10-Q: TurnOnGreen Reports Q2 2026 Results Amidst Going Concern Doubts

TurnOnGreen, Inc. filed its Form 10-Q for the quarter ended June 30, 2026, detailing revenue growth but persistent net losses and significant going concern risks.

Summary

• TurnOnGreen, Inc. reported revenues of $1.754 million for Q2 2026, a 4% increase from $1.692 million in Q2 2025. For the six months ended June 30, 2026, revenues were $3.490 million, up 6% from $3.284 million in the prior year period.
• Despite revenue growth, the company continued to incur net losses. The net loss for Q2 2026 was $348,000, an improvement from $651,000 in Q2 2025. The six-month net loss was $1.121 million, an improvement from $1.192 million in the prior year.
• The company faces substantial doubt about its ability to continue as a going concern due to recurring operating and net losses. Management plans to finance future activities through convertible debt and advances from Hyperscale.
• Material weaknesses in internal control over financial reporting were identified, primarily related to insufficient resources in the accounting function and inadequate user access controls.
• Total assets increased to $4.665 million as of June 30, 2026, from $3.227 million as of December 31, 2025. Total liabilities also increased to $13.628 million from $11.069 million.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to the company's continued operating losses, substantial doubt about its ability to continue as a going concern, and material weaknesses in internal controls.

Positives

• Revenue increased by 4% to $1.754 million for the three months ended June 30, 2026, compared to $1.692 million for the same period in 2025.
• Revenue increased by 6% to $3.490 million for the six months ended June 30, 2026, compared to $3.284 million for the same period in 2025.
• Gross profit for the three months ended June 30, 2026, increased by 21% to $821,000 from $681,000 in the prior year period.
• Gross profit for the six months ended June 30, 2026, increased by 16% to $1.634 million from $1.411 million in the prior year period.
• Operating loss improved significantly, decreasing by 69% to $154,000 for the three months ended June 30, 2026, from $504,000 in the prior year period.
• Operating loss improved by 15% to $775,000 for the six months ended June 30, 2026, from $914,000 in the prior year period.
• Net loss decreased by $303,000 to $348,000 for the three months ended June 30, 2026, compared to $651,000 in the prior year period.
• Net loss decreased by $71,000 to $1.121 million for the six months ended June 30, 2026, compared to $1.192 million in the prior year period.

Negatives

• The company has incurred recurring operating and net losses, leading to substantial doubt about its ability to continue as a going concern.
• As of June 30, 2026, the company had negative working capital of $9.3 million.
• Total liabilities increased to $13.628 million as of June 30, 2026, from $11.069 million as of December 31, 2025.
• Convertible notes payable increased significantly to $1.480 million as of June 30, 2026, from $557,000 as of December 31, 2025.
• Related party notes and advances payable remain substantial at $8.173 million as of June 30, 2026.
• The company reported material weaknesses in its internal control over financial reporting, including insufficient accounting resources and inadequate user access controls.
• The lawsuit liability remains significant at $1.166 million as of June 30, 2026.
• The fair value of embedded derivative liabilities decreased from $150,000 at December 31, 2025, to $23,000 at June 30, 2026, indicating a change in valuation assumptions.

Risks

• Substantial doubt exists regarding the company's ability to continue as a going concern due to recurring operating and net losses.
• The company's inability to continue as a going concern could negatively impact its ability to obtain needed financing.
• There can be no assurances that Hyperscale will continue providing financing to the company when needed or on acceptable terms.
• Material weaknesses in internal control over financial reporting could lead to a material misstatement of financial statements or prevent fraud.
• Failure to have effective internal controls could result in sanctions or investigations by government authorities, potentially harming investor perception and access to capital.
• The company is subject to claims, suits, regulatory and government investigations, although management believes these will not have a material adverse effect.
• The company has significant convertible debt and related party financing, which carries inherent risks related to repayment and terms.
• The valuation of embedded derivative liabilities involves significant judgment and unobservable inputs, posing a risk of material misstatement.

Future Outlook

Management believes the company will continue to incur operating and net losses until significant product deliveries begin. Future development and working capital needs are expected to be financed through convertible debt and advances from Hyperscale. There is substantial doubt about the company's ability to continue as a going concern.

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.
• The Company intends to finance its future development activities and its working capital needs through convertible debt as well as through advances from Hyperscale Data, Inc. until such time as funds provided by operations are sufficient to fund working capital requirements.
• 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.

Industry Context

StockSavvy.ai notes that TurnOnGreen operates in the competitive power electronics and EV charging solutions market. While the company shows revenue growth, its persistent losses and going concern issues are significant headwinds in an industry that requires substantial capital investment for R&D and scaling production.

Comparison to Industry Standards

• The company's revenue growth of 4% (Q2) and 6% (YTD) is modest compared to many rapidly expanding players in the EV charging infrastructure sector, which often see much higher year-over-year growth rates.
• The persistent net losses and negative working capital are concerning. Many established competitors in the power electronics and EV charging space are either profitable or have secured significant funding to sustain operations through growth phases.
• The reliance on related party financing (Hyperscale) and convertible debt is a common strategy for early-stage companies but carries higher risk than traditional equity or debt financing from unrelated institutions.
• The company's focus on 'premium' and 'highly engineered' solutions suggests a niche strategy, but profitability challenges indicate potential issues with pricing power, cost management, or market adoption compared to more commoditized offerings.

Legal Proceedings

• Gordon v. Digital Power Corporation: Plaintiff filed a complaint alleging wrongful termination and disability discrimination. An arbitration resulted in a final award against the Company for $1.1 million inclusive of interest, legal fees, administrative fees, and expenses. Interest accrues at 10% per annum on the net damages portion.

Related Party Transactions

• Hyperscale provides human resources, accounting, and other services, with allocated costs reflected in SG&A.
• Related party notes and advances payable from Hyperscale total $8.0 million (excluding accrued interest) with a credit limit of $8.0 million and a 10% interest rate, maturing December 31, 2026.
• A short-term sublease agreement with Microsource Inc. (a related party) commenced April 1, 2026, for 38% of the company's office and warehouse space.

Stakeholder Impact

• Shareholders: Continued losses and going concern risks may negatively impact share price and future equity value. Dilution risk from convertible notes.
• Creditors: Increased liabilities and going concern issues could impact the company's ability to meet its debt obligations.
• Employees: Uncertainty surrounding the company's financial stability could affect morale and job security.
• Suppliers: Potential for delayed payments or reduced orders due to financial constraints.
• Customers: Continued operational challenges could impact product delivery and service reliability.

Next Steps

• Continue to finance future development and working capital needs through convertible debt and advances from Hyperscale.
• Address material weaknesses in internal control over financial reporting.
• Seek to achieve significant product deliveries to improve operational cash flows.
• Continue to manage and potentially expand relationships with key customers such as Customer B, C, F, and G.
• Monitor and manage lawsuit liability and related interest accruals.

Key Dates

Recommendation

The company exhibits persistent operating losses, significant going concern risks, and material weaknesses in internal controls. While revenue is growing, the path to profitability is unclear, and the reliance on debt financing and related-party advances creates substantial financial risk. The ongoing lawsuit liability also adds to the uncertainty. These factors suggest a high risk for investors.

Keywords

TurnOnGreen, EV charging, power conversion systems, Form 10-Q, financial results, going concern, convertible notes, related party transactions