Electrovaya

Summary

== Operations ==Electrovaya Inc. designs, develops and manufactures directly or through out-sourced manufacturing lithium ion batteries for Material Handling Electric Vehicles (“MHEV”) and other electric transportation applications, as well for electric stationary storage and other battery markets. Its main businesses include: # lithium ion battery systems to power MHEV including fork-lifts as well as accessories such as battery chargers to charge the batteries;# lithium ion batteries for other transportation applications; and, # industrial and residential products for energy storage.The Company has a battery and battery systems research and manufacturing facility in Mississauga, Ontario. The Company researches in many areas of lithium ion batteries and has developed and patented a number of items in the lithium ion battery area. Electrovaya carries out engineering development at this facility, including assembly of complete battery systems. The Company has operating personnel at its headquarters in Canada and sales personnel in the USA. Electrovaya has a team of mechanical, electrical, electronic, battery, electrochemical, materials and system engineers able to give clients a “complete solution” for their energy and power requirements. Electrovaya also has substantial intellectual property in the lithium ion battery sector. The company believes that its battery and battery systems contain a unique combination of characteristics that enable it to offer battery offerings that are competitive with currently available advanced lithium ion and non-lithium ion battery technologies. These characteristics include: * Scalability and pouch cell geometry: Electrovaya believes that large-format pouched prismatic (flat) cells represent the best long-term battery technology for use in large electro-motive and energy storage systems.* Safety: Electrovaya believes our batteries provide a high level of safety in a lithium ion battery. Safety in lithium ion batteries is becoming an important performance factor and Original Equipment Manufacturers (“OEMs”) and users of lithium ion batteries prefer to have the highest level of safety possible in lithium ion batteries.* Cycle-life: Its cells are in the forefront of battery manufacturers with respect to cyclelife, with excellent rate capabilities. Cycle-life is generally controlled by the parasitic reactions inside the cell and these reactions have to be reduced in order to deliver industry leading cycle-life. Higher cycle-life is of importance in many intensive applications of lithium ion batteries.* Energy and Power: Its batteries give industry leading combination of energy and power and can be application specific.* Battery Management System: Its Battery Management System (“BMS”) has developed over the years, and provides excellent control and monitoring of the battery with advanced features as well as communication to many chargers, electric vehicles and other devices.== Strategy ==Electrovaya has developed a series of products which focus on maximising the cycle-life of the battery such that mission critical and intensive use applications would be interested in such long life batteries while giving appropriate energy and power. Electrovaya developed cells, modules, battery management systems, software and firmware necessary to deliver systems for discerning users. Electrovaya also developed supply chains which can produce needed components including separators, electrolytes with appropriate additives, cells and cell assembly, modules, electronic boards, electrical and mechanical components as needed for its battery systems. Supply chains allow flexibility in production as well as ability to manage scalable and fluctuating demands, especially for emerging new product introductions. The global trend in technology products is to use high quality supply chains to achieve scalable production and reduce or eliminate ownership of component suppliers. The battery systems that the company has developed are focused on mission critical applications, where the battery has to be used for long durations and could be charged and discharged several times a day. Electrovaya has moved away from owning component suppliers and making use of higher levels of contract manufacturing to produce its customised requirements. The company’s goal is to utilize its battery and systems technology to develop and commercialize mass production levels of battery systems for its targeted end markets. To achieve these strategic objectives, the company intends to:* Establish global strategic relationships in order to broaden the market potential of its products and services;* Develop and commercialize leading-edge technology for the stationary grid, zero-emission vehicle, as well as partnering with key large organizations to bring them to market;* Invest in research and development initiatives related to new technologies that reduce the costs of our products, but enhance the operating performance, of its current and future products; and,* Focus on intensive use and mission critical applications such as the logistics and ecommerce industry, automated guided vehicles, electric buses, energy storage and similar other applications. == Recent developments ==In January 2021 the Company announced it had completed a private placement for gross proceeds of $2.6 million (CDN$3.3 million). Also in January 2021, warrants and Compensation options were exercised for total proceeds of $3.8 million (CDN$4.8 million). The total gross proceeds raised from these transactions was $6.4 million (CDN$8.1 million) of which $1.8 million (CDN$2.3 million) was used to make a voluntary payment to reduce the outstanding balance of the revolving credit facility with the remaining $4.6 million (CDN$5.8 million) to be used for general corporate purposes. On February 23, 2021, the Company announced it had submitted an initial application to list the Common Shares on the Nasdaq Stock Market (“NASDAQ”). The Company is pursuing a NASDAQ listing in order to enhance its investor profile, with the goal of attracting a broader base of both institutional and retail investors, furthering strategic acquisition, opportunities, and increasing shareholder value. The Company currently earns the majority of its revenues from the United States, with its lithium-ion battery products powering electric lift trucks in over 48 locations, a majority of which are in the United States. Should the application for listing be successful, the Company expects the Common Shares will continue to be listed and trade on TSX under the symbol “EFL”. The listing of the Common Shares on NASDAQ remains subject to the review and approval of the Company’s listing application and the satisfaction of all applicable listing and regulatory requirements, including the approval of the United States Securities and Exchange Commission, and there is no assurance that NASDAQ will approve the listing of the Company’s Common Shares. In the event the listing is approved, the Company may pursue a consolidation of the Common Shares on a ratio not exceeding five pre-consolidation Common Shares for each one post-consolidation Common Share. The Company’s shareholders approved the potential consolidation at a meeting of shareholders held on February 17, 2021. On March 17, 2021, the Company announced the launch of its electric bus lithium ion battery systems with the delivery of a 700V, 300kWh battery. The product launch signaled the Company’s entry into the rapidly growing electric bus market. The Company believes its e-bus battery product provides safety, cost, cycle-life and performance advantages as the world generally moves away from dependence on fossil fuel consumption and combustion engines for transportation. Company batteries are now powering electric lift trucks in five big box retail stores in the New York City region owned by a Fortune 100 retailer with several thousand stores. The Company continues to receive repeat orders from Fortune 500 companies as the Company believes these organizations are recognizing efficiency gains from using the Company’s lithium ion batteries.The Company’s US-based Original Equipment Manufacturer (“OEM”) partner for electric lift trucks has started marketing the Company’s batteries into Canada, South America and Australasia, in addition to the United States. This OEM sales activity began in earnest from Q2 FY2021 after the Raymond Strategic Supply Agreement was signed in December 2020. The Company has delivered its first sales into Argentina through this OEM channel, along with sales into the United States. The Company added additional sales staff in the United States, to increase the reach of its direct sales channel. On June 16, 2021, the Company and its officers reached an agreement with the Administrator of Litarion GmbH, to mutually settle all potential claims of both parties as part of the termination of the insolvency proceedings of Litarion GmbH. The Company has agreed to pay €221,000 as full and final settlement which includes the acquisition of certain patents and trademarks. The payment is to be made in instalments over a nine month period. With the entry into the settlement agreement and upon payment of the instalment amounts, the Company’s liability with respect to Litarion GmbH will be satisfied in full. On June 23, 2021, the Company announced that it had established a new operating division: Electrovaya Labs. Electrovaya Labs will conduct ongoing research into next generation cells and batteries in the areas of solid-state cells, electrode production and higher energy density batteries, and will generate additional intellectual property and patent applications in connection therewith. The Company entered into a lease agreement (the “Lease Agreement”) with respect to a dedicated research and chemistry lab facility located at the Sheridan Science and Technology Park, Mississauga, where Electrovaya Labs will operate (the “Facility”). Subsequent to the quarter ended June 30, 2021, the Facility was acquired by an investor group controlled by Dr. Sankar Das Gupta, the Company’s Chief Executive Officer and controlling shareholder, which group also includes the Company’s Chief Operating Officer, Rajshekar Das Gupta. The Lease Agreement was not amended or terminated on the change of ownership of the Facility and remains in effect between the Company and the current Facility owner, such that the CDN$25,000 monthly fee payable by the Company under the Lease Agreement is now payable to a related party of the Company for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61- 101”). The board of directors of the Company (the “Board”) determined that the Lease Agreement and the transactions contemplated thereunder are exempt from the formal valuation and shareholder approval requirements set forth in sections 5.4(1) and 5.6 of MI 61-101, respectively, as the fair market value of the Lease Agreement and the Fees did not exceed 25% of the market capitalization of the Company at the time of execution of the Lease Agreement for the purposes of sections 5.5(a) and 5.7(1)(a) of MI 61-101. For greater certainty, Dr. Das Gupta disclosed in writing the nature of his interest in the Lease Agreement and abstained from voting in connection with the Lease Agreement. On July 14, 2021, the Company extended the term to maturity of its CDN$6 million promissory notes with a Canadian financial institution from June 30, 2021 to December 31, 2021. The effective interest rate was reduced from 11% to 10%. The Company paid a 1% renewal fee of CDN$60,000 to the financial institution.* On July 20, 2021, the Company announced the following business updates: the Company received its first purchase orders from one of the world’s largest ecommerce companies. The orders were valued at more than $2 million and received through the Company’s OEM partner under the Raymond Strategic Supply Agreement; * the Company received repeat orders valued at approximately $1.5 million through its OEM partner from two of the world’s largest food manufacturing firms, headquartered in the United States and Europe, respectively; and* the Company received a purchase order worth approximately CDN$1 million from one of North America’s largest food processing firms, headquartered in Canada. This order came through the Company’s direct sales channel. In October 2021, the Company announced the signing of a Strategic Supply Agreement with Vicinity, a leading supplier of electric, compressed natural gas and clean diesel vehicles (the “Vicinity Strategic Supply Agreement”). The Vicinity Strategic Supply Agreement is for the supply of battery systems for Vicinity’s line of Vicinity Lightning™ EV buses and fully electric VMC 1200 Class 3 trucks. The Company believes it is continuing to make significant progress in the e-bus market and anticipates increased revenue from this segment in the 2022 fiscal year. The Company is making progress with its capital market initiatives in Canada and the United States. Management and the Board will carefully monitor the capital markets and the benefits and risks to the Company before a decision is made regarding the next steps toward a potential listing on the NASDAQ Stock Market. On October 1, 2021, the Company completed a brokered private placement of Common Shares and warrants to purchase Common Shares to an institutional investor in the United States for gross proceeds of approximately CDN$3.8 million. The Company issued 2,919,230 Common Shares and warrants to purchase up to 1,459,615 Common Shares at a price of CDN$1.30 per Common Share and associated warrant. Each warrant entitles the holder thereof to purchase one Common Share at an exercise price of CDN$1.60 per Common Share at any time prior to October 1, 2024.== Business Highlights and 2022 Outlook ==Business Highlights – Q4 FY2021:On September 22, 2021, the Company launched EVISION, an internally developed and proprietary remote monitoring system. This new system is cloud-based and is able to track battery operational usage in Electrovaya-powered applications such as lift trucks or electric buses in real-time. The system monitors battery health, utilization, and charging to provide customers with optimized fleet and charging management. The EVISION system is now live and generating revenue. On September 23, 2021, the Company announced that its research division, Electrovaya Labs, produced promising initial test results using a proprietary approach for a solid-state (NMC cathode/lithium metal anode) battery. The initial results have demonstrated minimal capacity fade, and multiple tests have demonstrated the repeatability of the performance with coin cells at room temperature. On October 5, 2021, the Company announced that all of its battery models will be receiving a capacity increase of approximately 7%. This change has also been reflected in the UL files for Electrovaya batteries, in which new model numbers are used to reflect the capacity increases. Furthermore, additional models have been added to the UL file, expanding the number of Electrovaya UL-listed offerings. On October 13, 2021, the Company signed a Strategic Supply Agreement with Vicinity Motor Corp, a leading supplier of electric, compressed natural gas, and clean diesel vehicles. The Vicinity Strategic Supply Agreement is for the supply of battery systems for Vicinity’s line of Vicinity Lightning™ EV buses and fully electric VMC 1200 Class 3 trucks. On December 1, 2021, the Company announced that Steven Berkenfeld has been engaged as a Special Advisor to the CEO and Board. Mr. Berkenfeld will provide capital markets, strategic, and commercial guidance to support the company’s growth across multiple market segments. On December 7, 2021, the Company filed a final base shelf prospectus with the securities regulatory authorities in each of the provinces and territories of Canada. The base shelf prospectus is valid for a 25-month period, during which time the Company may offer and issue, from time to time, common shares, warrants, units, subscription receipts and debt securities, or any combination thereof, having an aggregate offering price of up to $100 million. The ability to draw on the shelf prospectus was conditional upon extended the working capital and promissory note facilities. As this condition is now fulfilled the Company is free to draw upon the base shelf. On December 17, 2021, the Company amended its C$7 million working capital facility to extend the maturity from December 31, 2021 to December 31, 2022. All other terms and conditions are unchanged. In exchange for the extension, the Company paid CDN $70K as an extension fee. On December 17, 2021, the promissory note which was due to mature on December 31, 2021 was amended to extend the maturity to July 1, 2022. All other terms and conditions are unchanged. As consideration for the extension, the company issued 306,122 Common Shares (representing a value of CDN $300K at the closing price of the Common Shares on TSX on the day prior to the extension) as an extension fee. Positive Financial Outlook: The Company anticipates revenue of approximately $27 million for the fiscal year ending September 30, 2022 (“FY 2022”), more than double the revenue total of $11.6 million in FY 2021. The revenue is anticipated to be generated from two primary sources: direct sales and sales through the Company’s OEM partner dealer network.The revenue forecast takes into consideration the OEM Strategic Supply Agreement, which includes an exclusivity provision, pursuant to which the OEM must make annual purchases in the minimum amount of $15 million in order to maintain exclusivity. This annual period commences on January 1, 2022. While there is no assurance that the OEM will make more than $15 million of purchases in 2022, given the sales initiatives underway with the OEM, management anticipates achieving or even possibly exceeding this minimum purchase level and has accordingly included it in the revenue forecast of $27 million for FY 2022.== References and notes ==