Greetings. Welcome to the Electrovaya Fiscal Year 2018 conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Richard Halka, Executive Vice President and Chief Financial Officer for Electrovaya. Thank you. You may begin.
Thank you, Melissa. Good morning, everyone. Thank you for joining us on today's call to discuss Electrovaya's fiscal 2018 financial results. Today's call is being hosted by Dr. Sankar Das Gupta, CEO of Electrovaya, and myself, Richard Halka, Executive Vice President and CFO. Yesterday, Electrovaya issued a press release concerning its business highlights and financial results for the fourth quarter and fiscal year ended September 30th, 2018. If you would like a copy of the release, you can access it on our website. If you would also like to view our financials and Management Discussion and Analysis, you can access those documents on the SEDAR website at www.sedar.com. As with previous calls, our comments today are subject to normal provisions relating to forward-looking information.
We will provide information relating to our current views regarding trends in our markets, including the size and potential for growth, and our competitive position in those target markets. Although we believe that expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties. Actual results may differ materially from those expressed or implied in such statements. Additional information about factors that could cause actual results to differ materially from expectations and about material factors or assumptions implied in making forward-looking statements may be found in the company's press release announcing the fiscal 2018 results and the most recent annual information form and Management Discussion and Analysis under Risk and Uncertainties, as well as in other public disclosures filed with Canadian securities regulatory authorities. Please note that all numbers discussed on this call are in U.S. dollars, unless otherwise noted.
Let me turn the call over to Dr. Sankar Das Gupta, CEO of Electrovaya.
Thank you, Richard, and good morning, everyone. Fiscal 2018 was an important transition year for Electrovaya. Why? We achieved six important milestones this year. The first, after many years of working on electric vehicles, we finally found an important market, which is emerging quickly. Second, after all our years on technology innovation, we have developed a unique product for that market. Thirdly, we found some global dream set of companies who have started to purchase our products. We found two great channels to sell our products, direct sales, as well as sales through the large original equipment manufacturer truck maker distribution system.
Fifthly, we reorganized our company to position us for 2019 growth. Litarion, our low-margin component maker in Germany, is no longer with us. Electrovaya moves to contract manufacturing for scalability, nimbleness, and substantially reduced costs by dropping 75% of our employee base, along with its associated G&A and overhead costs.
Finally, we sold our real estate and excess space, unlocked value for proceeds of over CAD 20 million, and leased back the needed 54,000 sq ft. Although these six milestones happened in 2018, there were years of innovation behind them. Lithium-ion batteries is the critical technology as the world moves from fossil fuel to electric in transportation and other areas. In 2015, we purchased the largest lithium-ion electrode and separator plant in Europe, built to support Daimler's potential demand for up to 50,000 electric Smart cars a year. That demand never materialized, neither did any large demand come up in Europe. Similar to the situation in North America. Much discussion in the media, but actual OEM demand was and is still low. Except for two groups in two sectors. If one looks at 2017, the famous electric car company in California sold about 107,000 electric cars.
They purchased their batteries from themselves or their business partner from Japan. The other great group building electric vehicles were folks like Raymond Corporation, part of Toyota, and other industrial truck makers like Crown and others. I suspect this group was selling even more electric vehicles-Perhaps 200,000 or more a year in North America alone for electric forklifts and trucks. Possibly in 2017, the second group were the largest electric vehicle makers in the world. They met the industrial demand for our growing e-commerce, distribution, warehousing, and manufacturing. All the batteries they purchased were lead-acid batteries. Why?
These trucks operated 24/7, possibly worked equivalent mileage of 250,000 km or more per year, needed occasionally super high power as they moved heavy loads, while lithium-ion batteries in electric cars were designed to operate maybe two or three hours a day, and perhaps did 20,000 km, 30,000 km per year, not the 250,000 km these industrial trucks did. Lead-acid battery is the incumbent technology. Each materials handling truck, sometimes having three lead-acid batteries, changing batteries every few hours as the lead-acid energy capacity got used up. Not an elegant solution, changing couple of tons of batteries every few hours and charging batteries, which needs to be watered and maintained. The solution worked, but not efficiently. We liked our Electrovaya lithium-ion battery. It had high cycle life, good safety, good energy density, and pretty good power capabilities. Could it work in the materials handling electric vehicles?
A real market where there are, I believe, several million electric vehicles working hard. Not a fashionable market, but a real market. Work started in earnest to develop a battery for this market, and by 2017, we started building some prototypes for this industry. The industry is conservative. They did not like new disruptive technologies. We needed to have our batteries tested and verified for months on end in actual working conditions, round the clock. No changing of batteries, but fast charging when opportunity arose. Opportunity in a form of a coffee break or a lunch break in their three shift 24-hour operation. I'm pleased to say it is working. We went after the massive users. Our first test site was Mondelēz, a $25 billion snacking giant, makers of Cadbury chocolates and Oreo cookies. Why go after the massive, sophisticated user? Because they are sophisticated with enormous knowledge.
The electric truck makers like Raymond, Crown, and others also got involved. They wanted to test our product and verify that our lithium-ion batteries could really work round the clock and could interface mechanically, electrically, software, firmware, and handle the power, handle the cycle life. Months of testing and verification, months of collaboration, Mondelēz finally liked our batteries and was our first major customer. Walmart, the world's largest company, a $500 billion material mover par excellence, gave us the first CAD 4.3 million order to convert a single distribution center to be powered solely by Electrovaya's lithium-ion batteries. We delivered this in fiscal year 2018, and our batteries in these trucks have been operating for the last several months in the trucks from several OEM truck makers. This is possibly the largest single fleet of lithium-ion powered trucks in North America at a single location.
We are most humbled by this sector's careful engineering, the careful and brilliant work they do to make e-commerce and distribution a success today. Our engineering team, I must say, also worked well. In early 2017, I think we had one or two models. Today, we have added nearly 30 models in many different voltages and many different shape and sizes for all kinds of Class 1, Class 2, Class 3 trucks, plus the emerging market for autonomous guided vehicles. 2018, we completed our base foundation. In addition to the Fortune 1 company, we now have many other Fortune 500 and Fortune 1,000 companies starting to purchase from us. A revolution we think of lithium replacing the ubiquitous lead acid in what still, I believe, is the largest electric vehicle business in the world. A thin end of the wedge.
Now, no more fumes in the warehouse, no more changing tons of batteries, electricity usage going down, maintenance going down, lower manpower, lower cost, and higher efficiency. E-commerce, distribution, and manufacturing demands these efficiencies and a continuous lowering of costs. We have a product. We have real demand in what is possibly the largest electric vehicle market. A product which these major global companies are liking, a very large potential customer base. We reported last night, we are pleased that we have started generating revenues, and we are now getting sequential growth quarter-over-quarter. 2019 will be an interesting year. For 2019, we also needed to re-engineer Electrovaya for this product and market breakthrough. Now that this beachhead has been achieved, we needed to implement a couple of key strategic measures in Electrovaya. In 2018, we started that corporate transformation.
We did not want to manufacture and own our own component production of electrodes and separators. We divested our wholly owned German plant through a structured insolvency in stages of January and then in April 2018. We reduced our employees by 75%, our G&A and overhead costs have plummeted, and the effects will be seen in 2019. We now have large scalability with contract manufacturing supporting our design. Like most other tech companies, we have kept our intellectual property, our know-how, our design, and gave out the components to be built and supplied by many diverse group of contract manufacturers. These manufacturers are in Ontario, in Michigan, in California, in Taiwan. We have multiple sources, and we assemble in Mississauga, where we design, we innovate, we test, and we ship. Some folks earlier had interpreted this as negative news.
For us, it was the only smart and logical thing to do. The Litarion operations were a cash drain on Electrovaya, so removing them was a significant positive for our earnings and liquidity. Like many other technology companies, we determined that owning our own component cell production was unnecessary. It is a low-margin business at the best of times, and by replacing the Litarion production with greater use of contract manufacturing, our product scaling capabilities have increased. The other large cost reduction we did happened in late October 2018, a few weeks ago. We sold our 156,000 sq ft real estate and leased back our needed 54,000 sq ft. As we had previously stated, we had plenty of excess and unnecessary office space, so this was a smart way to monetize it.
The transaction generated proceeds to Electrovaya of approximately CAD 20 million, which we are using to pay down debt and for working capital, cost reductions everywhere. In debt financing, taxes, maintaining, fixing roofs, and managing real estate. Now our costs are now significantly reduced, and we are ready for the 2019 as the market follows the global leaders and start replacing lead-acid batteries with Electrovaya's high-performance lithium-ion batteries with industry-leading cycle life, safety, energy density, high power, and good engineering. I believe we are now at an important inflection point. We have approached the market through two channels, direct selling, as well as selling through the existing distribution the truck makers have. Hence, you see our batteries in Raymond trucks in CeMAT, Hanover, Germany. Both these channels are working well.
I will now turn the call over to Richard Halka to review our fiscal 2018 highlights in greater detail. Richard?
Thank you, Sankar. By the way, I apologize if you hear me sputtering and coughing in the background. I'm a bit under the weather, but we'll press on. Revenue from continued operations for the 12 months ended September 30th, 2018, was $5.6 million, an increase of 148% from $2.3 million in the same quarter last year. The higher revenue in fiscal 2018 reflects stronger order volume, including repeat orders, and includes Walmart order, which was worth CAD 4.3 million. Gross profit was $1.8 million, or 31% of revenue, compared to $900,000, or 40% of revenue in fiscal 2017. Net loss from continued operations was $10.2 million, compared to $4.7 million last year. I would note that this divergence is in a large part due to reimbursement of G&A expenses in fiscal 2017, without the corresponding inclusion of the discontinued operations expenses.
We also had higher research and development costs, higher finance costs in 2018. However, our finance costs are now dropping significantly due to our recent debt reduction, which I will speak about in a moment. Turning to the fourth quarter of 2018, revenue from continued operations was $1.2 million, a six-fold increase over $200,000 in the fourth quarter last year. This reflects stronger order volume. On a sequential basis, revenue was approximately three times higher than the $400,000 reported in the third quarter of 2018. Net loss from continued operations in Q4 was $2.3 million, compared to $1.5 million. The increased loss was primarily due to increases in manufacturing costs, R&D, sales and marketing expenses, partially offset by higher revenue, lower stock-based compensation, lower amortization, lower patents and trademark expenses, lower finance, and an increase in foreign exchange gain.
Since we are in mid-December and the first quarter is nearly over, we have good visibility on revenue for the current quarter. Based on deliveries to date, we are forecasting revenue for Q1 2019 of approximately $2 million, which represent continued sequential growth. Inventory was $1.8 million as of September 30th, compared with $4.1 million as of September 30th, 2017. We drew down stocks during the fiscal year for order fulfillment, as anticipated. Turning to our balance sheet, we had $1.1 million of cash and restricted cash as of September 30th, 2018. We used $5.2 million of cash in operating activities for continued operations during the fiscal year. It is important to note that our balance sheet has improved materially subsequent to the year-end. On October 23rd, we completed the sale-leaseback of our Mississauga headquarters. As Sankar mentioned, this transaction generated net proceeds to Electrovaya of CAD 20.2 million.
We applied CAD 16.9 million to debt reduction and designated the remaining CAD 3.3 million for working capital purposes. I would just note that those figures are Canadian dollars. We are now moving forward in significantly more financial flexibility than we had on September 30th. During the fourth quarter, on August 13th, we also entered into a $1.5 million secured facility with a corporation controlled by a director of the company. Interest is payable at 10% per annum. This provided additional liquidity. That loan has now been repaid. We noted in our fourth quarter MD&A that management is confident Electrovaya has or has access to adequate resource to continue operations for the foreseeable future. I would now turn the call back to Sankar to wrap up.
Thank you, Richard. Electrovaya today is a much different company than it was at the end of last fiscal year. We are far leaner, more cost-effective, with much less overhead. We are not bogged down by our unprofitable cell component production anymore. We have unlocked value from our real estate we own. As Richard noted, we have removed a large amount of debt from our balance sheet following the real estate sale. Our intellectual property and know-how is as strong as ever, and we continue to add fresh patents. We are using increasing amounts of contract manufacturing. We receive the components which as per our design, add our own critical items, and carry out the assembly, final testing, and delivery. We are also protecting our IP by siloing the contract manufacturing, which is common practice today.
Now that we have a more appropriate corporate structure and lower costs, we can generate stronger financial performance as more and more purchase orders are moving in. The market for lithium-ion batteries in materials handling electric vehicles is also morphing into the automated guided vehicles, and we have recently sold a few hundred battery packs to that sector as well. These automated guided vehicles is still in its very early stage, but is growing. Another similar market which needs vehicles working 12, 16, 18 hours a day are electric buses. We are pleased that SDTC, Sustainable Development Technology Canada, gave us a $3.8 million contract, and we have two good bus manufacturers with global reach as our consortium partners. In the materials handling electric vehicles, we have a dream customer roster, from Fortune 1 companies to multiple Fortune 500 companies.
We believe this industry is large and several hundred thousand new electric forklifts were sold globally. We have targeted the OEMs making these vehicles and the large global companies operating existing vehicles with lead-acid batteries. The response from both channels has been good and positive, and we are getting excellent repeat customers. This is a big market, and again, I believe no company in lithium-ion batteries is targeting it as effectively as Electrovaya. It has taken us some time to get to this point. We have built on our decades of experience in working with many automakers who still have not launched the electric cars in any volume, but I believe we finally have the right product for the right market at the right time.
We are pleased with our recent sales momentum, and we are going to work as hard as we can to generate continued growth in deliveries and purchase orders in fiscal 2019. Most importantly, we are building a good team and a terrific team in business development, in engineering, in operations. Both our management and the board are very optimistic about Electrovaya's prospects. 2019 will be an interesting year for Electrovaya. This concludes our remarks this morning. Richard and I would now be pleased to answer any questions you may have. Melissa?
Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Andrew Lawler with Canaccord Genuity. Please proceed with your question.
Hey, guys. Thanks for taking my call. I just had a question on the SDTC contract. If you could go over kind of a timeline for that project and kind of key milestones that we could look for.
The project is to work on the fundamental technology which we have and produce larger batteries with much higher voltages, which are suitable for what I call electric buses as well as electric trucks. Large vehicles. This is a two-year program, and we've got two good bus manufacturers as our consortium members. We are really looking forward to it because we believe that the wave for electric buses will start both in Europe and North America probably in the next few years.
Okay. Do you have anything set in place for any follow-on orders after this or kind of any pipeline discussion around that?
We always have, because that was the whole idea, that the SDTC was a development program, and our bus consortium members are the folks who would be using the batteries. Yes, we see this market, but this market has to emerge. This market has emerged very strongly in China, and we think this market is going to emerge in Western Asia, in Europe, and also in North America. We are working with a number of companies on it.
Okay, perfect. Do you have any update out of Walmart with respect to follow-on orders or any kind of update there?
Yes, we have received follow-on orders. We're certainly engaged in further discussion there. They're happy with the product. They've placed more orders. We'll announce anything if we have something material for the market.
Okay. In one of the more recent press releases, you talked about CAD 3.2 million in orders since June 30th. I'm wondering if you could provide more color surrounding that. Maybe who ordered them, kind of what they're going to be used for, and then maybe follow-on potential as well.
I think that we don't disclose unless we specifically have permission of the customer, the identity. What they are is generally in the material handling sector. It's, as Sankar has mentioned, two areas, which is autonomous vehicles and as well the material handling. They tend to be larger, more sophisticated customers, and many of these are repeat orders. I would also add that a number of these orders are coming through the OEM sales distribution network, which is great news for us because they're actually selling our product.
Okay, perfect. That's good color. I think that's all my questions. Thanks, guys.
Thanks, Andrew.
Thank you. Dr. Das Gupta, I'll turn the floor back to you for any final comments at this time.
Well, this concludes our call. Thank you for listening in, and we look forward to speaking with you again following the release of our fiscal first quarter results. We all hope you have a wonderful holiday going forward. Thank you. Bye.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.