What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2026-08-20 compared with 2025-09-17 · 471 added, 520 removed, 148 unchanged (87% of the section changed)

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

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

our mobile 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.

Our 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.

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.

Power Holdings, Inc.

(the “Company” or “Flux”) was incorporated in 1998 in the State of Nevada, and Flux’s

operations are conducted through its wholly owned subsidiary, Flux Power, Inc., a California corporation.

We design, develop, manufacture,

and sell a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of industrial and commercial sectors

which include material handling and airport ground support equipment (“GSE”).

We believe our mobile energy storage solutions

provide our customers with a reliable, high performing, cost effective, and more environmentally friendly alternative as compared to

traditional lead acid and propane-based solutions.

Our 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 battery pack performance.

We believe that the growing demand for lithium-ion

energy storage solutions and more environmentally friendly energy storage solutions across a range of industrial and commercial sectors

should continue to drive growth in the markets we serve.

long-term strategy is to meet the rapidly growing demand for lithium-ion energy solutions and to be the supplier of choice, targeting

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We have established selling relationships with customers with large fleets of forklifts

We intend to reach this goal by investing in research and development to expand our product mix, by expanding our sales and

marketing efforts, improving our customer support efforts and improving production efficiencies.

Our research and development efforts

will continue to focus on providing adaptable, reliable and cost-effective energy storage solutions for our customers.

We have received

two patents, with another patent pending, on advanced technology related to lithium-ion energy storage solutions.

The technology behind

these patents is designed to:

and ground support equipment.

We intend to reach this goal by investing in research and development to expand our product mix, by expanding

our sales and marketing efforts, improving our customer support efforts and improving production efficiencies.

Our research and development

efforts will continue to focus on providing adaptable, reliable and cost-effective energy storage solutions for our customers.

received three patents on advanced technology related to lithium-ion energy storage solutions.

The technology behind these patents is

battery life by optimizing the charging cycle,

1 unchanged sentence

artificial intelligence to predictively balance the cells for optimal performance.

largest sector of penetration thus far has been the material handling sector, which we believe is a multi-billion-dollar addressable market.

We believe the sector will provide us with an opportunity to grow our business as we enhance our product mix and service levels and grow

our sales to large fleets of forklifts and GSE.

Applications of our modular packs for other industrial and commercial uses, such as mobile

energy storage systems, are providing additional current growth and further opportunities.

We intend to continue to expand our supply

chain and customer partnerships and seek further partnerships and/or acquisitions that provide synergy to meeting our growth and “building

scale” objectives.

near-term priority will be to achieve profitability within our capital constraints.

Accordingly, we will continue to pursue supply chain improvements, gross margin expansion initiatives and cost reductions.

we are focusing on business expansion to accelerate gross margins by:

current high-profile “proven customer relationships” to respond to growing demand of large fleets for lithium-ion value

new markets that can leverage our technology and manufacturing capabilities;

features of our popular “SkyBMS” (telemetry) which provides customized fleet management, and real time reports;

our manufacturing and service capacities to ensure customer satisfaction from increased deliveries, and service;

on our leadership position with new product offerings, particularly to exploit the rising demand for higher power applications;

we are “agnostic to the type of lithium chemistry,” ensuring our research efforts support other chemistries as they may

become available.

largest sector of penetration thus far has been the material handling sector, which we believe is a multi-billion-dollar addressable

We believe the sector will provide us with an opportunity to grow our business as we enhance our product mix and service levels

and grow our sales to large fleets of forklifts and GSE.

Applications of our modular packs for other industrial and commercial uses,

such as mobile energy storage systems, are providing additional current growth and further opportunities.

We intend to continue to expand

our supply chain and customer partnerships and seek further partnerships and/or acquisitions that provide synergy in order to meet our

growth and “building scale” objectives.

near-term priority is to achieve profitability.

Accordingly, we will continue to pursue supply chain improvements, and other gross margin

expansion initiatives including redesigning our product line as well as other cost reduction initiatives.

In addition, we are focusing

on business expansion to accelerate gross margins by:

profitable growth – pursue supply chain, cost reductions and product design improvements aimed at lowering product costs;

on operational efficiencies – implementing advanced product design through modular concepts;

a solutions selling approach;

the right products to meet our customers’ needs – working with customers to design and build products with high demand;

value-add software across our battery portfolio to generate revenue streams – expanding features of our popular SkyEMS telemetry

can be no assurance that these initiatives and efforts will be successful.

Business Developments

We have experienced some delays in new orders of our energy storage solutions

due to corresponding deferrals of new forklift purchases mainly caused by lower capital spending by certain large customer fleets.

we have had very few cancellations of existing purchase orders, some customers have deferred their orders to later periods.

Some customers

have attributed lower capital spending to concerns over the economy and the uncertainty of higher interest rates, as well as broader geopolitical

More recently, the economic impacts and costs of higher global tariffs implemented by the U.S government have affected new

purchase orders.

The impact of deferrals and uncertainties related to new customer orders have required additional selling strategies

to support our targeted sales trajectory.

Some of these issues are discussed in the Business Trends and Uncertainties section in Part

Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report,

have seen improvements in our sourcing and purchasing activity, reflecting our efforts to expand and optimize our vendor strategy.

improvements include more secondary sources to minimize stock-outs, lower costs from increasing sources, and controlled delivery times,

as reflected in our current inventory levels.

With strategic supply chain and profitability improvement initiatives, lower costs and

higher volume purchasing, we are targeting gross margin improvement to continue.

We are highly focused on expanding sales and marketing

initiatives to secure new customer relationships and support continued migration to lithium of current customers.

We recently have added

our second “tier one” OEM private label battery program to supplement our strong OEM relationships and approvals.

This collaboration

marks a significant milestone for our S-Series line, which now includes products with the UL Type EE certification, which provides added

safety and durability capabilities.

We are also working with our distribution network to expand customer acquisition with direct-to-customer

are also expanding our deployment of our telemetry solution providing customers with state of health, better asset management, and a

platform for more timely management of service and maintenance requirements.

also announced a new partnership aimed at enhancing the recycling process for end-of-life lithium-ion batteries with the largest critical

battery components recycling company in the U.S.

This collaboration represents a significant step forward in our ongoing commitment to

environmental responsibility.

January 2025, the U.S.

government has increased certain existing import tariffs and has implemented new import tariffs across a wide

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

countries, notably China.

While we have been able to offset some of the impact of enacted tariffs with supply chain adjustments, alternative

manufacturing locations, cost reduction actions and by increasing the selling prices of our products, we believe that tariffs have negatively

impacted our revenues, profitability and cash flows.

Some of these tariff announcements have since been followed by announcements of

limited exemptions and temporary pauses and all have been affected by various circuit court decisions and a key decision by the U.S.

Supreme Court, which invalidated certain tariffs.

In response to the U.S.

Supreme Court ruling, the current administration debuted a

system for repaying importers for tariffs struck down by the U.S.

Supreme Court while also announcing the implementation of new tariffs

under an alternative statutory authority.

Upon the expiration of such tariffs, the current administration announced new tariffs under

a different statutory authority.

Management continues to actively evaluate ways to mitigate the impacts of tariffs on our business and

financial results, however, due to the uncertainties pertaining to tariffs and tariff levels, it is difficult for us to reliably forecast

the extent of the ongoing impact to our business or customers.

Trade-related

disruptions can create further uncertainty and supply chain interruptions, which may result in last-minute procurement efforts at elevated

We are closely monitoring the fluid nature of proposed tariffs and any further impact they may have on our operations, and will

continue to monitor macroeconomic conditions and evaluate the financial and operational impact of ongoing trade policy shifts.

risks could intensify depending on future developments, and we are actively incorporating these considerations into our future operation

planning, including assessing pricing actions, cost-control measures and long-term sourcing strategies.

tariffs continue to escalate or global inflationary trends persist, our customers may face greater economic strain, which could in turn

affect demand for our products.

We remain focused on maintaining operational flexibility and adapting our supply chain to navigate these

uncertainties to support long-term business performance.

See “Risk Factors” under Part I, Item 1A of this Form for additional

are also expanding our deployment of our telemetry solution providing customers with state of health, better asset management and a platform

for more timely management of service and maintenance requirements.

Stock Market Notices

On January 31, 2025, the Company received a notice (the “January

Notice”) from the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that based on its stockholders’ equity

of $194,000 as reported in its Form 10-K for the fiscal year ended June 30, 2024, the Company is no longer in compliance with Nasdaq Listing

Rule 5550(b)(1), which requires the Company to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing on

Nasdaq (the “Stockholders’ Equity Requirement”).

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.

On February 21, 2025, the Company received a notice (the “February

Notice”) from the Nasdaq Listing Qualifications Department (the “Staff”) stating that because the Company had not yet

filed its Form 10-Q for the period ended December 31, 2024 (the “December Form 10-Q”), the Company does not comply with Nasdaq

Listing Rule 5250(c)(1) (the “Listing Rule”), which requires Nasdaq-listed companies to timely file all required periodic

financial reports with the Securities and Exchange Commission.

The Company filed the December Form 10-Q on March 20, 2025 and is now current

with its required periodic financial reports to be filed with the Securities and Exchange Commission under the Listing Rule.

On 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 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 requests an appeal of the Staff’s determination to a Nasdaq Hearings Panel (the

On August 7, 2025, the Company submitted a 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 16, 2025, the Panel determined to grant the Company an exception to demonstrate compliance with the

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

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

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

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

If the Company fails to comply with the Nasdaq listing requirements and does not regain compliance, the Company’s

common stock will be subject to delisting by Nasdaq.

In the event our common stock is delisted, our stock price and market liquidity of

our stock will be adversely affected which will impact the ability of the Company’s stockholders to sell securities in the market.

Further, delisting from Nasdaq could also have other negative effects, including potential loss of confidence by partners, lenders, suppliers

and employees.

Common Stock Share Increase

May 28, 2025, we filed a Certificate of Amendment to our amended and restated articles of incorporation, as amended (the “Articles

of Incorporation”) with the Secretary of State of the State of Nevada to increase the number of authorized shares of common stock

of the Company from 30,000,000 to 75,000,000, effective upon filing.

The Amendment did not have any effect on the par value per share

of the Company’s common stock.

July 11, 2025, we entered into a settlement term sheet (the “Term Sheet”) to fully resolve the previously disclosed class

action litigation captioned Kassam v.

previously disclosed, on July 24, 2026, the Listing Qualifications Department (the “Staff”) of Nasdaq notified (the “July

2026 Notice”) us that for 30 consecutive business days preceding the date of the July 2026 Notice, the bid price of our common

stock had closed below the $1.00 per share minimum required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing

Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).

The July 2026 Notice has no effect on the listing of our common stock

at this time, and our common stock continues to trade on the Nasdaq Capital Market under the symbol “FLUX”.

Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days following the date of the July 2026 Notice to regain compliance with the

Minimum Bid Price Requirement (the “Compliance Period”).

If at any time during the Compliance Period the closing bid price

of our common stock is at least $1.00 for a minimum of 10 consecutive business days, we will regain compliance with the Minimum Bid Price

Requirement and our common stock will continue to be eligible for listing on the Nasdaq Capital Market absent noncompliance with any

other requirement for continued listing.

we do not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, we may be afforded an additional

180 calendar days to regain compliance with the Minimum Bid Price Requirement (the “Additional Compliance Period”) if on

the last day of the Compliance Period we are in compliance with the market value of publicly held shares requirement for continued listing

as well as all other standards for initial listing of our common stock on the Nasdaq Capital Market (other than the Minimum Bid Price

Requirement), unless we do not indicate our intent to cure the deficiency, or if it appears to Nasdaq that it is not possible for us

to cure the deficiency.

we do not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, or the Additional Compliance

Period, if applicable, our common stock will be subject to delisting.

intend to monitor the closing bid price of our common stock and may, if appropriate, consider implementing available options, including

the option to implement a reverse stock split, to regain compliance with the Minimum Bid Price Requirement.

There can be no assurance

that we will regain compliance within the Minimum Bid Price Requirement during the Compliance Period, secure an Additional Compliance

Period to regain compliance or maintain compliance with the other Nasdaq continued listing requirements.

requires that for continued listing on the Nasdaq Capital Market, we must meet all the requirements set forth in Rule 5550(a) and at

least one of the standards set forth in Rule 5550(b).

The standards set forth in 5550(b) include having (i) a minimum of $2,500,000 in

stockholders’ equity (the “Stockholders’ Equity Requirement”), (ii) a market value of listed securities of at

least $35 million (the “Market Equity Requirement”), or (iii) net income from continuing operations of $500,000 in the most

recently completed fiscal year or in two of the three most recently completed fiscal years (the “Net Income Requirement”).

As previously disclosed, on January 31, 2025 the Staff of Nasdaq notified us that we did not comply with the Stockholders’ Equity

On March 17, 2025, we filed our plan with Nasdaq to regain compliance with the Stockholders’ Equity Requirement, which

included requesting an extension through July 30, 2025.

On July 31, 2025, due to non-compliance with the Stockholders’ Equity Requirement,

the Staff informed us that trading of our common stock would be suspended at the opening of business on August 11, 2025 unless we requested

an appeal of the Staff’s determination to a Nasdaq Hearings Panel (the “Panel”).

We requested an appeal hearing with

the Panel and the Panel determined to grant us an exception to demonstrate compliance with the Stockholders’ Equity Requirement

and furthermore granted us our request for continued listing, which extension was subject to, among other requirements, us demonstrating

compliance with the Stockholder’s Equity Requirement on or before October 31, 2025.

October 14, 2025, we received a notification (the “October 2025 Notification”) from the Staff of Nasdaq that we had regained

compliance with Nasdaq’s continued listing rules because we satisfied the Market Equity Requirement.

The October 2025 Notification

also provided that, for a period of one year, the Staff of Nasdaq will monitor our compliance with the continued listing requirements.

If, during such one-year period, we fail to comply with Rule 5550(b), the Staff of Nasdaq will issue a delist determination letter and

we will have an opportunity to request a new hearing.

of June 30, 2026, we satisfied the Stockholder’s Equity Requirement, however, we can provide no assurances that we will be able

to continue to comply with the Stockholder’s Equity Requirement.

We no longer satisfy the Market Equity Requirement.

we fail to regain compliance with the Minimum Bid Price Requirement and/or fail to continue to meet at least one of the Rule 5550(b)

continued listing requirements, our common stock will be subject to delisting by Nasdaq.

In the event our common stock is delisted, our

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

in the market.

Further, delisting from Nasdaq could also have other negative effects, including potential loss of confidence by partners,

lenders, suppliers and employees.

of Legal Proceedings

Class Action.

On July 11, 2025, we entered into a settlement term sheet to fully resolve the previously disclosed class action litigation

captioned Kassam v.

Flux Power Holdings, Inc.

3:25-cv-00113-JO-DDL), against the Company, its former

chief executive officer, Ronald F.

Dutt, and its former chief financial officer, Charles A.

3:25-cv-00113-JO-DDL), against us, our former chief executive officer,

Dutt, and our former chief financial officer, Charles A.

Scheiwe (collectively, the “Defendants”).

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.

For additional information about the case, see Item 3, “Legal Proceedings,” contained

in Part I of this report.

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

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, heard by the Court on October 23, 2025.

settling the class action, we are not admitting any liability and the settlement agreement constitutes no admission of liability or any

admission regarding the accuracy of any allegation made by the plaintiffs.

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 expenses.

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 our 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 policy.

Meeting of Stockholders

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, $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 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 5635(d).

Amended and Restated Articles of Incorporation

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 therein.

The Restated Articles became effective upon filing with the Nevada Secretary of State on September 10, 2025.

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 purchase price per warrant to purchase Series A Preferred Stock paid

for by the holders of Series A Preferred Stock, adjusted for any stock splits, stock dividends, recapitalizations, or similar transaction

with respect to the Series A Preferred Stock (“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.

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 entitled the holder to purchase one share 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

were also 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”.

On 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, 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 at the Purchase Price for gross proceeds of 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”).

As of the Closing, there were no shares of Series A Preferred Stock issued

or outstanding.

The Company intends to use the net proceeds from the Private Placement for general corporate purposes and growth capital.

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.

Certain affiliates of the Company participated in the Private Placement, among which included

Krishna Vanka, our Chief Executive Officer and director, Kevin Royal, our Chief Financial Officer, Jeffrey Mason, our Chief Operating

Officer, Dale Robinette, our director, Michael Johnson, our director, and Cleveland Capital,

(“Cleveland”), which beneficially owns approximately 7.3% of our common stock.

Warrant and Common Warrant

Prefunded Warrant has 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

Common Warrant has an initial exercise price of $1.715, which is equal to the 20-day volume weighted average price (“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 has a “cashless

exercise” provision which provides that the Common Warrant can be exercised without further payment to the Company.

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

seventy-five (75) days following the date of the registration statement.

connection with the Closing, the Company entered into an Escrow Agreement (the “Escrow Agreement”), with David L.

on behalf of Hill Innovative Law, LLC, as escrow agent (the “Escrow Agent”), pursuant to which the Escrow Agent agreed to

hold and will disburse the total aggregate purchase price pursuant to the terms of the Escrow Agreement.

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.

Related Party Debt Agreements to the audited consolidated financial statements for additional information regarding the Cleveland

Satisfaction Agreement

September 15, 2025, concurrently with the Closing of the Private Placement, 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.

July 28, 2023, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Gibraltar Business Capital, LLC

The Agreement provided us 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 (the “Revolving

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

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

Provided that there is no event of default, the Maturity Date can automatically be extended for 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 Loan Agreement, we may request an increase in the Revolving Loan Commitment

from time to time upon not less than 30 days’ notice to GBC which increase may be made at the sole discretion of GBC, as long as:

(a) the requested increase is in a minimum amount of $1,000,000, and (b) the total increases do not exceed $5,000,000 and no more than

five (5) increases are made.

Outstanding principal under the GBC Credit Facility accrues interest at Secured Overnight Financing Rate

(“SOFR”, as defined in the Loan Agreement) plus five and one half of one percent (5.50%) per annum with such interest payment

due monthly on the last day of the month.

In the event of default, the amounts due under the Loan Agreement bear interest at a rate per

annum equal to three percent (3.0%) above the rate that is otherwise applicable to such amounts.

In addition, we are required to pay

a monthly unused line fee equal to one-half of one percent (0.50%) per annum on the difference between the Revolving Loan Commitment

and the average outstanding principal balance of the revolving loan(s) for such month.

The obligations under the GBC Credit Facility

may be prepaid in whole or in part at any time upon an exit fee of (a) two percent (2.00%) of the Revolving Loan Commitment if the obligations

are paid in full during the first year after the closing date, or (b) one percent (1.00%) of the Revolving Loan Commitment if the obligations

are paid in full one year after the closing date, provided, that, the exit fee will be waived if such prepayment occurs in connection

with the refinancing of the obligations with Bank of America, N.A., as lender.

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

assets of the Company (including, without limitation, our intellectual property) pursuant to the terms of the Loan Agreement and the

Intellectual Property Security Agreement dated July 28, 2023.

and Waivers to Credit Facility

November 2, 2023, we entered into Amendment No.

1 to the Loan Agreement (the “First Amendment”) which amended certain definition

of the Subordinated Debt referenced in the Loan Agreement as Subordinated Debt owed by us 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, we entered into Amendment No, 2 to the Loan Agreement (the “Second Amendment”) which amended certain terms

of the Loan Agreement 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.

In consideration

for the Second Amendment, we paid GBC a non-refundable amendment fee of $10,000 in cash, in addition to the $7,500 non-refundable closing

May 8, 2024, we received a waiver from GBC, which waived an event of default with respect to our anticipated failure to maintain the

EBITDA covenant for the trailing three (3) month period ended April 30, 2024.

May 31, 2024, we entered into Amendment No.

3 to the Loan Agreement (the “Third Amendment”) 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.

consideration for the Third Amendment, we paid GBC a non-refundable amendment fee of $50,000 in cash.

August 30, 2024, GBC agreed to waive our non-compliance with, and the effects of its non-compliance under, various representations, financial

covenants and non-financial covenants relating to our financial restatements.

January 17, 2025, we received a waiver which, subject to the satisfaction of certain conditions which were met, waived our non-compliance

with and the effects of our non-compliance under, various representations, financial covenants and non-financial covenants relating to

our financial restatements and our failure to maintain the EBITDA Minimum for certain financial periods.

exchange for us establishing a $1.75 million escrowed settlement fund to cover payments to the settlement class, attorneys’ fees

and settlement administration expenses.

Our liability insurers directly funded the full $1.75 million settlement amount, which was released

from the escrowed settlement fund pursuant to the Order and Final Judgement.

Derivative Action.

On January 7, 2025, plaintiff Ronald Pearl filed a stockholder derivative complaint in the United States District

Court, District of Nevada, captioned Pearl v.

Dutt, et al .

2:25-cv-00042), against our current and former officers and

directors, naming us as a nominal defendant.

The complaint generally arises out of the same allegations contained in the above securities

class action and alleges claims for breach of fiduciary duties and related claims.

a mediation, on July 11, 2025, the parties reached an agreement to resolve the derivative complaint in exchange for us implementing and

maintaining certain corporate governance reforms and enhancements.

In connection with the settlement, defendants agreed to a payment

of attorneys’ fees and reimbursement of expenses for plaintiff’s counsel in the total amount of $425,000.

On April 7, 2026,

the Court issued its Order and Final Judgement and thereby dismissed all claims with prejudice.

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.

As of June 30, 2026, our liability insurers directly funded $187,000

of the agreed upon attorneys’ fees.

Employment-Related

On April 30, 2024, a former employee filed a class action complaint against us and Insperity, our third-party payroll

service provider, in San Diego County Superior Court for various claims which he has purported to assert on behalf of himself and all

other individuals who worked for us or Insperity, amended to include a representative action complaint for Violation of Private Attorneys’

General Act, seeking an unspecified amount of penalties and attorneys’ fees based on allegations that we violated certain California

employment laws.

Motion to Compel Arbitration was granted and arbitration was scheduled for March 26, 2026 wherein the parties agreed to a settlement

Final 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.

Equity Facility

May 15, 2026, we entered into a purchase agreement (the “CEF Purchase Agreement”) and a related registration rights agreement

(the “CEF Registration Rights Agreement”) with Roth Principal Investments, LLC (“Roth Principal Investments”).

Subject to the terms and conditions of the CEF Purchase Agreement, we may, in our sole discretion, sell to Roth Principal Investments

up to $40,000,000 of shares of our common stock (the “Commitment Amount”) from time to time during the term of the CEF Purchase

Agreement (the “Committed Equity Facility”).

We are under no obligation to sell any shares, and Roth Principal Investments

is required to purchase shares only as directed by us and subject to the CEF Purchase Agreement.

to the CEF Registration Rights Agreement, we filed a registration statement (the “CEF Resale Registration Statement”) to

and after June 4, 2026, and for a period of up to 36 months (the “Commitment Period”), unless earlier terminated, we may

direct Roth Principal Investments to purchase shares of common stock through one or more “Market Open Purchases”, “Intraday

Purchases”, “Pre-Market Purchases” or “Post-Market Purchases”, each subject to the terms, conditions, notice

requirements, and limitations set forth in the CEF Purchase Agreement, including the requirement that the closing sale price of our common

stock on the trading day immediately prior to the applicable purchase date is not less than the threshold price of $0.50 (the “Threshold

per share purchase price for shares sold in a Market Open Purchase, an Intraday Purchase, a Pre-Market Purchase or a Post-Market Purchase

is based on the volume weighted average price (“VWAP”) of our common stock during the applicable valuation period, less a

fixed 3.0% discount in the case of a Market Open Purchase or an Intraday Purchase or less a fixed 5.25% discount in the case of a Pre-Market

Purchase or a Post-Market Purchase, subject, in each case, to the applicable minimum price thresholds and other adjustments set forth

in the CEF Purchase Agreement.

There is no upper limit on the per share price that Roth Principal Investments may be required to pay.

control the timing and amount of any sales under the CEF Purchase Agreement.

Actual sales, if any, will depend on market conditions,

the trading price of our common stock and our capital needs.

Net proceeds, if any, are expected to be used for working capital and general

corporate purposes.

applicable Nasdaq rules, issuances under the CEF Purchase Agreement may not exceed 4,272,062 shares of common stock, representing 19.999%

of the shares outstanding immediately prior to execution of the purchase agreement (the “Exchange Cap”), unless stockholder

approval is obtained or the average price paid by Roth Principal Investments equals or exceeds $1.2143, in which case the Exchange Cap

will not apply.

In addition, issuances may not result in Roth Principal Investments and its affiliates beneficially owning more than

4.99% of our outstanding common stock (the “Beneficial Ownership Limitation”).

CEF Purchase Agreement will terminate upon the earliest to occur of the expiration of the Commitment Period, the purchase of the full

Commitment Amount, certain listing or bankruptcy events, or earlier termination by us upon 10 trading days’ prior written notice.

Neither the CEF Purchase Agreement nor the CEF Registration Rights Agreement may be assigned or amended except as expressly permitted

consideration for Roth Principal Investments’ commitment, we paid a $25,000 structuring fee and agreed to pay a cash commitment

fee of up to $800,000, payable over time by Roth Principal Investments withholding cash amounts equal to 10% of the total aggregate purchase

price payable by Roth Principal Investments to us in connection with each purchase of shares of our common stock effected under the CEF

Purchase Agreement.

We also agreed to reimburse Roth Principal Investments’ legal fees in the amounts specified in the CEF Purchase

the purchase price for Purchase Shares is based on future VWAP calculations, we cannot determine the actual number of shares that may

be issued under the CEF Purchase Agreement.

If all shares registered for resale under the CEF Resale Registration Statement were issued,

such issuances would result in significant dilution to existing stockholders.

of August 14, 2026, the closing sale price of our common stock on the Nasdaq Capital Market was $0.595 per share.

As noted above, if

the closing sale price of our common stock drops below the Threshold Price we cannot direct Roth Principal Investments to purchase shares

of our common stock pursuant to the CEF Purchase Agreement until the closing price of our common stock exceeds the Threshold Price.

can be no assurances that our common stock will continue to trade at a price that will exceed the Threshold Price.

Line of Credit - Gibraltar Business Capital Credit Facility

July 28, 2023, we entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Gibraltar Business

Capital (“GBC”) (the “GBC Credit Facility”).

The Loan and Security Agreement provides the Company with a senior

secured revolving loan facility for up to $15.0 million, which was increased by amendment, see below (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 Loan and Security Agreement).

The GBC Credit Facility is evidenced by a revolving note, which was to mature

on July 28, 2025 (the “Maturity Date”), and was extended prior to maturity by amendment, see below (the “Revolving

Concurrently, we entered into an Intellectual Property Security Agreement (the “IP Security Agreement”).

addition, subject to conditions and terms set forth in the Loan and Security Agreement, we may request an increase in the Revolving Loan

Commitment from time to time upon not less than 30 days’ notice to GBC, which increase may be made at the sole discretion of GBC,

(a) the requested increase is in a minimum amount of $1,000,000, and (b) the total increases do not exceed $5,000,000 and

no more than five (5) increases are made.

On January 30, 2024, we entered into Amendment No.

2 to the Loan and Security Agreement with

GBC, pursuant to which, among other things, the Revolving Loan Commitment was increased to $16.0 million.

Outstanding principal under

the GBC Credit Facility accrues interest at Secured Overnight Financing Rate (“SOFR”, as defined in the Loan and Security

Agreement) plus five and one half of one percent (5.50%) per annum with such interest payment due monthly on the last day of the month.

In the event of default, the amounts due under the Loan and Security Agreement bear interest at a rate per annum equal to three percent

(3.0%) above the rate that is otherwise applicable to such amounts.

We paid GBC a non-refundable closing fee for the GBC Credit Facility

of $112,500 upon the execution of the Loan and Security Agreement.

In addition, we are required to pay a monthly unused line fee equal

to one-half of one percent (0.50%) per annum on the difference between the Revolving Loan Commitment and the average outstanding principal

balance of the revolving loan(s) for such month.

The obligations under the GBC Credit Facility may be prepaid in whole or in part at

any time upon an exit fee of (a) two percent (2.0%) of the Revolving Loan Commitment if the obligations are paid in full during the first

year after the closing date, or (b) one percent (1.0%) of the Revolving Loan Commitment if the obligations are paid in full one year

after the closing date, provided that the exit fee will be waived if such prepayment occurs in connection with the refinancing of the

obligations with Bank of America, N.A., as lender.

January 22, 2025, we entered into Amendment No.

4 to the Loan Agreement (the “Fourth Amendment”) which amended certain terms

relating to the EBITDA Minimum financial covenant.

In consideration for the Fourth Amendment, we paid GBC a non-refundable amendment

fee of $50,000.

4 to the Loan and Security Agreement (the “Fourth Amendment”) with GBC which

amended certain terms of the Loan and Security Agreement, as amended, relating to the EBITDA minimum financial covenant.

In consideration

for the Fourth Amendment, we 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, 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.

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, as amended.

Pursuant to the Fifth

Amendment, we and GBC agreed to amend the of the maturity date to August 31, 2025, unless otherwise extended pursuant to the terms of

the Loan and Security Agreement, provided however, upon the occurrence of either (i) an extension of the due date of our Subordinated

Unsecured Promissory Note, dated November 2, 2023 (the “Original Note”), as amended on July 16, 2025 (the “Cleveland

Note”), with Cleveland Capital, L.P.

(“Cleveland”) 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 Company, the maturity date will automatically extend

to July 31, 2027.

In consideration for the Fifth Amendment, we agreed to pay GBC a non-refundable amendment fee of $112,500.

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.

Upon the closing of the Private Placement on September 15, 2025, all the outstanding

obligations under the Cleveland Note were applied in full 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.

6 to the Loan and Security Agreement (the “Sixth Amendment”), with the effective

date of August 31, 2025, which amended certain terms of the Loan and Security Agreement, including (i) modifications to the EBITDA minimum

financial covenant, 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 and Security Agreement.

Upon the closing of the Private Placement (as defined herein)

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 and we entered into a Debt Satisfaction Agreement with Cleveland (the “Debt Satisfaction

Agreement”) pursuant to which Cleveland represented full payment and satisfaction of any and all of our obligations due to Cleveland

under the Cleveland Note.

Upon the conversion of all the outstanding obligations under the Cleveland Note into equity of the Company,

the Maturity Date of the Loan and Security Agreement was automatically extended to July 31, 2027 according to the Fifth Amendment.

loans and other obligations under the GBC Credit Facility are secured by substantially all of our tangible and intangible assets (including,

without limitation, intellectual property) pursuant to the terms of both the July 31, 2023 Loan and Security Agreement and the IP Security

During the fiscal year ended June 30, 2026, our multiple drawdowns and repayments under the GBC Credit Facility resulted in

a net $7.3 million repayment.

As of June 30, 2026, the outstanding balance under the GBC Credit Facility was approximately $6.3 million.

Our borrowing base changes as qualified collateral fluctuates and, therefore, available funding under the GBC Credit Facility could be

substantially lower.

As discussed in Note 7 – Line of Credit, on March 31, 2026, we notified GBC that we failed to comply with

the minimum EBITDA financial covenant for the trailing three-month period ended February 28, 2026 under the GBC Credit Facility, which

resulted in an “event of default” under the GBC Credit Facility.

We are working with GBC to negotiate an amendment to the

GBC Credit Facility or otherwise obtain a waiver from GBC, but there can be no assurance that we will be able to do so or that we will

be able to obtain a waiver from GBC on terms favorable to us or at all.

GBC has allowed us to continue to use our line of credit under

the GBC Credit Facility while negotiations continue, however, GBC can choose to limit or discontinue availability at any time.

due to our event of default under the GBC Credit Facility, GBC may, at its option, declare its commitments to us terminated and all our

obligations under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required

on the part of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party

under the GBC Credit Facility.

OF OUR BUSINESS

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solutions that meet our customers’ needs currently and in the foreseeable future.

Our goal is to obtain a UL Listing for all of our Packs, and we recently completed the process for our newest source

of battery cells.

We believe this UL Listing provides us a significant competitive advantage and provides assurance to customers that

our technology has been rigorously tested by an independent third party and determined to be safe, durable and reliable.

Our goal is to obtain a UL Listing for all of our Packs, and we recently completed the process for our newest source of

battery cells.

We believe this UL Listing provides us a significant competitive advantage and provides assurance to customers that our

technology has been rigorously tested by an independent third party and determined to be safe, durable and reliable.

equipment manufacturer (OEM) approvals.

Many of our energy storage packs have been tested and approved for use by Toyota Material

Handling USA, Inc., Crown Equipment Corporation, and The Raymond Corporation, among the top global lift truck manufacturers by revenue

according to Material Handling & Logistics.

We also provide a “private label” Class 3 Walkie Pallet Pack to two major

top 10 forklift OEMs.

Handling USA, Inc., and Crown Equipment Corporation, among the top global lift truck manufacturers by revenue according to Material Handling

We also provide a “private label” Class 3 Walkie Pallet Pack to two major top-ten forklift OEMs.

product offering and scalable design.

We offer energy storage packs for use in a variety of industrial motive applications.

believe that our modular and scalable design enables us to optimize design, inventory, and part count to accommodate natural product

extensions of our products to meet customer requirements.

We have leveraged our Class 3 Walkie Pallet Pack design to develop larger energy

storage packs for larger forklifts, GSE Packs, and other industrial equipment applications.

Natural product extensions, based on our

modular, scalable designs, include solar backup power for electric vehicle (“EV”) mobile charging stations and robotic warehouse

that our modular and scalable design enables us to optimize design, inventory and part count to accommodate natural product extensions

of our products to meet customer requirements.

We have leveraged our Class 3 Walkie Pallet Pack design to develop larger energy storage

packs for larger forklifts, GSE Packs and other industrial equipment applications.

Natural product extensions, based on our modular and

scalable designs, include solar backup power for electric vehicle (“EV”) mobile charging stations and robotic warehouse equipment.

advantages over lead acid and propane-based solutions.

We believe that lithium-ion battery systems have significant advantages

over existing technologies and will displace lead acid batteries and propane-based solutions, in most applications.

Relative to lead

acid batteries, such advantages include environmental benefits, no water maintenance, faster charge times, greater cycle life, longer

run times, and less energy used that provide operational and financial benefits to customers.

When compared to lead acid solutions, our

energy storage solutions do not discharge carbon dioxide in the atmosphere due to lithium chemistry efficiencies.

In addition, when compared

to propane-based solutions, lithium-ion systems avoid the generation of exhaust emissions and associated odor and environmental contaminates,

and maintenance of an internal combustion engine, which has substantially more parts subject to wear than an electric motor.

We believe that lithium-ion battery systems have significant advantages over

existing technologies and will displace lead acid batteries and propane-based solutions in most applications.

Relative to lead acid batteries,

such advantages include environmental benefits, no water maintenance, faster charge times, greater cycle life, longer run times and less

energy used that provide operational and financial benefits to customers.

When compared to lead acid solutions, our energy storage solutions

do not discharge carbon dioxide in the atmosphere due to lithium chemistry efficiencies.

In addition, when compared to propane-based

solutions, lithium-ion systems avoid the generation of exhaust emissions and associated odor and environmental contaminates, and maintenance

of an internal combustion engine, which has substantially more parts subject to wear than an electric motor.

Battery Management System.

8 unchanged sentences

higher performance.

We have included our proprietary telemetry solution, branded “SkyBMS” which provides real time reports

on pack performance, health, and remaining useful life.

We have included our proprietary telemetry solution, branded “SkyEMS,” which provides real time reports

on battery pack performance, health, and remaining useful life.

design, develop, test and sell our energy storage solutions for use in a broad range of lift trucks, industrial equipment including airport

14 unchanged sentences

Our smart charging solutions are designed to interface with our BMS and integrate easily into most all major chargers in the market.

Product Update

fiscal 2025, we advanced our product portfolio with new designs aimed at addressing customer needs while improving our own

manufacturing and service operations, including lowering costs to improve margins.

These updates emphasized higher energy capacities to support longer and more demanding shifts, simplified service

access and cost efficiencies.

Collectively, these improvements were intended to resolve performance challenges in customer applications

and strengthen our ability to deliver reliable efficient energy solutions.

Looking forward, we plan to continue introducing designs that

enhance margins, increase part commonality and improve serviceability.

2025, we introduced the G96, a higher-voltage battery system with greater capacity for intensive applications in the Airline and Aviation

industry and improved the developed G80 design that simplifies maintenance and enhances usability for GSE.

Beyond hardware, we began developing

and showcasing SkyEMS, our energy management solution, marking a significant step in building a more comprehensive energy ecosystem.

initiatives reflect our commitment to ramping up integrated energy solutions by combining advanced hardware with intelligent software.

Our focus is on creating a connected platform that optimizes performance, improves serviceability, and expands the long-term value we deliver

to customers.

Product Updates

fiscal 2026, we advanced our product portfolio with new designs aimed at addressing customer needs while improving our own manufacturing

and service operations, including a comprehensive evaluation of our supply chain sourcing strategy aimed at lowering costs to improve

gross profit margins.

Notably, we completed a new forklift OEM approval, further supporting our battery sales through an expanded base

of approved equipment applications.

Product portfolio updates also emphasized higher energy capacities to support longer and more demanding

shifts, simplified service access and cost efficiencies.

Looking forward, we plan to continue introducing designs that increase part

commonality and improve serviceability, which we believe will also enhance gross profit margins.

fiscal 2025, we introduced the G96, a higher-voltage battery system with greater capacity for intensive applications in the Airline and

Aviation industry and we improved our G80 design to simplify maintenance and enhance usability for the ground support equipment industry.

Beyond hardware, we began developing and showcasing SkyBMS, our energy management solution, marking a significant step in building a

more comprehensive energy ecosystem.

These initiatives reflect our commitment to ramping up integrated energy solutions by combining

advanced hardware with intelligent software.

Our focus is on creating a connected platform that optimizes performance, improves serviceability

and expands the long-term value we deliver to customers.

Historically,

lithium-ion battery solutions were unable to compete with lead acid and propane-based solutions in industrial applications on the basis

However, the supply of lithium-ion batteries has rapidly expanded, leading to price declines of eighty-five percent (85%) since

2010 according to BloombergNEF.

BloombergNEF also estimates that lithium-ion battery prices, which averaged $1,160 per kilowatt hour

in 2010, were $156 per kWh in 2019 and dropped to $115 per kWh in 2024.

Our unit costs to source lithium in 2025 did not materially change

Lithium metal itself represents well less than 5% of the cost of our energy storage solutions.

sharp decline in the price of lithium-ion batteries has made these energy solutions more cost competitive.

Affordability has in turn

enabled customers to shift away from lead acid and propane-based solutions for power lift equipment to lithium-ion based solutions with

more favorable environmental and performance characteristics.

Reducing our cost per kilowatt of energy enables our value proposition

to attract increasing customer demand.

Handling Equipment

lithium-ion battery solutions were unable to compete with lead acid and propane-based solutions in industrial applications on the

basis of cost.

However, the supply of lithium-ion batteries has rapidly expanded, leading to significant price declines according to

BloombergNEF.

BloombergNEF estimates that lithium-ion battery prices, which averaged $1,160 per kilowatt hour in 2010, were $156 per

kWh in 2019, dropped to $115 per kWh in 2024, and fell an additional 8% in 2025 to $108/kWh.

Our unit costs to source of lithium

changed materially in 2025 and 2026 as a result of the imposition of tariffs.

focus on energy storage solutions for industrial equipment and related industrial applications because we believe they represent large

and growing markets that are just beginning to adopt lithium-ion based technology.

We apply our scalable, modular designs to natural

product extensions in the industrial equipment market.

These markets include not only the sale of lithium-ion energy storage solutions

for new equipment but also a replacement market for existing lead acid battery packs.

to Worldwide Industrial Truck Statistics (“WITS”), new lift truck sales reached approximately 2.1 million units

worldwide in 2023.

Approximately 431,000 units were sold in the Americas, primarily Canada, the United States and Mexico, spread

relatively evenly between electric rider (Class 1 and Class 2), motorized hand (Class 3) and internal combustion engine

powered lift trucks (Class 4 and Class 5).

The International Truck Association (“ITA”) estimates that electric products represented approximately sixty-seven percent

(67%) of the North American shipments in 2023, reflecting the long-term trend of increasing mix of electric products versus internal

combustion (propane) engines.

Driven by growth in global manufacturing, e-commerce and construction, Research and Markets expects

that the global lift truck market will grow at a compound annual growth rate of 5.7% from 2024 through

and growing markets that are in the early stages of adoption lithium-ion based technology.

We apply our scalable, modular designs to

natural product extensions in the industrial equipment market.

These markets include not only the sale of lithium-ion energy storage

solutions for new equipment but also a replacement market for existing lead acid battery packs.

Handling Equipment

to Worldwide Industrial Truck Statistics (“WITS”), new lift truck sales reached approximately 2.4 million units worldwide

Approximately 435,000 units were sold in the Americas, primarily Canada, the United States and Mexico, spread relatively evenly

between electric rider (Class 1 and Class 2), motorized hand (Class 3) and internal combustion engine powered lift trucks (Class 4 and

The Industrial Truck Association (“ITA”) estimates that electric-powered models represented approximately seventy-one

percent (71%) of North American retail orders in 2024 (the latest publicly available information), reflecting the long-term trend of

increasing mix of electric products versus internal combustion (propane) engines.

Driven by growth in global manufacturing, e-commerce

and construction, Research and Markets expects that the global lift truck market will grow at a compound annual growth rate of approximately

7.0% from 2025 through 2030.

customers include OEMs, forklift equipment dealers, battery distributors and end users.

Our customers vary from small companies to

Fortune 500 companies.

the year ended June 30, 2025, we had three major customers that each represented more than 10% of our revenues on an individual basis,

and together represented approximately $48,288,000 or 73% of our total revenues.

During the year ended June 30, 2024, we had three major

customers that each represented more than 10% of our revenues on an individual basis, and together represented approximately $47,178,000

or 78% of our total revenues.

Our customers vary from small companies to Fortune

500 companies.

the fiscal year ended June 30, 2026, we had two major customers that each represented more than 10% of our revenues on an individual

basis, and together represented approximately $30,065,000 or 71% of our total revenues.

As of June 30, 2026, three customers represented

approximately $3,525,000 or 71% of accounts receivable, of which 96% was aged less than 60 days from invoice.

During the fiscal year

ended June 30, 2025, we had three major customers that each represented more than 10% of our revenues on an individual basis, and together

represented approximately $48,288,000 or 73% of our total revenues.

Toward Lithium-ion Battery Technologies

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Lithium-based energy storage systems can perform for a longer duration compared to lead acid batteries.

Lithium-ion batteries provide up to 50% longer run times than lead acid batteries of comparable capacity, or amps-per-hour rating, allowing

equipment to be operated over a long period of time between charges.

batteries provide up to 50% longer run times than lead acid batteries of comparable capacity, or amps-per-hour rating, allowing equipment

to be operated over a long period of time between charges.

High/Sustained

Lithium-ion batteries are better suited to deliver high power versus legacy lead acid.

For example, a 100Ah lead acid

battery will only deliver 80Ah if discharged over a four-hour period.

In contrast, a 100Ah lithium-ion system will achieve over 92Ah

even during a 30-minute discharge.

Additionally, during discharge, the energy storage pack sustains its initial voltage, maximizing the

performance of the forklift truck, whereas, lead acid voltages, and hence power, decline over the working shift.

Lead acid batteries are limited to one shift a day, as they discharge for eight hours, need eight hours for charging, and

another eight hours for cooling.

For example, a 100Ah lead acid battery

will only deliver 80Ah if discharged over a four-hour period.

In contrast, a 100Ah lithium-ion system will achieve over 92Ah even during

a 30-minute discharge.

Additionally, during discharge, the energy storage pack sustains its initial voltage, maximizing the performance

of the forklift truck, whereas lead acid voltages, and hence power, decline over the working shift.

Lead acid batteries are limited to one shift a day, as they discharge for eight hours, need eight hours for charging and another

eight hours for cooling.

For multi-shift operations, this typically requires battery changeout for the equipment.

Because lithium

batteries can be recharged in as little as one hour and do not degrade when subjected to opportunity charging, hence, battery changeout

is unnecessary.

The toxic nature of lead acid batteries presents significant safety and environmental issues in the event of a cell

Because lithium batteries

can be recharged in as little as one hour and do not degrade when subjected to opportunity charging, hence battery changeout is unnecessary.

The toxic nature of lead acid batteries presents significant safety and environmental issues in the event of a cell breach.

During charging, lead acid batteries emit combustible gases and increase in temperature.

Lithium-ion (particularly LFP) batteries

do not get as hot and avoid many of the safety and environmental issues associated with lead acid batteries.

Lithium-ion (particularly LFP) batteries do

not get as hot and avoid many of the safety and environmental issues associated with lead acid batteries.

The performance of lead acid batteries degrades after approximately 500 charging cycles in industrial equipment applications.

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Lithium is about one-third the weight of lead acid for comparable power ratings.

Lower weight enables forklift OEMs

the ability to optimize the design of the truck based on a smaller footprint for lithium-ion instead of lead acid.

Lower weight enables forklift OEMs the

ability to optimize the design of the truck based on a smaller footprint for lithium-ion instead of lead acid.

Lithium-ion energy storage solutions provide power dense solutions with extended cycle life, reduced maintenance and improved

operational performance, resulting in lower total cost of ownership.

Energy Used :

we believe our lithium-ion energy storage solutions use 20-50% less energy based on our internal studies comparing

lithium-ion to lead acid.

We believe our lithium-ion energy storage solutions use 20-50% less energy based on our internal studies comparing lithium-ion

to lead acid.

and Marketing

sell our products through several different channels including OEMs, lift equipment dealers and battery distributors as well as directly

to end users.

In the industrial motive market, OEMs sell their lift products through dealer networks and directly to end customers.

of environmental issues associated with lead acid batteries and to preserve customer choice, industrial lift products are typically sold

without a battery pack or an energy storage solution.

Equipment dealers source battery packs from battery distributors and battery pack

suppliers based on demand or in response to customer specifications.

End customers may specify a specific type and manufacturer of battery

pack to the equipment dealer or may purchase battery packs from battery distributors or directly from battery suppliers.

direct sales staff cover major geographies throughout North America and collaborate with our sales partners who have an established customer

We plan to hire additional sales staff to support our expected sales growth.

In the industrial motive market, which includes batteries and power systems to propel heavy-duty material handling and

commercial vehicles such as electric forklifts and warehouse pallet trucks, OEMs sell their lift products through dealer networks and

directly to end customers.

Because of environmental issues associated with lead acid batteries, and to preserve customer choice, industrial

lift products are typically sold without a battery pack or an energy storage solution.

Equipment dealers source battery packs from battery

distributors and battery pack suppliers based on demand or in response to customer specifications.

End customers may specify a specific

type and manufacturer of battery pack to the equipment dealer or may purchase battery packs from battery distributors or directly from

battery suppliers.

direct sales team covers major geographies throughout North America and collaborates with our sales channel partners who have an established

customer base.

We plan to expand our direct sales team to support future sales growth.

In addition, we have developed a nationwide sales

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than manufacture our own battery cells, our battery cells are currently sourced from one manufacturer located in China.

the remainder of the components primarily from numerous vendors in the United States.

We developed our BMS to be agnostic to a

battery’s lithium-ion chemistry and cell manufacturer.

Despite such flexibility, we have experienced occasional supply

interruptions in the past, and more recently, we have been forced to navigate supply chain and transportation issues stemming from

the global pandemic.

We have made great strides in sourcing alternate suppliers and parts to minimize future global supply chain

We are continuing to monitor and test potential new battery cell technologies on an ongoing basis to help mitigate our

supply chain risks.

Using Lean Manufacturing principles, our final assembly, testing and shipping of our energy storage solutions

are completed within our ISO 9001 certified facility in Vista, California, which includes six assembly lines.

We source the

remainder of the components primarily from numerous vendors in the United States.

Despite such flexibility, we have experienced occasional

supply interruptions in the past, and more recently, we have been forced to navigate supply chain and transportation issues stemming

from the global pandemic and tariffs.

Where possible, we have diversified our base of suppliers, and we will continue these efforts to

minimize future global supply chain disruptions.

Using Lean Manufacturing principles, our final assembly, testing and shipping of our

energy storage solutions are completed within our ISO 9001 certified facility in Vista, California, which includes six assembly lines.

are continuing to monitor and test potential new battery cell technologies on an ongoing basis to help mitigate our supply chain risks.

Our BMS was developed to be agnostic to both a battery’s lithium-ion chemistry and cell manufacturer which should provide greater

flexibility to our diversification alternatives.

buy chargers from several sources, including a U.S.

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has become increasingly aware of the performance, lifetime cost and environmental advantages of lithium-ion solutions.

At the same time,

our competitor base offering lithium-ion solutions has grown from a number of early-stage businesses and now includes several larger

The increasing market activity reflects the double-digit sales growth of lithium-ion based solutions.

The sales channel includes.

equipment dealers, OEMs and battery distributors.

Our competitors

offering lithium-ion solutions include Electrovaya, EnerSys, Ethium by EControls, Green Cubes Technology and Stromcore Energy.

The increasing

market activity reflects the double-digit sales growth of lithium-ion based solutions.

The sales channel includes equipment dealers,

OEMs and battery distributors.

key competitive factors in this market are performance, reliability, durability, safety and price.

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To accomplish this, we rely

on a combination of patents, patent applications pending, trade secrets, including know-how, employee and third-party nondisclosure agreements,

copyright laws, trademarks, intellectual property licenses and other contractual rights to establish and protect our proprietary rights

in our technology.

In addition to such factors as innovation, technological expertise and experienced personnel, we believe that a strong

patent position is important to remain competitive.

of June 30, 2025, we have two issued U.S.

patents and one U.S.

patent pending pertaining to advanced technology related to

lithium-ion energy storage solutions.

on a combination of patents, trade secrets, including know-how, employee and third-party nondisclosure agreements, copyright laws, trademarks,

intellectual property licenses and other contractual rights to establish and protect our proprietary rights in our technology.

to such factors as innovation, technological expertise and experienced personnel, we believe that a strong patent position is important

to remain competitive.

of June 30, 2026, we have three issued U.S.

patents pertaining to advanced technology related to lithium-ion energy storage solutions.

The technology behind these three patents is designed to:

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artificial intelligence to predictively balance the cells for optimal performance.

do not know whether any of our efforts will result in the issuance of patents or whether the examination process will require us to narrow

Even if granted, there can be no assurance that these pending patent applications will provide us with protection.

have obtained U.S.

federal trademark registrations for Flux, Flux Power, Flux Power logo and Lift.

We have pending applications to register

SkyBMS and SkyEMS.

federal trademark registrations for Flux, Flux Power, Flux Power logo, Lift and SkyBMS.

We have a pending application

to register SkyEMS.

We also believe that we have common law trademark rights to certain marks in addition to those which we have registered.

Company obtains components and supplies included in its products from a group of suppliers.

We do not manufacture the battery cells used

in our energy storage solutions.

Our battery cells, which are an integral part of our energy storage solutions, are sourced from a single

manufacturer located in China.

obtain components and supplies included in our products from a group of suppliers.

We do not manufacture the battery cells used in our

energy storage solutions.

Our battery cells, which are an integral part of our energy storage solutions, are sourced from a single manufacturer

located in China.

In response to business uncertainties resulting from tariffs and increased tariff levels imposed by the U.S.

on goods imported into the U.S., as discussed in the previous risk factor, we temporarily paused imports from our supplier in China.

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.

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

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 our operations.

However, further escalation of tariffs between the U.S.

and China could

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

the year ended June 30, 2025, we had one supplier who accounted for more than 10% of our total purchases, which represented approximately

and China could have a material effect on our ability to cost-effectively source

from our supplier in China.

the fiscal year ended June 30, 2026, we had one supplier who accounted for more than 10% of our total purchases, which represented approximately

$7,002,000 or 20% of our total purchases.

During the year ended June 30, 2024, we had one supplier who accounted for more than 10% of

our total purchases, which represented approximately $12,437,000 or 27% of our total purchases.

During the fiscal year ended June 30, 2025, we had one supplier who accounted for more than

10% of our total purchases, which represented approximately $15,902,000 or 28% of our total purchases.

Safety Regulations

Our products are subject to product safety regulations by Federal, state, and local organizations.

we may be required, or may voluntarily determine, to obtain approval of our products from one or more of the organizations engaged in

regulating product safety.

These approvals could require significant time and resources from our technical staff and, if redesign were

necessary, could result in a delay in the introduction of our products in various markets and applications.

products are subject to product safety regulations by Federal, state, and local organizations.

Accordingly, we may be required, or may

voluntarily determine, to obtain approval of our products from one or more of the organizations engaged in regulating product safety.

These approvals could require significant time and resources from our technical staff and, if redesign were necessary, could result in

a delay in the introduction of our products in various markets and applications.

Environmental

Regulations .

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

transportation, and disposal of various components of advanced energy storage systems.

Although we believe that our operations are in

material compliance with current applicable environmental regulations, there can be no assurance that changes in such laws and regulations

will not impose costly compliance requirements on us or otherwise subject us to future liabilities.

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

of various components of advanced energy storage systems.

Although we believe that our operations are in material compliance with current

applicable environmental regulations, there can be no assurance that changes in such laws and regulations will not impose costly compliance

requirements on us or otherwise subject us to future liabilities.

Federal, state, and local governments may enact additional regulations relating to the manufacture, storage, transportation and disposal

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relating to the manufacture, storage, transportation and disposal of components of advanced energy systems will not be imposed.

Safety and Health Regulations .

The California Division of Occupational Safety and Health (Cal/OSHA) and other regulatory agencies

have jurisdiction over the operations of our Vista, California facility.

Because of the risks generally associated with the assembly

of advanced energy storage systems we expect rigorous enforcement of applicable health and safety regulations.

Frequent audits by, or

changes, in the regulations issued by Cal/OSHA, or other regulatory agencies with jurisdiction over our operations, may cause unforeseen

delays and require significant time and resources from our technical staff.

Safety and Health Regulation s

California Division of Occupational Safety and Health (Cal/OSHA) and other regulatory agencies have jurisdiction over the operations

of our Vista, California facility.

Because of the risks generally associated with the assembly of advanced energy storage systems, we

expect rigorous enforcement of applicable health and safety regulations.

Frequent audits by, or changes in, the regulations issued by

Cal/OSHA or other regulatory agencies with jurisdiction over our operations may cause unforeseen delays and require significant time

and resources from our technical staff.

Capital Resources

of June 30, 2025 and August 31, 2025, we had 101 and 99 employees, respectively.

of June 30, 2026 and 2025, we had 70 and 101 employees, respectively.

We engage outside consultants to assist our efforts in business

development, operations, finance and other functions from time to time.

None of our employees is currently represented by a trade

corporate headquarters and production facility totals approximately 63,200 square feet and is located in Vista, California.

None of our employees is currently represented by a trade union.

corporate headquarters and production facility occupies approximately 63,200 square feet and is located in Vista, California.

Our production

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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 1. Business