What changed in this filing

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Item 1A. Risk Factors

2025-01-29 compared with 2023-09-21 · 337 added, 162 removed, 345 unchanged (59% of the section changed)

13 unchanged sentences

Factors Relating to Our Business

independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern

in its report on our audited financial statements included in this report.

Our audited financial statements at June 30, 2024, and for

the year then ended, were prepared assuming that we will continue as a going concern.

Management has evaluated the Company’s expected cash requirements, including investments in additional sales

and marketing and research and development, capital expenditures and working capital requirements, and believes the Company’s existing

cash and funding available under the GBC Credit Facility and the Subordinated LOC, along with the forecasted gross margin, will not be

sufficient to meet the Company’s anticipated capital requirements to fund planned operations for the next twelve months following

the filing date of this Annual Report on Form 10-K.

report from our independent registered public accounting firm for the year ended June 30, 2024 includes an explanatory paragraph

stating that our current liquidity position and projected cash needs raise substantial doubt about our ability to continue as a going concern, along with management’s assessment and strategies.

The perception

that we may not be able to continue as a going concern may make it difficult for us to raise new funds and to operate our business

due to concerns about our ability to meet our contractual obligations.

There is no assurance that sufficient financing will be available when needed or on reasonable terms to allow us

to continue our operations.

Our ability to continue as a going concern is contingent

upon, among other factors, the availability of the GBC Credit Facility or obtaining alternate financing.

We cannot provide any

assurance that we will be able to raise additional capital.

See Liquidity and Financial Condition in Note 3 – Summary of Significant Accounting Policies to the audited consolidated financial

statements for additional information.

have a history of losses and negative working capital.

the fiscal years ended June 30, 2024 and 2023, we had net losses of $8.3 million and $7.7 million, respectively.

We have historically

experienced net losses and until we generate sufficient revenue, we anticipate that we will continue to experience losses in the near

of June 30, 2023 and 2022, we had a cash balance of $2.4 million and $485,000, respectively.

We expect that our existing cash balances,

credit facilities, and cash resources from operations will be sufficient to fund our existing and planned operations for the next twelve

Until such time as we generate sufficient cash to fund our operations, we will need additional capital to continue our operations

have relied on equity financings, borrowings under short-term loans with related parties, our credit facilities and/or cash resources

from operating activities to fund our operations.

However, there is no guarantee that we will be able to obtain additional funds in the

future or that funds will be available on terms acceptable to us, if at all.

Any future financing may result in dilution of the ownership

interests of our stockholders.

If such funds are not available on acceptable terms, we may be required to curtail our operations or take

other actions to preserve our cash, which may have a material adverse effect on our future cash flows and results of operations.

will need to raise additional capital or financing to continue to execute and expand our business.

we expect that our existing cash and additional funding available under our GBC Credit Facility, combined with funds available to us under

our subordinated line of credit and the potential net proceeds from our At-The-Market offering will be sufficient to meet our anticipated

capital resources and to fund our planned operations for the next twelve months, such sources of funding are subject to certain restrictions

and covenants and our ability to sell stock will be impacted by market conditions.

If we are unable to meet the conditions provided in

the loan documents, the funds will not be available to us.

In addition, should there be any delays in the receipts of key component parts,

due in part to supply chain disruptions, our ability to fulfil the backlog of sales orders will be negatively impacted resulting in

lower availability of cash resources from operations.

In that event, we may be required to raise additional capital to support our expanded

operations and execute on our business plan by issuing equity or convertible debt securities.

In the event we are required to obtain

additional funds, there is no guarantee that additional funds will be available on a timely basis or on acceptable terms.

To the extent

that we raise additional funds by issuing equity or convertible debt securities, our stockholders may experience additional dilution

and such financing may involve restrictive covenants.

Newly issued securities may include preferences, superior voting rights, and the

issuance of warrants or other convertible securities that will have additional dilutive effects.

We cannot assure that additional funds

will be available when needed from any source or, if available, will be available on terms that are acceptable to us.

Further, we may

incur substantial costs in pursuing future capital and/or financing.

We may also be required to recognize non-cash expenses in connection

with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and

We have historically experienced net losses and until we generate sufficient revenue, we anticipate that we will continue to experience

losses in the near future.

of June 30, 2024 and 2023, we had a cash balance of $0.6 million and $2.4 million, respectively.

We currently believe that our

existing cash balances, availability of our credit facilities and cash resources from operations will not be sufficient to fund our

existing and planned operations for the next twelve months.

Until such time as we generate sufficient cash to fund our operations,

we will need additional capital to continue our operations thereafter.

have historically relied on equity financings, borrowings under short-term loans with related parties, credit facilities and/or cash

resources from operating activities to fund our operations.

Specifically, we have relied heavily on a credit facility with GBC, and

there can be no assurance that we will be able to maintain this facility, obtain additional funds via a new facility or that funds will

be available on terms acceptable to us, if at all.

Failure to maintain the GBC debt facility without a replacement facility would have material adverse impact on our

we were to access additional capital via an equity or equity-linked financing, such funding would result in dilution of the

ownership interests of our current stockholders.

If funds are not available on acceptable terms, we may be required to curtail

our operations or take other actions to preserve our cash, which may have a material adverse effect on our future cash flows and

results of operations.

Our ability to obtain needed financing may be impaired by such factors as the weakness of capital markets, and

the fact that we have not been profitable, which could impact the availability and cost of future financings.

If such funds are not available

when required, management will be required to curtail investments in additional sales and marketing and product development, which may

have a material adverse effect on future cash flows and results of operations.

have identified material weaknesses in our internal control over financial reporting.

If we are unable to remediate these material weaknesses,

or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls,

we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business

and stock price.

on management’s evaluation of our disclosure controls and procedures as of June 30, 2024, we identified material weaknesses in

our internal controls over financial reporting.

The material weaknesses were based on our ineffective oversight of our internal control

over financial reporting and lack of sufficient personnel resources with technical accounting expertise related to certain aspects of

the financial reporting process.

While management intends to increase the use of third-party consultants and technical accounting experts

and to implement measures designed to improve our internal control over financial reporting to remediate material weaknesses, there can

be no assurance that these steps will be effective.

previously disclosed, we have concluded that the previously issued audited consolidated financial statements as of and for the fiscal

year ended June 30, 2023 and the unaudited consolidated financial statements as of and for the quarters ended September 30,

2023, December 31, 2023, and March 31, 2024, which were filed with the Securities and Exchange Commission (“SEC”) on September 21, 2023, November 9, 2023, February 8, 2024 and May 13, 2024, respectively, should no longer be relied upon because

of errors in such financial statements relating to the improper accounting for inventory and a restatement should be undertaken.

part of this restatement and evaluation process, we also discovered that:

Company’s original estimate of the overstatement of inventories had risen due to additional

excess and obsolete inventory identified related to inventory components not recorded at

the lower of cost or net realizable value, as well as consigned inventory not reconciled

in a timely manner;

Company had not properly recognized revenue in the periods in which the related performance

obligations had been satisfied for a contract with a certain customer, and that the Company

had improperly recorded accounts receivable pertaining to that contract as a reduction to

its accounts payable owed to that customer although the right of offset conditions under

ASC 210-20 had not been met, resulting in misstatements to revenues, accounts receivable

and accounts payable;

Company had improperly recorded various inventory write downs to research and development

expenses although such expenses did not meet the classification criteria for research and

development under ASC 730, resulting in an overstatement of research and development expenses

and a corresponding understatement of cost of sales;

Company had various clearing accounts that had not been reconciled in a timely manner, resulting

in misstatements of accounts payable, inventories and cost of sales;

Company had not included certain product warranty-related expenses within the proper periods

in its calculation of its product warranty reserve estimate, resulting in an understatement

of accrued expenses, an understatement of accounts payable and an understatement of cost

Company erroneously presented non-cash debt issuance cost incurred in conjunction with credit

facility arrangements as a non-cash adjustment to reconcile net loss to net cash used in

operating activities in the consolidated cash flow statements when such cost should have

been recognized as a change in other assets.

a result, we have determined to restate our audited consolidated financial statements for the fiscal years ended June 30, 2023 and 2022,

including all related unaudited consolidated interim financial statements within the fiscal years ended June 30, 2024, 2023 and 2022.

re-evaluation, the Company’s management has concluded that considering the errors described above, this represents an

additional material weakness in the Company’s disclosure controls and procedures and the Company’s internal control over

financial reporting.

The material weakness was based upon a lack of sufficiently designed controls over the prevention of fraud and

possible management override of controls.

To address this material weakness, management plans to continue to devote significant

effort and resources to the remediation and improvement of the Company’s internal control over financial reporting.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future

events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Moreover, the effectiveness of our controls and procedures may be limited by a variety of factors, including faulty human judgment and

simple errors, omissions or mistakes;

fraudulent action of an individual or collusion of two or more people;

inappropriate management

override of procedures;

and the possibility that any enhancements to controls and procedures may still not be adequate to assure timely

and accurate financial control.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute

assurance that all control issues and instances of fraud or error, if any, have been detected, and there is a risk that material misstatements

may not be prevented or detected on a timely basis by internal control over financial reporting.

are committed to remediating our material weakness.

However, there can be no assurance as to when this material weakness will be remediated

or that additional material weaknesses will not arise in the future.

If we are unable to maintain effective internal control over financial

reporting, our ability to record, process and report financial information in a timely manner and accurately could be adversely affected

and could result in a material misstatement in our financial statements, which could subject us to litigation or investigations, require

management resources, increase our expenses, negatively affect investor confidence in our financial statements and adversely impact the

trading price of our common stock.

The restatement of

our previously issued financial statements has had a material adverse impact on us, including increased costs, loss of investor

confidence, the increased possibility of legal or administrative proceedings and non-compliance with the Nasdaq listing

In connection with the

restatements, we have become subject to a number of additional risks and uncertainties, including:

● We incurred substantial unanticipated costs for accounting, legal and consultancy fees in

connection with the restatements and internal investigation, and we expect to continue to incur additional costs;

● The SEC may institute a formal investigation of the Company’s financial statements.

In such an event, investigation will divert

our management’s time and attention and cause us to incur substantial costs.

These investigations can also lead to fines or injunctions

or orders with respect to future activities, as well as further substantial costs and diversion of management time and attention;

● Our ability to regain compliance and continue to meet the continued listing standards of the Nasdaq

Stock Market;

● A pending purported federal securities class action lawsuit has been filed against us, our

Chief Executive Officer, Ronald F.

Dutt, and our former Chief Financial Officer, Charles A.

outcome of litigation is uncertain and we may not be successful in defending against these and future claims.

In addition, the

Company is named as a nominal defendant in a pending purported shareholder derivative lawsuit.

These proceedings, and any

other regulatory proceedings or actions, can be lengthy, time consuming and disruptive to normal business operations and could cause

us to incur significant defense costs, including costs associated with the indemnification of our

officers and directors, and could damage our reputation or adversely affect our stock price.

Any adverse ruling or

unfavorable resolution in any legal or regulatory proceeding or action could have a material adverse effect on our business,

operating results, or financial condition.

For additional information regarding certain of the matters in which we are involved, see

Item 3, “Legal Proceedings,” contained in Part I of this report.

and certain of our current and former officers and directors, face litigation and legal proceedings which could adversely affect our business,

financial condition, results of operations or cash flows.

are subject to lawsuits, legal proceedings and claims in the normal course of our business, which can be expensive, lengthy, and

disruptive to normal business operations.

Moreover, the results of complex legal proceedings are difficult to predict.

currently the subject of complaints alleging violations of various laws, including but not limited to certain employment lawsuits, a

shareholder class action lawsuit and a derivative lawsuit, which are further described under the heading “Legal

Proceedings” elsewhere in this report, and in the future could also be subject to other proceedings.

These proceedings and any

other regulatory proceedings or actions may be time consuming, could cause us to incur significant defense costs and could damage

our reputation or adversely affect our stock price.

Any adverse ruling or unfavorable resolution in any legal or regulatory

proceeding or action could have a material adverse effect on our business, operating results or financial condition.

For additional

information regarding certain of the matters in which we are involved, see Item 3, “Legal Proceedings,” contained in

Part I of this report.

will need to raise additional capital or financing to continue to execute and expand our business.

expect that our existing cash and additional funding which we believe are available under our GBC Credit Facility, combined with funds

available to us under our subordinated line of credit and from our operations, will not be sufficient to meet our anticipated capital

resources and to fund our planned operations for the next twelve months (see Liquidity

and Financial Condition in Note

3 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional information).

the use of such credit facilities remains subject to performance metrics, certain restrictions and compliance with loan covenants.

we are unable to meet the conditions provided in the loan documents, these funds will not be available to us.

In addition, should there

be any delays in the receipts of key component parts, due in part to supply chain disruptions, our ability to fulfil the backlog of sales

orders will be negatively impacted resulting in lower availability of cash resources from operations.

We may be required to access other

forms of capital to support our expanded operations and execute our business plan by issuing equity or convertible debt securities, or

by entering into another form of structured financing or strategic transaction.

Our ability to access such forms of capital will be impacted

by investor confidence in our business strategy as well as market conditions In addition, our failure to timely file our fiscal

2024 annual report on form 10-K and subsequent fiscal 2025 interim quarterly reports on Form 10-Q means that we currently are ineligible

to use a registration statement on Form S-3.

We will not be eligible to use a registration statement on Form S-3 again until we have

timely filed all materials and reports required to be filed pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934

for a period of at least twelve (12) calendar months immediately preceding the filing of a new registration statement on Form S-3.

inability to use a Form S-3 registration statement will limit our ability to raise capital through sales of our securities in a timely

and cost-efficient manner.

In the event we are required to obtain additional funds, there is no guarantee that additional funds will be available on a timely

basis or on acceptable terms.

To the extent that we raise additional funds by issuing equity or convertible debt securities, our

stockholders may experience additional dilution and such financing may involve restrictive covenants.

Newly issued securities may

include preferences, superior voting rights, and the issuance of warrants or other convertible securities that will have additional

dilutive effects.

We cannot assure that additional funds will be available when needed from any source or, if available, will be

available on terms that are acceptable to us.

Further, we may incur substantial costs in pursuing future capital and/or financing.

We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes

and warrants, which will adversely impact our financial condition and results of operations.

Our ability to obtain needed financing

may be impaired by such factors as the weakness of capital markets, and the fact that we have not been profitable, which could

impact the availability and cost of future financings.

If such funds are not available when required, management will be required to

curtail investments in additional sales and marketing and product development, which may have a material adverse effect on future

cash flows and results of operations.

the event of default of the Revolving Note under the GBC Credit Facility, such default could adversely affect our business, financial

condition, results of operations or liquidity.

and other obligations of the Company under the GBC Credit Facility are secured by substantially all of our tangible and intangible assets

(including, without limitation, intellectual property) pursuant to the terms of a Loan and Security Agreement with GBC dated July 28,

2023 (the “Agreement”) and an Intellectual Property Security Agreement (the “IP Security Agreement”).

Credit Facility is evidenced by a revolving note, which matures on July 28, 2025 (the “Maturity Date”), unless extended, modified,

or renewed (the “Revolving Note”).

Provided that there is no event of default, the Maturity Date can automatically be extended

for one (1) year period upon payment of a renewal fee for each such extension in the amount of three-quarters of one percent (0.75%) of

the Revolving Loan Commitment, which fee will be due and payable on or before the applicable Maturity Date.

The holder of the Revolving

Note is entitled to all of the benefits and security provided for in the Agreement.

All Revolving Loans shall be repaid by the Borrower

on the Maturity Date, unless payable sooner pursuant to the provisions of the Agreement.

party, upon an event of default, GBC will have a first priority right to the collateral granted to them under the Agreement and IP Security

Agreement, and we may lose our ownership interest in the assets pledged as security interest.

A loss of our collateral will have a material

adverse effect on our operations, our business and financial condition.

loans and other obligations of the Company under the GBC Credit Facility are secured by substantially all of our tangible and

intangible assets (including, without limitation, intellectual property) pursuant to the terms of a Loan and Security Agreement with

GBC dated July 28, 2023 (the “Agreement”) and an Intellectual Property Security Agreement (the “IP Security

The GBC Credit Facility is evidenced by a revolving note, which matures on July 28, 2025 (the “Maturity

Date”), unless extended, modified, or renewed (the “Revolving Note”).

Provided that there is no event of default,

the Maturity Date can automatically be extended for one (1) year period upon payment of a renewal fee for each such extension in the

amount of three-quarters of one percent (0.75%) of the Revolving Loan Commitment, which fee will be due and payable on or before the

applicable Maturity Date.

The holder of the Revolving Note is entitled to all of the benefits and security provided for in the

All Revolving Loans shall be repaid by the Borrower on the Maturity Date, unless payable sooner pursuant to the

provisions of the Agreement.

As a secured party, upon an event of default, GBC will have a first priority right to the collateral

granted to them under the Agreement and IP Security Agreement, and we may lose our ownership interest in the assets pledged as

security interest.

Events of default have occurred under the GBC Credit Facility associated with certain EBITDA requirements that were

not achieved for the three-month period ending April 30, 2024, May 31, 2024 and July 31, 2024, non-compliance with various

representations, financial covenants and non-financial covenants relating to our financial restatements under the Agreement.

We have obtained

waivers with respect to such defaults, which each waive any failure of the Company to be in compliance with such representations, financial

covenants and non-financial covenants under the Agreement.

We may need to seek waivers in the future and we cannot provide any assurance

that such waivers will be available should we not be in compliance with the terms of the GBC Credit Facility in the future.

not been able to obtain such waivers, we would have had events of default under the GBC Credit Facility and GBC could terminate their commitments

under the facility and foreclose against substantially all our assets.

We would likely be forced to seek bankruptcy protection and our investors could

lose the full value of their investment in our common stock.

As such, a default and/or loss of our collateral will have a material

adverse effect on our operations, business and financial condition.

are dependent on one supplier for our battery cells, and the inability of this supplier to continue to deliver, or their refusal to deliver,

our battery cells at prices and volumes acceptable to us would have a material adverse effect on our business, prospects and operating

We do not manufacture the battery cells used in our energy storage solutions.

Our battery cells, which are an integral part of our energy

storage solutions, are sourced from a single manufacturer located in China.

While we obtain components for our products and systems from

multiple sources whenever possible, we have spent a great deal of time in developing and testing our battery cells that we receive from

our main supplier.

Additionally, our operations are materially dependent upon the continued market acceptance and quality of this manufacturer’s

products and its ability to continue to manufacture products that are competitive and that comply with laws relating to environmental

and efficiency standards.

Our inability to obtain products from our main supplier or a decline in market acceptance of its products could

have a material adverse effect on our business, results of operations and financial condition.

From time to time we have experienced shortages,

allocations and discontinuances of certain components and products, resulting in delays in filling orders.

Qualifying new suppliers to

compensate for such shortages may be time-consuming and costly.

In addition, we may have to recertify our UL Listings for the battery

cells from new suppliers, which in turn has led to delays in product acceptance.

Similar delays may occur in the future.

the performance of the components from our supplier as incorporated in our products may not meet the quality requirements of our customers.

To date, we have no qualified alternative sources for our battery cells although we research and assess cells from other suppliers on

an ongoing basis.

We generally do not maintain long-term agreements with our current supplier.

While we believe that we will be able to

establish additional supplier relationships for our battery cells, we may be unable to do so in the short term or at all at prices, quality

or costs that are favorable to us.

We intend to undertake and diversify suppliers for our battery cells to lessen this concentration,

however, in the near term, this relationship is a critical component in our business and operations.

The loss of this supplier, significant

changes in our product requirements, delays of significant orders could have a material adverse effect upon the Company’s business, operating

results and financial condition.

Changes in business conditions, wars, regulatory requirements, economic conditions and cycles, governmental changes, pandemic, and other

factors beyond our control could also affect our suppliers’ ability to deliver components to us on a timely basis or cause us to

terminate our relationship with them and require us to find replacements, which we may have difficulty doing.

Furthermore, if we experience

significant increased demand, or need to replace our existing suppliers, there can be no assurance that additional supplies of component

parts will be available when required on terms that are favorable to us, at all, or that any supplier would allocate sufficient supplies

to us in order to meet our requirements or fill our orders in a timely manner.

In the past, we have replaced certain suppliers because

of their failure to provide components that met our quality control standards.

The loss of any limited source supplier or the disruption

in the supply of components from these suppliers could lead to delays in the deliveries of our battery products and systems to our customers,

which could hurt our relationships with our customers and also materially adversely affect our business, prospects and operating results.

may not be indicative of future operating results.

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our battery products.

a majority of our product sales have been generated from a small number of OEMs and customers, including two (2) customers who, on

an aggregate basis, made up 57% of our sales for the year ended June 30, 2023, and four (4) customers who, on an aggregate basis,

made up 69% of our sales for the year ended June 30, 2022.

As a result, our success depends on continued demand from this small group of customers and

their willingness to incorporate our battery products in their equipment.

a majority of our product sales have been generated from a small number of OEMs and customers, including three (3) customers who, on

an aggregate basis, made up 77% of our sales for the year ended June 30, 2024, and three (3) customers who, on an aggregate basis, made

up 80% of our sales for the year ended June 30, 2023.

As a result, our success depends on continued demand from this small group of customers

and their willingness to incorporate our battery products in their equipment.

The loss of a significant customer would have an adverse

effect on our revenues.

There is no assurance that we will be successful in our efforts to convince end users to accept our

Our failure to gain acceptance of our products could have a material adverse effect on our financial condition and results

of operations.

There is no assurance that we will be successful in our efforts to convince end users to accept our products.

Our failure to gain acceptance of our products could have a material adverse effect on our financial condition and results of operations.

Additionally,

16 unchanged sentences

has resulted in a public perception that lithium-ion batteries are dangerous and unpredictable.

Although we believe our battery packs

Although we believe our energy storage solutions

are safe, these perceived hazards may result in customer reluctance to adopt our lithium-ion based technology.

2 unchanged sentences

catastrophic failure of our battery modules could cause personal or property damages for which we would be potentially liable.

to or the failure of our battery packs to perform to customer specifications could result in unexpected warranty expenses or result in

to or the failure of our energy storage solutions to perform to customer specifications could result in unexpected warranty expenses or result in

a product recall, which would be time consuming and expensive.

18 unchanged sentences

have a material adverse effect on our results of operations.

2018, the United States government announced tariffs on certain steel and aluminum products imported into the United States, which led

to reciprocal tariffs being imposed by the European Union and other governments on products imported from the United States.

States government has implemented tariffs on goods imported from China.

lithium-ion battery industry has been subjected to tariffs implemented by the United States government on goods imported from China.

There is an ongoing risk of new or additional tariffs being put in place on lithium-ion batteries or related part.

There is an ongoing risk of new or additional tariffs being put in place on lithium-ion batteries or related parts which would dramatically increase the cost of our energy storage solutions.

Since all of our lithium-ion

9 unchanged sentences

Tariffs on components imported by us from China could have a material adverse effect on our business and results of operations.

are dependent on a limited number of suppliers for our battery cells, and the inability of these suppliers to continue to deliver, or

their refusal to deliver, our battery cells at prices and volumes acceptable to us would have a material adverse effect on our business,

prospects and operating results.

do not manufacture the battery cells used in our energy storage packs.

Our battery cells, which are an integral part of our battery products

and systems, are sourced from a limited number of manufacturers located in China.

While we obtain components for our products and systems

from multiple sources whenever possible, we have spent a great deal of time in developing and testing our battery cells that we receive

from our suppliers.

We refer to the battery cell suppliers as our “limited source suppliers.” Additionally,

our operations are materially dependent upon the continued market acceptance and quality of these manufacturers’ products and their

ability to continue to manufacture products that are competitive and that comply with laws relating to environmental and efficiency standards.

Our inability to obtain products from one or more of these suppliers or a decline in market acceptance of these suppliers’ products

could have a material adverse effect on our business, results of operations and financial condition.

From time to time we have experienced

shortages, allocations and discontinuances of certain components and products, resulting in delays in filling orders.

Qualifying new

suppliers to compensate for such shortages may be time-consuming and costly.

In addition, we may have to recertify our UL Listings for

the battery cells from new suppliers, which in turn has led to delays in product acceptance.

Similar delays may occur in the future.

Furthermore, the performance of the components from our suppliers as incorporated in our products may not meet the quality requirements

of our customers.

date, we have no qualified alternative sources for our battery cells although we research and assess cells from other suppliers on an

ongoing basis.

We generally do not maintain long-term agreements with our limited source suppliers.

While we believe that we will be

able to establish additional supplier relationships for our battery cells, we may be unable to do so in the short term or at all at prices,

quality or costs that are favorable to us.

in business conditions, wars, regulatory requirements, economic conditions and cycles, governmental changes, pandemic, and other factors

beyond our control could also affect our suppliers’ ability to deliver components to us on a timely basis or cause us to terminate

our relationship with them and require us to find replacements, which we may have difficulty doing.

Furthermore, if we experience significant

increased demand, or need to replace our existing suppliers, there can be no assurance that additional supplies of component parts will

be available when required on terms that are favorable to us, at all, or that any supplier would allocate sufficient supplies to us in

order to meet our requirements or fill our orders in a timely manner.

In the past, we have replaced certain suppliers because of their

failure to provide components that met our quality control standards.

The loss of any limited source supplier or the disruption in the

supply of components from these suppliers could lead to delays in the deliveries of our battery products and systems to our customers,

which could hurt our relationships with our customers and also materially adversely affect our business, prospects and operating results.

in costs, disruption of supply or shortage of raw materials, in particular lithium-ion phosphate cells, could harm our business.

59 unchanged sentences

applications related to issue United States patents will be issued.

Furthermore, if these patent applications issue, some foreign countries

Furthermore, if these patent applications are issued, some foreign countries

provide significantly less effective patent enforcement than in the United States.

20 unchanged sentences

business depends substantially on the continuing efforts of the members of our senior management team and our business may be severely

disrupted if we lose their services.

believe that our success is largely dependent upon the continued service of the members of our senior management team, who are critical

to establishing our corporate strategies and focus, overseeing the execution of our business strategy and ensuring our continued growth.

disrupted if we lose their services or are unable to recruit qualified replacements in the event of departures.

believe that our success is largely dependent upon the continued service of the members of our senior management team, who are responsible for who establishing our corporate strategies and focus, overseeing the execution of our business strategy and ensuring our continued growth.

Our continued success will depend on our ability to attract and retain a qualified and competent management team in order to manage our

existing operations and support our expansion plans.

Although we are not aware of any change, if any of the members of our senior management

If any of the members of our senior management

team are unable or unwilling to continue in their present positions, we may not be able to replace them readily.

3 unchanged sentences

of our senior management team joins a competitor or forms a competing company, we may lose some of our customers.

On November 20, 2024, Ronald F.

Dutt, our chairman and Chief Executive Officer, notified the Company’s Board of Directors that he

intends to retire from his positions upon the appointment of a successor.

The Board has commenced a search for a new Chief Executive Officer

Dutt will remain with Flux Power through the search and transition period.

In the event Company is unable to successfully

recruit a new chief executive officer who can effectively and efficiently transition to this position, the Company and business may be

adversely affected

we are forced to implement workforce reductions, our staff resources will be stretched making our ability to comply with legal and regulatory

37 unchanged sentences

by the SEC or other regulatory authorities, which would require additional financial and management resources.

have identified material weaknesses in our internal control over financial reporting.

If we are unable to remediate these material weaknesses,

or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls,

we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business

and stock price.

on management’s evaluation of our disclosure controls and procedures as of June 30, 2023, we identified material weaknesses in

our internal controls over financial reporting.

The material weaknesses were based on our ineffective oversight of our internal control

over financial reporting and lack of sufficient personnel resources with technical accounting expertise related to certain aspects of

the financial reporting process.

Until such time as we could have additional resources with such level of technical accounting expertise,

management intends to implement measures designed to improve our internal control over financial

reporting to remediate material weaknesses, including the use of third-party consultants and accounting experts.

are committed to remediating our material weakness.

However, there can be no assurance as to when this material weakness will be remediated

or that additional material weaknesses will not arise in the future.

If we are unable to maintain effective internal control over financial

reporting, our ability to record, process and report financial information timely and accurately could be adversely affected and could

result in a material misstatement in our financial statements, which could subject us to litigation or investigations, require management

resources, increase our expenses, negatively affect investor confidence in our financial statements and adversely impact the trading

price of our common stock.

may face significant costs relating to environmental regulations for the storage and shipment of our lithium-ion battery packs.

may face significant costs relating to environmental regulations for the storage and shipment of our lithium-ion energy storage solutions.

state, and local regulations impose significant environmental requirements on the manufacture, storage, transportation, and disposal

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common stock is being traded on the Nasdaq Capital Market under the symbol “FLUX.” We cannot predict the extent to which

investor interest in our common stock will lead to the development of an active trading market on that stock exchange or any other exchange

in the future.

investor interest in our common stock will lead to the development of an active trading market on that stock exchange or any other

exchange in the future.

An active market for our common stock may never develop.

We cannot assure you that the volume of trading in shares of

our common stock will increase in the future.

The trading price of our common stock has experienced volatility and is likely to continue

to be highly volatile in response to numerous factors, many of which are beyond our control, including, without limitation, the following:

We cannot assure you that the volume of trading in

shares of our common stock will increase in the future.

The trading price of our common stock has experienced volatility and is

likely to continue to be highly volatile in response to numerous factors which have been discussed in this Section 1A, and

additional factors, many of which are beyond our control, including, without limitation, the following:

earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the

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of our common stock, including sales by our directors, officers or significant stockholders;

or departures of key personnel.

or departures of key personnel, including but not limited to our chief financial officer.

trading price and volume of our common stock may impact your ability to sell your shares of common stock, causing you to lose all or

part of your investment.

ownership of our stock is highly concentrated in our management, and we have one controlling stockholder.

As of September 8,

2023, our directors and executive officers, and their respective affiliates beneficially owned approximately 28.5% of our outstanding

common stock, including common stock underlying options, and warrants that were exercisable or convertible or which would become exercisable

or convertible within 60 days.

Michael Johnson, our director and sole director of Esenjay Investments LLC (“Essenjay”), beneficially

owns approximately 26.7% of such outstanding common stock.

As a result of their ownership, our directors and executive officers and their

respective affiliates collectively, and Esenjay, individually, are able to significantly influence all matters requiring stockholder

ownership of our stock is highly concentrated in our management.

of January 3 2025, our directors and executive officers, and their respective affiliates beneficially owned approximately 27.5% of

our outstanding common stock, including common stock underlying options, and warrants that were exercisable or convertible or which would

become exercisable or convertible within 60 days, with Michael Johnson, our director and sole director of Esenjay Investments LLC (“Essenjay”),

beneficially owning approximately 25.1% of such outstanding common stock.

As a result of their ownership, our directors and executive officers

and their respective affiliates collectively, and Esenjay, individually, are able to significantly influence all matters requiring stockholder

approval, including the election of directors and approval of significant corporate transactions.

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and expansion of our business and, therefore, we do not anticipate paying cash dividends on shares of our common stock in the foreseeable

our common stock is listed on The NASDAQ Capital Market, there can be no assurance that we will be able to comply with continued listing

standards of The NASDAQ Capital Market.

our common stock is listed on The NASDAQ Capital Market, we cannot assure you that we will be able to continue to comply with the minimum

currently in compliance with the continued listing requirements for the Nasdaq Stock Market.

If we fail to regain compliance or to

meet the continued listing requirements, our common stock may be delisted, which could affect the market price of our common stock, hurt your ability to sell your shares and negatively impact our ability to access the capital markets

On October 16, 2024, we received a notice (the “October Notice”) from the Listing Qualifications Department (the “Staff”)

of the Nasdaq Stock Market stating that because the Company had not yet filed its Form 10-K for the fiscal year ended June 30, 2024 (the

“Form 10-K”), the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Listing Rule”), which

requires Nasdaq-listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission.

November 20, 2024, we received a notice (the “November Notice,” together with the October Notice, the “Notices”)

from the Staff of the Nasdaq Stock Market stating that because the Company had not yet filed its Form 10-Q for the period ended September

30, 2024 (the “Form 10-Q”) and because the Company remains delinquent in filing its Form 10-K for the fiscal year ended June

30, 2024 (the “Form 10-K” and together with the Form 10-Q, the “Delinquent Reports”), the Company does not comply

with the Listing Rule.

Under the Nasdaq rules and pursuant to the Notices, we had until December 16, 2024 to submit to Nasdaq a plan to regain compliance

with the Nasdaq Listing Rule.

If Nasdaq accepts our plan, then Nasdaq may grant us up to 180 days from the prescribed due date for filing

the Delinquent Reports to regain compliance.

December 11, 2024, we filed a plan with Nasdaq to regain Nasdaq compliance with the Listing Rule, including requesting an extension to

file the Delinquent Reports by no later than April 14, 2025.

If Nasdaq does not accept the Plan and we fail to prevail in our appeal to

Nasdaq, or if we fail to regain compliance with the Listing Rule, the Company’s common stock will be subject to delisting by Nasdaq .

We intend to file the

Form 10-Q by no later than April 15, 2025 to regain compliance with the Nasdaq Listing Rule.

However, any subsequent failure to

regain and maintain compliance with the continued listing requirements of Nasdaq could result in delisting of our common stock from

Nasdaq and negatively impact our company and holders of our common stock, including by reducing the liquidity and trading of our

common stock, limited availability of price quotations and reduced news and analyst coverage.

Delisting may adversely impact the

perception of our financial condition, cause reputational harm with investors, our employees and parties conducting business with us

and limit our access to debt and equity financing.

In addition, we cannot assure you that we will be able to continue to comply with the minimum

bid price requirement, stockholder equity requirement and the other standards that we are required to meet in order to maintain a listing

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or delay or prevent a change of control of our Company, and therefore could reduce the value of such common stock.

1B - UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors