10-Q: TurnOnGreen Q2 Revenue Jumps 37%, EV Charger Sales Soar

TurnOnGreen, Inc. reported a 37% increase in Q2 2025 revenue and a significant reduction in net loss, driven by strong EV charger sales and defense contracts, despite ongoing liquidity concerns and material weaknesses in internal controls.

Summary

• Revenue for the three months ended June 30, 2025, increased by 37% to $1.69 million, and by 33% to $3.28 million for the six months ended June 30, 2025, compared to the same periods in 2024.
• Gross profit rose by 20% to $0.68 million in Q2 2025 and by 25% to $1.41 million for the six months ended June 30, 2025.
• Net loss decreased by 19% to $0.65 million in Q2 2025 and by 22% to $1.19 million for the six months ended June 30, 2025.
• Net loss available to common shareholders significantly improved due to the waiver of preferred dividends by a related party.
• EV charger sales saw substantial growth, increasing by 226% to $0.48 million in Q2 2025 and by 245% to $0.80 million for the six months ended June 30, 2025.
• The company continues to operate with a substantial accumulated deficit of $48.28 million and negative working capital of $7.45 million as of June 30, 2025.
• Management identified material weaknesses in internal control over financial reporting, including insufficient accounting resources, lack of segregation of duties, and deficiencies in revenue recognition and complex financial instrument accounting.
• The company faces substantial doubt about its ability to continue as a going concern, relying heavily on advances from its related party, Hyperscale Data, Inc.

Sentiment

Score: 3

Explanation: While revenue growth and reduced net loss are positive, the severe liquidity issues, substantial doubt about going concern, increasing related party debt, and identified material weaknesses in internal controls present significant financial and operational risks. The company's reliance on related party financing for survival indicates a precarious financial position.

Positives

• Revenue increased significantly by 37% for the three months ended June 30, 2025, and 33% for the six months ended June 30, 2025, compared to the prior year periods.
• Gross profit improved by 20% for the three months and 25% for the six months ended June 30, 2025.
• Net loss decreased by 19% for the three months and 22% for the six months ended June 30, 2025.
• Net loss available to common shareholders improved substantially due to the waiver of $511,000 in preferred dividends for Q2 2025 and $1,011,000 for the six months ended June 30, 2025.
• Sales of EV chargers showed strong growth, increasing by 226% in Q2 2025 and 245% for the six months ended June 30, 2025.
• Operating expenses decreased by 7% for both the three and six months ended June 30, 2025, primarily due to reduced selling and marketing expenses.
• Cash and cash equivalents increased to $207,000 as of June 30, 2025, from $27,000 at December 31, 2024.
• Customer advance payments increased significantly to $626,000 as of June 30, 2025, from $125,000 at December 31, 2024, indicating strong order intake.

Negatives

• The company has incurred recurring operating and net losses, with an accumulated deficit of $48.28 million as of June 30, 2025.
• Negative working capital worsened to $7.45 million as of June 30, 2025, from $6.51 million at December 31, 2024.
• Reliance on related party financing from Hyperscale Data, Inc. continues, with related party notes and advances payable increasing to $6.48 million as of June 30, 2025.
• Interest expense, particularly from related parties, increased significantly by 57% in Q2 2025 and 67% for the six months ended June 30, 2025.
• Increased costs of components sourced from China impacted gross profit.
• Obsolete inventory expenses increased by $25,000 in Q2 2025 compared to Q2 2024.
• Sales from medical customers decreased by approximately $95,000 in Q2 2025 and $194,000 for the six months ended June 30, 2025.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to recurring operating and net losses and insufficient cash flows.
• Dependence on Hyperscale Data, Inc. for financing, with no assurance that Hyperscale will continue providing funds on acceptable terms.
• Material weaknesses in internal control over financial reporting, including insufficient accounting resources, lack of segregation of duties, and deficiencies in revenue recognition, complex financial instrument accounting, and related party transaction disclosures.
• Risk of material misstatement in financial statements due to identified internal control weaknesses.
• Ongoing litigation, including a $1.1 million lawsuit liability from the Gordon v. Digital Power Corporation case, with interest accruing at 10% per annum.
• Exposure to increased costs of components, particularly those sourced from China.
• The company's financial statements do not include adjustments for recoverability and classification of assets/liabilities should it be unable to continue as a going concern.

Future Outlook

The company expects to continue incurring operating and net losses each quarter until it begins significant deliveries of its products. It plans to finance future development and working capital needs primarily through advances from Hyperscale Data, Inc., and potentially through the sale of equity securities or term notes.

Management Comments

• Management believes that the Company will continue to incur operating and net losses each quarter until at least the time it begins significant deliveries of its products.
• Although management believes that capital sources will be available, there can be no assurances that Hyperscale will continue providing financing to the Company when needed to allow the Company to continue its operations, or if available, on terms acceptable to the Company.
• We are committed to the continuous improvement of our internal control over financial reporting.

Industry Context

TurnOnGreen operates in the power electronics and electric vehicle (EV) charging solutions markets. The significant growth in EV charger sales aligns with the broader global trend towards electrification and increasing demand for EV infrastructure. The company's focus on highly engineered power conversion systems for mission-critical applications (defense, medical, industrial) positions it in specialized, high-value segments within the power electronics industry. The increase in sales from defense industry customers suggests a strong market for their specialized power solutions.

Comparison to Industry Standards

• The filing does not provide specific industry benchmarks or comparable company data to assess performance against industry standards.
• The company's recurring net losses and substantial accumulated deficit indicate it is still in a growth or early-stage phase, or struggling to achieve profitability, which is not uncommon for emerging technology companies but raises concerns given the 'going concern' warning.
• The significant reliance on related-party financing from Hyperscale Data, Inc. is a deviation from standard financing practices for mature, profitable companies and highlights the company's limited access to conventional capital markets.
• The identified material weaknesses in internal controls are a significant concern, indicating a need for substantial improvement in financial reporting infrastructure compared to established industry standards for publicly traded companies.

Corporate Governance

Legal Proceedings

• A final award of $1.1 million was entered against Digital Power Corporation in May 2023 in the Gordon v. Digital Power Corporation lawsuit for wrongful termination and disability discrimination, with interest accruing at 10% per annum.
• The company is regularly subject to other claims, suits, regulatory and government investigations in the ordinary course of business, but believes the amount or range of reasonably possible loss will not have a material adverse effect.

Related Party Transactions

• The company is a controlled subsidiary of Hyperscale Data, Inc., which is deemed a related party.
• Hyperscale Data, Inc. provides human resources, accounting, and other services, with allocated expenses of $64,000 for Q2 2025 and $128,000 for the six months ended June 30, 2025.
• Related party notes and advances payable from Hyperscale Data, Inc. increased to $6,426,000 as of June 30, 2025, from $5,118,000 at December 31, 2024.
• The credit limit with Hyperscale Data, Inc. was increased to $8,000,000 and extended to December 31, 2026.
• Interest expense to related parties was $138,000 for Q2 2025 and $262,000 for the six months ended June 30, 2025.
• The holder of the Series A Convertible Redeemable Preferred Stock, a related party, waived all accrued and future dividends in exchange for an increase in the liquidation preference to 125%.

Stakeholder Impact

• Shareholders: Common shareholders face significant dilution risk from potential future equity raises and the ongoing accumulated deficit. The waiver of preferred dividends is positive for common shareholders' net loss, but the increased liquidation preference for preferred stock could impact their recovery in a liquidation scenario. The "going concern" warning poses a substantial risk to investment value.
• Creditors: The increasing related party debt and negative working capital indicate higher risk for creditors, particularly unsecured ones. The lawsuit liability also represents a claim on assets.
• Employees: The identified material weakness regarding insufficient accounting resources and lack of segregation of duties could indicate operational inefficiencies or stress within the organization. The hiring of a material specialist is a positive step for inventory management.
• Customers: Increased customer advance payments suggest strong demand for products, particularly EV chargers, which is positive for customer relationships and future revenue. However, potential going concern issues could raise concerns about long-term product support or supply stability.
• Suppliers: The increase in inventory and accounts payable suggests ongoing operational activity, but the negative working capital could imply potential payment delays or strained relationships if liquidity issues persist.

Next Steps

• Begin significant deliveries of products to achieve sufficient cash flows from operations.
• Continue to finance future development and working capital needs through advances from Hyperscale Data, Inc.
• Seek additional funding from other sources, including the sale of equity securities and term notes.
• Implement actions to remediate identified material weaknesses in internal control over financial reporting, including enhancing controls over inventory, revenue recognition, accounts receivable, complex financial instruments, and fair value estimates.
• Increase staffing in the accounting function and supplement with more experienced personnel.
• Continue to diligently review internal control over financial reporting.

Key Dates

Recommendation

Despite revenue growth and a reduced net loss, the company faces severe financial distress, evidenced by a "substantial doubt about its ability to continue as a going concern," a worsening negative working capital position of $7.45 million, and heavy reliance on related-party financing. The identified material weaknesses in internal controls indicate significant operational and financial reporting risks. The accumulated deficit of over $48 million and increasing related party debt further highlight the precarious financial health. These fundamental issues outweigh any positive revenue trends, making the stock a high-risk investment with significant downside potential.

Keywords

Power Electronics, EV Charging, Electric Vehicle Infrastructure, Power Conversion Systems, SEC Filing, Form 10-Q, Financial Results, Quarterly Report, TurnOnGreen, TOG, Digital Power Corporation, TOG Technologies, Corporate Governance, Risk Management, Liquidity, Going Concern, Internal Controls, Related Party Transactions, Defense Industry, Commercial Customers, Medical Customers