Flux Power Holdings Inc
For the period ended Mar 31, 2024. Filed May 13, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 13, 2024
FLUX$0.32+1.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-08.
0001493152-24-005464
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-13.
0001493152-24-018968
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 72 previous paragraphs and 74 current paragraphs.
40 unchanged; 28 reworded; 6 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
The Company notified GBC of a certain event of default with respect to the Company’s anticipated failure to maintain the EBITDA covenant for the trailing three (3) month period ended April 30, 2024 (the “Default”). On May 8, 2024, the Company received a waiver to the Loan and Security Agreement with GBC dated July 28, 2023, as amended (the “Agreement”), which waived the Default, subject to satisfaction of the following conditions: (i) receipt of a counterpart of the Waiver duly executed by the Company; (ii) receipt of the waiver fee of $20,000; (iii) receipt of the representations and warranties from the Company that after giving effect to the Waiver, the representations and warranties contained in the Agreement, the Waiver and the other Loan Documents (as defined in the Agreement) shall be true and correct; and (iv) after giving effect to the Waiver, additional or event of default shall have occurred and be continuing on and as of the effective date of the Waiver. The Company is working with GBC to modify the financial covenants in the Agreement to prevent future defaults.
Current report
Revenues for the nine months ended March 31, 2024, decreased by $2,487,000 or 5% to $47,598,000, compared to $50,085,000 for the nine months ended March 31, 2023. The decrease in revenues was due to lower capital spending in the market sectors that we serve resulting in shipments of fewer units during this fiscal year and a larger mix of lower capacity models.
Current report
As of March 31, 2024, we have an existing cash balance of $1.3 million, the $2.4 million available under our $16.0 million GBC Credit Facility subject to borrowing base limitations, and the $2.0 million available from Cleveland Capital under our 2023 Subordinated LOC. However, if the Company continues the covenant non-compliance that was experienced for the trailing three (3) month period ended April 30, 2024, or the revised covenants set by GBC will not be met, there may not be additional funds available under the GBC LOC.(See Note 2 – Going Concern).
Current report
Net cash provided by financing activities was $6,247,000 for the nine months ended March 31, 2023, which primarily consisted of $5,602,000 in net borrowing under the working capital line of credit, and $697,000 in net proceeds from sales of common stock under our ATM offering.
Current report
As of May 6, 2024, we had a cash balance of $1.7 million, funding available under our GBC Credit Facility under which up to $3.2 million is currently available, subject to borrowing base limitations, and funds available under our 2023 Subordinated LOC of up to $2.0 million. Our operations have relied on our ability to successfully maintain and draw on our credit facilities. In light of the recent Default under the GBC Credit Facility, we are working with GBC to modify the financial covenants in Agreement to prevent future defaults. However, there is no guarantee that we will be able to modify the terms in a manner that is favorable to us. If we are unable to modify the terms or otherwise meet the conditions provided in the Agreement, the funds may not be available to us.
Current report
Our ability to draw funds from the GBC Credit Facility is subject to certain restrictions, covenants and borrowing base limitations. If we are unable to modify the terms or otherwise meet the conditions provided in the loan documents, the funds may not be available to us. In addition, the Company’s operations have been impacted by delays in new orders of its energy storage solutions due to corresponding deferrals of new forklift purchases mainly caused by lower capital spending in the market sector that we serve and interest rate variability affecting selected large customer fleets which have impacted its ability to meet projected revenue targets and generate cash from operations. Further, these events have placed pressure on the Company’s cash resources and raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months following the filing date of this Quarterly Report on Form 10-Q .
Removed paragraphs (4)
Previous report
On January 30, 2024, the Company entered into the Second Amendment to Loan and Security Agreement (the “Second Amendment”) with Gibraltar Business Capital, LLC (“GBC”), which amended certain terms of the Loan and Security Agreement dated July 28, 2023, including but not limited to, (i) increasing the commitment amount from $15 million to $16 million, (ii) adding an additional non-refundable closing fee in the amount of $7,500 in cash for the increase in the commitment amount to $16 million, (iii) amending the definition of “Eligible Accounts;” and (iv) amending the EBITDA Minimum financial covenant of the Company. In consideration for the Second Amendment, the Company agreed to pay GBC a non-refundable amendment fee of $10,000 in cash. Our credit line with Gibraltar provides for expansion up to $20 million.
Previous report
Revenues for the six months ended December 31, 2023, decreased by $1,857,000 or 5% to $33,141,000, compared to $34,998,000 for the six months ended December 31, 2022. The decrease in revenues was due to lower revenue during the first half of the six months ended December 31, 2023 resulted from lower unit sales stemming from delays in the delivery of forklifts earlier this fiscal year and a larger mix of lower capacity models, which was partially offset by stronger revenue achieved during the. second quarter
Previous report
As of January 31, 2024, we believe that our existing cash balance of $2.7 million, the $6.0 million available under our $16.0 million GBC Credit Facility and the $2.0 million available for future draws under our 2023 Subordinated LOC along with the expected cash from our future operations will enable us to fund our planned operations for the next twelve (12) months. See “Future Liquidity Needs” below.
Previous report
Net cash provided by financing activities was $1,900,000 for the six months ended December 31, 2022, mainly representing net borrowings under the SVB Credit Facility during six months ended December 31, 2022.
Reworded paragraphs (28)
Previous wording
We design, develop, manufacture, and sell a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of industrial commercial sectors which include material handling, airport ground support equipment (“GSE”), and other commercial and industrial applications. We focus on providing lithium-ion products and service to large fleets of Fortune 500 customers. We believe our mobile and stationary energy storage solutions provide our customers a reliable, high performing, cost effective, and more environmentally friendly alternative as compared to traditional lead acid and propane-based solutions. Our modular and scalable design allows different configurations of lithium-ion battery packs to be paired with our proprietary wireless battery management system to provide the level of energy storage required and “state of the art” real time monitoring of pack performance. We believe that the increasing demand for lithium-ion battery packs and more environmentally friendly energy storage solutions in the material handling sector should continue to drive our revenue growth.
Current wording
We design, develop, manufacture, and sell a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of industrial commercial sectors which include material handling, airport ground support equipment (“GSE”), and other commercial and industrial applications. We focus on providing lithium-ion products and service to large fleets of Fortune 500 customers. We believe our mobile and stationary energy storage solutions provide our customers a reliable, high performing, cost effective, and more environmentally friendly alternative as compared to traditional lead acid and propane-based solutions. Our modular and scalable design allows different configurations of lithium-ion battery packs to be paired with our proprietary wireless battery management system to provide the level of energy storage required and “state of the art” real time monitoring of pack performance. We believe that the increasing demand for lithium-ion energy storage solutions and more environmentally friendly energy alternatives from commercial and industrial users should continue to drive our revenue growth.
Previous wording
Our long-term strategy is to meet the rapidly growing demand for lithium-ion energy solutions and to be the supplier of choice, targeting large companies having energy storage needs. We have established selling relationships with OEMs and customers with large fleets of forklifts and GSEs. We intend to reach this goal by investing in research and development to expand our product mix, by expanding our sales and marketing efforts, by improving our customer support efforts, and by continuing our efforts to improve production capacity and efficiencies. Our research and development efforts will continue to focus on providing adaptable, reliable and cost-effective energy storage solutions for our customers. We have filed three new patents on advanced technology related to lithium-ion battery packs. The technology behind these pending patents is designed to:
Current wording
Our long-term strategy is to meet the rapidly growing demand for lithium-ion energy solutions and to be the supplier of choice, targeting large companies having energy storage needs. We have established selling relationships with OEMs and customers with large fleets of forklifts and GSEs. We intend to reach this goal by investing in research and development to expand our technology and product mix, our sales and marketing efforts, by improving our customer support efforts, and by continuing our efforts to improve production capacity and efficiencies. Our research and development efforts will continue to focus on providing adaptable, reliable and cost-effective energy storage solutions to improve asset management for our customers. We have filed three new patents on advanced technology related to lithium-ion battery packs. The technology behind these pending patents is designed to:
Previous wording
“Backlog” represents the amount of anticipated revenues we may recognize in the future from existing contractual orders with customers that are in progress and have not yet shipped. Backlog values may not be indicative of future operating results as orders may be cancelled, modified or otherwise altered by customers. In addition, our ability to realize revenue from our backlog will be dependent on the delivery of key parts from our suppliers and our ability to manufacture and ship our products to customers in a timely manner. There can be no assurance that outstanding customer orders will be fulfilled as expected and that our backlog will result in future revenues.
Current wording
“Backlog” represents the amount of anticipated revenues, at a given point in time, we may recognize in the future from existing contractual orders with customers that are in progress and have not yet shipped. Backlog values may not be indicative of future operating results as orders may be cancelled, modified or otherwise altered by customers. In addition, our ability to realize revenue from our backlog will be dependent on the delivery of key parts from our suppliers and our ability to manufacture and ship our products to customers in a timely manner. There can be no assurance that outstanding customer orders will be fulfilled as expected and that our backlog will result in future revenues.
Previous wording
As of February 1, 2024, our order backlog was approximately $29.7 million.
Current wording
As of May 6, 2024, our order backlog was approximately $18.5 million and, in part, reflects current delays in orders of new forklifts due to a general slowing of capital spending by our customers.
Previous wording
We continue to experience some deferrals of new Flux packs due to corresponding deferrals of forklifts of selected large customer fleets. There have been very few cancellations of purchase orders, but some orders have been delayed to the July – December 2024 period. Some customers have continued to provide “indications” of ordering our battery packs into 2025 and 2026, reflecting a lengthening of the OEM planning horizon. Causal rationale for delays are speculative and not definitive, but some feedback reflects concerns over the economy and the uncertainty of interest rates. The impact of deferrals has required additional selling strategies to maintain our sales trajectory.
Current wording
We have recently experienced some delays in new orders of our energy storage solutions due to corresponding deferrals of new forklift purchases mainly caused by lower capital spending in the market sector that we serve and interest rate variability affecting selected large customer fleets. While we have had very few cancellations of existing purchase orders, some customers have revised their order terms to the July – December 2024 period. Causal rationale for delays is speculative and not definitive, but some customer feedback indicates concerns over the economy and the uncertainty of interest rates. The impact of order deferrals has required additional selling strategies to support our targeted sales trajectory.
Previous wording
We have seen modest improvements in our sourcing and purchasing activity, reflecting our efforts to expand and optimize our vendor strategy. Additional improvements include more secondary sources to minimize stock-outs and control delivery times, as evidenced in our maintaining inventory levels despite higher growth.
Current wording
We have seen improvements in our sourcing and purchasing activity, reflecting our efforts to expand and optimize our vendor strategy. Additional improvements include more secondary sources to minimize stock-outs, lower costs from increasing sources, and controlled delivery times, as evidenced in our maintaining inventory levels. With strategic supply chain and profitability improvement initiatives, lower costs and higher volume purchasing, we are targeting gross margin improvement to continue. We are highly focused on expanding sales and marketing initiatives to secure new customer relationships and support continued migration to lithium of current customers. We recently have added our second tier one OEM private label program to supplement our strong OEM relationships and approvals. We are also working with our distribution network to expand customer acquisition with direct-to-customer initiatives.
Previous wording
Revenues for the quarter ended December 31, 2023, increased by $1,186,000 or 7% to $18,344,000, compared to $17,158,000 for the quarter ended December 31, 2022. The increase in revenues was due to higher number of units of energy storage packs sold during the quarter ended December 31, 2023, as well as price increases for certain energy storage units sold.
Current wording
Revenues for the quarter ended March 31, 2024, decreased by $630,000 or 4% to $14,457,000, compared to $15,087,000 for the quarter ended March 31, 2023. The decrease in revenues was primarily due to lower capital spending in the market sectors that we serve resulting in shipments of fewer units during the quarter ended March 31, 2024, partially offset by price increases for certain energy storage units.
Previous wording
Cost of sales for the quarter ended December 31, 2023, decreased by $374,000, or 3%, to $12,676,000 compared to $13,050,000 for the quarter ended December 31, 2022. The decrease in cost of sales was directly associated with lower average cost of sales per unit achieved during the current quarter as a result of our gross margin improvement initiatives, partially offset by increases in cost of sales proportionately as a result of higher number of units of energy storage packs sold during the current quarter. Cost of sales as a percent of revenues for the quarter ended December 31, 2023 was 69%, an improvement of 7 percentage points compared to 76% for the quarter ended December 31, 2022.
Current wording
Cost of sales for the quarter ended March 31, 2024, decreased by $301,000 or 3% to $10,067,000 compared to $10,368,000 for the quarter ended March 31, 2023. The decrease in cost of sales was directly associated with a decrease in units of energy storage packs sold during the current quarter, and lower average cost of sales per unit achieved during the current quarter as a result of our product cost improvement initiatives, offset by higher warranty costs. Cost of sales as a percent of revenues for the quarter ended March 31, 2024 was 70%, an increase of only 1 percentage point compared to 69% for the quarter ended March 31, 2023.
Previous wording
Gross profit for the quarter ended December 31, 2023 increased by $1,560,000 or 38%, to $5,668,000 compared to $4,108,000 for the quarter ended December 31, 2022. The gross profit margin (gross profit as a percent of revenues) increased to 31% for the quarter ended December 31, 2023 compared to 24% for the quarter ended December 31, 2022. Gross profit margin improved by 700 basis points as a result of lower average cost of sales per unit achieved during the quarter ended December 31, 2023 as a result of our gross margin improvement initiatives and the revenue growth during the quarter.
Current wording
Gross profit for the quarter ended March 31, 2024 decreased by $329,000 or 7%, to $4,390,000 compared to $4,719,000 for the quarter ended March 31, 2023. The gross profit margin (gross profit as a percent of revenues) decreased to 30% for the quarter ended March 31, 2024 compared to 31% for the quarter ended March 31, 2023. Gross profit margin decreased nominally by 100 basis points as a result of higher warranty expense during the current quarter, partially offset by lower average cost of sales per unit achieved during the quarter ended March 31, 2024 as a result of our product cost improvement initiatives.
Previous wording
Selling and administrative expenses for the quarter ended December 31, 2023 increased by $343,000 or 8%, to $4,593,000 compared to $4,250,000 for the quarter ended December 31, 2022. The increase was primarily attributable to higher staff related expenses and increases in depreciation expense, professional service fees, stock-based compensation, outbound shipping costs, and travel expenses, partially offset by decreases in sales commissions, recruiting costs, training expenses, and consulting fees.
Current wording
Selling and administrative expenses for the quarter ended March 31, 2024 increased by $587,000 or 12%, to $5,311,000 compared to $4,724,000 for the quarter ended March 31, 2023. The increase was primarily attributable to higher staff related expenses including certain severance expenses and increases in stock-based compensation, recruiting expenses, outbound shipping costs, and professional service fees, partially offset by decreases in sales commissions, D&O insurance expense, travel expense, and depreciation expense.
Previous wording
Research and development expenses for the quarter ended December 31, 2023 increased by $278,000 or 24%, to $1,440,000 compared to $1,162,000 for the quarter ended December 31, 2022. Such expenses consisted primarily of materials, supplies, salaries and personnel related expenses, product testing, consulting, and other expenses associated with revisions to existing product designs and new product development. The increase in research and development expenses was primarily due to higher staff related expenses, stock-based compensation, travel expenses, and general research and development costs, partially offset by a decrease in equipment rental fees.
Current wording
Research and development expenses for the quarter ended March 31, 2024 increased by $104,000 or 9%, to $1,286,000 compared to $1,182,000 for the quarter ended March 31, 2023. Such expenses consisted primarily of materials, supplies, salaries and personnel related expenses, product testing, consulting, and other expenses associated with revisions to existing product designs and new product development. The increase in research and development expense was primarily due to higher staff related expense including severance expense, stock-based compensation, travel expense, and general research and development costs, partially offset by a decrease in equipment rental fees.
Previous wording
Interest expense for the quarter ended December 31, 2023 increased by $64,000 or 17% to $449,000 compared to $385,000 for the quarter ended December 31, 2022. The increase in interest expense was primarily related to higher balances outstanding under our credit facilities. The interest expense for the quarter ended December 31, 2023 and 2022 included additional interest expense of $54,000 and $197,000, respectively, representing the amortization of debt issuance costs related to our existing credit facilities. In addition, approximately $15,000 of other financing costs were included in interest expense during the quarter ended December 31, 2023.
Current wording
Interest expense for the quarter ended March 31, 2024 increased by $175,000 or 68% to $433,000 compared to $258,000 for the quarter ended March 31, 2023. The increase in interest expense was primarily related to higher balances outstanding under our credit facility. The interest expense for the quarter ended March 31, 2024 and 2023 included amortization of debt issuance costs related to our existing credit facility of $41,000 and $20,000, respectively. In addition, approximately $23,000 of other financing costs were included in interest expense during the quarter ended March 31, 2024.
Previous wording
Net loss for the quarter ended December 31, 2023 improved by $867,000 or 52%, to $814,000 as compared to $1,681,000 for the quarter ended December 31, 2022. The decrease in net loss for the three months ended December 31, 2023 was primarily attributable to increased gross profit, offset by increases in operating expenses and interest expense.
Current wording
Net loss for the quarter ended March 31, 2024 increased by $1,195,000 or 83%, to $2,640,000 as compared to $1,445,000 for the quarter ended March 31, 2023. The increase in net loss for the three months ended March 31, 2024 was primarily attributable to decreased gross profit, and increases in operating expenses and interest expense.
Previous wording
The following table represents our unaudited condensed consolidated statement of operations for the six months ended December 31, 2023 and December 31, 2022.
Current wording
The following table represents our unaudited condensed consolidated statement of operations for the nine months ended March 31, 2024 and March 31, 2023.
Previous wording
Cost of sales for the six months ended December 31, 2023, decreased by $3,780,000, or 14%, to $23,162,000 compared to $26,942,000 for the six months ended December 31, 2022. The decrease in cost of sales was directly associated with lower average cost of sales per unit achieved during the current period as a result of our gross margin improvement initiatives. Cost of sales as a percent of revenues for the six months ended December 31, 2023 was 70%, an improvement of 7 percentage points compared to 77% for the six months ended December 31, 2022.
Current wording
Cost of sales for the nine months ended March 31, 2024, decreased by $4,081,000 or 11% to $33,229,000 compared to $37,310,000 for the nine months ended March 31, 2023. The decrease in cost of sales was directly associated with fewer units sold due to delays in the delivery and ordering of forklifts, partially offset by lower average cost of sales per unit achieved during the current period as a result of our product cost improvement initiatives. Cost of sales as a percent of revenues for the nine months ended March 31, 2024 was 70%, an improvement of 4 percentage points compared to 74% for the nine months ended March 31, 2023.
Previous wording
Gross profit for the six months ended December 31, 2023 increased by $1,923,000 or 24%, to $9,979,000 compared to $8,056,000 for the six months ended December 31, 2022. The gross profit margin (gross profit as a percent of revenues) increased to 30% for the six months ended December 31, 2023 compared to 23% for the six months ended December 31, 2022. Gross profit margin improved by 700 basis points as a result of lower average cost of sales per unit achieved during the six months ended December 31, 2023 as a result of our gross margin improvement initiatives, partially offset by slight revenue decrease during the period.
Current wording
Gross profit for the nine months ended March 31, 2024 increased by $1,594,000 or 11%, to $14,369,000, compared to $12,775,000 for the nine months ended March 31, 2023. The gross profit margin (gross profit as a percent of revenues) increased to 30% for the nine months ended March 31, 2024 compared to 26% for the nine months ended March 31, 2023. Gross profit margin improved by 400 basis points as a result of lower average cost of sales per unit achieved during the nine months ended March 31, 2024 as a result of our gross margin improvement initiatives, partially offset by a revenue decrease during the period.
Previous wording
Selling and administrative expenses for the six months ended December 31, 2023 increased by $532,000 or 6%, to $9,318,000 compared to $8,786,000 for the six months ended December 31, 2022. The increase was primarily attributable to higher staff related expenses and increases in depreciation expense, professional service fees, stock-based compensation, recruiting costs, and travel expenses, partially offset by decreases in sales commissions, training expenses, and consulting fees.
Current wording
Selling and administrative expenses for the nine months ended March 31, 2024 increased by $1,119,000 or 8%, to $14,629,000, compared to $13,510,000 for the nine months ended March 31, 2023. The increase was primarily attributable to higher staff related expenses, including certain severance expenses and increases in stock-based compensation, recruiting costs, professional service fees, depreciation expense, public relation costs, and travel expense, partially offset by decreases in sales commissions, D&O insurance expense, sales and marketing expenses, and consulting fees.
Previous wording
Research and development expenses for the six months ended December 31, 2023 increased by $350,000 or 15%, to $2,735,000 compared to $2,385,000 for the six months ended December 31, 2022. Such expenses consisted primarily of materials, supplies, salaries and personnel related expenses, product testing, consulting, and other expenses associated with revisions to existing product designs and new product development. The increase in research and development expenses was primarily due to higher staff related expenses, stock-based compensation, and travel expenses, partially offset by decreases in equipment rental fees and general research and development costs.
Current wording
Research and development expenses for the nine months ended March 31, 2024 increased by $454,000 or 13%, to $4,021,000 compared to $3,567,000 for the nine months ended March 31, 2023. Such expenses consisted primarily of materials, supplies, salaries and personnel related expenses, product testing, consulting, and other expenses associated with revisions to new product development and existing product designs. The increase in research and development expenses was primarily due to higher staff related expenses, partially offset by decreases in equipment rental fees and general research and development costs.
Previous wording
Interest expense, net for the six months ended December 31, 2023 increased by $139,000 or 19% to $852,000 compared to $713,000 for the six months ended December 31, 2022. The increase in interest expense was primarily related to higher balances outstanding under our credit facilities. The interest expense for the six months ended December 31, 2023 and 2022 included additional interest expense of $134,000 and $426,000, respectively, representing the amortization of debt issuance costs related to our existing credit facilities. In addition, approximately $64,000 of other financing costs were included in interest expense during the six months ended December 31, 2023.
Current wording
Interest expense, net for the nine months ended March 31, 2024 increased by $314,000 or 32% to $1,285,000 compared to $971,000 for the nine months ended March 31, 2023. The increase in interest expense was primarily related to higher balances outstanding under our credit facilities. The interest expense for the nine months ended March 31, 2024 and 2023 included additional interest expense of $175,000 and $445,000, respectively, representing the amortization of debt issuance costs related to our existing credit facilities. In addition, approximately $87,000 of other financing costs were included in interest expense during the nine months ended March 31, 2024.
Previous wording
Net loss for the six months ended December 31, 2023 improved by $894,000 or 23%, to $2,926,000 as compared to $3,820,000 for the six months ended December 31, 2022. The decrease in net loss for the six months ended December 31, 2023 was primarily attributable to increased gross profit, offset by increases in operating expenses and interest expense.
Current wording
Net loss for the nine months ended March 31, 2024 increased by $301,000 or 6%, to $5,566,000 as compared to $5,265,000 for the nine months ended March 31, 2023. The increase in net loss for the nine months ended March 31, 2024 was primarily attributable to increased gross profit, offset by increases in operating expenses and interest expense.
Previous wording
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is calculated by taking net income and adding back the expenses related to interest, income taxes, depreciation, amortization, and stock-based compensation, each of which has been calculated in accordance with GAAP. Adjusted EBITDA was $291,000 for the three months ended December 31, 2023 and improved by $1,179,000 from a loss of $888,000 for the three months ended December 31, 2022. Adjusted EBITDA was a loss of approximately $881,000 for the six months ended December 31, 2023 and improved by $1,551,000 from a loss of $2,432,000 for the six months ended December 31, 2022.
Current wording
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is calculated by taking net income and adding back the expenses related to interest, income taxes, depreciation, amortization, and stock-based compensation, each of which has been calculated in accordance with GAAP. Adjusted EBITDA was a loss of $1,380,000 for the three months ended March 31, 2024 an increase of $704,000 compared to a loss of $676,000 for the three months ended March 31, 2023. Adjusted EBITDA was a loss of approximately $2,261,000 for the nine months ended March 31, 2024 and improved by $847,000 from a loss of $3,108,000 for the nine months ended March 31, 2023.
Previous wording
For the six months ended December 31, 2023, the Company generated negative cash flows from operations of $4.0 million, and as of December 31, 2023, the Company had an accumulated deficit of $91.5 million. To date our business has not generated sufficient cash to fund our operations. However, given our existing backlog, we anticipate that revenue growth coupled with improvement in our gross margin will move us closer to profitability and improve our cash flow. Our gross margin improvement plan includes, but is not limited to, efforts to drive bill of material costs down while increasing the price of our products for new orders. We have received new orders during the twelve (12) months period ended December 31, 2023, of approximately $64.2 million.
Current wording
For the nine months ended March 31, 2024, the Company generated negative cash flows from operations of $4.3 million. As of March 31, 2024, the Company had an accumulated deficit of $94.1 million. To date, our business has not generated sufficient cash to fund our operations. However, given our existing backlog, we anticipate that revenue growth coupled with improvement in our gross margin and lower operating expenses will move us closer to profitability and improve our cash flow. Our gross margin improvement plan includes, but is not limited to, efforts to reduce product costs while increasing the price of our products for new orders. We have received new orders during the twelve (12) months period ended March 31, 2024, of approximately $58.5 million.
Previous wording
Net cash used in operating activities was $4,045,000 for the six months ended December 31, 2023, compared to net cash used in operating activities of $1,892,000 for the six months ended December 31, 2022, primarily reflecting increases in working capital requirements. The primary usages of cash for the six months ended December 31, 2023 were the net loss of $2,926,000 and increases in accounts receivable, and other assets and decreases in office lease payable, that were partially offset by non-cash operating costs, and increases in accounts payable, accrued expenses, deferred revenue, customer deposits, and accrued interest and a decrease in inventory. The primary usages of cash for the six months ended December 31, 2022 were the net loss of $3,820,000 and increases in accounts receivable, inventory, and other assets, and decreases in deferred revenue, customer deposits and office lease payable, that were partially offset by non-cash operating costs, and increases in accounts payable and accrued expenses.
Current wording
Net cash used in operating activities was $4,274,000 for the nine months ended March 31, 2024, compared to net cash used in operating activities of $5,197,000 for the nine months ended March 31, 2023, primarily reflecting increases in working capital requirements. The primary usages of cash for the nine months ended March 31, 2024 were the net loss of $5,566,000 and increases in accounts receivable, inventory, and other assets and decreases in office lease payable and customer deposits, that were partially offset by non-cash operating costs, and increases in accounts payable, accrued expenses, deferred revenue, and accrued interest. The primary usages of cash for the nine months ended March 31, 2023 were the net loss of $5,265,000 and increases in accounts receivable, and inventory, and decreases in deferred revenue, customer deposits and office lease payable, that were partially offset by non-cash operating costs, and increases in accounts payable and accrued expenses and a decrease in other assets.
Previous wording
Net cash used in investing activities was $338,000 for the six months ended December 31, 2023 and consisted primarily of the costs of internal software development and other capital equipment.
Current wording
Net cash used in investing activities was $588,000 for the nine months ended March 31, 2024 and consisted primarily of the costs of internal software development and other capital equipment.
Previous wording
Net cash used in investing activities was $336,000 for the six months ended December 31, 2022 and consisted primarily of the costs of internal software development and other capital equipment.
Current wording
Net cash used in investing activities was $745,000 for the nine months ended March 31, 2023 and consisted primarily of the costs of internal software development and other capital equipment.
Previous wording
Net cash provided by financing activities was $3,588,000 for the six months ended December 31, 2023, which primarily consisted of $3,663,000 in net borrowing under the GBC Credit Facility and SVB Credit Facility.
Current wording
Net cash provided by financing activities was $3,733,000 for the nine months ended March 31, 2024, which primarily consisted of $3,733,000 in net borrowing under the GBC Credit Facility and SVB Credit Facility, $110,000 proceeds from issuance of common stock, partially offset by payments of financed leases of $110,000.
Previous wording
We have evaluated our expected cash requirements over the next twelve (12) months, which include, but are not limited to, investments in additional sales and marketing and research and development, capital expenditures, and working capital requirements. As of January 31, 2024, we believe that our existing cash of approximately $2.7 million, expected cash from our future operations, funding available under our GBC Credit Facility, under which $6.0 million is currently available, and funds available under our 2023 Subordinated LOC of up to $2.0 million will enable us to fund our planned operations for at least the next twelve (12) months. In addition, to support our operations and anticipated growth, we intend to continue to explore alternatives to secure additional capital from a variety of current and new sources including, but not limited to, sales of our equity securities. We also continue to execute our cost reduction, sourcing, pricing recovery initiatives in efforts to increase our gross margins and improve cash flow from operations.
Current wording
We have evaluated our expected cash requirements over the next twelve (12) months, which include, but are not limited to, investments in additional sales and marketing and research and development, capital expenditures, and working capital requirements and have determined that our existing cash resources are not sufficient to meet our anticipated needs during the next twelve (12) months, from the filing of this quarterly report, and that additional financing is required to support current operations.
Previous wording
Although management believes that our existing cash, cash from our future operations, together with the additional funding sources currently available to us under the lines of credit will be sufficient to fund planned operations for the next twelve (12) months, this is dependent on our ability to successfully maintain and draw on our credit facilities. Our ability to draw funds from the GBC Credit Facility is subject to certain restrictions and covenants. If we are unable to meet the conditions provided in the loan documents, the funds will not be available to us. In addition, should there be any delays in the receipts of key component parts, due in part to supply change disruptions, our ability to fulfil the backlog of sales orders will be negatively impacted resulting in lower availability of cash resources from operations. In that event, we may be required to raise additional funds by issuing equity or convertible debt securities. If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and product development, which may have a material adverse effect on future cash flows and results of operations. In addition, any unforeseen factors in the general economy beyond management’s control could potentially have a negative impact on the planned gross margin improvement plan.
Current wording
Furthermore, should there be any delays in the receipts of key component parts, due in part to supply change disruptions, our ability to fulfill the backlog of sales orders will be negatively impacted resulting in lower availability of cash resources from operations. In that event, we may be required to raise additional funds by issuing equity or convertible debt securities. If such funds are not available when required, management will be required to curtail investments in new product development, which may have a material adverse effect on future cash flows and results of operations and the Company’s ability to continue operating as a going concern.