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, 2022, filed with the Securities and Exchange
Commission on September 27, 2022 (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 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 also are also pursuing agreements with residential
developers, commercial developers, and other commercial opportunities. Because
we are purely dedicated to energy solar systems, virtually of our current
resources and efforts go into further developing our flagship NV14 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 shares of our common stock
pursuant to Regulation A of the Securities Act (the "IPO"). The IPO was for a
total of 3,500,000 shares of our common stock at an offering price of $1.00 per
share. We used the proceeds of the IPO 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, Nevada, Georgia, Utah, Florida,
Puerto Rico, Oklahoma, Texas, Colorado, Wyoming, Tennessee, and Missouri.
As further discussed below under "Underwritten Public Offering," 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 are using 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.
14
Underwritten Public Offering
In early August 2022, we completed an underwritten public offering of our equity
securities in the form of Units with each Unit consisting of one share of common
stock and one warrant (the "Warrants") to purchase one share of common stock at
an exercise price of $4.00 per share. The shares of common stock and the
Warrants comprising the Units were immediately separated at closing of the
offering and each is now independently listed on the NASDAQ Capital Market under
the symbols "NEOV" and "NEOVW," respectively. Each Warrant became exercisable on
the date of issuance and will expire five years from the date of issuance.
Between the initial closing of the offering and the underwriters' exercise of
the overallotment option, 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, including the underwriters' exercise of the overallotment option, were
$4,485,000 and the net proceeds, after deduction of underwriting discounts and
other offering costs, were approximately $3,780,000. We are using 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.
In conjunction with the public offering, all holders of the Company's 2018
convertible notes in the total amount of $59,251, including accrued interest,
converted their debt into a total of 9,404,867 shares of common stock at the
stated conversion rate, and all holders of the Company's 2021 convertible notes
in the total amount of $1,068,000 converted their debt into a total of 267,000
shares of common stock at the stated conversion rate. As a result of the
simultaneous conversion of both sets of convertible notes, the Company has fully
eliminated its convertible debt.
Results of Operations
The following discussion reflects the Company's revenues and expenses for the
three month periods ended September 30, 2022 and 2021, as reported in our
financial statements included in Item 1.
Three months ended September 30, 2022 versus three months ended September 30,
2021
Revenues - Revenues from contracts with customers for the three months ended
September 30, 2022 were $1,537,836 compared to $1,599,604 for the three months
ended September 30, 2021. Such slight decrease was primarily due to the negative
impact of the COVID-19 pandemic on sales of our assembled energy storage systems
as well as timing differences in receiving installation orders from our major
wholesale dealers and installers operating in California and other states.
Cost of Goods Sold- Cost of goods sold for the three months ended September 30,
2022 were $1,291,960 compared to $1,360,994 for the three months ended September
30, 2021. 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
16% and 15%, respectively, with the comparative increase largely due to
differences with regard to the impact of temporary tariffs on materials we
source from China.
General and Administrative Expense - General and administrative expenses for the
three months ended September 30, 2022 were $919,428 compared to $356,558 for the
three months ended September 30, 2021. Such increase was primarily due to the
non-cash stock compensation expense recognized for the amortized value of the
restricted stock units granted to our two executive officers in March 2022.
Research and Development Expense - Research and development expenses for three
months ended September 30, 2022 were $20,900 compared to $4,253 for three months
ended September 30, 2021. Such fluctuation was due to a modest increase in the
level of the Company's product development efforts. We expect research and
development expense to increase in the future as we improve and expand upon our
product portfolio.
15
Interest Expense - Interest expense for the three months ended September 30,
2022 was $4,134 compared to $561 for the three months ended September 30, 2021.
This increase resulted from the incremental interest accrued on the 2021
convertible notes prior to their conversion in conjunction with the closing of
our public offering in August 2022.
Net Loss - Net loss for the three months ended September 30, 2022 was $698,586
compared to $122,762 for the three months ended September 30, 2021, 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 three months
ended September 30, 2022 was $118,139, compared to $187,520 in the three months
ended September 30, 2021, reflecting a modest decrease in net working capital
requirements in the current fiscal year period.
Financing activities. Net cash provided by financing activities in the three
months ended September 30, 2022 was $3,780,405, compared to zero in the three
months ended September 30, 2021. This fluctuation was entirely attributable to
the successful completion of an underwritten public offering of our equity
securities in early August 2022, as further described below.
We completed an underwritten public offering of our equity securities in the
form of Units in early August 2022. Each Unit consisted of one share of common
stock and one warrant to purchase one share of common stock at an exercise price
of $4.00 per share. 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, including the underwriters' exercise of the overallotment option, were
$4,485,000 and the net proceeds, after deduction of underwriting discounts and
other offering costs, were approximately $3,780,000.
In conjunction with the public offering, all holders of our 2018 convertible
notes in the total amount of $59,251, including accrued interest, converted
their debt into a total of 9,404,867 shares of common stock at the stated
conversion rate, and all holders of our 2021 convertible notes in the total
amount of $1,068,000 converted their debt into a total of 267,000 shares of
common stock at the stated conversion rate. As a result of the simultaneous
conversion of both sets of convertible notes, the Company has fully eliminated
its convertible debt.
As of September 30, 2022, we had a cash balance of $4.0 million and net working
capital of nearly $7.5 million. Currently, we are generating a roughly
break-even level of net operating cash flow from our net sales. However, we have
not sustained such performance on a consistent basis for an extended period of
time. We anticipate that demand for our products will continue to increase and
that we will have sufficient cash to operate for at least the next 12 months,
after taking into consideration the underwritten public offering completed in
August 2022, as noted above.
Recent Developments
As a result of the continued spread of the COVID-19 coronavirus since early
2020, economic uncertainties have arisen which could impact business operations,
supply chains, energy demand, and commodity prices that are beyond our control.
In calendar year 2022, we have experienced some negative impact of the COVID-19
pandemic on the sales of our assembled energy storage systems, primarily through
a group of wholesale dealers and installers located in California. We continue
to monitor COVID-19, but do not believe it will have a material unfavorable
impact to our future financial performance at this time.
16
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, 2022, as filed with the SEC on September 27, 2022, for a further description
of our critical accounting policies and estimates.
© Edgar Online, source Glimpses