Further to my initial article on Electrovaya Inc. (TSX:EFL), I thought I would follow up with another piece, analyzing the company’s performance on the basis of its most recent Q2 2017 earnings release.
Here’s the scoop.
Revenue came in at $2 million for the second quarter, up from $1.1 million in the first quarter, but down from $4.3 million for the same quarter last year.
The company’s net loss, however, doubled from the previous quarter to $6.3 million from $3.1 million in Q1.
Ignoring the large net loss, these revenue numbers are just a little shy of the company’s initial projections for 2017, projections which saw the business churning out $180 million in sales in 2017 (leading to a spike in the company’s share price to more than $4 per share).
Sales have slowed, and inventories are climbing, signs that the business model has not yet taken hold, and the company is having difficulty gaining traction. Current inventory has increased from $11.7 million last quarter to $15.6 million this quarter, indicative of issues within the company’s sales and distribution channels.
The company’s debt load is problematic, with Electrovaya currently maxed out on its credit lines. In March, the company received an emergency convertible debenture at a 9% interest rate. Given the company’s current debt situation, seriously negative earnings, and inability to gain traction with its sales channels, I believe this is a business that simply cannot survive very much longer.
If the business does survive, the convertible debentures will serve to dilute existing shareholders further, driving the stock price even lower.
