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CALGARY, Alberta, Aug. 29, 2024 (GLOBE NEWSWIRE) -- Eguana Technologies Inc. (TSXV: EGT) (OTCQB: EGTYF) (“Eguana” or the “Company”), a leading provider of high-performance energy storage systems, reports financial results for the second quarter ended June 30, 2024.
Second Quarter 2024
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Q2 2024 revenue of $0.7 million, a decline from the comparative quarter in June 2022 with revenue of approximately $2.1 million. 2024 revenues remain constrained by a slower than expected recovery of the residential rooftop solar market.
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Q2 2024 gross margin is stronger than prior quarters, at approximately 10% as compared approximately 0% for the prior comparative quarter for June 2023. The positive margin gain was driven by a change in product mix versus the comparative quarter.
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Q2 2024 operating loss of $2.1 million, a decrease from a $4.1 million operating loss for the comparative June quarter in 2023. This decrease is due to lower expenses in all expense categories, related to personnel reductions and overall cost reductions.
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Working capital at June 30, 2024 was negative $1.0 million, a decrease from $5.0 million at December 31, 2022. The decrease relates to ongoing cash used in operations.
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At June 30, 2024, the Company has a large overdue accounts receivable balance from one customer of which approximately $7.4 million, which is offset by an expected credit loss (“ECL”) of $7.4 million, thus showing a net receivable of only $nil, reflecting slow payments, missed agreed payments and overall collection risk. Although the customer has been delayed in making payments, progress payments have been received consistently over the past 60 days, as the customer developed a new sales channel and has increased sales. The Company reviews the expected credit loss quarterly and where appropriate adjusts the ECL estimate, in line with generally accepted accounting principles. During the three months ended June 2024, a price concession was provided to this customer that resulted in a credit to accounts receivable, with an offset to ECL of $415,000 USD. Based on new market information for inventory previously sold to the customer, and in good faith, the Company agreed to a one-time credit, reflecting market pricing through a new sales channel that is now available but only at a lower special selling price. This does not impact the Company’s existing inventory. For the three months ended June 30, 2024, the Company recorded other small reductions in ECL to reflect value received from inventory obtained as an offset to net accounts receivable with the major customer and payments received. As a result, the Company has an expected credit loss provision for this customer at June 30, 2024, in the amount of $7.4 million.
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During June 2024, the Company started the formal process for liquidation of its German subsidiary. The sales opportunities in German did not materialize and the Company made the decision to cut costs and put additional focus and resources on North American Virtual Power Plant (“VPP”) utility markets. At June 30, 2024, the Company took a $0.2 million write down of stock related to the European market and recorded $0.3 million of accrued liabilities related to estimated personnel and closure costs. The German subsidiary is categorized as discontinued operations and a loss of discontinued operations was recorded for the six months ended June 30, 2024 of $0.8 million.
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During 2024, the Company negotiated various payment delays and deferrals with the lender of its senior long-term debt (the “Lender”). On May 7, 2024, the Company entered into a forbearance agreement with the Lender whereby the Lender has agreed to a deferral of payments up to and including June 1, 2024, predicated on subjective conditions that if not complied with render the forbearance to be terminated, for which the Company complied. This agreement covered the period ended June 30, 2024. Subsequent to this recent quarter end, the Company missed a negotiated interest only payment in July and an anticipated August regular amortization payment, moving the loan into formal default. In August 2024, the Lender provided an updated forbearance agreement whereby the Lender has agreed to a deferral of payments up to and including September 1, 2024, predicated on the same subjective conditions that if not complied with render the forbearance to be terminated. Negotiations with the lender remain positive and ongoing and the Lender has not taken any action.
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In July 2024, the Company was notified, by the OTCQB in the USA, of the low trading price for the stock and potential removal of the EGTYF stock from the OTCQB marketplace. The Company plans to maintain the listing on the pink market, until such time migration back to the OTCQB is possible and appropriate.