10-K: TurnOnGreen, Inc. Reports Full Year 2023 Results Amidst Evolving EV Market

TurnOnGreen, Inc. reports its full year 2023 results, highlighting a shift towards EV charging solutions and challenges in a dynamic market.

Summary

• TurnOnGreen, Inc., formerly Imperalis Holding Corp., released its 10-K filing for the fiscal year ended December 31, 2023.
• The company experienced a decrease in revenue to $4.2 million, a 24% drop compared to $5.5 million in 2022.
• Gross profit also declined significantly by 56% to $895,000, down from $2.0 million in the previous year.
• The company reported a net loss available to common shareholders of $6.9 million for 2023, compared to a $4.9 million loss in 2022.
• Operating expenses decreased by 11% to $5.6 million, but this was not enough to offset the decline in revenue and gross profit.
• The company's business model is evolving to focus on EV charging solutions, which is increasing the complexity of its operations.
• TurnOnGreen is facing challenges related to supply chain disruptions, component shortages, and manufacturing interruptions.
• The company's backlog decreased slightly from $4.4 million in 2022 to $4.2 million in 2023.
• The company has a history of annual net losses and has a negative working capital of $5.5 million as of December 31, 2023.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positive aspects such as the company's strategic shift towards EV charging and its efforts to innovate, the significant financial losses, supply chain issues, and competitive pressures create a negative overall sentiment. The company's future success is highly dependent on its ability to overcome these challenges.

Positives

• Operating expenses decreased by 11% year-over-year, indicating some cost control measures.
• The company is actively pursuing strategic partnerships to expand its EV charging infrastructure.
• TurnOnGreen is investing in research and development to enhance its EV products and services.
• The company is working with OEM partners to develop innovative revenue models for EV charging solutions.

Negatives

• The company experienced a significant decrease in revenue and gross profit.
• Net losses increased year-over-year, indicating ongoing financial challenges.
• The company has a history of annual net losses and a negative working capital.
• TurnOnGreen is heavily reliant on a few major customers for a majority of its revenues.
• The company is facing intense competition, price erosion, and product obsolescence.
• The company's technology is generally unpatented, which could lead to competitors copying it.
• The company is dependent on third-party manufacturers for components and products, which could lead to supply chain issues.

Risks

• The company's ability to achieve its business objectives is negatively impacted by its history of annual net losses.
• The evolving business model focused on EV charging increases the complexity of operations.
• The company's growth strategy through acquisitions and partnerships involves significant risks.
• Failure to respond to rapid technological changes could materially and adversely affect the business.
• The company depends on a few major customers for most of its revenues, and the loss of any of these customers would significantly reduce revenues.
• The company is heavily dependent on its senior management, and a loss of a member of the team could adversely affect operations.
• The company relies on charging station manufacturers and other partners, and a loss of any such partner could have a material adverse effect on the business.
• The company is dependent on its and its contract manufacturers ability to timely procure electronic components.
• The company depends on international operations for a substantial portion of its manufacturing components and products, which are subject to various uncertainties.
• The company faces intense industry competition, price erosion and product obsolescence.
• The company's historical financial information as a subsidiary of Ault may not be representative of its results as an independent public company.
• Supply chain disruptions, component shortages, manufacturing interruptions or delays, or the failure to accurately forecast customer demand, could adversely affect the business.

Future Outlook

The company intends to continue to release advanced, new power technologies with respect to its eMobility network and EV charging infrastructures. They also intend to invest in EV charging station components for use in connection with installations of charging solutions at customer sites. The company expects the demand from businesses, municipalities and individuals to outpace supply over the next five years, creating a highly favorable environment for EVSE companies.

Management Comments

• The company believes that its charging solutions represent an entire generation of new chargers due to improvements in terms of size reduction in electronic circuitry and higher output density.
• The company believes that, by leveraging its experience and expertise in power conversion and generation, it can become a leader in the EV charging solution market.
• The company's strategy is to be the supplier of choice across numerous markets that require high-quality power system solutions where custom design, superior product, high quality, time to market and competitive prices are critical to business success.
• The company believes that it provides advanced custom product design services to deliver high-grade products that reach a high level of efficiency and density and can meet rigorous environmental requirements.

Industry Context

The document highlights the significant growth expected in the EV market and the need for charging infrastructure, aligning with broader industry trends. The company is positioning itself to capitalize on this growth by focusing on EV charging solutions. The document also notes the competitive landscape and the need for strategic partnerships and product development to succeed in this market.

Comparison to Industry Standards

• The document mentions several competitors in the power solutions and EV charging industries, including Bel Fuse, Artesyn Embedded Technologies, TDK-Lambda, Delta Electronics, Murata, Mean-Well Power Supplies, Tesla, ChargePoint, Blink Charging, EVGO, Electrify America, and Sema Connect.
• Many of these competitors are larger and have greater financial resources than TurnOnGreen.
• The document notes that the EV charging market is fragmented and not necessarily aligned with the EV needs of tomorrow, suggesting that TurnOnGreen's approach to market segmentation and strategic partnerships could be advantageous.
• The document also highlights that residential and commercial closed network charging are areas with the most potential for growth, as an estimated 85% of EV drivers charge at home or at work, which is a key area of focus for TurnOnGreen.

Management Changes

Corporate Governance

Legal Proceedings

• The Company is currently involved in litigation arising from matters in the ordinary course of business.
• The company is regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving labor and employment, commercial disputes, and other matters.
• The company recorded an undiscounted liability for contingent losses, including future legal costs, settlements and judgments, when it considers it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
• In May 2023 the arbitrator entered a final award against the Company and in favor of Mr. Gordon in the amount of $1.1 million inclusive of interest, legal fees, administrative fees and expenses.

Related Party Transactions

• The company had related party sales of $14,000 and $27,000 in 2023 and 2022, respectively.
• The company had related party receivables of $0 and $25,000 as of December 31, 2023, and 2022, respectively.
• The company has related party notes and advances payable of $2.47 million and $52,000 as of December 31, 2023, and 2022, respectively.
• Ault provides human resources, accounting and other services to the Company, which are included as allocations of these expenses.

Stakeholder Impact

• Shareholders are impacted by the company's net losses and the potential dilution from future equity raises.
• Employees are impacted by the company's financial challenges and the potential for job insecurity.
• Customers may be impacted by supply chain disruptions and potential delays in product delivery.
• Suppliers may be impacted by the company's financial challenges and potential changes in purchasing patterns.
• Creditors are impacted by the company's negative working capital and potential difficulties in repaying debts.

Next Steps

• The company intends to continue to release advanced, new power technologies with respect to its eMobility network and EV charging infrastructures.
• The company intends to invest in EV charging station components for use in connection with installations of charging solutions at customer sites.
• The company will evaluate and enter into strategic partnerships that facilitate its ability to bring best-in-class solutions to a wider network of EV drivers.
• The company will continue to aggressively market and sell its core power products through its existing domestic and international markets.
• The company will pursue strategic business acquisitions for growth.

Key Dates

Keywords

EV charging, electric vehicles, power solutions, power systems, renewable energy, eMobility, charging infrastructure, power conversion, digital power, energy management