What changed in this filing

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Item 9A. Controls and Procedures

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of Disclosure Controls and Procedures

the supervision and with the participation of our management, including our principal executive officer and principal financial officer,

as of the end of the period covered by this report, we conducted an evaluation of the effectiveness of the design and operation of our

disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Act of 1934.

Our disclosure controls

and procedures are designed to provide reasonable assurance that the information required to be included in our SEC reports is recorded,

processed, summarized and reported within the time periods specified in SEC rules and forms, relating to the Company, including our consolidated

subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures

were not effective as of June 30, 2024 because of the material weaknesses identified in our internal controls over financial reporting.

the supervision and with the participation of our management, including our principal executive officer and principal financial

officer, as of the end of the period covered by this report, we conducted an evaluation of the effectiveness of the design and

operation of our disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Act of 1934.

Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be included in

our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, relating

to the Company, including our consolidated subsidiaries, and was made known to them by others within those entities, particularly

during the period when this report was being prepared.

Based upon that evaluation, our Chief Executive Officer and Chief Financial

Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2025 because of the material weaknesses identified in our internal controls over financial reporting.

Report on Internal Control over Financial Reporting

12 unchanged sentences

the degree of compliance with the policies or procedures may deteriorate.

the supervision of management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of

the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and subsequent guidance prepared by

the Commission specifically for smaller public companies as of June 30, 2024.

Based on that evaluation, our management concluded

that our internal control over financial reporting was not effective as of June 30, 2024 due to previously identified material

weaknesses resulting from having insufficient personnel resources with technical accounting expertise related to certain aspects of

the financial reporting process.

In early March of 2024, the Company strengthened its internal financial expertise by hiring a new

Chief Financial Officer with over 20 years of experience with publicly traded companies and finance and accounting and who also

served as an auditor for 10 years with Ernst & Young LLP, where he became a certified public accountant.

As part of its ongoing remedial efforts to strengthen controls and procedures, in May 2024 the Company engaged an

external financial consulting firm with extensive technical accounting expertise during the quarter ended March 31, 2024.

In August 2024, the Company engaged an external financial consulting firm to assist the Company with accounting advisory services.

After re-evaluation, the

Company’s management has concluded that in connection with restatement and due to a lack of sufficiently designed controls that support an effective assessment of our internal controls

relating to the prevention of fraud and possible management override of controls, this represents an additional material weakness in

the Company’s disclosure controls and procedures and the Company’s internal control over financial reporting.

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.

While the Company has processes to account for its inventory,

under the leadership of the Company’s new Chief Financial Officer, the Company intends to strengthen its internal processes

and procedures over inventory management and reporting.

The Company has begun updating its processes and controls around inventory

obsolescence, the timing of its internal inventory audits and implementation of other measures.

In addition, in August 2024, the

Company has also engaged an external financial consulting firm with extensive technical accounting expertise to assist with the

analysis of prior periods, along with an independent law firm to conduct an internal review of the events and activities leading to

errors in the financial statements.

The Company ’ s

management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance

that the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource

constraints, and the benefits of controls must be considered relative to their costs.

Additionally, controls can be circumvented by collusion

or improper management override of the controls.

The design of any system of controls is based in part on 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.

Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies

or procedures may deteriorate.

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.

Under the supervision

of management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness

of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee

of Sponsoring Organizations of the Treadway Commission (2013 framework) and subsequent guidance prepared by the Commission specifically

for smaller public companies as of June 30, 2025.

Based on that evaluation, our management concluded that our internal control over financial

reporting was not effective as of June 30, 2025 due to previously identified material weaknesses resulting from having insufficient personnel

resources with technical accounting expertise related to certain aspects of the financial reporting process and a lack of sufficiently

designed controls that support an effective assessment of our internal controls relating to the prevention of fraud and possible management

override of controls.

In the Company’s Annual

Report on Form 10-K filed for the year ended June 30, 2024, we disclosed that our Chief Executive Officer and Chief Financial Officer

concluded that our disclosure controls and procedures were not effective as of June 30, 2024 because of material weaknesses identified

in our internal controls over financial reporting.

We also 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.

Accordingly, 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 discovered

(a) the 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;

(b) the 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;

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;

(d) the 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;

(e) the 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;

(f) the 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.

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 of controls.

In March 2024, the Company strengthened

its internal financial expertise by hiring a new Chief Financial Officer with over 20 years of experience with publicly traded companies

and finance and accounting and who also served as an auditor for 10 years with Ernst & Young LLP, where he became a certified public

As part of its ongoing remedial efforts to strengthen controls and procedures, in May 2024 the Company engaged an external

financial consulting firm with extensive technical accounting experience to assist in the preparation of SEC filings.

In addition, in

August 2024 the Company engaged an external financial consulting firm to assist the Company with accounting advisory services.

fiscal 2025, the Company 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.

Company intends to continue to strengthen its internal processes and procedures until the identified material weaknesses have been fully

Company’s management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable,

not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must reflect the fact

that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Additionally, controls

can be circumvented by collusion or improper management override of the controls.

The design of any system of controls is based in part

on 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.

Over time, controls may become inadequate because of changes in conditions, or

the degree of compliance with policies or procedures may deteriorate.

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 controls over financial

Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm

2 unchanged sentences

in Internal Control over Financial Reporting

as discussed above, there have been no changes in the Company’s internal controls over financial reporting during the fiscal quarter

ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control

over financial reporting.

There have been no

changes in the Company’s internal controls over financial reporting during the fiscal quarter ended June 30, 2025 that have materially

affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

9B - OTHER INFORMATION

9C - DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENTS INSPECTIONS

information required by Part III has been omitted from this Form 10-K.

This information is instead incorporated herein by reference to

our definitive Proxy Statement, which we will file within 120 days after the end of our fiscal year pursuant to Regulation 14A in time

for our next Annual Meeting of Stockholders.

10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

following table and text set forth the names and ages of our current directors, executive officers and significant employees as of January 3, 2025.

Our Board of Directors is comprised of only one class.

All of the directors will serve until the next annual meeting

of stockholders or until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal.

There are no family relationships among any of the directors and executive officers.

From time to time, our directors have received compensation

in the form of cash and equity grant for their services on the Board.

Chief Executive Officer and President

Financial Officer and Secretary

President of Operations

Walters-Hoffert (1) (2)

Robinette (1) (3)

Leposky (1) (4)

of the Audit Committee, Member of the Compensation Committee and the Nominating and Governance Committee.

Independent Director, Chairperson of the Compensation Committee, Member of the Audit Committee and the Nominating and Governance

of the Nominating and Governance Committee, Member of the Audit Committee and the Compensation Committee.

Leposky was elected to the Board on April 18, 2024.

November 7, 2022, Mr.

Mason’s position was expanded to include additional Company authority and delegation.

Royal was appointed as Chief Financial Officer and Secretary effective March 4, 2024.

are no arrangements or understandings between our directors and executive officers and any other person pursuant to which any director

or officer was or is to be selected as a director or officer.

Dutt , Chairman, Chief Executive Officer, President, and Director .

Dutt has been our chief executive officer, former

interim chief financial officer and director since March 19, 2014.

He became our chairman on June 28, 2019.

On September 19, 2017, he

was also appointed as our president, chief financial officer and corporate secretary.

He resigned as chief financial officer and corporate

secretary as of December 16, 2018.

Previously, he was our chief financial officer since December 7, 2012, and our interim chief executive

officer since June 28, 2013.

Dutt has served as the Company’s interim corporate secretary since June 28, 2013.

Prior to Flux

Dutt provided chief financial officer and chief operating officer consulting services during 2008 through 2012.

In this capacity

Dutt provided financial consulting, including strategic business modeling and managed operations.

Prior to 2008, Mr.

in several capacities as executive vice president, chief financial officer and treasurer for various public and private companies including

SOLA International, Directed Electronics, Fritz Companies, DHL Americas, Aptera Motors, Inc., and Visa International.

an MBA in Finance from University of Washington and an undergraduate degree in Chemistry from the University of North Carolina.

Additionally,

Dutt served in the United States Navy and received an honorable discharge as a Lieutenant.

Dutt’s past experience

as executive vice president, chief financial officer and treasurer for various public and private companies, the Company believes Mr.

Dutt is qualified to be on the Board.

Royal, Chief Financial Officer and Secretary.

Royal was appointed as our Chief Financial Officer and Secretary effective March

Royal has over 20 years of experience with publicly traded companies, leading Finance, Accounting, IT, HR, Legal, Investor

Relations, and M&A.

Since 2023, Mr.

Royal has served as a consultant for MCA Financial group.

Prior to joining the Company, Mr.

served as Executive Vice President and Chief Financial Officer of Zovio Inc.

(f/k/a Bridgepoint Education, Inc.) from October 2015 until

September 2022.

Royal also previously served as Senior Vice President, Chief Financial Officer, Treasurer and Secretary of Maxwell

Technologies, Inc., a developer, manufacturer and marketer of energy storage and power delivery solutions from April 2009 to May 2015.

Royal has held a series of senior finance positions, including appointments as senior vice president and chief financial officer

within the semiconductor industry.

Royal has also served as an auditor for 10 years with Ernst & Young LLP, where he became a

certified public accountant.

Royal received his Bachelor of Business Administration in Accounting from Harding University and is

a Certified Public Accountant in the State of California (inactive).

Mason, Vice President of Operations.

Mason served as the Director of Manufacturing of the Company from January 2021 to December

2021, and Vice President of Operations since December 2021.

On November 7, 2022, Mr.

Mason’s position was expanded to include additional

Company authority and delegation.

Prior to joining the Company, Mr.

Mason was the plant manager at NEO Tech from March 2017 to January

2021 after being promoted from Director of Operations from December 2013 to March 2017.

Mason has also worked for Sumitomo Electric

Interconnect Products, Inc., Radio Design Labs, Inc., and Motorola Inc.

during his career.

Mason received his Master of Business

Administration in International Business in 2015 and his Bachelor of Business Administration/Management in 2013 from North Central University.

Mason is also Total Productive Maintenance (TPM) Instructor Certified by the Japan Institute of Plant Maintenance, Tokyo, Japan.

Johnson, Director.

Johnson has been our director since July 12, 2012.

Johnson has been a director of Flux Power since it

was incorporated.

Since 2002, Mr.

Johnson has been a director and the chief executive officer of Esenjay Petroleum Corporation (Esenjay

Petroleum), a Delaware company located in Corpus Christi, Texas, which is engaged in the business oil exploration and production.

Johnson’s primary responsibility at Esenjay Petroleum is to manage the business and company as chief executive officer.

is a director and beneficial owner of Esenjay Investments LLC, a Delaware limited liability company engaged in the business of investing

in companies, and an affiliate of the Company beneficially owning approximately 26% of our outstanding shares, including common stock

underlying options, and warrants that were exercisable or convertible or which would become exercisable or convertible within sixty (60)

Johnson received a Bachelor of Science degree in mechanical engineering from the University of Southwestern Louisiana.

result of Mr.

Johnson’s leadership and business experience, he is an industry expert in the natural gas exploration industry and

brings a wealth of management and successful company building experience to the board.

Based on the foregoing, the Company believes Mr.

Johnson is qualified to be on the Board.

Walters-Hoffert, Director.

Walters-Hoffert was appointed to our Board on June 28, 2019.

Walters-Hoffert was a co-founder

of Daré Bioscience, Inc.

and following the company’s merger with Cerulean Pharma, Inc.

in July of 2017, became Chief Financial

Officer of the surviving public company (Nasdaq:

DARE) and served in this role until January of 2024.

For over twenty-five (25) years,

Walters-Hoffert was an investment banker focused on small-cap public companies in the technology and life science sectors.

Walters-Hoffert worked at Roth Capital Partners as Managing Director in the Investment Banking Division.

Walters-Hoffert

has held various positions in the corporate finance and investment banking divisions of Citicorp Securities in San José, Costa

Rica and Oppenheimer & Co, Inc.

in New York City, New York.

Walters-Hoffert has served as a member of the Board of Directors

of the San Diego Venture Group, as Past Chair of the UCSD Librarian’s Advisory Board, and as Past Chair of the Board of Directors

of Planned Parenthood of the Pacific Southwest.

Walters-Hoffert currently serves as a member of the Board of Directors of The Elementary

Institute of Science in San Diego.

Walters-Hoffert graduated magna cum laude from Duke University with a B.S.

in Management Sciences.

As a senior financial executive with over twenty-five years of experience in investment banking and corporate finance and based on Ms.

Walters-Hoffert’s expertise in audit, compliance, valuation, equity finance, mergers, and corporate strategy, the Company believes

Walters-Hoffert is qualified to be on the Board.

Robinette, Director .

Robinette was appointed to our Board on June 28, 2019 and our lead independent director on September

Robinette has been a CEO Coach and Master Chair since 2013 as an independent contractor to Vistage Worldwide, Inc., an

executive coaching company.

In addition, since 2013 Mr.

Robinette has been providing business consulting related to top-line growth and

bottom-line improvement through his company EPIQ Development.

From 2013 to 2019, Mr.

Robinette was the Founder and CEO of EPIQ Space,

a marketing website for the satellite industry, a member-based community of suppliers promoting their offerings.

Robinette was with

Peregrine Semiconductor, Inc., a manufacturer of high-performance RF CMOS integrated circuits, from 2007 to 2013 in two roles as a Director

of Worldwide Sales as well as the Director of the High Reliability Business Unit.

Robinette started his career from 1991 to 2007

at Tyco Electronics Ltd.

(known today as TE Connectivity Ltd.), a passive electronics manufacturer, in various sales, sales leadership

and product development leadership roles.

Robinette received a Bachelor of Science degree in Business Administration, Marketing from

San Diego State University.

Based on the above qualifications, the Company believes Mr.

Robinette is qualified to be on the Board.

Leposky, Director.

Leposky was elected to our Board on April 18, 2024.

Leposky has over 30 years of executive experience

in operations, engineering, supply chain, product and commercial roles.

Leposky is currently the Executive Vice President and Chief

Supply Chain Officer at Topgolf Callaway Brands and has led the company’s supply chain, engineering, and operations organization

among other responsibilities since 2012.

From 2018 to 2022, he also served as the EVP of Global Operations, Accessories and Licensing,

and previously served as Senior Vice Present of Global Operations, Accessories and Licensing from 2012 and 2018 for Topgolf Callaway

Prior to joining Topgolf Callaway Brands, Mr.

Leposky was the Co-Founder, President and Chief Executive Officer of Gathering

Storm dba Tmax Gear from 2005 to 2011, Chief Supply Chain Officer at Fisher Scientific International from 2004 to 2005 and Chief Operations

Officer at TaylorMade Adidas Golf from 2002 to 2004, and has held executive roles at The Coca-Cola Company and United Parcel Service.

Leposky holds a Bachelor of Sciences degree in Industrial Technology from Southern Illinois University, and an MBA from the Keller

Graduate School of Management.

In addition, Mr.

Leposky is also a 16-year infantry veteran of the US Army and Army National Guard, and

an avid golfer.

Based on the above qualifications, the Board believes the Mr.

Leposky’s extensive executive experience within the

consumer product and service industry qualifies Mr.

Leposky to serve on the Board.

Management Transition

On November 20, 2024, Ronald Dutt, our chairman and Chief Executive Officer, notified the Company’s Board of

Directors of his intention to retire from his positions upon the appointment of a new Chief Executive Officer.

The Board has commenced a search for a new

Chief Executive Officer and Mr.

Dutt will remain with the Company through the search and transition period.

in Certain Legal Proceedings

the best of our knowledge, during the past ten years, none of our directors or executive officers were involved in any of the following:

(1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at

the time of the bankruptcy or within two years prior to that time;

(2) any conviction in a criminal proceeding or being subject to a

pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) being subject to any order, judgment, or decree,

not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring,

suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities;

and (4) being found

by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodities Futures Trading Commission

to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Leadership Structure and Role in Risk Oversight

Board of Directors (“Board”) recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership

structure to provide independent oversight of management.

Our Board is currently led by a Chairman of the Board who also serves as our

Chief Executive Officer.

The Board understands that the right Board leadership structure may vary depending on the circumstances, and

our independent directors periodically assess these roles and the Board leadership to ensure the leadership structure best serves the

interests of the Company and stockholders.

On November 20, 2024, Ronald F.

Dutt, our chairman and Chief Executive Officer, notified the Company’s Board

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 and Mr.

Dutt will remain with the Company through the search and transition period.

Following Mr.

Dutt’s retirement,

the Nominating and Governance Committee of the Board has determined that the position of Chairman of the Board shall be held by a non-executive

member of the Board

September 10, 2021, the Board adopted the Lead Independent Director Guidelines (“Guidelines.).

The Guidelines provide that when

the positions of Chief Executive Officer and Chairman of the Board are combined or the Chairman is not an independent director, the independent

directors will appoint a lead independent director to serve with the authority and responsibility described in such Guidelines, and as

the Board and/or the independent directors may determine from time to time.

The Guidelines are available on our website at www.fluxpower.com.

Dutt currently holds the Chairman and Chief Executive Officer roles.

Robinette currently serves as the Lead Independent Director

elected by the majority of the Board on September 10, 2021.

responsibilities of the Lead Independent Director include, among others:

(i) serving as primary intermediary between non-employee directors

and management;

(ii) working with the Chairman of the Board to approve the agenda and meeting schedules for the Board;

(iii) working

with the Chairman of the Board as to the quality, quantity and timeliness of the information provided to directors;

(iv) in consultation

with the Nominating and Governance Committee, reviewing and reporting on the results of the Board and Committee performance self-evaluations;

(v) calling additional meetings of independent directors;

and (vi) serving as liaison for consultation and communication with stockholders.

believe that the current leadership structure, with combined Chairman and Chief Executive Officer roles and a Lead Independent

Director, has served the Company and its stockholders historically.

However, the Nominating and Corporate Governance Committee of

the Board has determined that following Mr.

Dutt’s retirement as Chairman and Chief Executive Officer, the position of

Chairman of the Board shall be held by a non-executive member of the Board.

The Board believes that the new proposed leadership

structure of a non-executive Chairman in conjunction with a Lead Independent Director will be in the Company’s and its

stockholders best interest following the transition of management.

Robinette, Lead Independent Director, possesses understanding

and knowledge of the business and affairs of the Company and has the ability to devote a substantial amount of time to serve in this

The Board believes the appointment of a strong Lead Independent Director and the use of regular executive sessions of the

non-management directors, along with a majority the Board being composed of independent directors, allow it to maintain effective

oversight of management.

addition, our Board as a whole has responsibility for risk oversight.

Our Board exercises this risk oversight responsibility directly

and through its committees.

The risk oversight responsibility of our Board and its committees is informed by reports from our management

teams to provide visibility to our Board about the identification, assessment and management of key risks, and our management’s

risk mitigation strategies.

Our Board has primary responsibility for evaluating strategic and operational risk, including related to

significant transactions.

Our audit committee has primary responsibility for overseeing our major financial and accounting risk exposures,

and, among other things, discusses guidelines and policies with respect to assessing and managing risk with management and our independent

Our compensation committee has responsibility for evaluating risks arising from our compensation and people policies and practices.

Our nominating and corporate governance committee has responsibility for evaluating risks relating to our corporate governance practices.

Our committees and management provide reports to our Board on these matters.

its governance role, and particularly in exercising its duty of care and diligence, our Board is responsible for ensuring that appropriate

risk management policies and procedures are in place to protect the Company’s assets and business.

Our Board has broad and ultimate

oversight responsibility for our risk management processes and programs and executive management is responsible for the day-to-day evaluation

and management of risks to the Company.

Composition, Committees and Independence

the rules of Nasdaq, “independent” directors must make up a majority of a listed company’s Board of Directors.

applicable Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation

committees be independent within the meaning of the applicable Nasdaq rules.

Audit committee members must also satisfy the independence

criteria set forth in Rule 10A-3 under the Exchange Act.

Board has undertaken a review of the independence of each director and considered whether any director has a material relationship with

us that could compromise the director’s ability to exercise independent judgment in carrying out his or her responsibilities.

a result of this review, our Board determined that Ms.

Walters-Hoffert, and Messrs.

Robinette and Leposky are independent directors as

defined in the listing standards of Nasdaq and SEC rules and regulations.

A majority of our directors are independent, as required under

applicable Nasdaq rules.

As required under applicable Nasdaq rules, our independent directors will meet in regularly scheduled executive

sessions at which only independent directors are present.

Board has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee.

The composition and responsibilities

of each of the committees is described below.

Audit Committee of the Board of Directors currently consists of three independent directors of which at least one, the Chairperson of

the Audit Committee, qualifies as a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.

Walters-Hoffert

is the Chairperson of the Audit Committee and financial expert.

Robinette and Leposky are the other directors who are members

of the Audit Committee.

The Audit Committee’s duties are to recommend to our Board of Directors the engagement of the independent

registered public accounting firm to audit our consolidated financial statements and to review our accounting and auditing principles.

The Audit Committee reviews the scope, timing and fees for the annual audit and the results of audit examinations performed by any internal

auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls.

The Audit Committee will at all times be composed exclusively of directors who are, in the opinion of our Board of Directors, free from

any relationship that would interfere with the exercise of independent judgment as a committee member and who possess an understanding

of consolidated financial statements and generally accepted accounting principles.

Our Audit Committee operates under a written charter,

which is available on our website at www.fluxpower.com .

Compensation Committee currently consists of three independent directors.

The Compensation Committee establishes our executive compensation

policy, determines the salary and bonuses of our executive officers and recommends to the Board stock option grants or other incentive

equity awards for our executive officers.

Robinette is the Chairperson of the Compensation Committee, and Ms.

Walters-Hoffert and

Leposky are members of the Compensation Committee.

Each of the members of our Compensation Committee are independent under Nasdaq’s

independence standards for compensation committee members.

Our chief executive officer often makes recommendations to the Compensation

Committee and the Board concerning compensation of other executive officers.

The Compensation Committee seeks input on certain compensation

policies from the chief executive officer.

Our Compensation Committee operates under a written charter, which is available on our website

at www.fluxpower.com .

and Governance Committee

Nominating and Governance Committee currently consists of three independent directors.

The Nominating and Governance Committee is responsible

for matters relating to the corporate governance of our Company and the nomination of members of the Board and committees of the Board.

Leposky is the Chairperson of the Nominating and Governance Committee.

Walters-Hoffert and Mr.

Robinette are members of the Nominating

and Governance Committee.

Each of the members of our Nominating and Governance Committee is independent under Nasdaq’s independence

The Nominating and Governance Committee operates under a written charter, which is available on our website at www.fluxpower.com .

seek directors with established strong professional reputations and experience in areas relevant to the strategy and operations of our

We seek directors who possess the qualities of integrity and candor, who have strong analytical skills and who are willing

to engage management and each other in a constructive and collaborative fashion.

We also seek directors who have the ability and commitment

to devote significant time and energy to serve on the Board and its committees.

We believe that all of our directors meet the foregoing

qualifications.

We do not have a formal policy with respect to diversity.

of Business Conduct and Ethics

Board has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all of our directors, officers, and

Any waivers of any provision of this Code for our directors or officers may be granted only by the Board or a committee appointed

by the Board.

Any waivers of any provisions of this Code for an employee or a representative may be granted only by our chief executive

officer or principal accounting officer.

We have filed a copy of the Code with the SEC and have made it available on our website at https://www.fluxpower.com/corporate-governance.

In addition, we will provide any person, without charge, a copy of this Code.

Requests for a copy of the Code may be made by writing

to the Company at is c/o Flux Power Holdings, Inc., 2685 S.

Melrose Drive, Vista, California 92081.

Indemnification

executed a standard form of indemnification agreement (“Indemnification Agreement”) with each of our Board members and executive

officers (each, an “Indemnitee”).

to and subject to the terms, conditions and limitations set forth in the Indemnification Agreement, we agreed to indemnify each Indemnitee,

against any and all expenses incurred in connection with the Indemnitee’s service as our officer, director and or agent, or is

or was serving at our request as a director, officer, employee, agent or advisor of another corporation, partnership, joint venture,

trust, limited liability company, or other entity or enterprise but only if the Indemnitee acted in good faith and in a manner he reasonably

believed to be in or not opposed to our best interest, and in the case of a criminal proceeding, had no reasonable cause to believe that

his conduct was unlawful.

In addition, the indemnification provided in the indemnification agreement is applicable whether or not negligence

or gross negligence of the Indemnitee is alleged or proven.

Additionally, the Indemnification Agreement establishes processes and procedures

for indemnification claims, advancement of expenses and costs and contribution obligations.

Insider Trading Policy and Rule 10b5-1 Trading

We have adopted an Insider Trading

Policy which prohibits directors, officers and all other employees, or consultants or contractors, as well as family members of such persons

(or any other person subject to the policy) from engaging in any transaction involving a purchase or sale of the our securities,

including any offer to purchase or offer to sell, based on material nonpublic information regarding the Company (“Material Nonpublic

Information”).

Under our Insider Trading Policy

and pursuant to SEC Rule 10b5-1, directors, officers and employees may establish written programs which permit (i) automatic trading of

the Company’s stock through a third-party broker or (ii) trading of the Company’s stock by an independent person (such as

an investment bank) who is not aware of Material Nonpublic Information at the time of a trade.

Under a Rule 10b5-1 plan, a broker

executes trades pursuant to parameters established by the director, executive officer, or other employee when entering into the plan,

without further direction from such insider.

Section 16(a) Reports

16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than

10% of a registered class of our equity securities, to file with the SEC initial statements of beneficial ownership, reports of changes

in ownership and Annual Reports concerning their ownership, of Common Stock and other of our equity securities on Forms 3, 4, and 5,

respectively.

Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies

of all Section 16(a) reports they file.

Based solely on our review of Forms 3, 4 and 5 and amendments thereto filed electronically with

the SEC during the most recent fiscal year, we believe that all reports required by Section 16(a) for transactions in the fiscal year

ended June 30, 2024 were timely filed.

information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with our

next Annual Meeting of Stockholders (the “Proxy Statement”), which is expected to be filed not later than 120 days after

the end of our fiscal year ended June 30, 2025 and is incorporated in this report by reference.

11 - EXECUTIVE COMPENSATION

for our Named Executive Officers

following table sets forth information concerning all forms of compensation earned by our named executive officers during Fiscal 2024

and Fiscal 2023 for services provided to the Company and its subsidiary.

and Principal Position

Stock Awards (1)

Option Awards (2) ($)

Non-Equity Incentive Plan Compensation

All Other Compensation

Chief Executive Officer, President, and Chairman

former Chief Financial Officer and Corporate Secretary (4)

Vice President of Operations

Chief Financial Officer and Corporate Secretary (5)

the fair value of the RSUs granted on grant date.

grant date fair value was determined in accordance with the provisions of FASB ASC Topic No.

718 using the Black-Scholes valuation

model with assumptions described in more detail in the notes to our audited financial statements included in this report.

November 7, 2022, Mr.

Mason’s position was expanded to include additional Company authority and delegation.

March 1, 2024, Mr.

Scheiwe stepped down as the Company’s Chief Financial Officer and Corporate Secretary.

Royal was appointed as the Company’s Chief Financial Officer and Corporate Secretary effective March 4, 2024.

do not have any profit-sharing plan or similar plans for the benefit of our officers, directors or employees.

However, we may establish

such plan in the future.

Compensation Plan Information

connection with the reverse acquisition of Flux Power, Inc.

in 2012, we assumed the 2010 Plan.

As of June 30, 2023, the number of options

outstanding to purchase common stock under the 2010 Plan was 21,944.

No additional options to purchase common stock may be granted under

the 2010 Plan.

February 17, 2015, our shareholders approved our 2014 Equity Incentive Plan (“2014 Plan”), which was amended on July 23,

2018 and on November 5, 2020.

The 2014 Plan authorizes the issuance of awards for up to 1,000,000 shares of our common stock in the

form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock

awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its

We granted 100,192 and 175,265 stock options under the 2014 Plan during Fiscal 2024 and Fiscal 2023,

respectively.

We granted 51,171 and 72,566 restricted stock units under the 2014 Plan during Fiscal 2024 and Fiscal 2023,

respectively.

April 29, 2021, at the Company’s annual stockholders meeting, the 2021 Equity Incentive Plan (the “2021 Plan”) was

approved by our stockholders.

The 2021 Plan authorizes the issuance of awards for up to 2,000,000 shares of our common stock in the

form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock

awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its

We granted 934,012 and 449,176 stock options under the 2021 Plan during Fiscal 2024 and Fiscal 2023, respectively.

We granted 17,057 restricted stock units under the 2014 Plan during Fiscal 2024.

did not grant any restricted stock units under the 2021 Plan during Fiscal 2023.

of June 30, 2024, we had 426,363 options outstanding and exercisable and 114,666 RSUs outstanding under the 2021 Plan, the 2014 Plan

and the 2010 Plan.

following table sets forth certain information concerning unexercised options, stock that has not vested, and equity compensation plan

awards outstanding as of June 30, 2024 for the named executive officers below:

Option Awards (1)

Award Grant Date

Award Expiration Date

Number of Securities Underlying Unexercised Options Exercisable

Number of Securities Underlying Unexercised Options Unexercisable

Equity Incentive Plan Awards:

Number of Securities Underlying Unexercised Unearned Options

Option Exercise Price

Number of Shares or Units of Stock That Have Not Vested

Grant Date Market Value of Shares or Units of Stock That Have Not Vested

Equity Incentive Plan Awards:

Number of Unearned Shares, Units or Other Rights That Have Not Vested

Equity Incentive Plan:

Grant Date Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

Ronald F.Dutt

The fair value of each option grant is estimated at the date of grant using the

Black-Scholes option pricing model.

Expected volatility is calculated based on the historical volatility of the Company’s

stock or, when the expected term exceeds how long the Company’s stock has been publicly traded, based on historical

volatility of a comparable peer group of publicly traded companies.

The risk-free interest rate is based on the U.S.

Treasury yield for a term equal to the expected life of the options at the

time of grant.

The fair value of each restricted stock unit is the fair value of the Company’s common stock on the grant

On November 7, 2022, Mr.

Mason’s position was expanded to include additional Company authority and delegation.

Royal was appointed as the Company’s Chief Financial Officer and Corporate Secretary effective March 4, 2024.

Option/Stock Appreciation Right (“SAR”) exercised and Fiscal year-end Option/SAR value table

our executive officers nor the other individuals listed in the tables above, exercised options or SARs during Fiscal 2024.

Employee Stock Purchase Plan (the “2023 ESPP”)

2023 ESPP was approved by the Board on March 6, 2023 and approved by the Company’s stockholders on April 20, 2023.

The 2023 ESPP

enables eligible employees of the Company and certain of its subsidiaries (a “Participating Subsidiary”) to use payroll deductions

to purchase shares of the Company’s Common Stock and acquire an ownership interest in the Company.

The maximum aggregate number

of shares of the Company’s Common Stock that have been reserved as authorized for the grant of options under the 2023 ESPP is 350,000

shares, subject to adjustment as provided for in the 2023 ESPP.

Participation in the 2023 ESPP is voluntary and is limited to eligible

employees (as such term is defined in the 2023 ESPP) of the Company or a Participating Subsidiary who (i) has been employed by the Company

or a Participating Subsidiary for at least 90 days and (ii) is customarily employed for at least twenty (20) hours per week and more

than five (5) months in any calendar year.

Each eligible employee may authorize payroll deductions of 1-15% of the eligible employee’s

compensation on each pay day to be used to purchase up to 1,500 shares of Common Stock for the employee’s account occurring during

an offering period.

The 2023 ESPP has a term of ten (10) years commencing on April 20, 2023, the date of approval by the Company’s

stockholders, unless otherwise earlier terminated.

There were 37,543 and zero shares of stock purchased under the ESPP during Fiscal 2024 and Fiscal 2023, respectfully.

Agreements with Executive Officers

February 12, 2021, we entered into an Amended and Restated Employment Agreement with the Company’s president and chief executive

officer, Ronald F.

Dutt (the “Dutt Employment Agreement”), which amends and restates the Employment Agreement effective December

11, 2012, as amended (the “Prior Agreement”).

In addition to the inclusion of terms relating to change in control, termination,

severance, benefits and the acceleration of vesting of options and restricted stock units upon certain events, the Dutt Employment Agreement

memorialized Mr.

Dutt’s continued services as the president and chief executive officer of the Company and its wholly-owned subsidiary,

Flux Power, Inc.

(“Flux Power”), and the terms pursuant to which he would provide such services.

Pursuant to the terms of

the Dutt Employment Agreement, Mr.

Dutt’s current annual base salary is $375,000.

On November 20, 2024, Mr.

Dutt notified the Company’s Board of Directors that he intends to retire from his position upon the appointment

of a successor.

The Board has commenced a search for a new chief executive officer and Mr.

Dutt will remain with Flux Power through the

search and transition period.

February 12, 2021, we entered into an Employment Agreement with the Company’s chief financial officer, treasurer and secretary,

Scheiwe (the “Scheiwe Employment Agreement”).

In addition to the inclusion of terms relating to change in control,

termination, severance, benefits and the acceleration of vesting of options and restricted stock units upon certain events, the Employment

Agreement memorialized Mr.

Scheiwe’s continued services as the chief financial officer and secretary of the Company, and as chief

financial officer/treasurer and secretary of Flux Power.

Pursuant to the terms of the Scheiwe Employment Agreement, Mr.

annual base salary was $205,200.

On February 16, 2024, the Company and Mr.

Charles Scheiwe agreed to the stepping down of Mr.

as the Company’s Chief Financial Officer and Secretary, including all positions with the Company and Flux Power, Inc., a wholly-owned

subsidiary of the Company (“Flux”) and transitioning to a consultant for the Company (“the “Transition”),

effective March 1, 2024 (the “Separation Date”).Through the Separation Date, Mr.

Scheiwe will be entitled to continue

to receive his current salary.

In addition, in connection with the Transition, the Board approved the accelerated vesting of unvested

portions of outstanding awards previously granted to Mr.

Scheiwe under the Company’s 2014 Equity Incentive Plan and 2021 Equity

Incentive Plan (the “2021 Plan”).

February 22, 2024, we entered into an Employment Agreement with Mr.

Royal, in connection with Mr.

Royal’s appointment

as Chief Financial Officer and Corporate Secretary, which provides for an annual base salary of $330,000, effective March 4, 2024 (the

“Employment Agreement”).

The Employment Agreement includes terms relating to change in control, termination, severance, benefits

and the acceleration of vesting of options and restricted stock units upon certain events.

In addition, Mr.

Royal will be eligible for

a 60% cash bonus, as a percentage of base salary, and incentive stock options to purchase up to 55,000 shares of the Company’s

common stock (the “Options”) under the 2021 Plan.

The Options will be subject to the terms and conditions provided in the

form of Incentive Stock Option Agreement under the 2021 Plan, will have an exercise price based on the Company’s 10-day volume

weighted average price on the grant date, and will expire ten (10) years from the grant date and vest in four (4) equal annual instalments

commencing one year after the grant date.

their respective employment agreement, Messrs.

Dutt and Royal, among other things, are (i) eligible for annual target cash bonus and

awards of restricted stock units or other equity-based incentive compensation consistent with his position as determined by the Board

of Directors (the “Board”) and the Compensation Committee;

(ii) entitled to reimbursement for all reasonable business expenses

incurred in performing services;

and (iii) entitled to certain severance and change of control benefits contingent upon such employee’s

agreement to a general release of claims in favor of the Company following termination of employment.

Dutt and Royal and are

also eligible to participate in all customary employee benefit plans or programs generally made available to the senior executive officers.

Dutt and Royal have each agreed to observe the terms of a standard confidentiality and non-compete agreement for a restricted

period of two (2) years.

Each of Messrs.

Dutt and Royal employment is “at-will” and may be terminated at any time for any

Separation Agreements

August 12, 2022, Jonathan Berry, the Company’s Chief Operating Officer, separated from the Company and entered into an Employee

Separation and Release dated August 24, 2022 (“Separation Agreement”).

Under the Separation Agreement, the Company agreed

to provide Mr.

Berry with certain payments and benefits comprising of:

(i) a separation payment of two hundred five thousand two hundred

dollars, less required withholdings, (ii) twenty-eight thousand nine hundred seven and 52/100 dollars, less require holdings, to defray

costs for COBRA coverage, and (iii) reimbursement for an amount equal to twelve months for life insurance continuation (collectively,

the “Separation Benefits”).

In exchange for the Separation Benefits, among other things as set forth in the Separation Agreement,

Berry agreed to a release of claims and waivers in favor of the Company and to certain restrictive covenant obligations, and also

reaffirmed his commitment to comply with his existing restrictive covenant obligations.

March 1, 2024 and in connection with the Transition, the Company and Mr.

Scheiwe entered into a Separation and Release Agreement (the

“Scheiwe Separation Agreement”).

Under the Scheiwe Separation Agreement, Mr.

Scheiwe will be entitled to:

(i) cash severance

of $205,200, which is an amount equal to 12 months of Mr.

Scheiwe’s base salary in effect as of the Separation Date, (ii) a one-time

payment of $22,840.68, less required withholdings, to cover the COBRA premiums for COBRA continuation coverage for a period of twelve

(12) months following the Separation Date, and (iii) provided that Mr.

Scheiwe timely elects and enrolls in the life insurance continuation

coverage, reimbursement for an amount equal to twelve (12) months of such life insurance continuation coverage.

The Separation Agreement

additionally includes a customary general release of claims by Mr.

Scheiwe in favor of the Company and certain related parties.

November 5, 2020, the Board approved an annual cash bonus plan (the “Annual Bonus Plan”) which allows the Compensation Committee

and/or the Board of the Company to set the amount of bonus each fiscal year and the performance criteria.

Executive officers and all

employees (other than part-time employees and temporary employees) are eligible to participate in the Annual Bonus Plan (“Participants”)

as long as the Participant remains an active regular employee of the Company.

The Annual Bonus Plan was effective for Fiscal 2021 and

is effective each fiscal year thereafter (the “Plan Year”).

For each Plan Year, the Compensation Committee establishes an

aggregate amount of allocable Bonus under the Annual Bonus Plan and determines the performance goals applicable to a bonus during a Plan

Year (the “Participation Criteria”).

The Participation Criteria may differ from Participant to Participant and from bonus

The Participation Criteria for each Plan Year is based on the Company achieving certain performance targets based on annual

revenue, gross margin, operating expense and new business development.

All of the Company’s executive officers are eligible to

participate in the Annual Bonus Plan.

October 20, 2023, the Board approved an amended and restated annual cash bonus plan (the “Amended Annual Bonus Plan”) which

allows the Compensation Committee and/or the Board of the Company to set the amount of bonus each fiscal year and the performance criteria.

Executive officers and all employees (other than part-time employees and temporary employees) are eligible to participate in the Amended

Annual Bonus Plan (“Participants”) as long as the Participant remains an active regular employee of the Company.

Annual Bonus Plan is effective for fiscal year 2024 and each fiscal year thereafter (the “Plan Year”).

For each Plan Year,

the Compensation Committee will establish an aggregate amount of allocable Bonus under the Amended Annual Bonus Plan and determine the

performance goals applicable to a bonus during a Plan Year (the “Participation Criteria”).

The Participation Criteria may

differ from Participant to Participant and from bonus to bonus.

All of the Company’s executive officers are eligible to participate

in the Amended Annual Bonus Plan.

Amended Annual Bonus Plan was approved by the Board in anticipation of the Company adopting its “clawback” policy applicable

to its executive officers as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

Clawback Policy

To comply with Section 10D of the Securities Exchange Act of 1934, as amended, Rule 10D-1 promulgated under the Securities Exchange Act

of 1934, as amended, and Nasdaq Listing Rule 5608 applicable to incentive-based compensation for executive officers of listed companies,

in November 2023, the Board adopted a Policy for the Recovery of Erroneously Awarded Compensation (the “Clawback Policy”)

with an effective date of October 2, 2023.

Current executive officers of the Company have agreed in writing to the terms and conditions

of the Clawback Policy.

Under the Clawback Policy, if the Company is required to restate its financial results due to material noncompliance

with financial reporting requirements under the federal securities laws, the Company will recoup any erroneously awarded incentive-based

compensation from the Company’s current and former executive officers.

Administration of the Clawback Policy will be by the Compensation

Committee of the Company.

Restatement of Prior Financial

In connection with the restatements of the Prior Financial Statements undertaken

by the Company, the Compensation Committee, as the administrator, completed a recovery analysis under the Company’s Clawback Policy.

The Compensation Committee concluded that although bonus amounts were paid to executive officers for fiscal periods ended before the effective

date of the Clawback Policy, October 2, 2023, the bonuses will be deemed to be “Received” (as defined in the Clawback Policy)

during those fiscal periods before the Clawback Policy became effective.

As a result, such amounts would not fall under the definition

of “Clawback Eligible Incentive Compensation” (as defined in the Clawback Policy”) and would therefore not be subject

to further recovery analysis or actions for recovery.

The analysis and conclusion does not include any analysis or recoverable amounts

under 304 of the Sarbanes-Oxley Act pursuant to action by SEC.

October 31, 2022, the Compensation Committee also approved the bonus pool and performance criteria for the Annual Bonus Plan for the

fiscal year 2023 (the “2023 Bonus”).

For the Company’s fiscal year 2023, the performance goals applicable to a bonus

are based on the Company achieving certain targets based on the Company’s annual revenue, Adjusted EBITDA (earnings before interest,

income taxes, depreciation, amortization, and stock-based compensation), functional goals (the “Financial Targets”), in addition

to individual performance objectives and additional bonus amounts if the Company’s financial results exceeds certain thresholds

of the Financial Targets.

Compensation Committee approved the target cash bonuses under the 2023 Bonus based on the base salary for fiscal year 2023 for the following

executive officers:

Percentage of

Chief Executive

$ 300,000 (2)

Charles Scheiwe

Chief Financial Officer

President of Operations

Subject to a bonus cap for achieving above set revenue target and a payout cap for achieving 10% positive Adjusted EBITDA.

To be effective during the second fiscal quarter of 2023.

October 20, 2023, pursuant to the recommendation of the Compensation Committee of the Board (the “Compensation Committee”),

the Board approved the following salary increases (the “Fiscal 2024 Annual Salary”) to the following executive officers, effective

for the fiscal year 2024 (“Fiscal 2024”):

Chief Executive

Charles Scheiwe*

Chief Financial Officer

Jeffrey Mason

Vice President of Operations

Plus an additional supplemental payment of $4,000 per month

March 1, 2024, pursuant to the recommendation of the Compensation Committee, the Board approved an adjustment to the base salary for

the following named executive officer:

Jeff Mason, Vice President of Operations.

The adjustment reflects a change in base salary to $275,000,

effective March 1, 2024.

Bonuses Under the Amended Bonus Plan

October 20, 2023, pursuant to the recommendation of the Compensation Committee, the Board also approved the bonus pool and performance

criteria for the Amended Annual Bonus Plan for Fiscal 2024 (the “2024 Bonus”).

For Fiscal 2024, the performance goals applicable to

a bonus are based on the Company achieving certain targets based on the Company’s full year revenue, Adjusted EBITDA (earnings

before interest, income taxes, depreciation, amortization, and stock-based compensation) for Fiscal 2024, and functional goals (the “Financial

Targets”), in addition to individual performance objectives and goals (the “2024 Performance Matrix”).

Board approved the following cash bonuses under the 2024 Bonus for the following executive officers:

Bonus Maximum Payout (2)

Chief Executive

Charles Scheiwe

Chief Financial Officer

Jeffrey Mason

Vice President of Operations

Full maximum payout assuming targets reached as set forth in the 2024 Performance Matrix.

Full maximum payout for achieving certain additional gross margin targets

Stock Unit Grants

did not grant any Restricted Stock Units to any of our executive officers in Fiscal 2024 and Fiscal 2023.

Option Grants

October 20, 2023 (the “Fiscal 2024 Grant Date”), pursuant to the recommendation of the Compensation Committee, the Board approved

the grant of stock options (the “Fiscal 2024 Options”) under the Company’s 2014 Equity Incentive Plan (the “2014 Plan”)

and the Company’s 2021 Equity Incentive Plan (the “2021 Plan” and together with 2014 Plan, the “Plan”)

to certain employees of the Company or its subsidiary, Flux Power, Inc.

The Fiscal 2024 Options are subject to the terms and conditions provided

in the form of the related Incentive Stock Option Agreement under the 2014 Plan (the “2014 Option Agreement”) or the form

of Incentive Stock Option Agreement under the 2021 Plan (the “2021 Option Agreement”).

Additionally, as previously discussed, Mr.

Royal was granted options as part of his chief financial officer employment agreement.

following executive officers of the Company were granted Options in such number, with such vesting schedule, and under the respective

Plan, set forth as follows:

Executive Officer

over 3 years from the date of grant

Financial Officer

over 3 years from the date of grant

President of Operations

over 3 years from the date of grant

Financial Officer

over 3 years from the date of grant

to $100,000 ISO limitation under the 2021 Plan.

Excess, if any, issued as non-qualified stock options.

October 31, 2022 (the “Fiscal 2023 Grant Date”), the Compensation Committee approved the grant of incentive stock options (the

“Fiscal 2023 Options”) under the Company’s 2014 Plan and the Company’s 2021 Plan to certain employees of the Company

or its subsidiary, Flux Power, Inc.

The Options are subject to the terms and conditions provided in the form of the 2014 Option Agreement

or the “2021 Option Agreement.

The following named executive officers of the Company were granted Stock Options under the 2021

Plan in such number and vesting schedule set forth as follows:

Executive Officer

Annually over 4 years from the date of grant

Financial Officer

Annually over 4 years from the date of grant

President of Operations

Annually over 4 years from the date of grant

Subject to $100,000 ISO limitation under the 2021 Plan.

Excess, if any, issued as non-qualified stock options.

the Committee and the Board will continue to explore and evaluate different long-term and short-term incentives to help attract, retain

and motivate our employees to align their interest to our business and financial success through the use of equity award and cash bonuses.

of Non-Executive Directors

January 14, 2022, pursuant to the recommendation and advice of the Compensation Committee of the Board of the Company, the Board approved

the following annual compensation package for non-executive directors of the Company for calendar year 2022, as follows:

Independent Non-Executive Director

Base Retainer (cash)

Chair Fee (cash)

Lead Independent Director

Lisa Walters-Hoffert

Dale Robinette

Compensation Chair

Cosentino Jr .

Governance Chair

Cheemin Bo-Linn (2)

Michael Johnson

Cosentino resigned as

our director on March 1, 2022.

As appreciation for Mr.

Cosentino’s board services, the Board approved to (i) accelerate the vesting

of the following securities the Board granted in connection with his board services:

435 unvested options and 4,578 restricted stock

awards, and (iii) pay his board fees for 3rd quarter of Fiscal 2022.

Bo-Linn was appointed

as Chairperson of the Governance Committee on March 3, 2022.

Bo-Linn’s services as Chairperson, she is entitled to a

Chair Fee of $5,000 for calendar year 2022.

was no change to the cash compensation package for non-executive directors of the Company during Fiscal 2023.

March 8, 2023, pursuant to the recommendation and advice of the Compensation Committee of the Board of the Company, the Board approved

the following annual compensation package for non-executive directors of the Company for fiscal year ending June 30, 2024, as follows:

Independent Non-Executive Director

Base Retainer (cash)

Chair Fee (cash)

Committee Member Fee (1)

Lead Independent Director ( cash)

Lisa Walters-Hoffert

Dale Robinette

Compensation Chair

Cheemin Bo-Linn (2)

Michael Johnson

Mark Leposky (3)

$3,750 for non-chair committee members of the Audit Committee, and $2,500 for non-chair committee members of the Compensation

Committee and the Nominating and Governance Committee.

Bo-Linn stepped down as our director on April 18, 2024.

As appreciation for Dr.

Bo-Linn’s services as a director to the Company,

the Board approved to accelerate the vesting of 18,561 unvested restricted stock units, effective as of April 18, 2024.

Leposky was elected as our director on April 18, 2024 and appointed as Chairperson of the Governance Committee on April 18, 2024.

Leposky’s services, he is entitled to a prorated Chair Fee and Committee Member Fee for the fiscal year ended June 30, 2024.

April 18, 2024, pursuant to the recommendation and advice of the Compensation Committee of the Board of the Company, the Board approved

the following annual compensation package for non-executive directors of the Company for the fiscal year ending June 30, 2025, as follows:

Independent Non-Executive Director

Base Retainer (cash)

Chair Fee (cash)

Committee Member Fee (1)

Lead Independent Director (cash)

Lisa Walters-Hoffert

Dale Robinette

Compensation Chair

Nominating and Governance Chair

Michael Johnson

Committee Member Fees:

$3,750 for non-chair committee members

of the Audit Committee, and $2,500 for non-chair committee members of the Compensation, Nominating and Governance Committees.

Component of Non-Executive Director Compensation

addition, our directors are eligible to receive an annual equity grant of RSUs.

Pursuant to grants approved by our Board at the recommendation

of the Compensation Committee in April 2022 and 2023, our non-executive directors were granted RSUs under the 2014 Plan.

The number of

RSUs granted to each non-executive director was equal to the amount of $50,000 divided by the fair market value of the RSUs, with all

RSUs subject to vesting restrictions.

The fair market value of the RSUs was determined by applying a 10-day volume weighted average stock

price prior to the grant issuance date.

April 2022, each of our non-executive directors were granted 17,793 RSUs which fully vested on April 28, 2023.

In addition, in August

2022, as compensation for board services provided during the last quarter of Fiscal 2022, Dr.

Bo-Linn was granted 5,034 RSUs, of which

1/3 vested immediately, each of the remaining 1/3 of the RSUs will vest on April 29, 2023, and April 29, 2024.

grant was consistent with the standard equity component of Non-Executive Director Compensation Package as approved by the Board.

April 2023, each of our non-executive directors were granted 16,883 RSUs which are scheduled to fully vest on April 20, 2024.

April 2024, each of our non-executive directors were granted 17,057 RSUs under the 2014 Plan or the 2021 Plan, which are scheduled to

fully vest on April 18, 2025.

Compensation Table

is a summary of compensation accrued or paid to our non-executive directors during Fiscal 2024 and Fiscal 2023.

Dutt, our chief

executive officer and president, received no compensation for his service as a director and is not included in the table.

compensation Mr.

Dutt receives as an employee of the Company is included in the section titled “Executive

Compensation.”

Fees Earned or Paid In Cash

Stock Awards (1) ($)

All Other Compensation

Lisa Walters-Hoffert

Dale Robinette

Michael Johnson

Cheemin Bo-Linn (2)

the fair value of the RSUs granted using the volume weighted average price of the ten days of trading prior to grant date.

Bo-Linn stepped down as our director on April 18, 2024.

Leposky was elected as our director on April 18 , 2024.

following table shows the aggregate number of vested stock options held by our non-employee directors as of June 30, 2024 and June 30,

Vested Stock Options

Lisa Walters-Hoffert

Dale Robinette

Cheemin Bo-Linn (1)

Michael Johnson

Bo-Linn stepped down as our director on April 18, 2024.

Leposky was elected as our director on April 18, 2024.

information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.

12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Ownership of Principal Stockholders and Management

used in this section, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Exchange Act, as consisting

of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the

power to dispose of or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship

or otherwise, subject to community property laws where applicable.

As of January 3, 2025, we had a total of 16,842,465 shares

of common stock issued and outstanding.

following table sets forth, as of January 3, 2025, information concerning the beneficial ownership of shares of our common stock

held by our directors, our named executive officers, our directors and executive officers as a group, and each person known by us to

be a beneficial owner of more than five percent (5%) of our outstanding common stock.

Unless otherwise indicated, the business address

of each of our directors, executive officers and beneficial owners of more than five percent (5%) of our outstanding common stock is

c/o Flux Power Holdings, Inc., 2685 S.

Melrose Drive, Vista, California 92081.

Each person has sole voting and investment power with

respect to the shares of our common stock, except as otherwise indicated.

Beneficial ownership consists of a direct interest in the shares

of common stock, except as otherwise indicated.

Name and Address of Beneficial Owner (1)

Officers and Directors

Michael Johnson, Director

4,197,882 (2)

Dutt, Chief Executive Officer, President, and Director

Royal, Chief Financial Officer and Secretary

Mason, Vice President of Operations

Leposky, Director

Lisa Walters-Hoffert, Director

Dale Robinette, Director

All Officers and Directors as a group (7 people)

5% Stockholders

Esenjay Investments LLC

4,148,680 (2)

Cleveland Capital Management L.L.C.

1,174,032 (9)

1250 Linda Street, Suite 304

Rocky River, OH 44116

Formidable Asset Management, LLC

3,274,325 (10)

221 E Fourth Street, Suite 2700

Cincinnati OH 45202

Represents less than 1% of shares outstanding.

addresses above are 2685 S.

Melrose Drive, Vista, California 92081, unless otherwise stated.

(i) 39,254 shares of common stock held by Mr.

Johnson and 4,148,680 shares of common stock held by Esenjay Investments LLC, of which

Johnson is the sole director and beneficial owner, and (ii) 9,948 shares of common stock issuable to Mr.

Johnson upon exercise

of stock options.

Includes 41,930 shares

of common stock, 317,012 shares of common stock issuable upon exercise of stock options and 17,235 shares of common stock issuable

upon vesting of restricted stock units within 60 days.

Royal was appointed

as Chief Financial Officer and Secretary effective March 4, 2024.

Includes 3,552 shares of

common stock, 35,802 shares of common stock issuable upon exercise of stock options and 1,280 shares of common stock issuable up

vesting of restricted stock units within 60 days.

Leposky was elected

as a director on April 18, 2024.

Includes 27,050 shares

of common stock and 3,948 shares of common stock issuable upon exercise of stock options.

Includes 39,254 shares

of common stock and 3,948 shares of common stock issuable upon exercise of stock options.

Based on Amendment No.

7 to Schedule 13G filed jointly by Cleveland, Rocky River Specific Opportunities Fund LLC, Wade Massad, John Shiry and Cleveland

Capital Management, L.L.C.

with the SEC on February 7, 2024, reporting information as of December 31, 2023.

Reflects 1,174,032 shares

of common stock held by certain private funds managed by Cleveland Capital Management, L.L.C., or by its principals, and hold shared

voting and dispositive power with respect to such shares.

Excludes (i) 18,700 shares of common stock individually held by Mr.

and (ii) 50,000 shares of common stock individually held by Mr.

Based on Schedule 13D filed

by Formidable Asset Management, LLC with the SEC on October 31, 2023.

Reflects (i) 548,226 shares of common stock held by Formidable

Asset Management, LLC, and (ii) 2,726,099 shares of common stock held by certain accounts managed by Formidable Asset Management,

LLC, and hold shared voting and dispositive power with respect to such shares.

information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.

13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

RELATIONSHIPS AND RELATED TRANSACTIONS

following includes a summary of certain relationships and transactions, including transactions since July 1, 2022 to January 3,

2025 and any currently proposed transactions, to which we were or are to be a participant, in which (1) the amount involved exceeded

or will exceed the lesser of (i) $120,000 or (ii) one percent (1%) of the average of our total assets for the last two completed fiscal

years, and (2) any of our directors, executive officers or holders of more than five percent (5%) of our capital stock, or any affiliate

or member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest other than compensation

and other arrangements that are described under the section titled “Executive Compensation.”

to the Audit Committee’s written charter, our Audit Committee has the responsibility to review, approve and oversee transactions

between the Company and any related person (as defined in Item 404 of Regulation S-K) and any potential conflict of interest situations

on an ongoing basis, in accordance with our policies and procedures, and to develop policies and procedures for the Audit Committee’s

approval of related party transactions.

of Credit Facility and Subordinated Unsecured Promissory Note

November 2, 2023, we entered into a Credit Facility Agreement (the “Credit Facility”) with Cleveland (the “Lender”).

The Credit Facility provides the Company with a line of credit of up to $2,000,000 for working capital purposes (“LOC”).

In connection with the LOC, the Company issued a subordinated unsecured promissory note for $2,000,000 (the “Commitment Amount”)

in favor of the Lender (the “Note”).

to the terms of the Credit Facility, the Lender agreed to make loans (each such loan, an “Advance”) up to such Lender’s

Commitment Amount to the Company from time to time, until August 15, 2025 (the “Due Date”).

The Note accrues interest at

Secured Overnight Financing Rate plus nine percent (9%) per annum on each Advance from and after the date of disbursement of such Advance.

All indebtedness, obligations and liabilities of the Company to the Lender is subject to the rights of Gibraltar Business Capital, LLC,

a Delaware limited liability company (together with its successors and assigns, “GBC”), pursuant to a Subordination Agreement

dated on or about November 2, 2023, by and between the Lender and GBC (the “Subordination Agreement”).

Subject to the Subordination

Agreement, the Company may, from time to time, prior to the Due Date, draw down, repay, and re-borrow on the Note, by giving notice to

the Lenders of the amount to be requested to be drawn down.

Subject to the Subordination Agreement, the Note is payable upon the earlier

of (i) the Due Date or (ii) on occurrence of an event of Default (as defined in the Note).

As consideration of the Lender’s commitment

to provide the Advances, we agreed to issue the Lender warrants to purchase 41,196 shares of common stock (the “Warrants”)

which are exercisable immediately from the date of issuance, expire on the five (5) year anniversary of the date of issuance and have

an exercise price of $3.24 per share.

DIRECTOR INDEPENDENCE

A majority of our Board of Directors are independent directors, see discussion above under “Item 10.

Executives and Corporate Governance – Board Composition, Committees and Independence.”

information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.

14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

the fiscal years ended June 30, 2024 and 2023, the Company’s independent public accounting firm was Baker Tilly US, LLP

Paid to Principal Independent Registered Public Accounting Firm

aggregate fees billed by our Independent Registered Public Accounting Firm, for the fiscal years ended June 30, 2024 and 2023 are as

Audit fees (1)

Audit related fees (2)

All other fees (4)

fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review

of our quarterly financial statements and those services normally provided in connection with statutory or regulatory filings or

engagements including comfort letters, consents and other services related to SEC matters.

This information is presented as of the

latest practicable date for this annual report.

Audit-related

fees represent fees for assurance and related services that are reasonably related to the performance of the audit or review of our

financial statements and not reported above under “Audit Fees.”

Tilly US, LLP did not provide us with tax compliance, tax advice or tax planning services.

other fees include fees billed by our independent auditors for products or services other than as described in the immediately preceding

three categories.

No such fees were incurred during the fiscal years ended June 30, 2024 or 2023.

on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

audit committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered

public accounting firm, the scope of services provided by our independent registered public accounting firm and the fees for the services

to be performed.

These services may include audit services, audit-related services, tax services and other services.

Pre-approval is

detailed as to the particular service or category of services and is generally subject to a specific budget.

independent registered public accounting firm and management are required to periodically report to the audit committee regarding the

extent of services provided by our independent registered public accounting firm in accordance with this preapproval, and the fees for

the services performed to date.

of the services relating to the fees described in the table above were approved by our audit committee.

information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.

15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) Financial Statements

following financial statements of Flux Power Holdings, Inc., and Report of Baker Tilly US, LLP, independent registered public accounting

following financial statements of Flux Power Holdings, Inc., Report of Haskell & White, LLP, independent registered public accounting firm,

and Baker Tilly US, LLP, registered public accounting

firm, are included in this report:

Report of Independent Registered Public Accounting Firm – Haskell & White, L LP, Irvine, CA (PCAOB Firm ID# 200)

Report of Independent Registered Public Accounting Firm – Baker Tilly US, LLP, San Diego, CA (PCAOB Firm ID# 23 )

Consolidated Balance Sheets as of June 30, 2024, 202 3

(restated) and 2022 (restated)

Statements of Operations for the Years Ended June 30, 2024, 2023 (restated) and 202 2 (restated)

Statements of Stockholders’ Equity for the Years Ended June 30, 2024, 2023 (restated) and 2022 (restated)

Statements of Cash Flows for the Years Ended June 30, 2024, 2023 (restated) and 2022 (restated)

Notes to the Consolidated Financial Statements

Consolidated Balance Sheets as of June 30, 2025 and 2024

Consolidated Statements of Operations for the Years Ended June 30, 2025 and 2024

Statements of Stockholders’ Equity (Deficit) for the Years Ended June 30, 2025 and 2024

Consolidated Statements of Cash Flows for the Years Ended June 30, 2025 and 2024

Notes to Consolidated Financial Statements

Financial Statement Schedules:

8 unchanged sentences

Incorporated by reference to Exhibit 2.2 on Form 8-K filed with the SEC on June 18, 2012.

Restated Articles of Incorporation.

Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on February 19, 2015.

Second Amended and Restated Articles of Incorporation.

Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on September 15, 2025.

Amended and Restated Bylaws of Flux Power Holdings, Inc.

Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on May 31, 2012.

Certificate of Amendment to Articles of Incorporation.

Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on August 18, 2017.

Certificate of Change.

Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on July 12, 2019.

Description of Securities.

Incorporated by reference to Exhibit 4(vi) on Form 10-K filed with the SEC on September 28, 2020.

Form of Warrant.

6 unchanged sentences

Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on November 3, 2023.

Form of Prefunded Warrant (PIPE).

Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on September 16, 2025.

Form of Common Warrant (PIPE).

Incorporated by reference to Exhibit 4.2 on Form 8-K filed with the SEC on September 16, 2025.

Form of Indemnification Agreement.

54 unchanged sentences

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on February 1, 2024.

Form of Separation and Release Agreement (Charles Scheiwe).

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on February 23, 2024.

Form of Consulting Agreement (Charles Scheiwe).

Incorporated by reference to Exhibit 10.2 on Form 8-K filed on February 23, 2024.

Employment Agreement (Kevin S.

6 unchanged sentences

Waiver to Loan and Security Agreement dated August 30, 2024.

Incorporated by reference to Exhibit 10.30 on Form 10-K filed on January 29, 2025.

Waiver to Loan and Security Agreement dated January 17, 2025.

Incorporated by reference to Exhibit 10.31 on Form 10-K filed on January 29, 2025.

Amendment No.

1 unchanged sentence

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on January 28, 2025.

Executive Employment Agreement with Krishna Vanka.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on March 10, 2025.

Amendment to the Amended and Restated Employment Agreement with Ronald F.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed on March 10, 2025.

Separation and Release Agreement with Ronald F.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on April 2, 2025.

Flux Power Holdings, Inc.

2025 Equity Incentive Plan.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on May 30, 2025.

Form of Settlement Term Sheet.

Incorporated by reference to Exhibit 99.1 on Form 8-K filed on July 16, 2025.

Amendment No.5 to Loan and Security Agreement (GBC).

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on July 22, 2025.

First Amendment to Subordinated Unsecured Promissory Note.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed on July 22, 2025.

Amendment No.

6 to Loan and Security Agreement (GBC).

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on September 5, 2025.

Form of Amended and Restated Securities Purchase Agreement.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on September 16, 2025.

Form of Registration Rights Agreement.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on September 16, 2025.

Form of Escrow Agreement.

Incorporated by reference to Exhibit 10.3 on Form 8-K filed with the SEC on September 16, 2025.

Debt Satisfaction Agreement.

Incorporated by reference to Exhibit 10.4 on Form 8-K filed with the SEC on September 16, 2025.

Code of Business Conduct and Ethics.

1 unchanged sentence

Insider Trading Compliance Program Policy.

Incorporated by reference to Exhibit 19.1 to Form 10-K filed with the SEC on January 29, 2025.

Subsidiaries.

Incorporated by reference to Exhibit 21.1 on Form 8-K filed with the SEC on June 18, 2012.

Consent of Independent Registered Public Accounting Firm.

of Haskell & White LLP, Independent Registered Public Accounting Firm.

Consent of Baker Tilly US, LLP, Independent Registered Public Accounting Firm.

Certifications of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act.

3 unchanged sentences

Policy for the Recovery of Erroneously Awarded Compensation.

Incorporated by reference to Exhibit 97.1 on Form 10-K filed on January 29, 2025.

XBRL Instance Document.

10 unchanged sentences

Power Holdings, Inc.

January 29, 2025

September 16, 2025

Krishna Vanka

Executive Officer

4 unchanged sentences

registrant and in the capacities and on the dates indicated.

Krishna Vanka

Chief Executive Officer,

7 unchanged sentences

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of Flux Power Holdings, Inc.

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheet of Flux Power Holdings, Inc.

(the “Company”) as of June 30, 2025,

the related statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively,

the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material

respects, the financial position of the Company as of June 30, 2025, and the results of its operations and its cash flows for the year

then ended, in conformity with accounting principles generally accepted in the United States of America.

The consolidated financial statements of the Company

for the year ended June 30, 2024, before the effects of added comparative disclosures relative to the adoption of Accounting Standards

2023-07, Segment Reporting (Topic 280) , as presented in Note 13, were audited by other auditors whose report dated January

29, 2025, expressed an unqualified opinion, with an explanatory paragraph expressing substantial doubt about the Company’s ability

to continue as a going concern.

We audited the disclosures in Note 13 with respect to segment reporting for the year ended June 30, 2024.

We were not engaged to audit, review, or apply any procedures to the fiscal 2024 consolidated financial statements of the Company other

than with respect to the disclosures referred to herein and, accordingly, we do not express an opinion or any other form of assurance

on the fiscal 2024 consolidated financial statements taken as a whole.

Doubt About the Company’s Ability to Continue as a Going Concern

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

discussed in Note 2 to the consolidated financial statements, the Company has recurring losses from operations, an accumulated

deficit, expects to incur losses for the foreseeable future and requires additional working capital to achieve its operating plans.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans

in regard to these matters are also described in Note 2 to the consolidated financial statements.

The consolidated financial statements do not include any adjustments that

might result from the outcome of this uncertainty.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Audit Matters

audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or

required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the

consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that

there are no critical audit matters.

/s/ HASKELL & WHITE LLP

HASKELL & WHITE LLP

We have served as the Company’s auditor since

Irvine, California

September 16, 2025

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and the Board of Directors of Flux Power Holdings, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheets of Flux Power Holdings, Inc.

have audited the accompanying consolidated balance sheet of Flux Power Holdings, Inc.

(the “Company”) as of June 30,

and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows, for each of the three

years in the period ended June 30, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company

as of June 30, 2024, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended June

30, 2024, in conformity with accounting principles generally accepted in the United States of America.

of Previously Issued Financial Statements

discussed in Note 2 to the consolidated financial statements, the Company has restated prior year consolidated financial statements to

correct misstatements.

2024, the related consolidated statement of operations, stockholders’ equity, and cash flow, for the year then

ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the

Company as of June 30, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures

to the adjustments to retrospectively apply the change in accounting described in Note 13 and, accordingly, we do not express an opinion

or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

Those adjustments were audited

by other auditors.

Concern Uncertainty

6 unchanged sentences

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public

3 unchanged sentences

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

1 unchanged sentence

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

1 unchanged sentence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We believe that our audit provide a reasonable basis for our opinion.

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

4 unchanged sentences

BAKER TILLY US, LLP

have served as the Company’s auditor since 2012.

have served as the Company’s auditor from 2012 to 2025.

Diego, California

2 unchanged sentences

Current assets:

Accounts receivable, net of allowance for credit losses of $ 55,000 , $ 0 and $ 0

at June 30, 2024, 2023 and 2022, respectively

Accounts receivable, net of allowance for credit losses of $ 68,000 and $ 55,000 at June 30, 2025 and 2024, respectively

Inventories, net

1 unchanged sentence

Total current assets

Right of use asset

Right of use assets, net

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

2 unchanged sentences

Line of credit

Subordinated debt

Deferred revenue

8 unchanged sentences

Total liabilities

Stockholders’ equity:

Commitments and contingencies (Note 12)

Stockholders’ equity (deficit):

Preferred stock, $ 0.001 par value;

1 unchanged sentence

none issued and outstanding

Common stock, $ 0.001

shares authorized;

16,682,465 , 16,462,215

and 15,996,658

shares issued and outstanding at June 30, 2024, 2023 and 2022, respectively

Common stock, $ 0.001 par value;

75,000,000 and 30,000,000 authorized at June 30, 2025 and 2024, respectively;

16,835,698 and 16,682,465 shares issued and outstanding at June 30, 2025 and 2024, respectively

Additional paid-in capital

2 unchanged sentences

( 99,712,000 )

Total stockholders’ equity (deficit)

( 5,404,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total liabilities and stockholders’ equity (deficit)

accompanying notes are an integral part of these consolidated financial statements.

10 unchanged sentences

( 6,615,000 )

( 16,221,000 )

Other income (expense):

4 unchanged sentences

$ ( 8,333,000 )

$ ( 16,473,000 )

Net loss per share - basic and diluted

2 unchanged sentences

POWER HOLDING, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

Balance, as restated, at June 30, 2023

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance at June 30, 2024

$ ( 99,712,000 )

Issuance of common stock — exercised options and RSU settlements

Issuance of common stock – RSU settlements

Issuance of common stock – ESPP

Fair value of warrants issued

Stock-based compensation

3 unchanged sentences

$ 100,965,000

Balance, as restated, at June 30, 2022

$ ( 106,386,000 )

Issuance of common stock — public offering, net of costs

Issuance of common stock - exercised options and RSU settlement

Stock-based compensation

$ ( 5,404,000 )

( 7,743,000 )

Balance as restated, at June 30, 2023

$ ( 91,379,000 )

Balance, as restated, at June 30, 2021 *

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance at June 30, 2023

$ ( 91,379,000 )

Issuance of common stock and warrants - registered direct offering, net of costs

Issuance of common stock — public offering, net of costs

Issuance of common stock - exercised options and RSU settlement

Issuance of common stock – exercised options and RSU settlements

Issuance of common stock – ESPP

Fair value of warrants issued

2 unchanged sentences

( 8,333,000 )

Balance, as restated, at June 30, 2022

Balance at June 30, 2024

$ ( 99,712,000 )

* June 30, 2021 total shareholders’ equity, as restated, reflects the impact of restatement adjustments related to periods prior to the year ended June 30, 2022.

The impact of restatement is a decrease of $ 958,000 to accumulated deficit at June 30, 2021.

accompanying notes are an integral part of these consolidated financial statements.

5 unchanged sentences

$ ( 8,333,000 )

$ ( 16,473,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) used in operating activities:

Depreciation and amortization

Stock-based compensation

7 unchanged sentences

( 1,085,000 )

( 5,550,000 )

Accounts payable

4 unchanged sentences

Customer deposits

Net cash used in operating activities

( 4,798,000 )

( 3,574,000 )

Net cash provided by (used in) operating activities

( 4,798,000 )

1 unchanged sentence

Purchases of equipment

( 1,032,000 )

Proceeds from sale of fixed assets

Net cash used in investing activities

( 1,024,000 )

Cash flows from financing activities:

Proceeds from the issuance of common stock in registered direct offering, net of offering costs

Proceeds from the issuance of common stock in public offering, net of offering costs

Proceeds from stock option exercises and employee stock purchase plan exercises

Proceeds from employee stock purchase plan exercises

Proceeds from subordinated debt borrowing

Proceeds from revolving line of credit

2 unchanged sentences

( 63,287,000 )

( 3,561,000 )

Payment of finance leases

2 unchanged sentences

( 1,736,000 )

( 4,228,000 )

Cash, beginning of period

1 unchanged sentence

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Initial right of use asset recognition

Common stock issued for vested RSUs

11 unchanged sentences

(“Flux Power”), a California corporation (collectively, the “Company”).

Company designs, develops, manufactures, and sells a portfolio of advanced lithium-ion energy storage solutions for electrification of

a range of industrial commercial sectors which include material handling, airport ground support equipment (“GSE”), and stationary

energy storage.

The Company believes its mobile and stationary energy storage solutions provide customers with a reliable, high performing,

design, develop, manufacture, and sell a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of

industrial commercial sectors which include material handling, airport ground support equipment (“GSE”), and other commercial

and industrial applications.

We believe our mobile and stationary energy storage solutions provide our customers a reliable, high performing,

cost effective, and more environmentally friendly alternative as compared to traditional lead acid and propane-based solutions.

The Company’s

modular and scalable design allows different configurations of lithium-ion energy storage solutions to be paired with our proprietary

wireless battery management system to provide the level of energy storage required and “state of the art” real time monitoring

of pack performance.

The Company believes that the increasing demand for lithium-ion energy storage solutions and more environmentally

friendly energy storage solutions in the material handling sector should continue to drive revenue growth.

2 – Restatement of Previously Issued Financial Statements

connection with the preparation of its consolidated financial statements as of and for the year ended June 30, 2024, the Company identified

multiple prior-period misstatements.

In accordance with Staff Accounting Bulletins No.

99”) Topic 1.M, “Materiality”

99 Topic 1.N “Considering the Effects of Misstatements when Quantifying Misstatements in the Current Year Financial

Statements,” the Company assessed the materiality of these misstatements to its previously issued consolidated financial statements.

Based upon the Company’s evaluation of both quantitative and qualitative factors, the Company concluded the misstatements were

material to the Company’s previously issued consolidated financial statements for the fiscal years ended June 30, 2023 and 2022.

Accordingly, the Company is restating its previously issued audited consolidated financial statements and related notes as of and for

the fiscal years ended June 30, 2023 and 2022.

See Note 15 – Restatement of Previously Issued Financial Statements for the effects

of the restatement as of and for the fiscal years ended June 30, 2023 and 2022 and the restated amounts reflected within Note 4 –

Inventories, Note 11 – Income Taxes and Note 12 – Concentrations.

See Note 16 – Quarterly Financial Summary (Unaudited)

for the effects of the restatement on the interim periods within the fiscal years ended June 30, 2024, 2023 and 2022

and scalable design allows different configurations of lithium-ion energy storage solutions to be paired with our proprietary wireless

battery management system to provide the level of energy storage required and “state of the art” real time monitoring of

pack performance.

We believe that the increasing demand for lithium-ion energy storage solutions and more environmentally friendly energy

storage solutions in the material handling sector should continue to drive our revenue growth.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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of all intercompany accounts and transactions.

Liquidity and Financial Condition

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction

of liabilities in the normal course of business.

However, substantial doubt about the Company’s ability to continue as a going concern exists.

Historically,

the Company’s revenues and operating cash flows

have not been sufficient to sustain its operations and the Company has relied on debt and equity financing for additional funds.

Company has incurred an accumulated deficit of $ 99.7 million through June 30, 2024, and for the year ended June 30, 2024 generated negative

cash flows from operations of $ 4.8 million and incurred a net loss of $ 8.3 million.

As of December 31, 2024, the Company had a cash balance

million, $ 6.3 million available funding under the Gibraltar Business Capital (“GBC”) Credit Facility, and $ 1.0 million

available for future draws under the Subordinated LOC.

In addition, the Company’s

operations have been impacted by delays in new orders of its energy storage solutions due to corresponding deferrals of new forklift purchases

mainly caused by lower capital spending in the market sector that the Company serves and interest rate variability affecting selected large customer

fleets which have impacted the Company’s ability to meet projected revenue targets and generate cash from operations.

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 resources to fund planned operations for the next twelve months following the filing date

of this Annual Report on Form 10-K.

is evaluating strategies to improve profitability of operations and to obtain additional

These steps include actual and planned price increases for our energy storage solutions, a number of cost saving

initiatives including product cost efficiencies and planned operating cost savings.

Based on the Company’s existing backlog and customer orders, management anticipates increased revenues, together

with the improvements in its gross margin will move it closer to profitability.

The planned gross margin improvement tasks include, but

are not limited to, a plan to drive bill of material costs down while increasing price of our products for new orders.

We also continue to execute our cost reduction, sourcing, and pricing recovery initiatives in efforts to increase

our gross margins and improve cash flow from operations.

Unforeseen factors in the general economy beyond management’s control could

potentially have negative impact on the planned gross margin improvement plan.

Management is continuing to evaluate other sources of capital

to fund its operations and growth.

However, there can be no assurance that the Company will be able to realize the plans for improved

operations or access necessary additional financing when needed to provide sufficient liquidity to continue its operations over the next

twelve months.

If such liquidity is not available when required, management will be required to curtail investments in new product development,

which may have a material adverse effect on future cash flows and results of operations and the Company’s ability to continue operating

as a going concern.

The accompanying consolidated financial statements

do not include any adjustments that would be necessary should the Company be unable to continue as a going concern and, therefore, be

required to liquidate its assets and discharge its liabilities in other than the normal course of business and at amounts that may differ

from those reflected in the accompanying consolidated financial statements.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”)

requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses,

as well as certain financial statement disclosures.

Significant estimates include valuation allowances relating to inventory and deferred

While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate,

actual results could differ from these estimates.

and Financial Condition

accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of

assets and the satisfaction of liabilities in the normal course of business.

However, substantial doubt about the Company’s

ability to continue as a going concern exists.

Historically, the Company’s revenues and operating cash flows have not been

sufficient to sustain its operations and the Company has relied on debt and equity financing for additional funds.

The Company has

incurred an accumulated deficit of $ 106.4

million through June 30, 2025, and for the year ended June 30, 2025, generated positive cash flows from operations of $ 0.6

million and incurred a net loss of $ 6.7

As of July 31, 2025, the Company had a cash balance of $ 1.1 million and $ 6.7 million available funding under the Gibraltar

Business Capital (“GBC”) Credit Facility.

addition, the Company’s operations have been impacted by delays in new orders of its energy storage solutions due to

corresponding deferrals of new forklift purchases mainly caused by lower capital spending in the market sector that the Company

serves and interest rate variability affecting selected large customer fleets which have impacted the Company’s ability to

meet projected revenue targets and generate cash from operations.

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, funding available

under the GBC Credit Facility, forecasted gross margins and $ 3.8 million of cash proceeds from the $ 5.0 million Private Placement, which closed on September 15,

2015, will not be sufficient to meet

the Company’s anticipated capital resources to fund planned operations for the next twelve months following the filing date of

this Annual Report on Form 10-K.

is evaluating strategies to improve profitability of operations and to obtain additional funding.

These steps include actual and planned

price increases for our energy storage solutions, a number of cost saving initiatives including product cost efficiencies and planned

operating cost savings.

Based on the Company’s existing backlog and customer orders, management anticipates increased revenues,

together with the improvements in gross margin, will move the Company closer to profitability.

The planned gross margin improvement tasks include,

but are not limited to, a plan to drive bill of material costs down while increasing price of the Company’s products for new orders.

The Company also continues

to execute cost reduction, sourcing and pricing recovery initiatives in efforts to increase gross margins and improve cash flow

from operations.

Unforeseen factors in the general economy beyond management’s control could potentially have negative impact on

the planned gross margin improvement plan.

Management is continuing to evaluate other sources of capital to fund the Company’s operations and growth.

However, there can be no assurance that the Company will be able to realize the plans for improved operations or access necessary additional

financing when needed to provide sufficient liquidity to continue operations over the next twelve months.

If such liquidity is not

available when required, management will be required to curtail investments in new product development, which may have a material adverse

effect on future cash flows and results of operations and the Company’s ability to continue operating as a going concern.

accompanying consolidated financial statements do not include any adjustments that would be necessary should the Company be unable to

continue as a going concern and, therefore, be required to liquidate its assets and discharge its liabilities in other than the normal

course of business and at amounts that may differ from those reflected in the accompanying consolidated financial statements.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America

(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,

revenues, and expenses, as well as certain financial statement disclosures.

Significant estimates are made in determining inventory

obsolescence write-downs, warranty reserves and valuation allowances for credit losses and deferred tax assets.

While management

believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results

could differ from these estimates.

and Cash Equivalents

of June 30, 2024, 2023 and 2022, cash was approximately $ 0.6 million, $ 2.4 million and $ 0.5 million, respectively.

Cash consisted of

funds held in a non-interest-bearing bank deposit account.

The Company considers all liquid short-term investments with maturities of

less than three months when acquired to be cash equivalents.

of June 30, 2025 and 2024, cash was approximately $ 1.3 million and $ 0.6 million, respectively.

Cash consisted of funds held in a non-interest-bearing

bank deposit account.

The Company considers all liquid short-term investments with maturities of less than three months when acquired

to be cash equivalents.

The Company had no cash equivalents at June 30, 2025 and 2024.

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Company does not have any other assets or liabilities that are measured at fair value on a recurring or non-recurring basis.

Accounts receivable are carried at their estimated collectible amounts.

The Company has not experienced significant issues related to the collection of its accounts receivable.

As of June 30, 2024, the company

has an allowance for credit losses of $ 55,000 .

The company did not record an allowance for credit losses during the years ended

June 30, 2023 and 2022.

Inventories consist primarily of battery management systems and the related

subcomponents and are stated at the lower of cost (first-in, first-out) or net realizable value.

The Company evaluates inventories to

determine if write-downs are necessary due to obsolescence or if the inventory levels are in excess of anticipated demand at market value

based on consideration of historical sales and product development plans.

The Company recorded an adjustment related to obsolete inventory

in the amount of approximately $ 490,000 , $ 690,000 and $ 665,000 during the years ended June 30, 2024, 2023 (as restated) and 2022 (as restated),

respectively.

receivable are carried at their estimated collectible amounts.

The Company has not experienced significant issues related to the collection

of its accounts receivable.

As of June 30, 2025 and 2024, the Company has an allowance for credit losses of $ 68,000 and $ 55,000 , respectively.

consist primarily of battery management systems and the related subcomponents and are stated at the lower of cost (first-in, first-out)

or net realizable value.

The Company evaluates inventories to determine if write-downs are necessary due to obsolescence or if the inventory

levels are in excess of anticipated demand at market value based on consideration of historical sales and product development plans.

The Company recorded an adjustment related to obsolete inventory in the amount of approximately $ 534,000 and $ 490,000 during the years

ended June 30, 2025 and 2024, respectively.

Inventories at June 30, 2025 and 2024 are net of inventory obsolescence write-downs of $ 1,551,000 and $ 2,677,000 , respectively.

Plant and Equipment

plant and equipment are stated at cost, net of accumulated depreciation.

Depreciation and amortization are provided using the straight-line

method over the estimated useful lives, of the related assets ranging from three to five years , or, in the case of leasehold improvements,

over the lesser of the useful life of the related asset or the lease term.

Depreciation and amortization are provided using the

straight-line method over the estimated useful lives of the related assets ranging from 3 three to five

years , or, in the case of leasehold improvements, over the lesser of the useful life of the related asset or the lease

to the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

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costs incurred or to be incurred with respect to the transaction can be measured reliably.

revenue is recognized as a distinct single performance obligation which for the Company’s three major customers represents the

point in time that they receive delivery of the products, and for all other customers represents the point in time that the Company ships

the products.

revenue is recognized as a distinct single performance obligation which represents the point in time that a customer receives delivery

of our products.

Our customers do have a right to return product, but our returns have historically been minimal.

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packs, are warrantied for five years unless modified by a separate agreement.

As of June 30, 2024, 2023 and 2022, the Company carried

warranty liability of approximately $ 3,018,000 , $ 1,600,000 and $ 1,012,000 , respectively, which is included in accrued expenses on the

Company’s consolidated balance sheets.

As of June 30, 2025 and 2024, the Company carried warranty

liability of approximately $ 3,377,000 and $ 3,018,000 , respectively, which is included in accrued expenses on the Company’s consolidated

balance sheets.

of Long-lived Assets

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As a result, no unrecognized tax benefits have been identified

as of June 30, 2024, 2023 or 2022 and, accordingly, no additional tax liabilities have been recorded.

as of June 30, 2025 and 2024, and, accordingly, no additional tax liabilities have been recorded.

Company records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets

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Diluted loss per common share includes the impact from all dilutive potential common shares relating to outstanding convertible

the fiscal years ended June 30, 2024, 2023 and 2022, basic and diluted weighted-average common shares outstanding were 16,548,533 , 16,055,256

and 15,439,530 , respectively.

The Company incurred a net loss for the fiscal years ended June 30, 2024, 2023 and 2022, and therefore, basic

and diluted loss per share for each fiscal year were the same because potential common share equivalents would have been anti-dilutive.

The potentially dilutive common shares outstanding at June 30, 2024, 2023 and 2022 that were excluded from diluted weighted-average common

shares outstanding represent shares underlying outstanding stock options, RSUs and warrants, as follows:

the fiscal years ended June 30, 2025 and 2024, basic and diluted weighted-average common shares outstanding were 16,717,761 and 16,548,533 ,

respectively.

The Company incurred a net loss for the fiscal years ended June 30, 2025 and 2024;

therefore, basic and diluted loss per

share for each fiscal year was the same because potential common share equivalents would have been anti-dilutive.

The potentially dilutive

common shares outstanding at June 30, 2025 and 2024 that were excluded from diluted weighted-average common shares outstanding represent

shares underlying outstanding stock options, RSUs and warrants, as follows:

SCHEDULE OF DILUTIVE COMMON SHARES OUTSTANDING EXCLUDED FROM DILUTIVE WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Year ended June 30,

Stock options

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Accounting Pronouncements

Company did not adopt any new accounting pronouncements during the year ended June 30, 2024.

November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires retrospective disclosure

of significant segment expenses and other segment items on an annual and interim basis.

Additionally, it requires disclosure of the title

and position of the Chief Operating Decision Maker (“CODM”).

This ASU is effective annually for the Company’s fiscal

year ended June 30, 2025 and for interim periods thereafter.

The Company adopted this standard for the year ended June 30, 2025 and the

adoption did not have a material impact on the Company’s consolidated financial statements.

See Note 13 – Segment Information

for further information.

Issued Accounting Pronouncements

Management has considered all recent accounting pronouncements not yet adopted in the Company’s consolidated

financial statements.

November 2024, the FASB issued Accounting Standards Update (“ASU”) 2024-03, Income Statement – Reporting Comprehensive

Income – Expense Disaggregation Disclosures (Topic 220):

Disaggregation of Income Statement Expenses , which requires additional

disclosure of certain amounts included in the expense captions presented on the statement of operations, as well as disclosures about

selling expenses.

The ASU is effective on a prospective basis, with the option for retrospective application, for the Company’s fiscal year ending

June 30, 2028 and interim periods thereafter.

Early adoption is permitted for annual financial statements that have not yet been issued.

The Company is evaluating the disclosure requirements related to the new standard.

December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

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Income Tax Disclosures , which requires more detailed income tax disclosures.

The guidance requires entities to disclose

disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by

jurisdiction.

The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively.

standard is effective for our fiscal year ending June 30, 2026, with early adoption permitted.

The Company is evaluating the

disclosure requirements related to the new standard.

In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280):

Improvements to Reportable

Segment Disclosures ”, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced

disclosures about significant segment expenses.

The standard is effective annually for our fiscal year ending June 30, 2025 and interim

periods thereafter.

Early adoption is permitted.

The Company is evaluating the disclosure requirements related to the new standard.

The guidance requires entities to disclose disaggregated

information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction.

The disclosure

requirements will be applied on a prospective basis, with the option to apply them retrospectively.

The standard is effective for the Company’

fiscal year ending June 30, 2026, with early adoption permitted.

The Company is evaluating the disclosure requirements related to the

new standard.

3 – INVENTORIES

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OF OTHER CURRENT ASSETS

Lawsuit insurance receivable

Prepaid insurance

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OF ACCRUED EXPENSES

Payroll and bonus accrual

Warranty liability

Lawsuit settlements liability

Payroll and bonus accrual

Total accrued expenses

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( 2,821,000 )

( 1,136,000 )

property, plant and equipment, net

expense was approximately $ 1,045,000 , $ 899,000 and $ 575,000 , for the fiscal years ended June 30, 2024, 2023 and 2022, respectively, and

is included in selling and administrative expenses in the accompanying consolidated statements of operations.

expense on property, plant and equipment was approximately $ 848,000 and $ 1,045,000 for the fiscal years ended June 30, 2025 and 2024, respectively,

and is included in selling and administrative expenses in the accompanying consolidated statements of operations.

7 – NOTES PAYABLE

Line of Credit

Business Capital Credit Facility

Business Capital (“GBC”) Credit Facility

July 28, 2023, the Company entered into a Loan and Security Agreement (the “Agreement”) with GBC.

The Agreement provides

the Company with a senior secured revolving loan facility for up to $ 15.0 million (the “Revolving Loan Commitment”).

revolving amount available under the GBC Credit Facility is equal to the lesser of the Revolving Loan Commitment and the borrowing base

amount (as defined in the Agreement).

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 Company with a senior secured revolving loan facility for up to $ 15.0

million (the “Revolving Loan Commitment”).

The revolving amount available under the GBC Credit Facility is equal to the

lesser of the Revolving Loan Commitment and the borrowing base amount (as defined in the Agreement).

The GBC Credit Facility is

evidenced by a revolving note, which, as amended, matures on July

31, 2027 (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 a one-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.

addition, subject to conditions and terms set forth in the Agreement, the Company may request an increase in the Revolving Loan Commitment

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with the refinancing of the obligations with Bank of America, N.A., as lender.

November 2, 2023, the Company entered into the First Amendment to Loan and Security Agreement (the “First Amendment”) with

Gibraltar Business Capital, LLC (“GBC”), which amended certain definition of the Subordinated Debt referenced in the Loan

and Security Agreement dated July 28, 2023 as Subordinated Debt owed by Borrower to Cleveland Capital L.P.

pursuant to that certain Subordinated

Unsecured Promissory Note, dated as of November 1, 2023, in the aggregate principal amount of $ 2,000,000 .

January 30, 2024, the Company entered into the Second Amendment to Loan and Security Agreement (the “Second Amendment”) with

GBC, which amended certain terms of the Loan and Security Agreement dated July 28, 2023, including but not limited to, (i) increasing

the commitment amount from $ 15.0 million to $ 16.0 million, (ii) adding an additional non-refundable closing fee in the amount of $ 7,500 in

cash for the increase in the commitment amount to $ 16 million, (iii) amending the definition of “Eligible Accounts;” and

November 2, 2023, the Company entered into the First Amendment to the Loan and Security Agreement (the “First Amendment”)

with GBC, which amended certain definition of the Subordinated Debt referenced in the

Loan and Security Agreement dated July 28, 2023 as Subordinated Debt owed by the Company to Cleveland Capital L.P.

(“Cleveland”)

pursuant to that certain Subordinated Unsecured Promissory Note, dated as of November 1, 2023, in the aggregate principal amount of $ 2,000,000 .

January 30, 2024, the Company entered into Amendment No.

2 to the Loan and Security Agreement (the “Second Amendment”)

with GBC, which amended certain terms of the Loan and Security Agreement dated July 28, 2023, including but not limited to, (i) increasing

the commitment amount from $ 15.0 million to $ 16.0 million, (ii) adding an additional non-refundable closing fee in the amount of $ 7,500

in cash for the increase in the commitment amount to $ 16 million, (iii) amending the definition of “Eligible Accounts;” and

(iv) amending the EBITDA Minimum financial covenant of the Company.

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Property Security Agreement entered into by and among the Company and GBC on July 28, 2023.

During the year ended June 30, 2024, the

Company had multiple drawdowns under the GBC Credit Facility totaling $ 65.8 million, inclusive of the full repayment of the SVB Credit

Facility, and made multiple repayments totaling $ 52.0 million.

As of June 30, 2024, the outstanding balance under the GBC Credit Facility

was approximately $ 13.8 million, with up to $ 2.2 million available for future borrowings, subject to borrowing base limitations.

During the years ended June 30, 2025 and

2024, the Company had multiple drawdowns under the GBC Credit Facility totaling $ 64.5 million and $ 65.8 million, respectively, inclusive

of the full repayment of the SVB Credit Facility, and made multiple repayments totaling $ 64.7 million and $ 52.0 million, respectively.

As of June 30, 2025, the outstanding balance under the GBC Credit Facility was approximately $ 13.6 million, with up to $ 2.4 million available

for future borrowings, subject to borrowing base limitations.

April 2024, the Company notified GBC of a certain event of default with respect to the Company’s anticipated failure to maintain

the EBITDA covenant for the trailing three (3) month period ended April 30, 2024, or Default.

On May 8, 2024, the Company received a

Waiver, which waived the Default, subject to satisfaction of the following conditions:

(i) receipt of a counterpart of the Waiver duly

executed by the Company;

the EBITDA covenant for the trailing three (3) month period ended April 30, 2024 (the “Default”).

On May 8, 2024, the Company

received a Waiver, which waived the Default, subject to satisfaction of the following conditions:

(i) receipt of a counterpart of the

Waiver duly executed by the Company;

(ii) receipt of the waiver fee of $20,000;

(iii) receipt of the representations and warranties from the Company

that after giving effect to the Waiver, the representations and warranties contained in the Agreement, the Waiver and the other Loan

Documents shall be true and correct;

and (iv) after giving effect to the Waiver, no additional event of default shall have occurred and

be continuing on and as of the effective date of the Waiver.

May 31, 2024, the Company entered into the Third Amendment to Loan and Security Agreement (the “Third Amendment”) with GBC

which amended certain terms of the Loan and Security Agreement dated July 28, 2023, including but not limited to amending the EBITDA

(iii) receipt of the representations and warranties from

the Company that after giving effect to the Waiver, the representations and warranties contained in the Agreement, the Waiver and the

other Loan Documents shall be true and correct;

and (iv) after giving effect to the Waiver, no additional event of default shall have

occurred and be continuing on and as of the effective date of the Waiver.

May 31, 2024, the Company entered into Amendment No.

3 to the Loan and Security Agreement (the “Third Amendment”) with

GBC which amended certain terms of the Loan and Security Agreement dated July 28, 2023, including but not limited to amending the EBITDA

Minimum financial covenant of the Company.

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fee of $ 50,000 in cash.

August 30, 2024, GBC agreed to waive the Company’s non-compliance with, and the effects of its non-compliance under, various representations,

financial covenants and non-financial covenants relating to our financial restatements (the “August Waiver”).

filing of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 with the SEC was due on September 30,

2024 but was not filed until January 29, 2025.

The Company’s failure to file its Annual Report in a timely manner resulted in an

event of default with respect to a covenant under the Loan and Security Agreement with GBC to timely deliver a copy of the Company’s

annual audited financial statements.

Additionally, the Company notified GBC that it appeared likely that as a result of the restatement

it would fail to maintain the EBITDA covenant for the trailing three (3) month periods ended May 31, 2024 and July 31, 2024, or Default.

On January 17, 2025, the Company received a Waiver (the “January Waiver”), which waived the Defaults, subject to satisfaction

of the following conditions, which have been met:

(i) receipt of a counterpart of the January Waiver duly executed by the Company;

(ii) receipt of a waiver fee of $25,000;

and (iii) receipt of the representations and warranties from the Company that after giving effect

to the Waiver, the representations and warranties contained in the Agreement, the Waiver and the other Loan Documents shall be true and

and (iv) after giving effect to the January Waiver, no additional event of default shall have occurred and be continuing on

and as of the effective date of the January Waiver.

January 22, 2025, the Company entered into Amendment No.

4 to the Loan and Security Agreement (the “Fourth Amendment”)

with GBC which amended certain terms of the Loan and Security Agreement dated July 28, 2023, as amended, relating to the EBITDA Minimum

financial covenant of the Company.

In consideration for the Fourth Amendment, the Company agreed to pay GBC a non-refundable amendment

fee of $ 50,000 in cash, as follows:

(i) $ 25,000 paid on March 1, 2025, and (ii) $ 25,000 paid on April 1, 2025.

July 16, 2025, the Company entered into Amendment No.

5 to the Loan and Security Agreement (the “Fifth Amendment”) with

GBC which amended certain terms relating to the maturity date set forth under the Loan and Security Agreement dated July 28, 2023, as

Pursuant to the Fifth Amendment, GBC and the Company agreed to amend the definition of the maturity date to August 31, 2025 ,

unless otherwise extended pursuant to the terms of the Loan Agreement, provided however, upon the occurrence of either (i) an extension

of the due date of the Company’s Subordinated Unsecured Promissory Note, as amended, with Cleveland Capital, L.P.

(“the Cleveland

Note”) to a date no earlier than September 29, 2027, or (ii) the conversion of all of the outstanding obligations under the Cleveland

Note into equity of the Registrant, the maturity date will automatically extend to July 31, 2027.

See Note 8 – Related Party

Debt Agreements for additional information pertaining to the Cleveland Note.

In consideration for the Fifth Amendment, we agreed to pay

GBC a non-refundable amendment fee of $ 112,500 .

On September 4, 2025, we

entered into Amendment No.

6 to Loan Agreement (the “Sixth Amendment”), with the effective date of August 31, 2025,

which amended certain terms of the Loan Agreement, including (i) modifications to the EBITDA minimum financial covenant of the

Company, and (ii) an extension of the maturity date from August 31, 2025 to September 15, 2025, subject to acceleration or further

extension pursuant to the terms of the Loan Agreement.

the closing of the Private Placement on September 15, 2025, all the outstanding obligations under the Cleveland Note were applied in

full towards satisfaction of the subscription by Cleveland in the Private Placement.

Upon the conversion of all of the outstanding obligations under the Cleveland Note into equity of the

Company, the Maturity Date of the Revolving Note was automatically extended to July 31, 2027.

a result of the aforementioned waivers and amendments, and extension of the Maturity Date to July 31, 2027, we expect that the revolving credit facility will remain available subject

to meeting certain lending criteria under the Loan Agreement.

Valley Bank Credit Facility

1 unchanged sentence

Bank (“SVB”).

October 29, 2021, the Company entered into a First Amendment to Loan and Security Agreement (“First Amendment” and together

October 29, 2021, the Company entered into a First Amendment to the Loan and Security Agreement (“First Amendment” and together

with the Agreement, the “Loan Agreement”) with SVB which amended certain terms of the Agreement including, but not limited

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in connection with the First Amendment.

June 23, 2022, the Company entered into a Second Amendment to Loan and Security Agreement (“Second Amendment” and together

with the Loan Agreement, the “Second Amended Loan Agreement”) with SVB, which amended certain terms of the Loan Agreement,

including but not limited to, (i) increasing the amount of the revolving line of credit to $ 8.0 million, (ii) changing the financial

June 23, 2022, the Company entered into a Second Amendment to the Loan and Security Agreement (“Second Amendment” and together

with the Loan Agreement, the “Second Amended Loan Agreement”) with SVB, which amended certain terms of the Loan Agreement, including but not limited to, (i) increasing the amount of the revolving line of credit to $ 8.0 million, (ii) changing the financial

covenants of the Company from one based on tangible net worth to another based on adjusted EBITDA (as defined in the Second Amendment)

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incurred in connection with the Second Amendment.

connection with the Second Amendment, the Company issued a twelve-year warrant to SVB and its designee, SVB Financial Group, to purchase

up to 40,806 shares of common stock of the Company at an exercise price of $ 2.23 per share pursuant to the terms set forth therein.

November 7, 2022, the Company entered into a Third Amendment to Loan and Security Agreement (“Third Amendment”) with SVB,

which amended certain terms of the Second Amended Loan Agreement (together with the Third Amendment, the “Third Amended Loan Agreement”),

including but not limited to, (i) extending the maturity date from November 7, 2022 to May 7, 2023 (the “Extension Period”),

(ii) amending the financial covenants of the Company to cover the Extension Period and to include a liquidity ratio financial covenant,

and (iii) amending the definition of Permitted Liens (as defined in the Third Amendment).

Pursuant to the Third Amendment, the Company

paid SVB a non-refundable amendment fee of $ 12,500 and SVB’s legal fees and expenses incurred in connection with the Third Amendment.

January 10, 2023, the Company entered into a Fourth Amendment to Loan and Security Agreement (the “Fourth Amendment”) with

SVB, which amended certain terms of the Third Amended Loan Agreement including but not limited to, (i) increasing the amount of the SVB

Credit Facility from $ 8.0 million to $ 14.0 million, (ii) removing the liquidity ratio financial covenant of the Company under Section

6.9 of the Third Amended Loan Agreement, (iii) amending the definition of Borrowing Base (as defined in the Fourth Amendment), which

includes a new defined term for Net Orderly Liquidation Value (as defined in the Fourth Amendment), and (iv) removing certain defined

connection with the Second Amendment, the Company issued a 12 twelve-year warrant to SVB and its designee, SVB Financial Group, to

purchase up to 40,806 shares of common stock of the Company at an exercise price of $ 2.23 per share pursuant to the terms set forth

November 7, 2022, the Company entered into a Third Amendment to the Loan and Security Agreement (“Third Amendment”) with

SVB, which amended certain terms of the Second Amended Loan Agreement (together with the Third Amendment, the “Third Amended Loan

Agreement”), including but not limited to, (i) extending the maturity date from November 7, 2022 to May 7, 2023 (the “Extension

Period”), (ii) amending the financial covenants of the Company to cover the Extension Period and to include a liquidity ratio financial

covenant, and (iii) amending the definition of Permitted Liens (as defined in the Third Amendment).

Pursuant to the Third Amendment,

the Company paid SVB a non-refundable amendment fee of $ 12,500 and SVB’s legal fees and expenses incurred in connection with the

Third Amendment.

January 10, 2023, the Company entered into a Fourth Amendment to the Loan and Security Agreement (the “Fourth Amendment”)

with SVB, which amended certain terms of the Third Amended Loan Agreement including but not limited to, (i) increasing the amount of

the SVB Credit Facility from $ 8.0 million to $ 14.0 million, (ii) removing the liquidity ratio financial covenant of the Company under

Section 6.9 of the Third Amended Loan Agreement, (iii) amending the definition of Borrowing Base (as defined in the Fourth Amendment),

which includes a new defined term for Net Orderly Liquidation Value (as defined in the Fourth Amendment), and (iv) removing certain defined

liquidity terms under Section 13.1 of the Third Amended Loan Agreement.

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amendment fee of $ 10,000 and SVB’s legal fees and expenses incurred in connection with the Fourth Amendment.

April 27, 2023, the Company entered into a Fifth Amendment to Loan and Security Agreement (the “Fifth Amendment”) with SVB

which further amended certain terms of the credit facility (together with the Fifth Amendment, the “Agreement”), including

April 27, 2023, the Company entered into a Fifth Amendment to the Loan and Security Agreement (the “Fifth Amendment”) with

SVB which further amended certain terms of the credit facility (together with the Fifth Amendment, the “Agreement”), including

but not limited to, (i) extending the maturity date from May 7, 2023 to December 31, 2023 (the “2023 Extension Period”),

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SVB, as amended.

the year ended June 30, 2024, the Company had multiple Revolving LOC drawdowns totaling $ 1.4 million and multiple Revolving LOC payments

totaling $ 11.3 million inclusive of the final repayment of the LOC in full.

During the three months ended September 30, 2023, the Company had multiple Revolving LOC drawdowns totaling $ 1.4 million

and multiple Revolving LOC payments totaling $ 11.3 million inclusive of the final repayment of the LOC in full.

8 – RELATED PARTY DEBT AGREEMENTS

June 30, 2024,2023 and 2022, the Company had no related party debt balance outstanding.

Below are the activities for the Company’s

related party debt agreements that existed during the years ended June 30, 2024, 2023 and 2022.

Line of Credit Facilities

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November 2, 2023, the Company entered into a Credit Facility Agreement (the “Credit Facility”) with Cleveland Capital, L.P.,

(the “Lender”).

(“Cleveland”), a related party due to equity ownership.

The Credit Facility provides the Company with a line of credit of up to $ 2,000,000 for working capital purposes

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In connection with the LOC, the Company issued a subordinated unsecured promissory note for $ 2,000,000

(the “Commitment Amount”) in favor of the Lender (the “Note”).

to the terms of the Credit Facility, the Lender agreed to make loans (each such loan, an “Advance”) up to such Lender’s

Commitment Amount to the Company from time to time, until August 15, 2025 (the “Due Date”).

The Note accrues interest at

Secured Overnight Financing Rate plus nine percent ( 9 %) per annum on each Advance from and after the date of disbursement of such Advance.

All indebtedness, obligations and liabilities of the Company to the Lender are subject to the rights of Gibraltar Business Capital, LLC

(together with its successors and assigns, “GBC”), pursuant to a Subordination Agreement dated on or about November 2, 2023,

by and between the Lender and GBC (the “Subordination Agreement”).

Subject to the Subordination Agreement, the Company may,

from time to time, prior to the Due Date, draw down, repay, and re-borrow on the Note, by giving notice to the Lenders of the amount

(the “Commitment Amount”) in favor of Cleveland (the “Note”).

to the terms of the Credit Facility, Cleveland agreed to make loans (each such loan, an “Advance”) up to such Lender’s

Commitment Amount to the Company from time to time, until July 31, 2027 (the “Due Date”).

The Note accrues interest

at Secured Overnight Financing Rate plus nine percent ( 9 %) per annum on each Advance from and after the date of disbursement of such

All indebtedness, obligations and liabilities of the Company to Cleveland are subject to the rights of Gibraltar Business Capital,

LLC (together with its successors and assigns, “GBC”), pursuant to a Subordination Agreement dated on or about November 2,

2023, by and between Cleveland and GBC (the “Subordination Agreement”).

Subject to the Subordination Agreement, the Company

may, from time to time, prior to the Due Date, draw down, repay, and re-borrow on the Note, by giving notice to Cleveland of the amount

to be requested to be drawn down.

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(ii) on occurrence of an event of Default (as defined in the Note).

consideration of the Lender’s commitment to provide the Advances to the Company, the Company issued the Lender warrants to purchase

consideration of Cleveland’s commitment to provide the Advances to the Company, the Company issued Cleveland warrants to purchase

41,196 shares of common stock (the “Warrants”) which rights are represented by a warrant certificate (“Warrant Certificate”).

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and the adjusted warrant price.

(See Note 10 – Stockholders’ Equity).

See Note 9 – Stockholders’ Equity (Deficit).

July 16, 2025, the Company and Cleveland entered into the First Amendment to the Note (“First Amendment”).

The First Amendment

amended the due date set forth in the Note dated November 2, 2023 (“Original Note”) and as amended by the First Amendment,

the Note issued by the Registrant to Cleveland in connection with the Credit Facility Agreement dated November 2, 2023, by and between

Cleveland and the Registrant.

Pursuant to the First Amendment, the due date under the Original Note was changed from August 15, 2025

to September 30, 2025.

of June 30, 2025 and 2024, the outstanding balance under the Cleveland Credit Facility was $ 1,000,000 and zero , respectively.

Subordinated LOC

May 11, 2022, the Company entered into a Credit Facility Agreement (the “2022 Subordinated LOC”) with Cleveland, Herndon

Plant Oakley, Ltd., (“HPO”), and other lenders (together with Cleveland and HPO, the “Lenders”).

The 2022 Subordinated

LOC provided the Company with a short-term line of credit not less than $ 3,000,000 and not more than $ 5,000,000 , to be used by the Company

for working capital purposes.

In connection with the 2022 Subordinated LOC, the Company issued a separate subordinated unsecured promissory

note in favor of each respective Lender (each promissory note, a “Note”) for each Lender’s commitment amount (each

such commitment amount, a “Commitment Amount”).

to the terms of the 2022 Subordinated LOC, each Lender severally agrees to make loans (each such loan, an “Advance”) up to

such Lender’s Commitment Amount to the Company from time to time, until December 31, 2022 (the “Due Date”).

May 11, 2022, the Company entered into a Credit Facility Agreement (the “Subordinated LOC”) with Cleveland, Herndon Plant

Oakley, Ltd., (“HPO”), and other lenders (together with Cleveland and HPO, the “Lenders”).

The Subordinated LOC

provides the Company with a short-term line of credit not less than $ 3,000,000 and not more than $ 5,000,000 , the proceeds of which shall

be used by the Company for working capital purposes.

In connection with the Subordinated LOC, the Company issued a separate subordinated

unsecured promissory note in favor of each respective Lender (each promissory note, a “Note”) for each Lender’s commitment

amount (each such commitment amount, a “Commitment Amount”).

to the terms of the Subordinated LOC, each Lender severally agrees to make loans (each such loan, an “Advance”) up to such

Lender’s Commitment Amount to the Company from time to time, until December 31, 2022 (the “Due Date”).

15, 2022, the Board of Directors of the Company elected to extend the Due Date to December 31, 2023.

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Note bears an interest rate of 15.0% per annum on each Advance from and after the date of disbursement of such Advance and is payable

on (i) the Due Date in cash or shares of common stock of the Company (the “Common Stock”) at the sole election of the Company,

on (i) the Due Date in cash or shares of common stock of the Company at the sole election of the Company,

unless such Due Date is extended pursuant to the Note, or (ii) on occurrence of an event of Default (as defined in the Note).

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a commitment fee equal to two percent (2%) of the Commitment Amount to the Lender within thirty (30) days prior to the original Due Date,

or (ii) by the Lender in writing.

or (ii) by the Lenders in writing.

In addition, each Lender signed a Subordination Agreement by and between the Lenders and SVB dated

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under the Note to GBC’s indebtedness by the Company then incurred and outstanding or thereinafter incurred.

2022 Subordinated LOC included customary representations, warranties and covenants by the Company and the Lenders.

The Company has also

agreed to pay the legal fees of Cleveland’s counsel in an amount up to $ 10,000 .

In addition, each Note also provides that, upon

the occurrence of a Default, at the option of the Lender, the entire outstanding principal balance, all accrued but unpaid interest and/or

Late Charges (as defined in the Note) at once will become due and payable upon written notice to the Company by the Lender.

connection with entry into the 2022 Subordinated LOC, the Company paid to each Lender a one-time commitment fee in cash equal to 3.5 %

of such Lender’s Commitment Amount.

In addition, in consideration of the Lenders’ commitment to provide the Advances to the

Company, the Company issued the Lenders five-year warrants to purchase an aggregate of 128,000 shares of common stock at an exercise

price of $ 2.53 per share that are, subject to certain ownership limitations, exercisable immediately (the “Warrants”) (the

number of warrants issued to each Lender is equal to the product of (i) 160,000 shares of common stock multiplied by (ii) the ratio represented

Subordinated LOC includes customary representations, warranties and covenants by the Company and the Lenders.

The Company has also agreed

to pay the legal fees of Cleveland’s counsel in an amount up to $ 10,000 .

In addition, each Note also provides that, upon the occurrence

of a Default, at the option of the Lenders, the entire outstanding principal balance, all accrued but unpaid interest and/or Late Charges

(as defined in the Note) at once will become due and payable upon written notice to the Company by the Lenders.

connection with entry into the Subordinated LOC, the Company paid to each Lender a one-time commitment fee in cash equal to 3.5 % of such

Lender’s Commitment Amount.

In addition, in consideration of the Lenders’ commitment to provide the Advances to the Company,

the Company issued the Lenders five-year warrants to purchase an aggregate of 128,000 shares of common stock at an exercise price of

$ 2.53 per share that are, subject to certain ownership limitations, exercisable immediately (the “Warrants”) (the number

of warrants issued to each Lender is equal to the product of (i) 160,000 shares of common stock multiplied by (ii) the ratio represented

by each Lender’s Commitment Amount divided by the $5,000,000).

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November 2, 2023, the Subordinated LOC was terminated.

10 – STOCKHOLDERS’ EQUITY

At-The-Market

(“ATM”) Offering

December 21, 2020 the Company entered into a Sales Agreement (the “Sales Agreement”) with H.C.

Wainwright & Co., LLC

(“HCW”) to sell shares of its common stock, par value $ 0.001 (the “Common Stock”) from time to time, through

an “at-the-market offering” program (the “ATM Offering”).

October 5, 2023, the Company terminated the Sales Agreement with HCW pursuant to the terms of the Sales Agreement.

From December 21,

2020 through October 5, 2023, the Company sold an aggregate of 1,524,873 shares of common stock at an average price of $ 10.45 per share

for gross proceeds of approximately $ 15.9 million under the ATM Offering.

The Company received net proceeds of approximately $ 15.3 million,

net of commissions and other offering related expenses.

Direct Offering

September 27, 2021, the Company closed a registered direct offering, priced at-the-market under Nasdaq rules (“RDO”) for

the sale of 2,142,860 shares of common stock and warrants to purchase up to an aggregate of 1,071,430 shares of common stock, at an offering

price of $ 7.00 per share and associated warrant for gross proceeds of approximately $ 15.0 million prior to deducting offering expenses

totaling approximately $ 1.0 million.

The associated warrants have an exercise price equal to $ 7.00 per share and are exercisable upon

issuance and expire in five years.

HCW acted as the exclusive placement agent for the registered direct offering.

securities sold in the RDO were sold pursuant to a “shelf” registration statement on Form S-3 (File No.

333-249521), including

a base prospectus, previously filed with the Securities and Exchange Commission (the “SEC”) on October 16, 2020 and declared

effective by the SEC on October 26, 2020.

The registered direct offering of the securities was made by means of a prospectus supplement

dated September 22, 2021 and filed with the SEC, that forms a part of the effective registration statement.

The “shelf” registration

statement expired on October 26, 2023.

connection with the Company’s RDO, in September 2021 the Company issued five-year warrants to the RDO investors to purchase up

There were no borrowings or amounts outstanding under the Subordinated LOC at

any time during the year ended June 30, 2024.

9 – STOCKHOLDERS’ EQUITY (DEFICIT)

Shares of Common Stock

May 28, 2025, the Company’s stockholders approved an increase in the number of authorized common shares to 75,000,000

shares from 30,000,000

Authorized Shares of Preferred Stock

As of June 30, 2025, there are

no outstanding shares of the Company’s preferred stock.

On August 29, 2025, our stockholders

approved the amendment and restatement of our Articles of Incorporation to, among other things, (i) increase the aggregate number of

authorized shares of preferred stock from 500,000

to 3,000,000 ,

par value per share (“Preferred Stock”), and (ii) grant the Board authority to fix the rights and preferences of the preferred

stock by resolution from time to time, and (iii) designate 1,000,000 shares of Preferred Stock as “Series A Convertible Preferred

Stock”, $0.001 par value per share (the “Series A Preferred Stock”), with rights, preferences, privileges and restrictions

all as set forth in the Second Amended and Restated Certificate of Incorporation.

The Second Amended and Restated Certificate of Incorporation

was filed with the State of Nevada on September 10, 2025.

connection with the Company’s Registered Direct Offering (“RDO”) in September 2021, the Company issued 5 five-year warrants to the RDO investors to purchase up

to 1,071,430 shares of the Company’s common stock at an exercise price of $ 7.00 per share and were estimated to have a fair value

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common stock at an exercise price of $ 2.53 per share and had a fair value of approximately $ 173,000 .

June 2022 and in conjunction with the entry into the Second Amendment to Loan and Security Agreement with SVB, the Company issued twelve -year

warrants to SVB and its designee, SVB Financial Group, to purchase up to 40,806 shares of the Company’s common stock at an exercise

price of $ 2.23 per share and had a fair value of approximately $ 80,000 .

June 2022 and in conjunction with the entry into the Second Amendment to the Loan and Security Agreement with SVB, the Company issued

twelve-year warrants to SVB and its designee, SVB Financial Group, to purchase up to 40,806 shares of the Company’s common stock

at an exercise price of $ 2.23 per share and had a fair value of approximately $ 80,000 .

November 2023 and in conjunction with the entry into the 2023 Subordinated LOC, the Company issued 5 five-year warrants to Cleveland Capital,

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SCHEDULE OF STOCK WARRANT ACTIVITY

Weighted Average

Exercise Price

Weighted Average

Contract Term

Warrants outstanding and exercisable at June 30, 2023

Warrants issued

Warrants exercised

Warrants forfeited and cancelled

Warrants outstanding and exercisable at June 30, 2024

detail for the year ended June 30, 2023 is reflected below:

Weighted Average

Exercise Price

Weighted Average

Contract Term

Warrants outstanding and exercisable at June 30, 2022

Warrants issued

Warrants outstanding and exercisable at June 30, 2023

Number of Warrants

Weighted Average Exercise Price Per Warrant

Weighted Average Remaining Contract Term (# years)

Outstanding and exercisable at June 30, 2024

Forfeited and cancelled

Outstanding and exercisable at June 30, 2025

detail for the year ended June 30, 2024 is reflected below:

Weighted Average

Exercise Price

Weighted Average

Contract Term

Warrants outstanding and exercisable at June 30, 2021

Warrants issued

Warrants outstanding and exercisable at June 30, 2022

Number of Warrants

Weighted Average Exercise Price Per Warrant

Weighted Average Remaining Contract Term (# years)

Outstanding and exercisable at June 30, 2023

Forfeited and cancelled

Outstanding and exercisable at June 30, 2024

Company uses the Black-Scholes valuation model to calculate the fair value of warrants.

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issuance date using the assumptions in the table below:

OF FAIR VALUE ASSUMPTIONS OF WARRANTS

SCHEDULE OF FAIR VALUE ASSUMPTIONS OF WARRANTS

Year ended June 30,

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Expected term (years)

No warrants were issued during the year ended June 30, 2023.

connection with the reverse acquisition of Flux Power, Inc.

in 2012, the Company assumed the 2010 Plan.

As of June 30, 2024, there weren’t

any options to purchase common stock outstanding under the 2010 Plan.

No additional options may be granted under the 2010 Plan.

(1) No warrants were

issued during the year ended June 30, 2025.

February 17, 2015, the Company’s stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”).

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and serves to encourage such persons to remain employed by the Company and to attract new employees.

The 2014 Plan allows for the award

of the Company’s common stock and stock options, up to 1,000,000 shares of the Company’s common stock.

As of June 30, 2024,

89,922 shares of the Company’s common stock were available for future grants under the 2014 Plan.

The 2014 Plan expired on November

26, 2024, at which time no future stock or stock option awards could be granted

April 29, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”).

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common stock were available for future grants under the 2021 Plan.

October 31, 2022, the Board of Directors authorized a total of 624,441 stock options to be granted under the Company’s 2014 Plan

and 2021 Plan.

May 28, 2025, the Company’s stockholders approved the 2025 Equity Incentive Plan (the “2025 Plan”).

The 2025 Plan authorizes

the issuance of awards for up to 1,000,000 shares of common stock in the form of incentive stock options, non-statutory stock options,

stock appreciation rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees

of, and consultants and advisors to, the Company or its affiliates.

As of June 30, 2025, 1,000,000 shares of the Company’s common

stock were available for future grants under the 2025 Plan.

in stock options during the year ended June 30, 2025 and related balances outstanding as of that date are reflected below:

SCHEDULE OF STOCK OPTIONS ACTIVITY

Weighted Average

Exercise Price

Weighted Average

Contract Term

Aggregate intrinsic Value

Weighted Average Grant Date Fair Value

Outstanding at June 30, 2024

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in stock options during the year ended June 30, 2024 and related balances outstanding as of that date are reflected below:

Weighted Average

Exercise Price

Weighted Average

Contract Term

Aggregate intrinsic Value

Weighted Average Grant Date Fair Value

Outstanding at June 30, 2023

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Exercisable at June 30, 2024

in stock options during the year ended June 30, 2022 and related balances outstanding as of that date are reflected below:

Weighted Average

Exercise Price

Weighted Average

Contract Term

Aggregate intrinsic Value

Outstanding at June 30, 2021

Forfeited and cancelled

Outstanding and exercisable at June 30, 2022

Company uses the Black-Scholes valuation model to calculate the fair value of stock options.

The fair value of stock options was measured

at the grant date using the assumptions (annualized percentages) in the table below:

OF FAIR VALUE ASSUMPTIONS OF STOCK OPTIONS

Company uses the Black-Scholes valuation model to calculate the fair value of warrants.

Weighted average annualized percentages and expected

term inputs used in Black-Scholes valuations during the periods are listed below:

SCHEDULE OF FAIR VALUE ASSUMPTIONS OF STOCK OPTIONS

Year ended June 30,

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Risk free interest rate

Forfeiture rate

Dividend yield

Expected term (years)

stock options were granted during the year ended June 30, 2022.

(1) No stock options

were granted during the year ended June 30, 2025.

November 5, 2020, the Company’s Board of Directors approved an amendment to the 2014 Plan, to allow for grants of Restricted Stock

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On April 18, 2024, a total of 68,228 time-based RSUs were authorized by the Company’s Board of Directors to

be granted under the amended 2014 Option Plan.

On October 29, 2021, the Board of Directors authorized the following RSUs to be granted

under the amended 2014 Option Plan:

(i) a total of 97,828 RSUs to certain executive officers of which 48,914 were performance-based RSUs

and 48,914 were time-based RSUs, and (ii) a total of 81,786 time-based RSUs to certain other key employees.

The RSUs are subject to the

terms and conditions provided in (i) the Restricted Stock Unit Award Agreement for time-based awards (“Time-based Award Agreement”),

and (ii) the Performance Restricted Stock Unit Award Agreement for performance-based awards (“Performance-based Award Agreement”).

Under the amended 2014 Option Plan and 2021 Plan, a total of 68,228 and 57,532 of time-based RSUs were authorized on April 18, 2024 and

April 20, 2023, respectively, by the Company’s Board of Directors to be granted to the Company’s four non-executive directors.

be granted to the Company’s four non-executive directors under the amended 2014 Plan and the 2021 Plan.

On May 28, 2025, a total

of 200,000 time-based RSUs were authorized by the Company’s Board of Directors to be granted to the Company’s four non-executive

directors under the 2021 Plan.

in RSUs during the year ended June 30, 2025 and related balances outstanding as of that date are reflected below:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Weighted Average

Exercise Price

Weighted Average

Contract Term

Outstanding at June 30, 2023

Vested and settled

Forfeited and cancelled

Outstanding at June 30, 2024

in RSUs during the year ended June 30, 2023 and related balances outstanding as of that date are reflected below:

Weighted Average

Exercise Price

Weighted Average

Average Grant

Contract Term

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in RSUs during the year ended June 30, 2024 and related balances outstanding as of that date are reflected below:

Weighted Average

Exercise Price

Weighted Average

Average Grant

Contract Term

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Stock Purchase Plan

March 6, 2023, the Company’s Board of Directors approved the 2023 Employee Stock Purchase Plan (the “2023 ESPP”), which

subsequently was approved by the Company’s stockholders on April 20, 2023.

March 6, 2023, the Company’s Board of Directors approved the 2023 Employee Stock Purchase Plan (the “2023 ESPP”), and

on April 20, 2023, the 2023 ESPP was approved by the Company’s stockholders.

The 2023 ESPP enables eligible employees of the Company

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least 90 days and (ii) is customarily employed for at least twenty (20) hours per week and more than five (5) months in any calendar

Each eligible employee may authorize payroll deductions of 1-15% of the eligible employee’s compensation on each pay day

to be used to purchase up to 1,500 shares of Common Stock for the employee’s account occurring during an offering period.

ESPP has a term of ten (10) years commencing on April 20, 2023, the date of approval by the Company’s stockholders, unless otherwise

earlier terminated.

March 28, 2024, participants in the 2023 ESPP purchased an aggregate total of 37,543 shares of common stock at a price equal to 85 % of

$ 3.30 , which was the closing price of the Company’s common stock on the offering date pursuant to the provisions of the 2023 ESPP.

June 30, 2024, 312,457 shares of the Company’s common stock were available for future grants under the 2023 ESPP.

compensation expense for the fiscal years ended June 30, 2024 and 2023 represents the estimated fair value of stock options, RSUs and

ESPP offerings at the time of grant amortized under the straight-line method over the expected vesting period and reduced for estimated

forfeitures of options and RSUs.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual

forfeitures differ from original estimates.

At June 30, 2024, the aggregate intrinsic value of the outstanding options and the exercisable

options were zero and zero , respectively.

following table summarizes stock-based compensation expense for employee and non-employee option and RSU grants:

OF STOCK-BASED COMPENSATION EXPENSES

Each eligible employee may authorize payroll deductions of one to 15% of the eligible employee’s compensation on each pay

day to be used to purchase up to 1,500 shares of common stock for the employee’s account occurring during an offering period.

2023 ESPP has a term of ten (10) years commencing on April 20, 2023, the date of approval by the Company’s stockholders, unless

otherwise earlier terminated.

the provisions of the 2023 ESPP, participants purchase common stock at 85% of the closing price of the Company’s common stock at

the start or end of each six-month offering period, whichever is lower.

On March 31, 2025, participants in the offering period ending

March 31, 2025 purchased 29,350 shares of common stock at $ 1.46 per share.

On March 28, 2025, participants in the offering period ending

September 30, 2024 purchased 20,987 shares of common stock at $ 2.58 per share.

While the purchase price for the offering period ending

September 30, 2024 under the 2023 ESPP had been established as of September 30, 2024, the Company was unable to issue shares of its common

stock until it became current with its required SEC filings.

On March 28, 2024, participants in the offering period ending March 28,

2024 purchased 37,543 shares of common stock at $ 2.80 per share.

At June 30, 2025, there were 252,120 shares of the Company’s

common stock available for grant under the 2023 ESPP.

compensation expense for the fiscal years ended June 30, 2025 and 2024 represents the estimated fair value of stock options and RSUs

at the time of grant, and ESPP shares at the beginning of each offering period, amortized under the straight-line method over the expected

vesting period and reduced for estimated forfeitures of options and RSUs.

Forfeitures are estimated at the time of grant and revised,

if necessary, in subsequent periods if actual forfeitures differ from original estimates.

At June 30, 2025, the aggregate intrinsic value

of exercisable stock options was zero .

following table summarizes stock-based compensation expense for employee and non-employee stock option and RSU grants and ESPP participation:

SCHEDULE OF STOCK-BASED COMPENSATION EXPENSES

Year ended June 30,

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tax reporting purposes, and (b) net operating loss and tax credit carryforwards.

A valuation allowance of approximately $ 26,483,000 ,

$ 24,696,000 and $ 23,461,000 has been established to offset the net deferred tax assets as of June 30, 2024, 2023 and 2022, respectively,

due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets.

A valuation allowance of approximately $27,508,000 and

$ 26,483,000 has been established

to offset the net deferred tax assets as of June 30, 2025 and 2024, respectively, due to uncertainties surrounding the Company’s

ability to generate future taxable income to realize these assets.

Company is subject to taxation in the United States, California and Georgia.

The Company’s tax years from 2010 and forward are

subject to examination by the United States and state taxing authorities due to the carry forward of unutilized net operating losses

subject to examination by the federal and state taxing authorities due to the carry forward of unutilized net operating losses

and research and development credits, as applicable.

Company has incurred losses since inception.

A current state income tax provision of $ 3,000 has been recorded for state minimum and net

Significant components of the Company’s net deferred tax assets and liabilities are shown in the table below.

Company has primarily incurred losses since inception.

A current state income tax provision of $ 4,000

has been recorded for state minimum and net worth taxes.

Significant components of the Company’s net deferred tax assets and

liabilities are shown in the table below.

OF DEFERRED TAX ASSETS AND LIABILITIES

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( 26,483,000 )

( 23,461,000 )

Total deferred tax assets

7 unchanged sentences

$ 54,763,000 do not expire.

Federal NOL carryforwards arising before 2018 of approximately $ 22,408,000 and all of the state NOL carryforward

Federal NOL carryforwards arising before 2018 of approximately $ 22,408,000 and all of the state NOL carryforwards

begin to expire in 2030 .

6 unchanged sentences

$ ( 1,749,000 )

$ ( 3,459,000 )

State income taxes, net

( 1,151,000 )

Permanent differences and other

2 unchanged sentences

Provision for income taxes

Revenue Code Sections 382 limits the use of our net operating loss carryforwards if there has been a cumulative change in ownership of

Revenue Code Section 382 limits the use of our net operating loss carryforwards if there has been a cumulative change in ownership of

more than 50% within a three-year period.

The Company has not yet completed a Section 382 net operating loss analysis.

The Company has not yet completed a Section 382 study.

If such analysis

determines there is a limitation on the use on net operating loss carryforwards to offset future taxable income, the recorded deferred

determines there is a limitation on the use of net operating loss carryforwards to offset future taxable income, the recorded deferred

tax asset relating to such net operating loss carryforwards will be reduced.

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accounting in interim periods, disclosure and transition.

accordance with ASC 740, there are no unrecognized tax benefits as of June 30, 2024, 2023 or 2022.

In accordance with ASC 740, there are no unrecognized tax benefits as of June 30, 2025 and 2024.

11 – CONCENTRATIONS

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As of June 30, 2025 and 2024,

2022, cash was approximately $ 643,000 , $ 2.4 million and $ 485,000 , respectively.

March 10, 2023, the Federal Deposit Insurance Corporation (the “FDIC”) issued a press release stating that Silicon Valley

Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as

In a joint statement issued by the Department of the Treasury, Board of Governors of the Federal Reserve System and Federal

Deposit Insurance Corporation on March 12, 2023, the Department of Treasury took actions to enable the FDIC to complete its resolution

of SVB in a manner that fully protects all depositors.

According to the joint statement (the “Statement”), depositors will

have access to all of their money starting Monday, March 13, 2023.

On March 13, 2023, Silicon Valley Bridge Bank, N.A., the new entity

formed by the FDIC announced appointment of a new CEO, who provided assurance of immediate restoration of full banking services.

27, 2023, First Citizens BancShares, Inc.

announced that it has entered into an agreement with the FDIC to purchase all of the assets

and liabilities of Silicon Valley Bridge Bank, N.A.

Company has not experienced any losses in such accounts.

Management believes that the Company is not exposed to any significant credit

risk with respect to its cash.

cash was approximately $ 1,334,000 and $ 643,000 , respectively.

The Company has not experienced any losses in such accounts.

believes that the Company is not exposed to any significant credit risk with respect to its cash.

Concentrations

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basis, and together represented approximately $ 48,288,000 or 73 % of its total revenues.

the year ended June 30, 2023, the Company had three (3) major customers (as restated) that each represented more than 10% of its

revenues on an individual basis, and together represented approximately $ 53,140,000

(as restated) or 80 %

(as restated) of its total revenues.

the year ended June 30, 2022, the Company had four (4) major customers that each represented more than 10% of its revenues on an

individual basis, and together represented approximately $ 35,229,000

(as restated) or 83 %

(as restated) of its total revenues.

the year ended June 30, 2024, the Company had three (3) major customers that each represented more than 10% of its revenues on an individual

basis, and together represented approximately $ 47,178,000 or 78 % of its total revenues.

Suppliers/Vendor

Concentrations

Company obtains a limited number of components and supplies included in its products from a small group of suppliers.

During the year

ended June 30, 2024 the Company had one (1) supplier who accounted for more than 10% of its total purchases which represented approximately

Company obtains components and supplies included in its products from a group of suppliers.

The Company does not manufacture the battery

cells used in energy storage solutions.

Battery cells, which are an integral part of energy storage solutions, are sourced from a single

manufacturer located in China.

In response to business uncertainties resulting from tariffs and increased tariff levels imposed by the

government on goods imported into the U.S., imports from the battery cell supplier in China were temporarily paused.

The pause was

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

At this time, neither the pause in shipments nor the modified terms have

materially affected the Company’s operations.

However, further escalation of tariffs between the U.S.

and China could have a material

effect on the Company’s ability to cost-effectively source from the supplier in China.

the year ended June 30, 2025, the Company had one supplier who accounted for more than 10% of its total purchases which represented approximately

$ 15,901,000 or 28 % of its total purchases.

During the year ended June 30, 2023 the

Company had one (1) supplier who accounted for more than 10% of its total purchases which represented approximately $ 17,022,000 or 31 %

of its total purchases.

the year ended June 30, 2022 the Company had one (1) supplier who accounted for more than 10% of its total purchases which represented

approximately $ 13,884,000

of its total purchases

the year ended June 30, 2024 the Company had one supplier who accounted for more than 10% of its total purchases which represented approximately

$ 12,437,000 or 27 % of its total purchases.

12 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.

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may harm the Company’s business.

To the best of its knowledge, except for the legal proceedings disclosed below, there are no other material legal proceedings pending against

November 1, 2024, plaintiff Asfa Kassam filed a purported federal securities class action complaint in the United States District Court,

District of Nevada, captioned Kassam v.

To the best of its knowledge, except for the legal proceedings disclosed below, there are no other

material legal proceedings pending against the Company.

November 1, 2024, plaintiff Asfa Kassam filed a purported federal securities class action complaint in the United States District

Court, District of Nevada, captioned Kassam v.

Flux Power Holdings, Inc.

2:24-cv-02051), against the Company, our Chief Executive

Officer, Ronald F.

2:24-cv-02051), against the Company, our

Chief Executive Officer, Ronald F.

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

The complaint generally alleges that the defendants

made false and misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5

promulgated thereunder.

The action purports to be brought on behalf of those who purchased or otherwise acquired the Company’s

publicly traded securities between November 11, 2022 and September 30, 2024, and seeks unspecified damages and other relief.

14, 2025, the court granted an unopposed motion to transfer the case to the Southern District of California for all further proceedings.

The case is in its early stages and a lead plaintiff has yet to be appointed.

Management believes these claims to be meritless and intends

to vigorously defend against them.

The complaint generally alleges

that the defendants made false and misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of

1934, and Rule 10b-5 promulgated thereunder.

The action purports to be brought on behalf of those who purchased or otherwise

acquired the Company’s publicly traded securities between November 11, 2022 and September 30, 2024, and seeks unspecified

damages and other relief.

On January 14, 2025, the court granted an unopposed motion to transfer the case to the Southern District

of California for all further proceedings.

On February 20, 2025, the court appointed Brandon Paulson to act as lead plaintiff for the putative class.

21, 2025, lead plaintiff filed an amended complaint.

On May 12, 2025, the defendants filed motions to dismiss the amended complaint.

a mediation, on July 11, 2025, the parties entered into a settlement term sheet (the “Term Sheet”) to fully resolve the

class action litigation.

The settlement was subsequently memorialized in a definitive settlement agreement, executed on August 27,

2025, which was filed with the Court on August 28, 2025 in connection with an unopposed motion for preliminary approval of the

settlement, which motion will be heard by the Court on October 23, 2025.

In settling the class action, the Company is not admitting

any liability and neither the Term Sheet nor the definitive settlement agreement constitutes an admission of liability or an admission regarding the accuracy of any allegation made by the plaintiffs.

The settlement provides for, among other things, the final dismissal of the litigation and a release of claims against the Defendants in

exchange for the Company establishing a $ 1.75

million escrowed settlement fund to cover payments to the settlement class, attorneys’ fees and settlement administration

settlement class will consist of all persons or entities who purchased publicly traded common stock of the Company between November 15,

2021 and February 14, 2025, but will exclude (i) persons who suffered no compensable losses;

and (ii) the Defendants;

present and former

officers, directors, or control persons of the Company at all relevant times;

members of their immediate families and their legal representatives,

heirs, successors, predecessors, or assigns;

present and former parents, subsidiaries, assigns, successors, and predecessors of the Company;

and any entity in which any of the persons excluded hereunder has or had a controlling or majority ownership interest in the Company

The plaintiff’s motion seeks certification of the settlement class, and, for settlement purposes only, Defendants

will not object to certification of the action as a class action.

settlement is subject to, among other things, court approval of such agreement.

If the settlement does not obtain approval, the parties agree that the settlement class will be decertified

without prejudice, and that all the parties will revert to their pre-settlement positions.

expect the Company’s liability insurers to directly fund approximately $ 1.15 million of the settlement fund.

The Company estimates

that it will contribute approximately $ 600,000 to the settlement fund as its remaining retention/deductible related to its insurance

Derivative Action

January 7, 2025, plaintiff Ronald Pearl filed a purported shareholder derivative complaint in the United States District Court, District

of Nevada, captioned Pearl v.

January 7, 2025, plaintiff Ronald Pearl filed a purported s tock holder derivative complaint in the United States District Court,

District of Nevada, captioned Pearl v.

Dutt, et al .

2:25-cv-00042), against current and former officers and directors of the Company,

naming the Company as a nominal defendant.

The complaint generally arises out of the same allegations contained in the Kassam

securities class action and alleges claims for breach of fiduciary duties and related claims.

The action purports to be brought derivatively

on behalf of the Company and seeks damages and other various relief.

2:25-cv-00042), against current and former officers and

directors of the Company, naming the Company as a nominal defendant.

The complaint generally arises out of the same allegations

contained in the Kassam securities class action and alleges claims for breach of fiduciary duties and related claims.

action purports to be brought derivatively on behalf of the Company and seeks damages and other various relief.

On February 19, 2025, the court granted an unopposed motion to transfer the case to the Southern District of California

for all further proceedings (Case No.

3:25-cv-00373-W-JLB).

On March 27, 2025, the parties filed a joint motion to stay the derivative

action pending the underlying class action, which motion was granted on May 1, 2025.

On April 1, 2025, the Court transferred the matter

to Judge Ohta, as related to the Kassam securities class action (now captioned Case No.

3:25-cv-00373-JO-DDL).

a mediation, on July 11, 2025, the parties reached an agreement to resolve the derivative complaint in exchange for the Company

implementing and maintaining certain corporate governance reforms and enhancements.

In connection with the settlement, defendants

agreed not to oppose a payment of attorneys’ fees and reimbursement of expenses for plaintiff’s counsel, and a service

award for plaintiff, in the total amount of $ 425,000 ,

subject to Court approval.

On August 13, 2025, plaintiff filed an unopposed motion for preliminary approval of the settlement, which

will be heard by the Court on October 16, 2025.

In settling the derivative complaint, the defendants are not admitting any

liability, and the settlement does not constitute an admission regarding the accuracy of any allegation made by the plaintiffs.

Final settlement remains subject to, among other things, court approval.

We expect the Company’s liability insurers to

directly fund approximately $ 350,000 of

the agreed upon attorney’s fees.

Related Actions

April 30, 2024, a former employee (the “Employee”) filed a class action complaint against the Company and Insperity, its

April 30, 2024, a former employee (the “Employee”) filed a class action complaint against the Company and Insperity, our

third-party payroll service provider, in San Diego County Superior Court for claims including failure to pay minimum wage, failure to

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for Violation of Private Attorneys’ General Act (“PAGA”), seeking an unspecified amount of penalties and attorneys’

fees based on allegations that the Compnay violated certain California employment laws (the “PAGA Proceeding”).

fees based on allegations that the Company violated certain California employment laws (the “PAGA Proceeding”).

8, 2024, the Company filed an answer to the complaint in which the Company denied that any of the asserted claims possessed any merit

6 unchanged sentences

On October 22, 2024, the Employee elected to dismiss

Insperity from the action without prejudice.

January 25, 2024, a former CPM, LTD Inc.

(“CPM”) employee filed a complaint against CPM, a third-party staffing service provider,

Flux Power, Inc., and Flux Power Holdings, Inc.

(collectively, the “Defendants”) in San Diego County Superior Court for claims

including harassment, failure to prevent harassment, retaliation, wrongful termination, failure to provide meal periods and rest breaks,

failure to provide accurate wage statements, and failure to pay wages at separation.

CPM is a San Diego based staffing company that provided

employees (including the plaintiff) to the Company.

The plaintiff has alleged that the Company and CPM were “joint employers”

to the plaintiff under California law and are jointly liable for the plaintiff’s claims.

The plaintiff is seeking an unspecified

amount of unpaid wages, statutory penalties, emotional distress damages, punitive damages, and attorneys’ fees from Defendants.

On June 21, 2024, the Company filed an answer to the complaint in which the Company denied that any of the asserted claims possessed

any merit and contended that certain of the asserted claims were subject to binding arbitration.

is not possible at this time to reasonably assess the final outcomes of these proceedings or reasonably to estimate the possible loss

or range of loss with respect to these proceedings.

The Company intends to vigorously defend against these claims.

April 25, 2019 the Company signed a Standard Industrial/Commercial Multi-Tenant Lease (“Lease”) with Accutek to rent approximately

Insperity from the action without

January 25, 2024, in a separate action, a former CPM, LTD Inc.

(“CPM”) employee filed a complaint against CPM, a third-party

staffing service provider, Flux Power, Inc., and Flux Power Holdings, Inc.

(collectively, the “Defendants”) in San Diego

County Superior Court for claims including harassment, failure to prevent harassment, retaliation, wrongful termination, failure to provide

meal periods and rest breaks, failure to provide accurate wage statements, and failure to pay wages at separation.

CPM is a San Diego

based staffing company that provided employees (including the plaintiff) to us.

The plaintiff has alleged that we and CPM were “joint

employers” to the plaintiff under California law and are jointly liable for the plaintiff’s claims.

The plaintiff sought

an unspecified amount of unpaid wages, statutory penalties, emotional distress damages, punitive damages, and attorneys’ fees from

On June 21, 2024, the Company filed an answer to the complaint in which the Company denied that any of the asserted claims

possessed any merit and contended that certain of the asserted claims were subject to binding arbitration.

Following discussions,

on April 28, 2025, the parties entered into a written settlement agreement that resolved all of the asserted claims.

that settlement, Defendants received a general release from the plaintiff, while expressly denying any wrongdoing whatsoever.

on May 6, 2025, the plaintiff dismissed the action with prejudice.

April 25, 2019 the Company signed a Standard Industrial/Commercial Multi-Tenant Lease (“the Lease”) with Accutek to rent

approximately 45,600

square feet of industrial space at 2685 S.

Melrose Drive, Vista, California.

The Lease has an initial term of seven years and

four months and commenced on or about June 28, 2019.

The lease contains an option to extend the term for two periods of 24 months each,

and the right of first refusal to lease an additional approximate 15,300 square feet.

The monthly rental rate was $ 42,400 for the first

12 months, escalating at 3 % each year.

February 26, 2020, the Company entered into the First Amendment to Standard Industrial/Commercial Multi-Tenant Lease dated April 25,

2019 (the “Amendment”) with Accutek to rent an additional 16,309

Lease has an initial term of seven years and four months and commenced on or about June 28, 2019.

lease contains an option to extend the term for two periods of 24 months each, and the right of first refusal to lease an additional

approximate 15,300 square feet.

The monthly rental rate was $ 42,400

for the first 12 months, escalating at 3 %

February 26, 2020, the Company entered into the First Amendment to the Lease to rent an additional 16,309

rentable square feet of space plus a residential unit of approximately

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rentable square feet).

lease for the additional space commenced 30 days following the occupancy date of the additional space and will terminate

concurrently with the term of the original lease, which expires on November

The base rent for the additional space is the same rate as the space rented under the terms of the original

lease, $ 0.93

lease for the additional space commenced 30 days following the occupancy date of the additional space and will terminate concurrently

with the term of the original lease, which expires on November

The base rent for the additional space is the same rate as

the space rented under the terms of the original lease, $ 0.93

per rentable square foot (subject to 3% annual increase).

In connection with the Amendment, the Company purchased certain existing

office furniture for a total purchase price of $ 8,300 .

December 16, 2022, the Company signed a Lease Agreement with MM Parker Court Associates, LLC to rent approximately 4,892 square feet of

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commenced on or about February 1, 2023.

The monthly rental rate was approximately $ 2,300 for the first 6 months, and $ 4,700 for months

7 to 12, escalating at 5 % each year.

The monthly rental rate was approximately $ 2,300 for the first six months, and $ 4,700 for months

seven to 12, escalating at 5 % each year.

rent expense was approximately $ 929,000 and $ 942,000 for the fiscal years ended June 30, 2025 and 2024, respectively.

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Property Leased

Lease Term (months)

Commencement Date

Monthly Lease Payment(1)

Monthly Lease

Manufacturing equipment

4 unchanged sentences

costs are amortized on a straight-line basis over their respective lease terms.

Depreciation expense related to leased assets was approximately

$ 153,000 and $ 86,000 for the years ended June 30, 2024 and 2023, respectively.

Interest expense on leased liabilities was approximately

$ 29,000 and $ 23,000 for the years ended June 30, 2024 and 2023, respectively.

The Company did not have any finance leases during the

year ended June 30, 2022.

Depreciation expense related to leased assets was

approximately $ 154,000

and $ 153,000

for the years ended June 30, 2025 and 2024, respectively.

Interest expense on lease liabilities was approximately $ 17,000

for the years ended June 30, 2025 and 2024, respectively.

minimum lease payments as of June 30, 2025 are as follows:

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Leases payable, noncurrent portion

weighted average remaining lease term for operating leases was 2.6 years, 3.6 years and 4.4 years as of June 30, 2024, 2023 and 2022,

respectively.

The weighted average discount rate for operating leases was 8.8 %, 8.9 % and 10.0 % as of June 30, 2024, 2023 and 2022, respectively.

weighted average remaining lease term for operating leases was 1.6 years and 2.6 years as of June 30, 2025 and 2024, respectively.

weighted average discount rate for operating leases was 8.5 % and 8.8 % as of June 30, 2025 and 2024, respectively.

weighted average remaining lease term for finance leases was 0.8 years and 1.6 years as of June 30, 2025 and 2024, respectively.

weighted average discount rate for finance leases was 3.4 % and 1.9 % as of June 30, 2025 and 2024, respectively.

There were no finance

leases as of June 30, 2022.

14 – SUBSEQUENT EVENTS

Management Transition

On November 20, 2024, Ronald F.

Dutt, the Company’s chairman and Chief Executive Officer, notified the Company’s

Board of Directors of his intentions to retire from his positions upon the appointment of a new Chief Executive Officer.

The Board has

commenced a search for a new Chief Executive Officer and Mr.

Dutt will remain with the Company through the search and transition period.

to Loan and Security Agreement with Gibraltar Business Capital

previously announced in the Company’s Form 8-K filed with the SEC on September 5, 2024, the Board of Directors of the Company,

including its audit committee members, concluded on August 30, 2024 that the previously issued audited consolidated financial statements

for the fiscal years ended June 30, 2023 and 2022, and all of the quarterly unaudited consolidated financial statements within the fiscal

years ended June 30, 2024, 2023 and 2022 (collectively, the “Prior Financial Statements”), could no longer be relied upon

due to material accounting errors identified by management.

See Note 15 – Restatement of Previously Issued Financial Statements.

Company notified GBC that the restatement of historical financial statements was likely to result in event of default with respect to

the Company’s failure to maintain the EDITDA covenant for the trailing three (3) month periods ended July 31, 2023 and August 31,

2023, or Default.

On August 30, 2025, the Company received a Waiver, which waived the Default, subject to satisfaction of the following

(i) receipt of a counterpart of the Waiver duly executed by the Company;

and (ii) receipt of the representations and warranties

from the Company that after giving effect to the Waiver, the representations and warranties contained in the Agreement, the Waiver and

the other Loan Documents shall be true and correct;

and (iii) after giving effect to the Waiver, no additional event of default shall

have occurred and be continuing on and as of the effective date of the Waiver.

Company’s failure to file this Annual Report on Form 10-K for the year ended June 30, 2024 in a timely manner resulted in an event

of default with respect to the covenant to timely deliver a copy of the Company’s annual audited financial statements.

Additionally,

the Company notified GBC that it appeared likely that as a result of the restatement it would fail to maintain the EBITDA covenant for

the trailing three (3) month periods ended May 31, 2024 and July 31, 2024, or Default.

On January 17, 2025, the Company received a Waiver,

which waived the Defaults, subject to satisfaction of the following conditions:

(i) receipt of a counterpart of the Waiver duly executed

by the Company;

and (ii) receipt of the waiver fee of $25,000;

and (iii) receipt of the representations and warranties from the Company

that after giving effect to the Waiver, the representations and warranties contained in the Agreement, the Waiver and the other Loan

Documents shall be true and correct;

and (iv) after giving effect to the Waiver, no additional event of default shall have occurred and

be continuing on and as of the effective date of the Waiver .

to Loan and Security Agreement with Gibraltar Business Capital

January 22, 2025, we entered into Amendment No.

4 to Loan and Security Agreement (the “Fourth Amendment”) with GBC which

amended certain terms of the Loan and Security Agreement dated July 28, 2023, as amended, relating to the EBITDA Minimum financial

covenant of the Company.

In consideration for the Fourth Amendment, the Company agreed to pay GBC a non-refundable amendment fee of $ 50,000

in cash, as follows:

(i) $ 25,000 shall be due and payable on March 1, 2025, and (ii) $ 25,000 shall be due and payable on

April 1, 2025.

15 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

described in Note 2 – Restatement of Previously Issued Financial Statements, and as further described below, in connection with the

preparation of its consolidated financial statements as of and for the year ended June 30, 2024, the Company identified multiple

prior-period misstatements that were improperly accounted for in its previously issued audited consolidated financial statements for

the fiscal years ended June 30, 2023 and 2022.

nature of the restatement adjustments and their impact on previously reported consolidated financial statements are as follows:

The Company did not properly evaluate its calculation of its excess and obsolescence reserve on its finished goods and

raw materials inventories, resulting in an overstatement of inventories of $ 926,000

and $ 764,000

as of June 30, 2023 and 2022, respectively, an understatement of accumulated deficit of $ 521,000 as of June 30, 2021, and an

understatement of cost of sales of $ 162,000

and $ 243,000

for the years ended June 30, 2023, and 2022, respectively.

In addition, certain inventory components were not properly recorded at

the lower of cost or net realizable value, resulting in an overstatement of inventories of $ 781,000

and $ 607,000

as of June 30, 2023 and 2022, respectively, an understatement of accumulated deficit of $ 296,000 as of June 30, 2021, and an

understatement of cost of sales of $ 174,000

and $ 311,000

for the years ended June 30, 2023 and 2022, respectively.

Further, certain loaner service packs and consigned inventory were not

reconciled in a timely manner, resulting in an overstatement of inventories of $ 670,000

and $ 210,000

as of June 30, 2023 and 2022, respectively, and an understatement of cost of sales of $ 460,000

and $ 210,000

for the years ended June 30, 2023 and 2022, respectively.

Additionally, the Company did not properly present inventory write downs

on the consolidated statement of cash flows resulting in an understatement of inventory write downs of $ 354,000

and $ 111,000

and corresponding overstatement of changes in inventories of $ 354,000

and $ 111,000

on the consolidated statement of cash flows for the years ended June 30, 2023 and 2022, respectively.

(b) Revenues.

The Company did not

properly recognize revenue in the periods in which the related performance obligations were satisfied for a certain contract with a

customer, resulting in an understatement of revenues of $ 151,000 for the year ended June 30, 2023 and a corresponding understatement

of accounts receivable of $ 151,000 as of June 30, 2023.

Company 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 of $ 208,000 and $ 828,000 for the years ended June 30, 2023 and 2022, respectively.

The Company had various

clearing accounts that were not reconciled in a timely manner, resulting in an understatement of accounts payable of $ 137,000

as of June 30, 2023, overstatement of inventories of $ 461,000

and $ 241,000

as of June 30, 2023 and 2022, respectively, an understatement of accumulated deficit of $ 141,000 as of June 30, 2021, and

understatement of cost of sales of $ 357,000

and $ 100,000

for the years ended June 30, 2023 and 2022, respectively.

(e) Cash flow presentation of debt

issuance cost in the form of issued Company stock warrants.

The Company erroneously presented $ 253,000

of debt issuance cost incurred in conjunction with credit facility arrangements made during the year ended June 30, 2022 as fair

value of warrants issued, an adjustment to reconcile net loss to cash used in operating activities in the Company’s

consolidated statement of cash flows for the year ended June 30, 2022.

As debt issuance costs are recorded as a current asset, the

presentation overstated items reconciling net loss to cash used in operating activities and understated the change in other assets

in the consolidated statement of cash flows.

Additionally, the Company improperly omitted the non-cash disclosure related to the

issuance of warrants within the supplemental disclosures of non-cash investing and financing activities for the year ended June 30,

are the restated consolidated balance sheets as of June 30, 2023 and 2022, and the restated consolidated statements of operations, statements

of stockholders’ equity and statements of cash flows for each of the years ended June 30, 2023 and 2022 that summarize the effects

of the restatement.

SCHEDULE OF ADJUSTMENT FOR CORRECTION TO PREVIOUS PERIODS

POWER HOLDINGS, INC.

BALANCE SHEET

As previously

Restatement adjustments

June 30, 2023

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,838,000 )

Other current assets

Total current assets

( 2,687,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,687,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)(d)

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

16,462,215 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(b)(d)

( 88,555,000 )

( 2,824,000 )

( 91,379,000 )

Total stockholders’ equity

( 2,824,000 )

Total liabilities and stockholders’ equity

$ ( 2,687,000 )

POWER HOLDINGS, INC.

BALANCE SHEET

As previously

Restatement adjustments

June 30, 2022

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a)(d)

( 1,822,000 )

Other current assets

Total current assets

( 1,822,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,822,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Preferred stock value

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

15,996,658 shares issued and outstanding

Common stock value

Additional paid-in capital

Accumulated deficit (a)(d)

( 81,814,000 )

( 1,822,000 )

( 83,636,000 )

Total stockholders’ equity

( 1,822,000 )

Total liabilities and stockholders’ equity

$ ( 1,822,000 )

POWER HOLDINGS, INC.

STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Year ended June 30, 2023

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

( 1,210,000 )

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 5,410,000 )

( 1,002,000 )

( 6,412,000 )

Other income (expense):

Interest income (expense), net

( 1,339,000 )

$ ( 6,741,000 )

$ ( 1,002,000 )

$ ( 7,743,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Year ended June 30, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

( 1,692,000 )

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 15,357,000 )

( 16,221,000 )

Other income (expense):

Interest income (expense), net

$ ( 15,609,000 )

$ ( 864,000 )

$ ( 16,473,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDING, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

Paid-in Capital

previously reported

June 30, 2022

$ ( 81,814,000 )

Issuance of common stock and warrants - registered direct

offering, net of costs

Issuance of common stock and warrants - registered direct offering, net

of costs, shares

common stock – public offering, net of costs

common stock – exercised options and RSU settlement

Fair value of warrants issued

( 6,741,000 )

June 30, 2023

( 88,555,000 )

June 30, 2022 (a)(d)

( 1,822,000 )

loss (a) (b) (d)

( 1,002,000 )

Balance, June 30, 2023

( 2,824,000 )

June 30, 2022

( 83,636,000 )

common stock – public offering, net of costs

common stock – exercised options and RSU settlement

( 7,743,000 )

June 30, 2023

$ ( 91,379,000 )

POWER HOLDING, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

Paid-in Capital

previously reported

June 30, 2021

$ ( 66,205,000 )

common stock and warrants - registered direct offering, net of costs

common stock – public offering, net of costs

common stock - exercised options and RSU settlement

Fair value of warrants issued

( 15,609,000 )

June 30, 2022

( 81,814,000 )

June 30, 2021 (a)(d)

Balance, June 30, 2022

( 1,822,000 )

June 30, 2021

( 67,163,000 )

common stock and warrants - registered direct offering, net of costs

common stock – public offering, net of costs

common stock - exercised options and RSU settlement

Fair value of warrants issued

( 16,473,000 )

June 30, 2022

$ ( 83,636,000 )

POWER HOLDING, INC.

STATEMENTS OF CASH FLOWS

As previously

Restatement adjustments

Year ended June 30, 2023

As previously

Restatement adjustments

Cash flows from operating activities:

Net loss (a)(b)(d)

$ ( 6,741,000 )

$ ( 1,002,000 )

$ ( 7,743,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Fair value of warrants issued as debt discount cost

Amortization of debt issuance costs

Non-cash lease expense

Inventory write downs (a)

Changes in operating assets and liabilities:

Accounts receivable (b)

Inventories (a)(d)

( 2,734,000 )

( 2,408,000 )

Accounts payable (b)(d)

Accrued expenses

Accrued interest

Office leases payable

Deferred revenue

Customer deposits

Net cash used in operating activities

( 3,574,000 )

Cash flows from investing activities:

Purchases of equipment

( 1,032,000 )

Proceeds from sale of fixed assets

Net cash used in investing activities

( 1,024,000 )

Cash flows from financing activities:

Proceeds from the issuance of common stock in registered direct offering, net of offering costs

Proceeds from the issuance of common stock in public offering, net of offering costs

Proceeds from revolving line of credit

Payment of revolving line of credit

( 58,377,000 )

Payment of finance leases

Net cash provided by financing activities

Net change in cash

Cash, beginning of period

Cash, end of period

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Initial right of use asset recognition

Common stock issued for vested RSUs

Supplemental cash flow information:

Interest paid

POWER HOLDING, INC.

STATEMENTS OF CASH FLOWS

As previously

Restatement adjustments

13 – SEGMENT INFORMATION

Company has one business activity and derives its revenue from the design, development, manufacturing, and sale of a portfolio of advanced

lithium-ion energy storage solutions for electrification of a range of industrial commercial sectors which include material handling,

airport ground support equipment (“GSE”), and stationary energy storage.

Accordingly, the Company operates as a single operating

and reporting segment.

The Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer.

CODM reviews financial information including operating results and assets on a consolidated basis.

evaluating the Company’s financial performance and making strategic decisions, the CODM uses net income (loss) and Adjusted EBITDA

to assess performance and allocate financial, capital and personnel resources.

Net income (loss) and Adjusted EBITDA are used in the

annual operating plan and forecasting process as well as ongoing decisions driven by the monthly or quarterly reviews of the plan versus

actual results.

table below is a summary of the segment profit or loss, including significant segment expenses, for the periods presented:

OF SEGMENT INFORMATION

Year ended June 30,

As previously

Restatement adjustments

Cash flows from operating activities:

Net loss (a)(d)

$ ( 15,609,000 )

$ ( 864,000 )

$ ( 16,473,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Fair value of warrants issued as debt discount cost

Non-cash lease expense

Inventory write downs (a)

Changes in operating assets and liabilities:

Accounts receivable

( 2,512,000 )

Inventories (a)(d)

( 5,810,000 )

( 5,550,000 )

Accounts payable

Accrued expenses

Accrued interest

Office leases payable

Deferred revenue

Customer deposits

Net cash used in operating activities

( 23,893,000 )

Cash flows from investing activities:

Purchases of equipment

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from the issuance of common stock in registered direct offering, net of offering costs

Proceeds from the issuance of common stock in public offering, net of offering costs

Proceeds from revolving line of credit

Payment of revolving line of credit

( 3,561,000 )

Net cash provided by financing activities

Net change in cash

( 4,228,000 )

Cash, beginning of period

Cash, end of period

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Common stock issued for vested RSUs

Warrants issued in connection with borrowing agreements, recorded as debt issuance cost

Supplemental cash flow information:

Interest paid

(a) Inventories.

Company did not properly evaluate its calculation of its excess and obsolescence reserve on its finished goods and raw materials inventories,

resulting in an overstatement of inventories and an understatement of cost of sales.

In addition, certain inventory components were not

properly recorded at the lower of cost or net realizable value, resulting in an overstatement of inventory and an understatement of cost

Further, certain loaner service packs and consigned inventory were not reconciled timely, resulting in an overstatement of

inventory and an understatement of cost of sales.

Lastly, the Company also corrected the cash flow presentation related to inventory

write downs on the statement of cash flows.

The Company did not properly recognize revenue in the periods which the related performance obligations were satisfied

for a certain contract with a customer.

Additionally, the Company improperly recorded accounts receivable from the same contract with a customer as a reduction to its accounts payable owed to the customer prior to the right

of offset conditions under ASC 210-20 being met.

As a result, revenues, accounts receivable, and accounts payable were misstated.

The Company 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.

The Company had various clearing accounts that were not reconciled in a timely manner, resulting in misstatements of accounts

payable, inventories and cost of sales.

16 – QUARTERLY FINANCIAL SUMMARY (Unaudited)

following tables present the impact of the restatement for the quarters ended March 31, 2024, December 31, 2023, September 30, 2023,

June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021 (collectively, the “Restated Quarters”).

These tables also include financial information pertaining to the quarter ended June 30, 2024.

unaudited condensed consolidated interim financial statements reflect all

adjustments, consisting only of normal and recurring items, necessary to present fairly the Company’s financial position, the results

of operations, statements of cash flows, and changes in stockholder’s equity for the quarters ended within the Restated Quarters.

nature of the restatement adjustments and their impact on previously reported unaudited condensed consolidated interim financial statements

are as follows:

The Company did not properly evaluate its calculation of its excess and obsolescence reserve on its finished goods and

raw materials inventories, resulting in an overstatement of inventories and an understatement of cost of sales.

In addition, certain

inventory components were not properly recorded at the lower of cost or net realizable value, resulting in an overstatement of

inventories and an understatement of cost of sales.

Further, certain loaner service packs and consigned inventory were not

reconciled in a timely manner, resulting in an overstatement of inventories and an understatement of cost of sales.

Additionally, the Company did not properly present inventory write downs on the consolidated statement of cash flows resulting in an understatement of inventory write downs and corresponding overstatement

of changes in inventories on the consolidated statement of cash flows.

The Company did not properly recognize revenue in the periods which the related performance obligations were satisfied

for a certain contract with a customer.

Additionally, the Company improperly recorded accounts receivable from the same contract with a customer as a reduction to its accounts payable owed to the customer prior to the right

of offset conditions under ASC 210-20 being met.

As a result, revenues, accounts receivable, and accounts payable were misstated.

Expense classification.

The Company 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.

The Company had various clearing accounts that were not reconciled in a timely manner, resulting in misstatements of accounts

payable, inventories and cost of sales.

Product warranty liability.

The Company did not include certain product warranty-related expenses within the proper period 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.

(f) Cash flow presentation of debt

issuance cost in the form of issued Company stock warrants.

The Company erroneously presented debt issuance cost incurred in

conjunction with credit facility arrangements as fair value of warrants issued, an adjustment to reconcile net loss to net cash used

in operating activities in the Company’s consolidated statement of cash flows.

As debt issuance costs are recorded as a

current asset, the presentation overstated adjustments to reconcile net loss to cash used in operating activities and understated

the change in other assets in the consolidated statement of cash flows.

Additionally, the Company improperly omitted the non-cash

disclosure related to the issuance of warrants within the supplemental disclosures of non-cash investing and financing

Financial Items

following tables set forth summarized quarterly financial information of

the Restated Quarters, including the effects of the restatement on our previously reported consolidated statements of operations, and

the quarter ended June 30, 2024.

SCHEDULE OF SUMMARIZED FINANCIAL ITEMS

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

Fiscal year 2024

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

Operating loss

( 1,811,000 )

( 2,572,000 )

( 1,785,000 )

( 2,244,000 )

( 3,005,000 )

( 2,188,000 )

Net loss per share – basic and diluted

June 30, 2023

March 31, 2023

December 31, 2022

September 30, 2022

Fiscal year 2023

June 30, 2023

March 31, 2023

December 31, 2022

September 30, 2022

Operating loss

( 1,832,000 )

( 1,229,000 )

( 1,419,000 )

( 1,932,000 )

( 2,200,000 )

( 1,487,000 )

( 1,796,000 )

( 2,260,000 )

Net loss per share – basic and diluted

June 30, 2022

March 31, 2022

December 31, 2021

September 30, 2021

Fiscal year 2022

June 30, 2022

March 31, 2022

December 31, 2021

September 30, 2021

Operating loss

( 2,672,000 )

( 3,841,000 )

( 5,348,000 )

( 4,360,000 )

( 2,838,000 )

( 3,893,000 )

( 5,379,000 )

( 4,363,000 )

Net loss per share – basic and diluted

Financial Summary

net impact of the restatement on our quarterly and year-to-date unaudited condensed financial statements is as follows:

SCHEDULE OF QUARTERLY

FINANCIAL SUMMARY

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

September 30,

Fiscal year 2024

September 30,

Current assets:

Accounts receivable

Inventories, net

Other current assets

Total current assets

Right of use asset

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

16,599,683 , 16,532,275 and 16,478,237 shares issued and outstanding at March 31, 2024, December 31, 2023 and September 30, 2023, respectively

Additional paid-in capital

Accumulated deficit

( 97,468,000 )

( 94,463,000 )

( 93,567,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

September 30,

Fiscal year 2023

September 30,

Current assets:

Accounts receivable

Inventories, net

Other current assets

Total current assets

Right of use asset

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

16,156,432 , 16,029,478 and 15,998,336 shares issued and outstanding at March 31, 2023, December 31, 2022 and September 30, 2022, respectively

Additional paid-in capital

Accumulated deficit

( 89,179,000 )

( 87,692,000 )

( 85,896,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

September 30,

Fiscal Year 2022

September 30,

Current assets:

Accounts receivable

Inventories, net

Other current assets

Total current assets

Right of use asset

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

15,992,080 , 15,987,502 and 15,987,502 shares issued and outstanding at March 31, 2022, December 31, 2021 and September 30, 2021, respectively

Additional paid-in capital

Accumulated deficit

( 80,798,000 )

( 76,904,000 )

( 71,526,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

March 31, 2024

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,812,000 )

Other current assets

Total current assets

( 2,748,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,748,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)(d)(e)

Accrued expenses (e)

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

16,599,683 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)(e)

( 94,121,000 )

( 3,347,000 )

( 97,468,000 )

Total stockholders’ equity

( 3,347,000 )

Total liabilities and stockholders’ equity

$ ( 2,748,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

December 31, 2023

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,729,000 )

Other current assets

Total current assets

( 2,582,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,582,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)(d)(e)

Accrued expenses (e)

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

16,532,275 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)(e)

( 91,481,000 )

( 2,982,000 )

( 94,463,000 )

Total stockholders’ equity

( 2,982,000 )

Total liabilities and stockholders’ equity

$ ( 2,582,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

September 30, 2023

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,904,000 )

Other current assets

Total current assets

( 2,763,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,763,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (d)

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

16,478,237 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(b)(d)

( 90,667,000 )

( 2,900,000 )

( 93,567,000 )

Total stockholders’ equity

( 2,900,000 )

Total liabilities and stockholders’ equity

$ ( 2,763,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

March 31, 2023

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,100,000 )

Other current assets

Total current assets

( 2,072,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,072,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)

Accrued expenses

Line of credit

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

16,156,432 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)

( 87,079,000 )

( 2,100,000 )

( 89,179,000 )

Total stockholders’ equity

( 2,100,000 )

Total liabilities and stockholders’ equity

$ ( 2,072,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

December 31, 2022

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,058,000 )

Other current assets

Total current assets

( 2,018,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,018,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

16,029,478 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)

( 85,634,000 )

( 2,058,000 )

( 87,692,000 )

Total stockholders’ equity

( 2,058,000 )

Total liabilities and stockholders’ equity

$ ( 2,018,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

September 30, 2022

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a)(d)

( 1,943,000 )

Other current assets

Total current assets

( 1,943,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,943,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

15,998,336 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)

( 83,953,000 )

( 1,943,000 )

( 85,896,000 )

Total stockholders’ equity

( 1,943,000 )

Total liabilities and stockholders’ equity

$ ( 1,943,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

March 31, 2022

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a) (d)

( 1,637,000 )

Other current assets

Total current assets

( 1,637,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,637,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

15,992,080 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)

( 79,161,000 )

( 1,637,000 )

( 80,798,000 )

Total stockholders’ equity

( 1,637,000 )

Total liabilities and stockholders’ equity

$ ( 1,637,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

December 31, 2021

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a) (d)

( 1,493,000 )

Other current assets

Total current assets

( 1,493,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,493,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

15,987,502 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a) (d)

( 75,411,000 )

( 1,493,000 )

( 76,904,000 )

Total stockholders’ equity

( 1,493,000 )

Total liabilities and stockholders’ equity

$ ( 1,493,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

September 30, 2021

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a)(d)

( 1,191,000 )

Other current assets

Total current assets

( 1,191,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,191,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Deferred revenue

Customer deposits

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Preferred stock value

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

15,987,502 shares issued and outstanding

Common stock value

Additional paid-in capital

Accumulated deficit

( 70,335,000 )

( 1,191,000 )

( 71,526,000 )

Total stockholders’ equity

( 1,191,000 )

Total liabilities and stockholders’ equity

$ ( 1,191,000 )

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal year 2024

September 30,

Cost of sales

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 2,572,000 )

( 4,804,000 )

( 2,232,000 )

( 1,785,000 )

Other income (expense):

Interest income (expense), net

( 1,285,000 )

$ ( 3,005,000 )

$ ( 6,089,000 )

$ ( 896,000 )

$ ( 3,084,000 )

$ ( 2,188,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal year 2023

September 30,

Cost of sales

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 1,229,000 )

( 4,580,000 )

( 1,419,000 )

( 3,351,000 )

( 1,932,000 )

Other income (expense):

Interest income (expense), net

$ ( 1,487,000 )

$ ( 5,543,000 )

$ ( 1,796,000 )

$ ( 4,056,000 )

$ ( 2,260,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal year 2022

September 30,

Cost of sales

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 3,841,000 )

( 13,549,000 )

( 5,348,000 )

( 9,708,000 )

( 4,360,000 )

Other income (expense):

Interest income (expense), net

$ ( 3,893,000 )

$ ( 13,635,000 )

$ ( 5,379,000 )

$ ( 9,742,000 )

$ ( 4,363,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended March 31, 2024

As previously

Restatement adjustments

Cost of sales (a)(e)

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 2,207,000 )

( 2,572,000 )

Other income (expense):

Interest income (expense), net

$ ( 2,640,000 )

$ ( 365,000 )

$ ( 3,005,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Three months ended December 31, 2023

As previously

Restatement adjustments

$ ( 141,000 )

Cost of sales (a)(c)(d)(e)

(a) (c) (d) (e)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

Other income (expense):

Interest income (expense), net

$ ( 814,000 )

$ ( 896,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended September 30, 2023

As previously

Restatement adjustments

Cost of sales (a)

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 1,709,000 )

( 1,785,000 )

Other income (expense):

Interest income (expense), net

$ ( 2,112,000 )

$ ( 2,188,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Three months ended March 31, 2023

As previously

Restatement adjustments

Cost of sales (a)(d)

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 1,187,000 )

( 1,229,000 )

Other income (expense):

Interest income (expense), net

$ ( 1,445,000 )

$ ( 1,487,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended December 31, 2022

As previously

Restatement adjustments

Cost of sales (a)(d)

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 1,304,000 )

( 1,419,000 )

Other income (expense):

Interest income (expense), net

$ ( 1,681,000 )

$ ( 115,000 )

$ ( 1,796,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Three months ended September 30, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 1,811,000 )

( 1,932,000 )

Other income (expense):

Interest income (expense), net

$ ( 2,139,000 )

$ ( 121,000 )

$ ( 2,260,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended March 31, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 3,697,000 )

( 3,841,000 )

Other income (expense):

Interest income (expense), net

$ ( 3,749,000 )

$ ( 144,000 )

$ ( 3,893,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Three months ended December 31, 2021

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 5,046,000 )

( 5,348,000 )

Other income (expense):

Interest income (expense), net

$ ( 5,077,000 )

$ ( 302,000 )

$ ( 5,379,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended September 30, 2021

As previously

Restatement adjustments

Cost of sales (a)(d)

Operating expenses:

Selling and administrative

General and administrative

Selling and marketing

Research and development

Total operating expenses

Operating loss

$ ( 6,674,000 )

$ ( 8,333,000 )

Other income (expense):

Interest income (expense), net

$ ( 4,130,000 )

$ ( 233,000 )

$ ( 4,363,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Six months ended December 31, 2023

As previously

Restatement adjustments

$ ( 151,000 )

Cost of sales (a)(c)(d)(e)

(a) (c) (d) (e)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 2,074,000 )

( 2,232,000 )

Other income (expense):

Interest income (expense), net

$ ( 2,926,000 )

$ ( 158,000 )

$ ( 3,084,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Six months ended December 31, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 3,115,000 )

( 3,351,000 )

Other income (expense):

Interest income (expense), net

$ ( 3,820,000 )

$ ( 236,000 )

$ ( 4,056,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Six months ended December 31, 2021

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

( 1,088,000 )

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 9,173,000 )

( 9,708,000 )

Other income (expense):

Interest income (expense), net

$ ( 9,207,000 )

$ ( 535,000 )

$ ( 9,742,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Nine months ended March 31, 2024

As previously

Restatement adjustments

$ ( 151,000 )

Cost of sales (a)(c)(d)(e)

(a) (c) (d) (e)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 4,281,000 )

( 4,804,000 )

Other income (expense):

Interest income (expense), net

( 1,285,000 )

$ ( 5,566,000 )

$ ( 523,000 )

$ ( 6,089,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Nine months ended March 31, 2023

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 4,302,000 )

( 4,580,000 )

Other income (expense):

Interest income (expense), net

$ ( 5,265,000 )

$ ( 278,000 )

$ ( 5,543,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

As previously

Restatement adjustments

Nine months ended March 31, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

( 1,407,000 )

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 12,870,000 )

( 13,549,000 )

Other income (expense):

Interest income (expense), net

$ ( 12,956,000 )

$ ( 679,000 )

$ ( 13,635,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDING, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance, as restated, June 30, 2023

$ ( 91,379,000 )

Activity, as reported

( 2,112,000 )

( 1,836,000 )

Adjustments (a)

Balance, as restated, September 30, 2023

( 93,567,000 )

Activity, as reported

Adjustments (a)(b)(d)(e)

(a) (b) (d) (e)

Balance, as restated, December 31, 2023

( 94,463,000 )

Activity, as reported

( 2,640,000 )

( 1,967,000 )

Adjustments (a)

Balance, as restated, March 31, 2024

$ ( 97,468,000 )

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance, as restated, June 30, 2022

$ ( 83,636,000 )

Activity, as reported

( 2,139,000 )

( 2,044,000 )

Adjustments (a)

Balance, as restated, September 30, 2022

( 85,896,000 )

Activity, as reported

( 1,681,000 )

( 1,472,000 )

Adjustments (a)

Balance, as restated, December 31, 2022

( 87,692,000 )

Activity, as reported

( 1,445,000 )

Adjustments (a)

Balance, as restated, March 31, 2023

$ ( 89,179,000 )

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance, as restated, June 30, 2021 *

$ ( 67,163,000 )

Activity, as reported

( 4,130,000 )

Adjustments (a)

Balance, as restated, September 30, 2021

( 71,526,000 )

Activity, as reported

( 5,077,000 )

( 4,933,000 )

Adjustments (a)

Balance, as restated, December 31, 2021

( 76,905,000 )

Activity, as reported

( 3,749,000 )

( 3,597,000 )

Adjustments (a)

Balance, as restated, March 31, 2022

$ ( 80,798,000 )

* June 30, 2021 total

shareholders’ equity, as restated, reflects the impact of restatement adjustments related to periods prior to the year ended June

The impact of restatement is a decrease of $ 958,000

to accumulated deficit at June 30, 2021.

POWER HOLDING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

March 31, 2024

Six months ended

December 31, 2023

Three months ended

September 30, 2023

Fiscal Year 2024

Nine months ended

March 31, 2024

Six months ended

December 31, 2023

Three months ended

September 30, 2023

Cash flows from operating activities:

$ ( 6,089,000 )

$ ( 3,084,000 )

$ ( 2,188,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Amortization of debt issuance costs

Non-cash lease expense

Inventory write downs

Changes in operating assets and liabilities:

Accounts receivable

( 1,668,000 )

( 3,926,000 )

( 2,040,000 )

( 1,562,000 )

Accounts payable

Accrued expenses

Accrued interest

Office leases payable

Deferred revenue

Customer deposits

Net cash used in operating activities

( 4,274,000 )

( 4,045,000 )

( 3,093,000 )

Cash flows from investing activities:

Purchases of equipment

Proceeds from sale of fixed assets

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from stock option exercises and employee stock purchase plan exercises

Proceeds from the issuance of common stock in registered direct offering, net of offering costs

Proceeds from the issuance of common stock in public offering, net of offering costs

Proceeds from revolving line of credit

Payment of revolving line of credit

( 49,087,000 )

( 32,205,000 )

( 15,981,000 )

Payment of finance leases

Net cash provided by financing activities

Net change in cash

( 1,129,000 )

( 1,240,000 )

Cash, beginning of period

Cash, end of period

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Common stock issued for vested RSUs

Warrants issued in connection with borrowing agreements, recorded as debt issuance cost

Supplemental cash flow information:

Interest paid

POWER HOLDING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

March 31, 2023

Six months ended

December 31, 2022

Three months ended

September 30, 2022

Fiscal Year 2023

Nine months ended

March 31, 2023

Six months ended

December 31, 2022

Three months ended

September 30, 2022

Cash flows from operating activities:

$ ( 5,543,000 )

$ ( 4,056,000 )

$ ( 2,260,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Amortization of debt issuance costs

Non-cash lease expense

Inventory write downs

Changes in operating assets and liabilities:

Accounts receivable

( 1,272,000 )

( 1,898,000 )

( 2,987,000 )

( 4,610,000 )

( 3,097,000 )

( 2,538,000 )

Accounts payable

provided to the CODM are consistent with those reported on the consolidated balance sheets.

All long-lived assets are held in the United

States, and revenues and net losses are solely generated from operations in the United States.

14 – SUBSEQUENT EVENTS

Management evaluated events subsequent

to June 30, 2025 through the filing date of these consolidated financial statements and concluded there are no material subsequent events

to disclose other than those presented as follows.

of Delisting or Failure to Satisfy a Continued Listing Rule or Standard;

Transfer of Listing

January 31, 2025, the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”)

notified the Company that the Company did not comply with the minimum $2,500,000 stockholders’ equity requirement for continued listing

set forth in Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”).

On March 17, 2025, the

Company filed its plan with Nasdaq to regain compliance with the Stockholders’ Equity Requirement, which included requesting

an extension through July 30, 2025.

July 31, 2025, the Company received a determination letter from the Staff notifying the Company that based on the Company’s most

recent disclosure, the Company’s stockholders’ equity was a deficit of $ 4,372,000 as of March 31, 2025 and that the Staff

had determined that the Company had not regained compliance with the Stockholders’ Equity Requirement.

The Staff has informed the

company that trading of the Company’s common stock would be suspended at the opening of business on August 11, 2025, unless the

Company requested an appeal of the Staff’s determination to a Nasdaq Hearings Panel (the “Panel”).

August 7, 2025, the Company submitted such hearing request to the Panel, which request will stay suspension of the Company’s

securities and the filing of the Form 25-NSE pending the Panel’s decision.

On September 4, 2025, the Company made its

presentation to the Panel.

On September 15, 2025, the Company raised $5.0 million through a private placement of its securities.

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, subject to the following:

(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.

In addition, the Company has taken steps to reduce its cash burn

rate through a reduction in force of approximately 15% of its work force.

The Company is 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 the Company’s request for continued listing, or stay the suspension of the Company’s securities.

Amendment to the Subordinated Unsecured Promissory Note

July 16, 2025, we entered into a First Amendment to the Subordinated Unsecured Promissory Note (“Note Amendment”) with Cleveland

Capital, L.P.

(“Cleveland”).

The Note Amendment amended the due date set forth in the Subordinated Unsecured Promissory Note

dated November 2, 2023 (“Original Note” and as amended by the First Amendment, the “Cleveland Note”) issued by

us to Cleveland in connection with a certain Credit Facility Agreement dated November 2, 2023 (the “Subordinated LOC”).

to the Note Amendment, the due date under the Original Note was changed from August 15, 2025 to September 30, 2025.

Debt Satisfaction Agreement

On September 15, 2025, concurrently

with the Closing of the Private Placement (discussed below), we entered into a Debt Satisfaction Agreement with Cleveland (the “Debt

Satisfaction Agreement”) pursuant to which Cleveland represented that the full subscription price for the Securities acquired and

issued in the Private Placement to Cleveland were in exchange for the full payment and settlement of any and all obligations of the Company

due to Cleveland the Cleveland Note and upon issuance of the Securities in the Private Placement to Cleveland, all obligations under the

Cleveland Note and Subordinated LOC were deemed paid in full and the Subordinated LOC was terminated.

In connection with such termination, the Cleveland Note was cancelled.

Facility Amendments

July 16, 2025, we entered into Amendment No.

5 to the Loan Agreement (the “Fifth Amendment”), which amended the definition

of the maturity date to August 31, 2025 unless otherwise extended pursuant to the terms of the Loan Agreement, provided however, upon

the occurrence of either (i) an extension of the due date of Cleveland Note to a date no earlier than September 29, 2027, or (ii) the

conversion of all of the outstanding obligations under the Cleveland Note into equity of the Registrant, the maturity date will automatically

extend to July 31, 2027.

In consideration for the Fifth Amendment, we paid GBC a non-refundable amendment fee of $ 112,500 .

September 4, 2025, we entered into Amendment No.

6 to the Loan Agreement (the “Sixth Amendment”), with the effective

date of August 31, 2025, which amended certain terms of the Loan Agreement, including (i) modifications to the EBITDA minimum

financial covenant of the Company, and (ii) an extension of the maturity date from August 31, 2025 to September 15, 2025, subject to

acceleration or further extension pursuant to the terms of the Loan Agreement.

Upon the closing of the Private Placement on

September 15, 2025, all the outstanding obligations under the Cleveland Note were applied in full towards satisfaction of the

subscription by Cleveland in the Private Placement.

Upon the conversion of all

of the outstanding obligations under the Cleveland Note into equity of the Company, the

Maturity Date of the Revolving Note was automatically extended to July 31, 2027.

Meeting of Stockholders

On August 29 2025, at a

Special Meeting of Stockholders, our stockholders approved the following proposals:

(1) the amendment and restatement of the

Company’s Amended and Restated Articles of Incorporation as amended and currently in effect (the “Articles”) to,

among other things, (i) increase the aggregate number of authorized shares of preferred stock from 500,000

to 3,000,000 ,

par value per share (“Preferred Stock”), (ii) grant the Board authority to fix the rights and preferences of the

preferred stock by resolution from time to time, and (iii) designate 1,000,000

shares of Preferred Stock as “Series A Convertible Preferred Stock”, $ 0.001

par value per share (the “Series A Preferred Stock”), with rights, preferences, privileges and restrictions all as set

forth in the Second Amended and Restated Certificate of Incorporation (the “Restated Articles”) in substantially the

form attached to the Proxy Statement, and (2) the reservation and issuance of such number of shares of common stock issuable in connection with the conversion of the shares of Series A Preferred Stock which are issuable upon exercise of certain

prefunded warrants, and exercise of certain common stock warrants issued and issuable in the Private Placement, which total issuance could

exceed 20% of the amount outstanding of common stock prior to the Private Placement for purposes of complying with Nasdaq Listing Rule

Second Amended

and Restated Articles of Incorporation and Establishment of Series A Preferred Stock

September 10, 2025, the Company filed a Second Amended and Restated Articles of Incorporation (the “Restated Articles”)

with the Secretary of State of the State of Nevada (“Nevada Secretary of State”) to among other things, (i) increase the

aggregate number of authorized shares of preferred stock from 500,000 to 3,000,000 , $ 0.001 par value per share (“Preferred

Stock”), (ii) grant the Board authority to fix the rights and preferences of the preferred stock by resolution from time to

time, and (iii) designate 1,000,000 shares of Preferred Stock as “Series A Convertible Preferred Stock ”, $ 0.001 par

value per share (the “Series A Preferred Stock”), with rights, preferences, privileges and restrictions set forth

The Restated Articles became effective upon filing with the Nevada Secretary of State on September 10, 2025.

The Restated Articles did not have any effect on the par value per share of the Company’s common stock.

A Preferred Stock

Series A Preferred Stock have the following material rights, features, privileges and limitations:

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”).

The holders of shares of Series A Preferred Stock have a right 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, except that holders of Series A Preferred Stock shall have the right to vote as a separate

class with respect to certain specified matters.

The holders of each share of the Series A Preferred Stock then outstanding are entitled to receive cumulative cash dividends

at an annual dividend rate of 8.0%, payable quarterly on the last day of March, June, September, and December of each year, which may

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

Dissolution, or Winding Up.

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a

“Liquidation”), bankruptcy event, or change of control, the holders of shares of Series A Preferred Stock will be entitled

to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of $ 19.369 (adjusted

for any stock splits, stock dividends, recapitalizations, or similar transaction with respect to the Series A Preferred Stock) (“Liquidation

Value”) 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.

The holders of shares of Series A Preferred Stock have the right to convert all or any portion of the outstanding shares

of Series A Preferred Stock held by such holder multiplied by the Liquidation Value into shares of the Company’s common stock at

the initial conversion price equal to 120% of the 20-day volume weighted average price (“VWAP”) per share of common stock

immediately preceding the initial closing in which the warrants to purchase Series A Preferred Stock were first issued to such holders

(the “Initial Conversion Price”), with automatic conversion at the Initial Conversion Price upon (i)

the conversion of the shares of Series A Preferred Stock by a then majority of holders of Series A Preferred Stock (the “Majority

Holders”), (ii) the affirmative vote or written consent by the Majority Holder to convert all outstanding shares of Series A Preferred

Stock, and (iii) on the fifth (5th) anniversary of the initial closing date in which the warrants to purchase Series A Preferred Stock

are first issued to such holders of Series A Preferred Stock.

Adjustments to Conversion

Price and Conversion Shares .

The Conversion Price is subject to standard weighted average anti-dilution protection, and anti-dilution

protection against issuance of securities by the Company in certain incidences, such as (i) in the event of a stock dividend on, or a

subdivision, combination or reclassification of, common stock, and (ii) in the event of any capital reorganization, reclassification

of the capital stock, consolidation or merger of the Company.

July 18, 2025, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors

(the “Initial Purchaser(s)”) pursuant to which the Company agreed to sell an initial aggregate amount of approximately $ 2.9

million in Prefunded Warrants (the “Prefunded Warrants”) at a purchase price equal to $ 19.369 per warrant (the “Purchase

Each Prefunded Warrant entitles the holder to purchase shares of the Company’s Series A Convertible Preferred Stock,

par value $ 0.001 per share (the “Series A Preferred Stock”) for $ 0.001 per share.

Purchasers of Prefunded Warrants will also

be issued an additional five (5) year warrant to purchase a number of shares of common stock, par value $ 0.001 per share equal to fifty

percent (50%) of the number of shares of common stock issuable upon conversion of the Series A Preferred Stock (the “Common Warrants,”

and together with the Prefunded Warrants, the “Warrants”).

The Warrants, the shares of Series A Preferred Stock issuable

upon exercise of the Prefunded Warrants, and the shares of common stock issuable upon exercise of the Common Warrants are referred herein

as the “Securities”.

The Securities were offered to a small select group of accredited investors, as defined in Rule 501

of Regulation D, all of whom have a substantial pre-existing relationship with the Company.

September 15, 2025, the Company entered into an amended and restated securities purchase agreement (the “Amended and Restated Purchase

Agreement”) with certain of the Initial Purchasers and certain additional investors (collectively, the “Purchasers”)

pursuant to which, among other things, confirmed the filing of the Second Amended and Restated Articles of Incorporation of the Company

upon receipt of the requisite stockholder approval, and the Purchasers agreed to subscribe for and purchase, and the Company agreed to

issue and sell to the Purchasers, an aggregate of 258,144 Prefunded Warrants and 1,214,769 Common Warrants for approximately $ 5.0 million

(the “Private Placement”).

The Purchase Price was paid in cash or, in lieu of cash, cancellation of certain existing debt of the Company.

closing of the Private Placement contemplated by the Purchase Agreement occurred simultaneously on September 15, 2025 upon the satisfaction

of certain customary conditions (the “Closing”).

The Company intends to use the net proceeds from the Private Placement for

general corporate purposes and growth capital.

Warrant and Common Warrant

Prefunded Warrant will have an exercise price per share of Series A Preferred Stock equal to $ 0.001 per share.

The Prefunded Warrants

are immediately exercisable upon the Closing of the Private Placement and expire when exercised in full.

The exercise price and the number

of shares of Series A Preferred Stock issuable upon exercise of each Prefunded Warrant is subject to appropriate adjustments in

the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting

the Series A Preferred Stock.

Common Warrant will have an initial exercise price of $ 1.715 , which is equal to the 20-day VWAP per share of common stock immediately

preceding the Closing of the Private Placement (subject to adjustment therein), are exercisable immediately following issuance and have

a term of five (5) years from the initial issuance date.

The Common Warrant will have a “cashless exercise” provision which

provides that the Common Warrant can be exercised without further payment to the Company.

The exercise price and the number of shares

of common stock issuable upon exercise of each Common Warrant is subject to appropriate adjustments in the event of certain stock dividends

and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock.

addition, the Warrants may not be exercised in full and may not be exercised to the extent that immediately following such exercise,

the holder would beneficially own greater than 4.99% or, at the election of the holder, greater than 9.99% of the Company’s outstanding

common stock.

Rights Agreement

connection with the Purchase Agreement, the Company agreed to enter into a registration rights agreement with the Purchasers (the “Registration

Rights Agreement”), pursuant to which the Company will 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, and to use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC within

75 days following the date of the registration statement.

In connection with the Closing, the Company

entered into an Escrow Agreement, with David L.

Hill, II on behalf of Hill Innovative Law, LLC, as escrow agent (the “Escrow Agent”),

pursuant to which the Escrow Agent will disburse the total aggregate purchase price pursuant to the terms of the Escrow Agreement.

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 9A. Controls and Procedures