for expected credit losses whenever a loss is expected to be incurred
in the realization of a customer’s account. As of December 31, 2024 and June 30, 2024, our allowance for expected credit losses
was $
Stock Compensation Expense – Employee and non-employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period.
Research and Development Costs – Research and development costs are expensed as incurred.
Use of Estimates – Management has made a number of estimates and assumptions in preparing these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.
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Recent Accounting Pronouncements – From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, (“FASB”), or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued and prospective standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption. The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.
Liquidity – These financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern has been dependent upon the ability of the Company to obtain necessary debt and equity financing to continue operations and the attainment of profitable operations.
As disclosed in Note 2, we
entered into an agreement with a financing entity in September 2024 whereby we have obtained a line of credit for borrowings of up to
$
(2) Debt Financing Transactions
On September 3, 2024, we entered
into an agreement with a newly formed financing entity whereby we obtained a line of credit for borrowings of up to $
On October 4, 2024, we made
an initial borrowing of $
In the month of November 2024,
we initiated short-term borrowings from a commercial lender under a loan agreement allowing for borrowings, secured by certain property
interests, of up to $2,000,000. As of December 31, 2024, we had made borrowings from this lender to finance four shipments to the new
customer in Puerto Rico in the total amount of $
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(3) Equity
Common Stock –
In August 2022, the Company completed an underwritten public offering of its equity securities in the form of Units with
In the underwritten public
offering, a total of Units, including exercise of the underwriter’s overallotment option, were sold at an offering price
to the public of $4.00 per Unit. The gross proceeds of the offering were $
In conjunction with the public
offering, all holders of the Company’s 2018 convertible notes in the total amount of $
Warrants – The
Warrants for a total of
The following table presents activity with respect to the Company’s warrants for the six months ended December 31, 2024:
| Schedule of warrant activity | Number | Wtd. Avg. | Wtd. Avg. | Aggregate | ||||||||||||
| of | Exercise | Remaining | Intrinsic | |||||||||||||
| Shares | Price | Term (Yrs.) | Value | |||||||||||||
| Outstanding at June 30, 2024 | $ | |||||||||||||||
| Warrants issued | ||||||||||||||||
| Warrants exercised/forfeited | ( | ) | ( | ) | ||||||||||||
| Outstanding at December 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at December 31, 2024 | $ | $ | ||||||||||||||
These warrants were issued
in conjunction with an underwritten public equity offering, therefore, there was no employee or non-employee compensation expense recognized.
In November 2024, the underwriter elected to exercise all Warrants at an exercise price of $4.40 per share, via a cashless exercise,
as permitted under the warrant agreement, resulting in the issuance of shares of our common stock. Additionally, the holders of
publicly issued Warrants to purchase an aggregate of
| 12 |
Stock Compensation Expense – In April 2024, we entered into an employment agreement with a new Chief Executive Officer (“CEO”), providing for an initial term extending through June 30, 2027, which will be automatically renewed for additional one-year terms unless either party chooses not to renew it. Pursuant to the agreement, our new CEO received an initial equity grant equal to restricted stock units (“RSU’s”), with a grant date value of $, which will vest over a four-year period, subject to his continued employment with the Company, and will be entitled to earn additional RSU’s on each anniversary in the form of three annual performance-based equity grants, beginning in the year ending June 30, 2025, with a target value of up to $660,000 each. However, no such additional grants have been made as of December 31, 2024.
In February 2022, we entered into a new employment agreement with our then CEO, effective April 1, 2022. As noted above, we engaged a new CEO effective April 29, 2024, replacing our former CEO who remains as Chairman of the Board and chief technology officer. Pursuant to the agreement, we issued our former CEO an RSU award for up to 150,000 shares of our common stock upon achieving the following milestones (which achievements shall be determined by the Board): (i) Milestone 1 - Successfully complete an uplisting of our common stock in 2022 and continue his employment with our company until January 1, 2023: 50,000 shares; and (ii) Milestone 2 - Produce 2,000 ESSs in 2022 and continue his employment with our company until January 1, 2023: 100,000 shares. As of December 31, 2023, Milestone 1 had been achieved, however, Milestone 2 had not been achieved and was no longer achievable. The underlying shares of common stock earned under Milestone 1 were issued to our former CEO as of January 1, 2023.
In February 2022, we entered into a new employment agreement with our Chief Financial Officer (“CFO”), effective March 1, 2022. Pursuant to the agreement, we issued our CFO an RSU award for up to 300,000 shares of our common stock upon achieving the following milestones (which achievements shall be determined by the Board): (i) Milestone 1 - Successfully complete an uplisting of our common stock in 2022 and continue his employment with our company until January 1, 2023: 250,000 shares; and (ii) Milestone 2 - successfully complete and file the Company’s Form 10-K for the year ended June 30, 2023 no later than September 29, 2023 and continue his employment with our company until January 1, 2024: 50,000 shares. Milestone 1 was achieved as of January 1, 2023, and the underlying shares of common stock earned under Milestone 1 were issued to our CFO as of that date. Milestone 2 was achieved as of January 1, 2024, and the underlying shares of common stock earned under Milestone 2 are expected to be issued to our CFO at a later date (see Note 5).
Based upon our assessment of the probability of our three executive officers noted above, plus the non-executive recipient of two other RSU award issued in June 2024 and October 2024, ultimately achieving any applicable milestones specified under the RSU awards indicated above, we have calculated the grant date value of such awards and are amortizing it as stock compensation expense over the underlying performance periods. We have recognized stock compensation expense applicable to such RSU awards in the six months ended December 31, 2024 and 2023 in the amounts of $ and $, respectively
In conjunction with our public
offering in August 2022, we appointed two new independent directors and adopted a new compensation plan for all independent directors
based on an annual compensation amount of $65,000 with not less than 70% of such amount paid in shares of our common stock, calculated
based on the share price at the end of such prior fiscal quarter, and up to 30% paid in cash, with such final amounts to be determined
by each director. As of December 31, 2024, we booked an accrual of $
In the six months ended December
31, 2024, we recognized total non-cash stock compensation expense of $
| 13 |
In the six months ended December
31, 2023, we recognized total non-cash stock compensation expense of $
Other Matters – In February 2019, the Company’s Board of Directors approved the establishment of a new 2019 Stock Plan (“Plan”) with an authorization for the issuance of up to shares of common stock. In December 2024, the Plan was amended to increase the number of shares of common stock authorized for issuance by shares. The Plan is designed to provide for future discretionary grants of stock options, stock awards and stock unit awards to key employees, consultants, advisors, and non-employee directors. As of December 31, 2024, we have made total awards of shares under the Plan as follows: (i) shares for the RSUs granted to our three executive officers and two non-executive recipients, as noted above; (ii) shares for the initial services of our three independent directors in the years ended June 30, 2024 and 2023, pursuant to the new compensation plan adopted in August 2022 for independent directors; and (iii) shares granted to several wholesale dealers under an incentive sales program.
(4) Commitments and Contingencies
Effective January 1, 2021, we secured new corporate and manufacturing office space under a sublease agreement with a company that served as our contract manufacturer at that time. Under the terms of the sublease agreement, we were required to make rental payments of $10,350 per month during the initial one-year term of the agreement. Further, under the terms of the sublease agreement, we were granted the right to renew the sublease for additional terms of 12 months each upon mutual agreement of both parties, provided thirty days’ notice is given for each subsequent term, at a modest increase in the monthly rent, through December 31, 2024, with no obligation to renew it. At inception of the sublease, management determined that exercise of the renewal option was not reasonably certain and, notwithstanding that the Company elected to renew the agreement for additional one year periods as of January 1, 2022, 2023 and 2024. Accordingly, we have accounted for it as a short-term lease under ASC 842, Leases. Effective December 31, 2024, the parties mutually agreed to a short-term extension of the sublease agreement, on essentially the same terms, through February 28, 2025. Prior to expiration of the extended sublease, the Company relocated its corporate and manufacturing office space to another facility in the same vicinity under a one year sublease agreement with the sublandlord, at a base rental of $15,532 per month.
As indicated in Note 1, we sell our proprietary ESS units through wholesale dealers, primarily in California. In that regard, we have entered into agreements with several wholesale dealers operating in California and other states under which we have incentivized the dealers to achieve quarterly sales above targeted levels by agreeing to grant them shares of our common stock for exceeding such quarterly sales targets, determined as of the calendar year end, subject to defined maximums, as determined annually on a calendar year basis.
We are dependent on our two main component vendors for our suppliers of batteries, inverters and other raw materials and the inability of these single-source suppliers to deliver necessary components of our products according to our schedule and at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components, could have a material adverse effect on our financial condition and operating results.
From time to time in the ordinary course of our business, the Company may be involved in legal proceedings, the outcomes of which may not be determinable. The Company is not involved in any legal proceedings at this time. The results of litigation are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources. We are not able to estimate an aggregate amount or range of reasonably possible losses for those legal matters for which losses are not probable and estimable.
| 14 |
(5) Subsequent Events
On February 4, 2025, the Company entered into an agreement with an accredited investor group under which the Company issued a total of 500,000 shares of its common stock to the investor group at an offering price of $2.00 per share resulting in gross proceeds to the Company in the amount of $1,000,000. The Company expects to use the proceeds of this private offering to meet working capital needs and for other general corporate purposes.
On February 4, 2025, Brent Willson retired as the Chairman of the Board of Directors and Ardes Johnson, the Company’s chief executive officer, was elected as a director and as the new Chairman of the Board of Directors.
Effective February 4, 2025, the Company’s Board of Directors and Compensation Committee approved an amended and restated employment agreement with the Company’s chief financial officer (“CFO”). The initial term of the employment agreement ends on December 31, 2027 and will be automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. Pursuant to the agreement, we issued our CFO an award of 240,000 RSUs vesting in four annual installments.
In February 2025, the Company entered into a referral agreement with a marketing company to market the Company’s products to qualified solar and energy storage system installers. The term of the referral agreement ends on December 31, 2026. The agreement provides for the issuance of shares of the Company’s common stock in exchange for reaching specified target levels of product sales, up to a maximum total of 2,000,000 shares for reaching a total of 2,500 units sold and paid for.
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Introduction
This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II. Other Information - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contained in our Annual Report on Form 10-K for the year ended June 30, 2024, filed with the Securities and Exchange Commission on September 27, 2024 (the “Annual Report”).
Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited financial statements included above under “Part I - Financial Information” - “Item 1. Financial Statements”.
Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “NEOV”, refer specifically to NeoVolta, Inc.
In addition, unless the context otherwise requires and for the purposes of this Report only:
| · | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; | |
| · | “SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and | |
| · | “Securities Act” refers to the Securities Act of 1933, as amended. |
Overview
We are a designer, manufacturer, and seller of high-end Energy Storage Systems (or ESS), primarily our NeoVolta NV14, NV14-K, and NV-24, which can store and use energy via batteries and an inverter at residential or commercial sites. We were founded to identify new ways to leverage emerging technologies with the dynamic changes that are taking place in the energy delivery space. We primarily market and sell our products directly to our certified solar installers and solar equipment distributors. We are also pursuing agreements with residential developers, commercial developers, and other commercial opportunities. Because we are purely dedicated to energy solar systems, virtually all our current resources and efforts go into further developing our flagship NV14, NV14-K, and NV-24 products, while focusing on specific industry needs for our next generation of products. We believe we are unique in the marketplace due to our low cost, our innovative battery chemistry, our product versatility and our commitment to installer service. Because of these factors, we believe NeoVolta is uniquely equipped to establish itself as a major player in the energy storage market.
In May 2019, we completed a public offering of 3,500,000 shares of our common stock at an offering price of $1.00 per share for gross proceeds of $3.5 million pursuant to Regulation A of the Securities Act. We used the proceeds of the offering to ramp up production, marketing, and sales of our NV14 product line. In that regard, we have used the proceeds from the offering to fund the marketing, production and distribution of our products, which commenced in July 2019 through a group of wholesale customers in California, as well as to provide additional working capital for other corporate purposes. We have expanded to include one wholesale distribution customer in Nevada. As of the current date, we have had successful installations of our products in the additional States of Arizona, Utah, Colorado, Wyoming, Texas, Oklahoma, Missouri, Tennessee, Alabama, Georgia, Florida, and Puerto Rico.
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As further discussed below under “Liquidity and Capital Resources,” we completed an underwritten public offering of our equity securities in the form of Units in August 2022. We sold a total of 1,121,250 Units in the offering at an offering price to the public of $4.00 per Unit. The gross proceeds of the offering were $4,485,000 and the net proceeds, after deduction of underwriting discounts and other offering costs, were approximately $3,780,000. We have used the proceeds of this public offering to increase our current production capacity, expand our product portfolio, enlarge our product marketing and sales efforts, and for other general corporate purposes.
On April 14, 2023, California implemented Net Energy Metering 3 (NEM3) for subsequent new solar installations. NEM3 reduces the amount of NEM credit for each kilowatt (KW) of solar power sent to the utility from a rate of approximately $0.20 per KW to $0.09 per KW (each Utility varies). NEM3 effectively increases the average solar Return of Investment (ROI) from 5-6 years to 10-12 years (each Utility varies). Effectively, the Company believes that solar installation in California currently makes little financial sense without also including a complimentary battery system such as ours. We believe that the anticipation of the passage of NEM3 in California, as well as the timing of its post-effective implementation, has had an erratic and temporary impact on the sales of our products in that state, beginning in December 2022.
Results of Operations
The following discussion reflects the Company’s revenues and expenses for the three-month and six-month periods ended December 31, 2024 and 2023, as reported in our financial statements included in Item 1.
Three months ended December 31, 2024 versus three months ended December 31, 2023
Revenues - Revenues from contracts with customers for the three months ended December 31, 2024 were $1,071,581 compared to $1,017,828 for the three months ended December 31, 2023. Such relatively modest increase in revenues was primarily due to the impact of opening various new sales channels since the engagement of our new chief executive officer in April 2024.
Cost of Goods Sold - Cost of goods sold for the three months ended December 31, 2024 were $747,670 compared to $811,955 for the three months ended December 31, 2023. The cost of goods sold in both periods reflected the cost of procuring and assembling the component parts of the energy storage systems that were sold in each fiscal year and resulted in gross profits on such sales of approximately 30% and 20%, respectively, with the increase largely being due to the reversal in December 2024 of a prior year reserve for obsolescence on component parts of our NV-14Ks of $90,000.
General and Administrative Expense - General and administrative expenses for the three months ended December 31, 2024 were $1,228,517 compared to $774,698 for the three months ended December 31, 2023. Such increase was mainly due to our engagement of a new chief executive officer, who was engaged at an annual salary of $350,000 and also received a 4 year amortizing equity award of $2,854,000, as well as the hiring of several other employees since April 2024. The addition of these personnel resulted in a higher level of both cash compensation expense and other associated expenses, such as marketing and travel, as well as non-cash stock compensation expenses related to the Company’s equity incentive programs.
Research and Development Expense - Research and development expenses for the three months ended December 31, 2024 were $42,324 compared to zero for the three months ended December 31, 2023. Such fluctuation was largely due to timing differences in the level of the Company’s recent product development efforts.
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Other Income and Expense - Interest expense for the three months ended December 31, 2024 was $24,546 compared to zero for the three months ended December 31, 2023, reflecting interest attributable to borrowings made under our line of credit and borrowing arrangements obtained since June 30, 2024. Interest income for the three months ended December 31, 2024 was $339 compared to $12,781 for the three months ended December 31, 2023. This decrease was due to our lower level of investable cash in the three months ended December 31, 2024.
Net Loss - Net loss for the three months ended December 31, 2024 was $971,137 compared to $556,044 for the three months ended December 31, 2023, representing the aggregate of the various revenue and expense categories indicated above. The Company has not recognized any income tax benefit for these net losses due to the uncertainty of its ultimate realization.
Six months ended December 31, 2024 versus six months ended December 31, 2023
Revenues - Revenues from contracts with customers for the six months ended December 31, 2024 were $1,661,817 compared to $1,781,958 for the six months ended December 31, 2023. Such decrease was primarily due to the impact of various macroeconomic factors, such as relatively high interest rates, and regulatory factors, such as utility regulations in the State of California, partially offset by the impact of opening various new sales channels since the engagement of our new chief executive officer in April 2024.
Cost of Goods Sold - Cost of goods sold for the six months ended December 31, 2024 were $1,245,059 compared to $1,454,913 for the six months ended December 31, 2023. The cost of goods sold in both periods reflected the cost of procuring and assembling the component parts of the energy storage systems that were sold in each fiscal year and resulted in gross profits on such sales of approximately 25% and 18%, respectively, with the increase largely being due to the reversal in December 2024 of a prior year reserve for obsolescence on component parts of our NV-14Ks of $90,000.
General and Administrative Expense - General and administrative expenses for the six months ended December 31, 2024 were $2,278,636 compared to $1,329,858 for the six months ended December 31, 2023. Such increase was mainly due to our engagement of a new chief executive officer, who was engaged at an annual salary of $350,000 and also received a 4 year amortizing equity award of $2,854,000, as well as the hiring of several other employees since April 2024. The addition of these personnel resulted in a higher level of both cash compensation expense and other associated expenses, such as marketing and travel, as well as non-cash stock compensation expenses related to the Company’s equity incentive programs.
Research and Development Expense - Research and development expenses for the six months ended December 31, 2024 were $50,941 compared to zero for the six months ended December 31, 2023. Such fluctuation was largely due to timing differences in the level of the Company’s recent product development efforts.
Other Income and Expense - Interest expense for the six months ended December 31, 2024 was $24,546 compared to zero for the six months ended December 31, 2023, reflecting interest attributable to borrowings made under our line of credit and borrowing arrangements obtained since June 30, 2024. Interest income for the six months ended December 31, 2024 was $1,734 compared to $18,054 for the six months ended December 31, 2023. This decrease was due to our lower level of investable cash in the six months ended December 31, 2024.
Net Loss - Net loss for the six months ended December 31, 2024 was $1,935,631 compared to $984,759 for the six months ended December 31, 2023, representing the aggregate of the various revenue and expense categories indicated above. The Company has not recognized any income tax benefit for these net losses due to the uncertainty of its ultimate realization.
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Liquidity and Capital Resources
Operating activities. Net cash used in operating activities in the six months ended December 31, 2024 was $1,451,330 compared to $503,497 in the six months ended December 31, 2023. This increase was largely due to the current period increase in our comparative net loss, primarily resulting from an increase in our previously noted cash operating expenses, as well as relatively higher changes in our net working capital needs on a comparative basis.
Financing activities. Net cash provided by financing activities in the six months ended December 31, 2024 was $793,649, compared to zero in the six months ended December 31, 2023. In September 2024, we entered into an agreement with a newly formed financing entity whereby we obtained a line of credit for borrowings of up to $5,000,000. As of December 31, 2024, we had made net borrowings under this credit agreement in the total amount of $383,538 initially to fund a short-term loan that we made to a customer in October 2024, in the amount of $250,000, which was fully repaid in December 2024. In November and December 2024, we made short-term borrowings from an accounts receivable lender in the total amount of $371,997, of which a portion had been repaid, leaving an outstanding balance as of December 31, 2024 of $249,711. In December 2024, we also received proceeds from the exercise of warrants issued in our August 2022 public offering in the amount of $160,400.
On February 4, 2025, the Company entered into an agreement with an accredited investor group under which the Company issued a total of 500,000 shares of its common stock to the investor group at an offering price of $2.00 per share resulting in gross proceeds to the Company in the amount of $1,000,000.
As of December 31, 2024, we had a cash balance of approximately $0.3 million and net working capital of approximately $3.7 million. Currently, we are not generating a break-even level of net operating cash flow from our net sales. However, we anticipate that demand for our products will ultimately increase over time and that, in conjunction with our recently obtained line of credit noted above and the completion of the February 2025 private offering, we will have sufficient cash to operate for at least the next 12 months.
Other Developments
We continue to monitor current international developments occurring in Ukraine and Israel. However, we do not believe that they will have a significant impact on either the domestic markets for our products or the international supply chains for our product components, which are largely sourced from Asia.
Presently, our two main raw material components, batteries and inverters, are imported from different Asian suppliers and are subject to fairly low tariff rates that have been in effect for several years. The newly inaugurated Trump Administration has indicated that it may propose a significant increase in such tariff rates on various types of goods imported from Asia that could apply to our two main components. In the event that any such possible tariff increases recently proposed by President Trump on China and two North American countries become enacted, which are applicable to our two main components, they would significantly increase the cost of our two main imported components whenever the increased rates become effective. In that case, we would be faced with a decision as to whether we should attempt to pass along such tariff increases to our customers through higher prices for our products or absorbing them internally, or some combination of those two alternatives.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as defined in Item 303 of Regulation S-K.
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Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We believe that certain accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. See “Note 1. Business and Summary of Significant Accounting Policies” of the Notes to Financial Statements set forth above and under “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended June 30, 2024, as filed with the SEC on September 27, 2024, for a further description of our critical accounting policies and estimates.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Information for this Item is not required as the Registrant is a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.
| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer, who is our principal executive officer, and Chief Financial Officer, who is our principal financial and accounting officer, to allow timely decisions regarding required disclosures.
As of December 31, 2024, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as a result of the material weakness relating to the lack of segregation of duties, our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were not effective. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. We will be required to hire additional personnel in order to remediate our material weakness.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Controls over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the quarter ended December 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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PART II. OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not currently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us, or contemplated to be brought against us.
| ITEM 1A. | RISK FACTORS |
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2024, as filed with the SEC on September 27, 2024 (the “Form 10-K”), under the heading “Risk Factors”, except as set forth below, and investors should review the risks provided in the Form 10-K prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended June 30, 2024, under “Risk Factors”, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
The new Administration may introduce tariff increases that would apply to the two main raw material components of our products which are sourced from Asian suppliers.
Presently, our two main raw material components, batteries and inverters, are imported from different Asian suppliers and are subject to fairly low tariff rates that have been in effect for several years. The newly inaugurated Trump Administration has indicated that it may propose a significant increase in such tariff rates on various types of goods imported from Asia that could apply to our two main components. In the event that any such possible tariff increases recently proposed by President Trump on China and two North American countries become enacted, which are applicable to our two main components, they would significantly increase the cost of our two main imported components whenever the increased rates become effective. In that case, we would be faced with a decision as to whether we should attempt to pass along such tariff increases to our customers through higher prices for our products or absorbing them internally, or some combination of those two alternatives.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
There have been no sales of unregistered securities during the three months ended December 31, 2024.
On February 4, 2025, the Company entered into an agreement with an accredited investor group under which the Company issued a total of 500,000 shares of its common stock to the investor group at an offering price of $2.00 per share resulting in gross proceeds to the Company in the amount of $1,000,000. The Company expects to use the proceeds of this private offering to meet working capital needs and for other general corporate purposes. The issuances were made pursuant to an exemption from registration as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.
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| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | OTHER INFORMATION |
Effective with the filing of this Report, the Company has relocated its corporate office to the following address:
NeoVolta, Inc.
12195 Dearborn Place
Poway, CA 92064
The Company’s phone number remains unchanged.
During the period covered by
this Quarterly Report, none of the Company’s directors or executive officers has
On February 4, 2025, the Company entered into an agreement with an accredited investor group under which the Company issued a total of 500,000 shares of its common stock to the investor group at an offering price of $2.00 per share resulting in gross proceeds to the Company in the amount of $1,000,000. The Company expects to use the proceeds of this private offering to meet working capital needs and for other general corporate purposes. The issuances were made pursuant to an exemption from registration as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.
On February 4, 2025, Brent Willson retired as the Chairman of the Board of Directors and Ardes Johnson, the Company’s chief executive officer, was elected as a director and as the new Chairman of the Board of Directors. Mr. Johnson will not receive any additional compensation for his service on the Board and will not serve on any Board committees.
On such date, Col Willson also informed the Company that he would also retire from his position as Chief Technology Officer of the Company on February 28, 2025. Upon Col Willson’s retirement, the Company agreed to enter into a consulting agreement with Col Willson for a period of three months at a monthly fee of $13,750 per month.
Effective February 4, 2025, the Company’s Board of Directors and Compensation Committee approved an amended and restated employment agreement with Steve Bond, the Company’s chief financial officer (“CFO”) and a director. The initial term of the employment agreement ends on December 31, 2027 and will be automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. The agreement provides for an initial base salary of $193,000 and a potential one-time bonus of $40,000. If Mr. Bond’s employment is terminated at our election without “cause” (as defined in the employment agreement), by Mr. Bond for “good reason” (as defined in the employment agreement), or if we choose not renew the agreement, Mr. Bond is entitled to receive severance payments equal to six months of base salary. Pursuant to the agreement, we issued Mr. Bond an award of 240,000 RSUs vesting in four annual installments.
In February 2025, the Company entered into a referral agreement with a marketing company to market the Company’s products to qualified solar and energy storage system installers. The term of the referral agreement ends on December 31, 2026. The agreement provides for the issuance of shares of the Company’s common stock in exchange for reaching specified target levels of product sales, up to a maximum total of 2,000,000 shares for reaching a total of 2,500 units sold and paid for.
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| ITEM 6. | EXHIBITS |
______________________
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NEOVOLTA, INC. | ||
| February 7, 2025 | /s/ H. Ardes Johnson | |
| H. Ardes Johnson | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| February 7, 2025 | /s/ Steve Bond | |
| Steve Bond | ||
| Chief Financial Officer | ||
| (Principal Financial/Accounting Officer) |
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