and welcome aboard the fluxworks powertrain

Hey,

and welcome aboard the fluxworks powertrain. it’s been an awesome, but intense spring already. many things are tracking well, but there are some challenges we’re working through.

key metrics

We continue to build momentum across every important metric. Recently locking in a strategic $100k line of credit & $350k draw term loan SBA from Huntington Bank, between January and April, we improved our Debt Management Ratio from 2.7 down to 1.6 and continue to pull it to our target of 1.3.

While we expected May to run cash-dry between government contracts, we did not expect be hungry in June as well. Moreover, July through September will capture less revenue than our monthly burn rate putting the powertrain on track to run out of cash early September, a month before things stabilize in October. Your investment is a key part to bridging the gap through the next few months, but I am doubling down efforts to try and get more FluxBucks July through September to mitigate this risk. See revenue by month below.

While opportunities ranging from Intuitive Machines to DARPA are all in the pipeline, I don’t expect those to get to contract this fiscal year. The highest likelihood sale for July revenue would be a coaxial magnetic gear project we begun tracking in December 2023. In this high-profile project, FluxWorks would be a subcontractor to the Army along with Renk America on a recently awarded contract from the (*takes breath*) Office of the Deputy Assistant Secretary of Defense for Environment and Energy Resilience, Operational Energy – Innovation directorate (ODASD(E&ER) OE-I). Say that 5 times fast.

Our Expense-to-Revenue ratio has gotten out of hand this year, in part because of processes that we have outgrown, and in part to keep Uncle Sam jolly. Taking advantage of the physical company move from College Station to Conroe as an opportunity re-create processes and break bad habits, our team already has 5 strategic areas targeted to reduce operating expenses. Additionally, our strategic SBA loan will be leveraged to pay for the overhaul of IT, purchase of multiple equipment in house, and begin the ISO9001 journey. At the end of Q1, our aim was to slash $270k of the projected operating expenses to recover before the end of CY24. We project our efforts have cut back $145k already. Needless to say, I’m cautiously hopeful. See sad graph below showing Gross & Operating Profit Margin %.

new drip (facilities update)

Thank you, Aggieland, for incubating this rare-earth-magnet-filled egg into the not-fake company FluxWorks has become. FluxWorks & all team members are fixin’ to move to Conroe (1030 Outpost Dr). Over Q1, 2024, FluxWorks received an incentive offer from Boston, MA, but Governor Abbot steamrolled those northerners by making a call right before my eyes to make sure we stay in Texas. His Economic Development & Tourism staff continue to support us.

In the back half of 2024, we would love to see you over yonder for the ribbon cutting party we will put together. Our place will look like the picture below, but with more magnetic gears and a FluxWorks sign.

fundraising an internal round

We closed our internal fundraising round, then immediately welcomed Ross Guieb as an invested advisory board member of FluxWorks. Ross has already been a huge asset to our team. We don’t plan to activate fundraising mode again until Q4 of this year.

In the future, a section called “learnings since last update” will go here
But this is our first newsletter. So, I want to take a moment to thank you for believing in FluxWorks. I also want to highlight the two big product initiatives we are scaling up.

Backlash-free magnetic gears are safer, more effective, and more reliable than their savage mechanical counterparts. We are honing in on two primary product initiatives:

1. The Celestial Gear™ is great for robotics, automation, semiconductor manufacturing, food processing & almost everything that go *brrr* in space. This product will require a longer time to market, so less of our attention is on this now.
2. The Coaxial Magnetic Gear is great for exhaust fans, compressors, cooling towers, conveyer belts, marine propulsion, and more. BAE Systems has agreed to pilot test our minimum viable product and the Army is setting aside some of their Program Funding & Congressional Add to cost share development.

Most of our internal funds raised are aimed towards commercializing the Coaxial Magnetic Gear (CMG) technology.

Over the last 6 months we’ve improved the biz dev approach to taking the Army from “Beers & Magnetic Gears” level chats to actual contract. We’ve recently implemented methods of measuring new government contract wins (currently an average 9-month lead time & lots of $$$ for in-person networking) to focus on maximizing efficiency and streamlining this process. By Q4 2024, my goal is to focus more of my 5’9” CEO energy on breaking us into the private sector as our CMG product & our manufacturing capabilities mature.

team

The huge growth we’ve seen this year is a direct impact of Kyle Maier, our tallest employee and the head of our operations department, and Craig Newman, P.E., our fearless Chief Engineer. Their 13+ years each of industry experience and new product development experience from the O&G sector has really taken our team to another level. One FluxWorker said it feels like last year we were Charmander, and now we are Charmeleon. The level to which I agree with that sentiment is alarming for multiple reasons.

Everyone is pumped and feels the momentum. Unfortunately, a few FluxWorkers missed the old company, and have since separated. We are stretched very thin and, while it’s been awesome seeing everyone step up, I worry about fatigue setting in and us losing steam in Q3. Active efforts to revitalize Fluxy vibes are the new location underway.

what i feel good about

We made the above gears, spun them for the Army, and the Branch Chief of Powertrain Electrification literally said “I want to get my grubby mitts on some of these to test at my facilities.” Jingo-jango, the Army renewed and will give us more money. Yahoo!

All the work we’ve done over the last year and a half is paying off. We’ve built the foundation that is going to let us grow and provide robust products in the future.

what grinds my gears

Besides operating expenses and lagging pipeline, this section is about the other items that keep me up at night that keep bringing me back to the whiteboard.

Firstly, I thought we predicted the cost of facility expansion well, but it keeps getting more expensive, and our runway keeps getting shorter (currently September).

Next, we made a poor purchase of a $20k+ industrial 3D printer that is printing catawampus. The company has finally come around to replace the machine on warranty, but the new one sucks too and now the OEM leaves us on read. We may have identified a College Station company that wants to purchase the printer from us, but nothing is in paper yet.

Lockheed and BAE interests are exciting but we are playing it careful. We have started to create wholly-owned subsidiary FluxWorks companies underneath the parent company (FluxWorks, Inc.) to house the Celestial Gear™ and the Coaxial Magnetic Gear IP and relevant contracts to mitigate risk and tee-up multiple exits.

what’s next

It’s technology and business milestone time – no fundraising in Q2/Q3 planned. We are interviewing for a full-time CFO position later this week, May 15th and 16th. Current roadmaps for both product initiatives shown below.

We’ve also got to finish May strong. We are pacing really well but it is FY25 planning season and FY24 spending season, so we need to get to contract with the rest of our pipeline and lock in many of our 2025 government business plans now until September. At the same time, we are preparing to take advantage of a massive surge in public interest in Space technology and will ring the bells on our ISS contract for marketing.

Candidly, this is our first newsletter. And while we checked formatting on several devices, if you personally get any funky formatting that makes this letter look less professional, please let us know.

thank you

Thank you to Amos McDonald for the introductions that led us to meet Greg Abbot and to the owner of the Conroe Workhub facility. Thank you Ross Guieb for making the intros to folks like LTG Coffman and to BAE Systems. Thank you, Mike, Brad, and Austin of Seed Round Capital for leading this internal round and providing pitch deck feedback and listening to me run over and over.

Thank you also Blake Petty, Darryl Heath, and Mike Lodzinski for being some the earliest believers and supporters of FluxWorks. I was thrilled to see you join this round.

At this time, I have no specific asks besides newsletter content and formatting. But I am happy to answer any questions you might have. Please stay on the lookout for a ribbon cutting invite in the July-August timeframe.

Thank you for all your support.

Happy to talk more.
If you have questions or comments, please email me at bryton@fluxworks.co

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