10-Q: TurnOnGreen Reports Increased Revenue and Reduced Net Loss in Q1 2025

TurnOnGreen, Inc. announces increased revenue and a decreased net loss for the first quarter of 2025, driven by higher sales in the defense and EV sectors.

Summary

• TurnOnGreen, Inc. reported revenue of $1.592 million for the three months ended March 31, 2025, compared to $1.225 million for the same period in 2024.
• The company's gross profit increased to $730,000 from $558,000 year-over-year.
• The net loss decreased to $541,000 from $735,000 in the prior year.
• The company's operating loss improved to $410,000 from $666,000 year-over-year.
• The company had cash and cash equivalents of $0 million as of March 31, 2025.
• The company has a negative working capital of $6.9 million as of March 31, 2025.
• The company intends to finance its future development activities and its working capital needs largely through the sale of equity securities with some additional funding from other sources, including term notes until such time as funds provided by operations are sufficient to fund working capital requirements.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company shows improved financial performance in terms of revenue growth and loss reduction, concerns about its ability to continue as a going concern and material weaknesses in internal controls temper the positive aspects.

Positives

• Increased revenue driven by higher sales from defense industry customers and a new EV customer.
• Improved gross profit due to increased sales and a reduction in obsolete inventory expenses.
• Decreased net loss due to increased gross profit and decreased selling and marketing expenses.
• The company amended its Series A Convertible Redeemable Preferred Stock, with the holder waiving all accrued and future dividends in exchange for an increase in the liquidation preference to 125%.

Negatives

• The company has incurred recurring net losses and operations have not provided sufficient cash flows.
• The company has a negative working capital of $6.9 million as of March 31, 2025.
• The company has cash and cash equivalents of $0 million as of March 31, 2025.
• The company's disclosure controls and procedures were not effective to ensure that material information relating to the Company required to be disclosed by the Company in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Risks

• The company's ability to continue as a going concern is subject to substantial doubt.
• The company relies on advances from Hyperscale, Inc. for financing, and there is no assurance that this funding will continue.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company is involved in ongoing litigation.

Future Outlook

The company intends to finance its future development activities and its working capital needs largely through the sale of equity securities with some additional funding from other sources, including term notes until such time as funds provided by operations are sufficient to fund working capital requirements.

Industry Context

The company operates in the power electronics and EV charging solutions markets, which are experiencing growth due to increasing demand for electric vehicles and advanced power systems.

Comparison to Industry Standards

• It is difficult to compare TurnOnGreen's results directly to industry standards without knowing the specific segments and product lines that are most relevant.
• However, companies like Blink Charging and ChargePoint operate in the EV charging space, while companies like Delta Electronics and TDK-Lambda compete in the power supply market.
• A more detailed analysis would require comparing TurnOnGreen's growth rates, profitability, and financial ratios to those of its direct competitors.

Legal Proceedings

• The Company has recorded a lawsuit liability of $ 1.1 million for this judgement as of March 31, 2025, and December 31, 2024, in the condensed consolidated balance sheets.
• The Company is currently involved in litigation arising from matters in the ordinary course of business.

Related Party Transactions

• The Company is a controlled subsidiary of Hyperscale, and as a result Hyperscale is deemed a related party.
• Hyperscale provides human resources, accounting and other services to the Company, which are included as allocations of these expenses.
• Related party notes and advances payable were used for working capital purposes and on March 31, 2025, and December 31, 2024, were comprised of the following: Schedule of related party notes payable Interest rate Due date Credit Limit March 31, 2025 December 31, 2024 Hyperscale advance payable 10% Demand $8,000,000 $5,683,000 $5,118,000 Chief Executive Officer 14% Default 71,000 46,000 Non-officer advance payable 21,000 21,000 Total related party notes and advances payable $5,775,000 $5,185,000

Stakeholder Impact

• Shareholders: The improved financial results may be viewed positively, but concerns about going concern status and internal control weaknesses remain.
• Employees: The company's ability to continue operations and invest in growth may be affected by its financial condition.
• Customers: The company's ability to deliver products and services may be impacted by its financial stability.
• Creditors: The company's ability to repay its debts is dependent on its ability to generate sufficient cash flow or raise additional capital.

Next Steps

• The company intends to enhance the design of existing controls and implement new controls over the accounting, processing and recording of inventory.
• The company intends on enhancing the design of existing controls and implementing new controls over the review of the application and recording of revenue for customer contracts under the guidance outlined in ASC 606.
• The company will design and implement controls to properly identify and implement the proper accounting treatment and classifications of our complex financial instruments to ensure our equity accounting and treatment is in accordance with U.S. generally accepted accounting principles.
• The company will design and implement additional control activities to ensure controls related to fair value estimates (including controls that validate the reasonableness, completeness and accuracy of information, data and assumptions), are properly designed, implemented and documented.

Key Dates

Keywords

revenue, net loss, EV chargers, power supply units, TurnOnGreen, financial results, Q1 2025