What changed in this filing

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Item 1A. Risk Factors

2025-09-17 compared with 2025-01-29 · 422 added, 361 removed, 321 unchanged (71% of the section changed)

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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.

Our audited financial statements at June 30, 2025 ,

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

has evaluated the Company’s expected cash requirements, including investments in additional sales and marketing, research and

development, capital expenditures and working capital requirements, and believes the Company’s existing cash and funding available

under the GBC Credit Facility, 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, 2025 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 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional

have a history of losses and negative working capital.

the fiscal years ended June 30, 2025 and 2024, we had net losses of $6.7 million and $8.3 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 future.

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, 2025 and 2024, we had a cash balance of $1.3 million and $0.6 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

We currently believe that our existing

cash balances, availability of our GBC credit facility, cash resources from operations and gross proceeds

from our recent private placement will not be sufficient to fund our existing and planned operations for the next twelve months.

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 financing, 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.

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 operations.

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.

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

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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

While management intends to continue 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.

We 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.

Our Annual Report on Form 10-K filed for the year ended June 30, 2024 included the restatement of those periods.

As a 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,

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 of sales;

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.

As a result, our Annual Report on Form 10-K filed for the year ended June 30, 2024 included the restatement of 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.

re-evaluation, the Company’s management 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

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 and have continued to remediate the identified material weaknesses

through additional processes and controls, including the timing of inventory audits, review of inventory for obsolescence and completeness

of data used to estimate warranty liability.

We intend to continue to strengthen our internal processes and procedures until the identified

material weaknesses have been fully remediated.

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

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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.

are not 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,

negatively impact stockholders’ ability to sell shares and negatively impact our ability to access the capital markets.

January 31, 2025, we received a notice (the “Stockholders’ Equity Notice”) from the Nasdaq Stock Market (“Nasdaq”)

LLC notifying the Company that based on its stockholders’ equity of $194,000 as reported in its Form 10-K for the fiscal year ended

June 30, 2024, the Company is no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires the Company to maintain a minimum

of $2,500,000 in stockholders’ equity for continued listing on Nasdaq (the “Stockholders’ Equity Requirement”).

the Nasdaq rules and pursuant to the Stockholders’ Equity Notice, we had until March 17, 2025 to submit to Nasdaq a plan to regain

compliance with the Stockholders’ Equity requirement.

On March 17, 2025, we filed such plan with Nasdaq to regain compliance with

the Stockholders’ Equity requirement, including requesting an extension through July 30, 2025, which is 180 calendar days from

the date of the Stockholders’ Equity Notice to regain compliance of the Stockholders’ Equity Requirement.

On July 31, 2025,

we received a determination letter from the Staff notifying us that based on our most recent disclosure, our stockholders’ equity

was a deficit of $4,372,000 as of March 31, 2025 and that the Staff had determined that we had not regained compliance with the Stockholders’

Equity Requirement.

The Staff informed us that trading of our common stock would be suspended at the opening of business on August 11,

2025, unless we requested an appeal of the Staff’s determination to a Nasdaq Hearings Panel (the “Panel”).

August 7, 2025, we submitted such hearing request to the Panel, which request will stay suspension of our securities and the filing of

the Form 25-NSE pending the Panel’s decision.

On September 15, 2025, we raised $5.0 million in capital through

a private placement of Company securities In addition, we have taken steps to reduce our cash burn rate through a reduction in force of

approximately 15% of our work force.

We are also exploring additional avenues to raise equity capital in order to be in compliance with

Nasdaq’s continued listing requirements.

There can be no assurance that the Panel will grant our request for continued listing or

stay the suspension of our securities.

On September 4, 2025, the Company made its presentation to the Panel.

On September 16, 2025, the Panel determined to grant the Company an exception to demonstrate compliance with the

Stockholders’ Equity Requirement and granted the Company’s request for continued listing, which extension is subject to the

(1) the Company shall file a Form 10-K for the period ending June 30, 2025 on or before September 30, 2025, and (2), the Company

shall demonstrate compliance with the Stockholder’s Equity Requirement on or before October 31, 2025 through public disclosures

describing the transactions undertaken by the Company to achieve compliance and demonstrate long-term compliance.

to comply with the Nasdaq listing requirements and do not regain compliance, our common stock will be subject to delisting by Nasdaq.

In the event our common stock is delisted, our stock price and market liquidity of our stock will be adversely affected, which will impact

our ability to sell securities in the market.

Further, delisting from Nasdaq could also have other negative effects, including potential

loss of confidence by partners, lenders, suppliers and employees.

can be no assurance that our common stock will continue to trade on Nasdaq or trade on the over-the counter markets or any public market

in the future.

In the event our common stock is delisted, our stock price and market liquidity of our stock will be adversely affected

which will impact your ability to sell your securities in the market.

government is currently

imposing increased tariffs on certain products imported into the U.S., which includes lithium-ion batteries and other component parts,

which may have an adverse impact on our future operating results.

The lithium-ion battery industry has been subjected to tariffs implemented

by the United States government on goods imported from China.

Since all of our lithium-ion battery cells are manufactured in China, current

and potential tariffs on lithium-ion battery cells imported by us from China could increase our costs, require us to increase prices to our customers or, if we are

unable to do so, result in lower gross margins on the products sold by us.

In April 2025, the U.S.

government increased import tariffs

across a wide range of countries at various rates, including on product imports from almost all countries and individualized higher tariffs

on certain countries.

Some of these tariff announcements have since been followed by announcements of limited exemptions and temporary

Based on the tariffs enacted and currently in effect, we anticipate incurring incremental tariff costs, additional costs that

we may incur on component parts for our battery backs, and costs as a result of import pauses on certain of our product imports and supply-chain

interruptions.

The uncertain impacts of higher tariffs on global economies and corporate

cost structures have also led to order delays by customers.

As a result of such developments, we are actively seeking alternative sourcing

arrangements.

If we are unable to diversify our supply chain and reduce China sourcing,

we remain subject to substantial potential exposure to tariffs, which would have significant impacts on our cost structure and product

We also import a portion of our

raw materials and components from other countries that are subject to import tariffs imposed by the U.S.

These tariff changes

and subsequent retaliatory actions have the potential to increase product costs for us.

China has already imposed tariffs on a wide range

of American products in retaliation for the American tariffs on steel and aluminum.

Any resulting escalation of trade tensions, including

any further escalation of “trade wars” with other countries, could have a significant adverse effect on world trade and the

world economy, lead to disruptions in our supply chain, and as such, adversely impact our results of operations.

At this time, we cannot predict

how such enacted tariffs will impact our business and operations.

The imposed tariffs on components imported by us from China or additional

tariffs on other countries where we source components necessary for our products could have a material adverse effect on our business

and results of operations.

In addition, any changes in tariffs or additional restrictions on various products may be announced with little

or no advance notice.

The adoption and expansion of tariffs or other trade restrictions, increasing trade tensions, or other changes in

governmental policies related to tariffs, trade agreements, products or policies, are difficult to anticipate or predict, which makes

it difficult for us to operate optimally.

If we are unable to navigate further changes in U.S.

or international trade policy, it could

have a material adverse impact on our business and results of operations.

We are closely monitoring potential changes in international

trade policy and actively assessing the potential impact of these and other trade policy changes on our business operations and financial

are dependent on one supplier in China 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, or as a result of any supply chain disruption, would have a material

adverse effect on our business, prospects and operating results.

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.

We have spent a great deal of time in developing and testing

our battery cells that we receive from our main supplier.

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.

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

and the loss of this supplier could have a material adverse effect upon the Company’s business, operating results and financial

In the near term, this relationship with our primary manufacturer is a critical component in our business and operations.

have no qualified alternative sources for our battery cells although we research and assess cells from other suppliers on an ongoing basis.

We are currently actively assessing our options to diversify suppliers for our battery cells to lessen this concentration.

However, qualifying

new battery cell suppliers may be time-consuming and costly.

In addition, any new battery cell would also require us to obtain a new UL

listing, which could further extend the timeframe for introducing new products.

In response to business uncertainties

resulting from tariffs and increased tariff levels imposed by the U.S.

government on goods imported into the U.S, we temporarily paused imports from our supplier in China.

was short-lived as both parties quickly agreed to modified terms.

At this time, the modified terms have not materially affected the Company’s

operations and we expect to continue sourcing and importing our battery cells from this supplier.

However, further escalation of tariffs

between the U.S.

and China could have a material effect on our ability to cost-effectively source from our supplier in China, which could

materially affect our business and operations.

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 rules.

connection with our previous financial restatements, we have become subject to a number of additional risks and uncertainties, including:

have incurred substantial unanticipated costs for accounting, legal and consultancy fees in connection with the restatements and

internal investigation;

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.

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

related to a final settlement in connection with a class action litigation against us, our former 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.

Scheiwe and any additional costs in connection with the court approval of

such settlement.

In addition, we are also subject to other regulatory proceedings or actions which 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.

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.

We are subject to 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.

We are currently the subject

of complaints alleging violations of various laws, including but not limited to certain employment lawsuits, 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.

expect that our existing cash, additional funding which we believe is available

under our GBC Credit Facility, funds from our private placement, which closed on September 15, 2025, and cash generated 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 2 – Summary of Significant Accounting Policies to the audited consolidated financial

statements for additional information).

Further, the use of such credit facilities remains subject to performance metrics, certain

restrictions and compliance with loan covenants.

If 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 annual report on form 10-K for the fiscal year ended June

30, 2024 and subsequent 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.

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.

assure that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable

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.

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.

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.

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 Agreement”).

The GBC Credit Facility is evidenced by a revolving note (the “Revolving

Note”), which maturity date was automatically extended to July 31, 2027 (the “Maturity Date”) upon the conversion of

all the outstanding obligations under the Cleveland Note into equity of the Company at the closing of the Private Placement on September

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.

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.

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.

If we had 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 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.

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

basis, made up 73% of our sales for the year ended June 30, 2025, and three customers who, on an aggregate basis, made up 78% of our

sales for the year ended June 30, 2024.

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 products.

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

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 energy storage solutions

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

Although we believe our energy storage

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

products may experience quality problems from time to time that could result in negative publicity, litigation, product recalls and warranty

claims, which could result in decreased revenues and harm to our brands.

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 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.

Such circumstances could result in negative publicity or lawsuits filed

against us related to the perceived quality of our products which could harm our brand and decrease demand for our products.

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

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.

Such circumstances could result in negative publicity or

lawsuits filed against us related to the perceived quality of our products which could harm our brand and decrease demand for our products.

may be subject to product liability claims .

13 unchanged sentences

may be insufficient in amount to cover our claims.

could be imposed on lithium-ion batteries or on any other component parts by the United States government or a resulting trade war could

have a material adverse effect on our results of operations.

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 parts which would dramatically increase the cost of our energy storage solutions.

Since all of our lithium-ion

batteries are manufactured in China, current and potential tariffs on lithium-ion batteries imported by us from China could increase

our costs, require us to increase prices to our customers or, if we are unable to do so, result in lower gross margins on the products

China has already imposed tariffs on a wide range of American products in retaliation for the American tariffs on steel and

Additional tariffs could be imposed by China in response to actual or threatened tariffs on products imported from China.

imposition of additional tariffs by the United States could trigger the adoption of tariffs by other countries as well.

Any resulting

escalation of trade tensions, including a “trade war,” could have a significant adverse effect on world trade and the world

economy, as well as on our results of operations.

At this time, we cannot predict how such enacted tariffs will impact our business.

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

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 are issued, some foreign countries

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

Furthermore, if these patent applications are issued, some foreign

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

status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain.

20 unchanged sentences

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.

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.

Therefore, our business

may be severely disrupted, and we may incur additional expenses to recruit and retain their replacement.

In addition, if any of the members

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

requirements as a public company difficult.

can be no assurance that our management team will be able to implement and affect programs and policies in an effective and timely manner

especially if subject to workforce reductions, that adequately respond to increased legal, regulatory compliance and reporting requirements

imposed by such laws and regulations.

Our failure to comply with such laws and regulations could lead to the imposition of fines and

penalties and further result in the deterioration of our business.

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

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.

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.

Therefore, our business may be severely disrupted,

and we may incur additional expenses to recruit and retain their replacement.

In addition, if any of the members of our senior management

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

we are forced to implement workforce and other cost reductions, our staff resources will be stretched making our ability to comply

with legal and regulatory requirements as a public company difficult.

can be no assurance that our management team will be able to implement and affect programs and policies in an effective and timely

manner especially if subject to workforce and other cost reductions, that adequately respond to increased legal, regulatory

compliance and reporting requirements imposed by such laws and regulations.

Our failure to comply with such laws and regulations

could lead to the imposition of fines and penalties and further result in the deterioration of our business.

with changing regulations concerning corporate governance and public disclosure may result in additional expenses.

79 unchanged sentences

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 which have been discussed in this Section 1A, and

additional 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

15 unchanged sentences

part of your investment.

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.

This concentration of ownership may

also have the effect of delaying or preventing a change in control.

ownership of our stock is highly concentrated in one of our directors.

Johnson, our director and sole director of Esenjay Investments LLC, beneficially owns in excess of 25% of our outstanding common

stock on an as-converted basis, which includes common stock underlying options and warrants that were exercisable or convertible, or

which would become exercisable or convertible within 60 days.

As a result of his ownership, Mr.

Johnson and Esenjay are able to significantly influence all matters requiring stockholder approval,

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

This concentration of ownership may also

have the effect of delaying or preventing a change in control.

do not intend to pay dividends on shares of our common stock for the foreseeable future.

2 unchanged sentences

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

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

of our common stock on the Nasdaq Capital Market.

Our failure to continue to meet these requirements may result in our common stock being

delisted from the Nasdaq Capital Market.

There can be no assurance that our common stock will continue to trade on the Nasdaq Capital

Market or trade on the over-the counter markets or any public market in the future.

In the event our common stock is delisted, our stock

price and market liquidity of our stock will be adversely affected which will impact your ability to sell your securities in the market.

We are not 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

We cannot assure you that we will

be able to comply with the corporate governance requirements, minimum bid price requirement and the other standards that we are required

to meet in order to maintain a listing of our common stock on the Nasdaq Capital Market.

Our failure to meet these requirements may result

in our common stock being delisted from the Nasdaq Capital Market.

There can be no assurance that our common stock will continue to trade

on the Nasdaq Capital Market or trade on the over-the counter markets or any public market in the future.

In the event our common stock

is delisted, our stock price and market liquidity of our stock will be adversely affected which will impact your ability to sell your

securities in the market.

Stock may be issued under our Articles of Incorporation, which may have superior rights to our common stock.

Articles of Incorporation authorize the issuance of up to 500,000 shares of preferred stock.

The preferred stock may be issued in one

or more series, the terms of which may be determined at the time of issuance.

These terms may include voting rights including the right

to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking

fund provisions.

In addition, these voting, conversion and exchange rights of preferred stock could negatively affect the voting power

or other rights of our common stockholders.

The issuance of any preferred stock could diminish the rights of holders of our common stock,

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

Pursuant to our Second Amended and Restated Articles of Incorporation,

our board of directors have the authority to fix the rights and preferences of the preferred stock by resolution from time to time, without

requiring the vote of the holders of our common stock or preferred stock would, unless otherwise expressly required by the Articles, the

preferred stock designation creating any series of preferred Stock, or to the extent required by the Nevada Revised Statutes or Nasdaq

(“Required Approval”).

The Board could authorize the issuance of preferred stock with voting or conversion rights that are

superior to the rights of holders of common stock and issuance of such preferred stock could dilute the voting power or rights of the

holders of common stock.

As such, the issuance of any preferred stock could diminish the rights of holders of our common stock, or delay

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

The issuance of shares

of our Series A Preferred Stock would reduce the voting power and dilute the ownership of holders of our common stock, and may

adversely affect the market price of our common stock.

On September 15, 2025, we completed the private placement of 258,144 Prefunded

Warrants to purchase up to 258,144 shares of our Series A Preferred Stock to certain accredited investors for gross proceeds of $5 million.

Upon the exercise of the Prefunded Warrants and issuance of the shares of Series A Preferred Stock, holders of the Series A Preferred

Stock will be entitled to vote as a single class with the holders of common stock on an as-if-converted-to-common-stock-basis based on

the greater of the (i) Conversion Price, or the (ii) Minimum Price as defined in Rule 5635(d) of the Nasdaq Listing Rules.

Series A Preferred Stock shall also have the right to vote as a separate class with respect to certain specified matters.

holders of our Series A Preferred Stock are entitled to receive cumulative cash dividends at an annual dividend rate of 8.0%, which may

be payable in kind or in cash at the option of the Company.

The subsequent issuance of additional shares of Series A Preferred Stock through

the payment of dividends will reduce the relative voting power of the holders of our common stock.

With respect to payment of dividends and distribution of assets upon liquidation,

dissolution or winding up of the Company, whether voluntary or involuntary, all shares of Series A Preferred Stock rank senior to all

the common stock and any other class of securities that is specifically designated as junior to the Series A Preferred Stock (“Junior

Securities”).

Holders of Series A Convertible Preferred Stock have the right to receive a liquidation preference entitling them

to be paid out of our assets available for distribution to stockholders before any payment may be made to holders of any other class or

series of capital stock, an amount equal to the purchase price per warrant to purchase Series A Preferred Stock paid for by the holders

of Series A Preferred Stock (adjusted for any stock splits, stock dividends, recapitalizations, or similar transaction with respect to

the Series A Preferred Stock) for each share of Series A Preferred Stock before any distribution or payment will be made to the holders

of any Junior Securities, and if the assets of the Company will be insufficient to pay in full such amounts, then the entire assets to

be distributed to the holders of shares of Series A Preferred Stock will be ratably distributed among such holders in accordance with

the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

Holders of shares of Series

A Preferred Stock will have conversion rights that are superior to the rights of holders of common stock which issuance could dilute the

voting power or rights of the holders of common stock, and anti-dilutive protection, which our holders of common stock do not and will

In addition, the conversion of the Series A Preferred Stock to our common

stock would dilute the ownership interest of existing holders of our common stock, and any sales in the public market of the common stock

issuable upon conversion of the Series A Preferred Stock could adversely affect prevailing market prices of our common stock.

In connection

with the Purchase Agreement and the Private Placement, we entered into a registration rights agreement pursuant to which we agreed to

prepare and file a registration statement with the SEC covering the resale of a number of shares of common stock underlying the Series

A Preferred Stock and the Common Warrants issued pursuant to the Purchase Agreement.

These registration rights would facilitate the resale

of such securities into the public market, and any such resale would increase the number of shares of our common stock available for public

Sales by the investors in the Private Placement of a substantial number of shares of our common stock in the public market, or

the perception that such sales might occur, could have a material adverse effect on the price of our common stock.

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