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 |
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 ☐ No
The number of shares outstanding of Common Stock, par value $0.001 per share, as of May 9, 2025, was shares.
NEOVOLTA, INC.
FORM 10-Q
MARCH 31, 2025
INDEX
| 2 |
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.
| 3 |
PART I. FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
NEOVOLTA, INC.
Balance Sheets
(Unaudited)
| March 31, | June 30, | |||||||
| 2025 | 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 | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| 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.
| 5 |
NEOVOLTA, INC.
Statements of Operations
(Unaudited)
| Nine Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| 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.
| 6 |
NEOVOLTA, INC.
Statements of Stockholders' Equity
Three and Nine Months Ended March 31, 2025 and 2024
(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 | ( | ) | ||||||||||||||||||
| Stock compensation expense | ||||||||||||||||||||
| Issuance of common stock in private offering | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| 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 | ( | ) | ||||||||||||||||||
| Stock compensation expense | – | |||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to unaudited financial statements.
| 7 |
NEOVOLTA, INC.
Statements of Cash Flows
(Unaudited)
| Nine Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| 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: | ||||||||
| Proceeds of private equity offering | ||||||||
| 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.
| 8 |
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, initially 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 March 31, 2025, the results of its operations for the three and nine month periods ended March 31, 2025 and 2024, the changes in its stockholders’ equity for the three and nine month periods ended March 31, 2025 and 2024, and cash flows for the nine month periods ended March 31, 2025 and 2024. 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 March 31, 2025, 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 $285,966.
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 March 31, 2025 and June 30, 2024:
| March 31, | June 30, | |||||||
| 2025 | 2024 | |||||||
| Raw materials, consisting of assembly parts, batteries and inverters | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
| 9 |
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, in California and several
other states. 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 March 31, 2025 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.
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, including ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense disaggregation disclosures (Topic 220-40): Disaggregation of Income Statement Expenses, 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.
| 10 |
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 accounts receivable lender under a loan agreement allowing for borrowings, secured
by certain property interests, of up to $
(3) Equity
Common Stock –
In February 2025, the Company closed a private equity offering under which the Company issued a total of shares of its common
stock to the investors at an offering price of $ per share resulting in gross proceeds to the Company in the amount of $
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 $
| 11 |
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 nine months ended March 31, 2025:
| 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 March 31, 2025 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2025 | $ | $ | ||||||||||||||
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
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, our Compensation Committee has not set any definitive targets, therefore, no additional grants have been made as of March 31, 2025.
In February 2025, we entered into an amended and restated employment agreement with our 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 RSUs vesting in four annual installments.
In February 2022, we entered into an earlier amended and restated employment agreement with our CFO, pursuant to which we issued him an RSU award for up to shares of our common stock upon achieving two defined milestones. The first milestone was achieved as of January 1, 2023, and the underlying shares of common stock were issued to our CFO as of that date. The second milestone was achieved as of January 1, 2024, and the underlying shares of common stock are expected to be issued to our CFO at a later date.
| 12 |
In January 2025, we entered into an employment agreement with our new Chief Operating Officer (“COO”). 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 COO an award of RSUs vesting in three annual installments. Additionally, we entered into employment agreements with two other individuals in June 2024 and October 2024, and we granted them a total of RSUs vesting in four annual installments. As a result, we presently have a total of RSUs that have been granted to our three officers and two other individuals. For all of these awards, we have calculated the grant date value of such awards and are amortizing it as stock compensation expense over the underlying vesting periods. We have recognized stock compensation expense applicable to such RSU awards in the nine months ended March 31, 2025 and 2024 in the amounts of $ and $, respectively.
In February 2025, we entered into a referral agreement with a marketing company to market our products to qualified solar and energy storage system installers. The term of the referral agreement ends on December 31, 2026. Pursuant to the agreement, the only compensation that the marketing company will be entitled to receive will be through the issuance of shares of our 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. In accordance with ASC 718, we are accounting for this agreement based on our periodic assessments of the probability of reaching such target levels. Based on that approach, we have recognized stock compensation expense in the three months ended March 31, 2025, in the amount of $62,158.
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 March 31, 2025, we booked an accrual of $
In the nine months ended March
31, 2025, we recognized total non-cash stock compensation expense of $
In the nine months ended March
31, 2024, 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 March 31, 2025, 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.
| 13 |
(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 $
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 in China 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. Beginning in April 2025, the Trump Administration implemented a significant increase in tariff rates on all goods imported from China. However, we anticipated the likelihood of facing such a tariff increase and have been stockpiling our inventory of these two components. As a result, we do not anticipate having to purchase a significant level of such components at post-tariff prices for the next several months.
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 |
| 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.
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.
| 15 |
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 nine-month periods ended March 31, 2025 and 2024, as reported in our financial statements included in Item 1.
Three months ended March 31, 2025 versus three months ended March 31, 2024
Revenues - Revenues from contracts with customers for the three months ended March 31, 2025 were $2,014,105 compared to $283,900 for the three months ended March 31, 2024. Such increase in our revenues, to the highest quarterly level in the history of our Company, 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 March 31, 2025 were $1,499,597 compared to $117,755 for the three months ended March 31, 2024. 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 26% and 58%, respectively, with the unusually high percentage in the prior year being due to the initial efficiencies that we realized from taking over responsibility for manufacturing of our products from a prior contract operator.
General and Administrative Expense - General and administrative expenses for the three months ended March 31, 2025 were $1,857,531 compared to $756,118 for the three months ended March 31, 2024. 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 has 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 March 31, 2025 were $27,947 compared to $10,392 for the three months ended March 31, 2024. 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 three months ended March 31, 2025 was $78,499 compared to zero for the three months ended March 31, 2024, reflecting interest attributable to borrowings made under our line of credit and another borrowing arrangement obtained since June 30, 2024. Interest income for the three months ended March 31, 2025 was $138 compared to $10,892 for the three months ended March 31, 2024. This decrease was due to our lower level of investable cash in the three months ended March 31, 2025.
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Net Loss - Net loss for the three months ended March 31, 2025 was $1,449,331 compared to $589,473 for the three months ended March 31, 2024, 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.
Nine months ended March 31, 2025 versus nine months ended March 31, 2024
Revenues - Revenues from contracts with customers for the nine months ended March 31, 2025 were $3,675,922 compared to $2,065,858 for the nine months ended March 31, 2024. Such increase in our 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 nine months ended March 31, 2025 were $2,744,656 compared to $1,572,668 for the nine months ended March 31, 2024. 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 24%, respectively, with the increase being partially 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 nine months ended March 31, 2025 were $4,136,167 compared to $2,085,976 for the nine months ended March 31, 2024. 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 has 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 nine months ended March 31, 2025 were $78,888 compared to $10,392 for the nine months ended March 31, 2024. 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 nine months ended March 31, 2025 was $103,045 compared to zero for the nine months ended March 31, 2024, reflecting interest attributable to borrowings made under our line of credit and another borrowing arrangement obtained since June 30, 2024. Interest income for the nine months ended March 31, 2025 was $1,872 compared to $28,946 for the nine months ended March 31, 2024. This decrease was due to our lower level of investable cash in the nine months ended March 31, 2025.
Net Loss - Net loss for the nine months ended March 31, 2025 was $3,384,962 compared to $1,574,232 for the nine months ended March 31, 2024, 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.
Liquidity and Capital Resources
Operating activities. Net cash used in operating activities in the nine months ended March 31, 2025 was $3,501,515 compared to $988,827 in the nine months ended March 31, 2024. 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 for personnel and related costs, as well as the relatively higher changes in our net working capital needs, including recent stockpiling and prepayment of inventory, on a comparative basis.
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Financing activities. Net cash provided by financing activities in the nine months ended March 31, 2025 was $3,051,054, compared to zero in the nine months ended March 31, 2024. In February 2025, we closed a private equity offering under which we issued a total of 543,500 shares of our common stock to the investors at an offering price of $2.00 per share resulting in gross proceeds of $1,087,000. 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 March 31, 2025, 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. Beginning in November 2024, we have made short-term borrowings from another lender in the total amount of $2,081,845, of which a portion had been repaid, leaving an outstanding balance as of March 31, 2025 of $1,420,116. While our increasing level of short-term borrowings from this lender have been made at a relatively high borrowing cost in terms of interest rate and fees, we have been able to meet our rising funding needs in this period in large part due to the timely responsiveness of this lender. 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.
As of March 31, 2025, we had a cash balance of approximately $0.5 million and net working capital of approximately $4.2 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 our 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 suppliers in China and, until recently, were subject to fairly low tariff rates that had been in effect for several years. Beginning in April 2025, the new Trump Administration implemented a significant increase in tariff rates on all goods imported from China that applies to our two main components. However, we anticipated the likelihood of facing such a tariff increase and have been stockpiling our inventory of these two components. As a result, we do not anticipate having to purchase a significant level of such components at post-tariff prices for the next several months while there are hopes that high level negotiations between China and the Trump Administration will ultimately lead to a mutually acceptable trade agreement.
In the event, however, that such a mutual trade agreement is not reached between the parties within the next several months and we find it necessary to begin purchasing a significant level of our inventory components from China at post-tariff prices, 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. Either circumstance would likely materially adversely affect our sales and/or our profitability.
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.
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.
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| 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 March 31, 2025, 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 March 31, 2025, 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 has introduced tariff increases that 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 suppliers in China and, until recently, were subject to fairly low tariff rates that had been in effect for several years. Beginning in April 2025, the new Trump Administration implemented a significant increase in tariff rates on all goods imported from China that applies to our two main components. However, we anticipated the likelihood of facing such a tariff increase and have been stockpiling our inventory of these two components. As a result, we do not anticipate having to purchase a significant level of such components at post-tariff prices for the next several months while there are hopes that high level negotiations between China and the Trump Administration will ultimately lead to a mutually acceptable trade agreement.
In the event, however, that such a mutual trade agreement is not reached between the parties within the next several months and we find it necessary to begin purchasing a significant level of our inventory components from China at post-tariff prices, 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. Either circumstance would likely materially adversely affect our sales and/or our profitability.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
On February 28, 2025, the Company closed a private equity offering with accredited investors under which the Company issued a total of 543,500 shares of its common stock to the investors at an offering price of $2.00 per share resulting in gross proceeds to the Company in the amount of $1,087,000. 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.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
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| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | OTHER INFORMATION |
During the period covered
by this Quarterly Report, none of the Company’s directors or executive officers has
| ITEM 6. | EXHIBITS |
| Exhibit No. | Exhibit Description | |
| 3.1 | Amended and Restated Articles of Incorporation of NeoVolta, Inc. (incorporated by reference to exhibit 2.1 of the Company’s Form 1-A (file no. 024-10942)). | |
| 3.2 | Second Amended and Restated Bylaws of NeoVolta, Inc. (incorporated by reference to exhibit 3.3 of the Company’s Form S-1 (file no. 333-264275)). | |
| 10.1 | Form of Subscription Agreement in February 2025 private offering (incorporated by reference to exhibit 10.1 of the Company’s Form 10-Q filed February 7, 2025). | |
| 10.2 | Amended and Restated Employment Agreement between NeoVolta, Inc. and Steve Bond dated February 4, 2025 (incorporated by reference to exhibit 10.2 of the Company’s Form 10-Q filed February 7, 2025) | |
| 10.3 | Consulting Agreement between NeoVolta, Inc. and Brent Willson effective March 1, 2025 (incorporated by reference to exhibit 10.3 of the Company’s Form 10-Q filed February 7, 2025) | |
| 31.1* | Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes- Oxley Act of 2002 | |
| 31.2* | Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Principal Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification of Principal Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS * | Inline XBRL Instance Document | |
| 101.SCH * | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL * | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF * | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB * | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE * | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
______________________
* 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. | ||
| May 9, 2025 | /s/ | H. Ardes Johnson |
| H. Ardes Johnson | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| May 9, 2025 | /s/ | Steve Bond |
| Steve Bond | ||
| Chief Financial Officer | ||
| (Principal Financial/Accounting Officer) |
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