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Item 1A. Risk Factors

2026-08-20 compared with 2025-09-17 · 504 added, 477 removed, 266 unchanged (79% of the section changed)

2 unchanged sentences

You should carefully consider the summary of risk factors described below,

together with all of the other information included in this report, before making an investment decision.

together with all of the other information included in this Form, before making an investment decision.

If any of the following risks

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Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance

of such statements in the context of this report.

of such statements in the context of this Form.

The risk factors below do not address all the risks relating to securities, business

3 unchanged sentences

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

Our audited financial statements at June 30, 2025 ,

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

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

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

under the GBC Credit Facility, along with the forecasted gross margin, will not be sufficient to meet the Company’s

anticipated capital requirements to fund planned operations for the next twelve months following the filing date of this Annual Report

on Form 10-K.

report from our independent registered public accounting firm for the year ended June 30, 2025 includes an explanatory paragraph stating

that our current liquidity position and projected cash needs raise substantial doubt about our ability to continue as a going concern,

along with management’s assessment and strategies.

The perception that we may not be able to continue as a going concern may make

it difficult for us to raise new funds and to operate our business due to concerns about our ability to meet our contractual obligations.

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

Our ability to continue as a going concern is contingent upon, among other factors, the availability of the GBC Credit Facility or obtaining

alternate financing.

Our audited financial statements at June 30, 2026, and for

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

has evaluated our expected cash requirements, including investments in additional selling, general and marketing, research and development,

capital expenditures and working capital requirements, and believes our existing cash, along with the forecasted gross margin and the

proceeds that we believe are available under the Committed Equity Facility, will not be sufficient to meet our anticipated capital requirements

to fund planned operations for the next twelve months following the filing date of this Report.

As described below, our ability to continue

as a going concern is partially contingent upon the availability of the GBC Credit Facility, which may become unavailable due to a covenant

breach by the Company.

Report includes an explanatory paragraph stating that our current liquidity position and projected cash needs raise substantial doubt

about our ability to continue as a going concern, along with management’s assessment and strategies.

The perception that we may

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

about our ability to meet our contractual obligations.

There is no assurance that sufficient financing will be available when needed

or on reasonable terms to allow us to continue our operations.

Our ability to continue as a going concern is contingent upon, among other

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

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.

While GBC has allowed us to continue to use our line of credit under the GBC Credit Facility despite our event of default, GBC can choose

to limit or discontinue availability at any time.

In addition, 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.

Since GBC can choose to limit our access

to our line of credit under the GBC Credit Facility and/or call the debt at any time, substantial doubt exists about our ability to continue

as a going concern.

While we have entered into the CEF Purchase Agreement with Roth Principal Investments as a potential source of financing,

we can only direct Roth Principal Investments to purchase shares of our common stock pursuant to the CEF Purchase Agreement if the closing

sale price of our common stock on the prior trading day exceeds the Threshold price.

On August 14, 2026, the closing sale price of our

common stock on the Nasdaq Capital Market was $0.595 and there can be no assurances that our common stock will continue to trade above

the Threshold Price.

We cannot provide any assurance that we will be able to raise additional capital.

See Liquidity and Financial

Condition in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional

are currently in default under the Revolving Note under the GBC Credit Facility, and such default could adversely affect our business,

financial condition, results of operations or liquidity.

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 the Loan and Security Agreement with GBC and the IP Security Agreement.

The GBC Credit Facility is evidenced by a revolving note (the “Revolving Note”), which maturity date was automatically extended

to July 31, 2027 (the “Maturity Date”), upon the conversion of all the outstanding obligations under the Cleveland Note into

equity of the Company at the closing of the Private Placement on September 15, 2025.

Provided that there is no event of default, the

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

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

before the applicable Maturity Date.

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

the Loan and Security Agreement.

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

provisions of the Loan and Security Agreement.

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

the collateral granted to them under the Loan and Security Agreement and IP Security Agreement, and we may lose our ownership interest

in the assets pledged as security interest.

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.

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

Facility despite our event of default, GBC can choose to limit or discontinue availability at any time.

In addition, due to our event

of default under the GBC Credit Facility, GBC may also, 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.

If GBC were to terminate their commitments under the GBC Credit Facility and foreclose against substantially all our

assets, we would likely be forced to seek bankruptcy protection and our investors could lose the full value of their investment in our

Common Stock.

As such, our loss of access to our line of credit under the GBC Credit Facility or our collateral will have a material

adverse effect on our operations, business and financial condition.

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

expect that our existing cash, additional funding which we believe is available under our GBC Credit Facility, additional proceeds we

believe are available under the Committed Equity Facility, and cash generated from our operations, will not be sufficient to meet our

anticipated capital resources and to fund our planned operations for the next twelve months (see Liquidity and Financial Condition

in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional information).

Further, the use of our GBC Credit Facility remains subject to performance metrics, certain restrictions and compliance with loan covenants.

As discussed in Note 7 – Line of Credit, on March 31, 2026, the Company notified GBC that the Company 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.

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.

We continue to work with Gibraltar

Capital to renegotiate the terms of the GBC Credit Facility;

however, 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.

In addition, due to our event of default under the GBC

Credit Facility, GBC may also, 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.

While we have

entered into the CEF Purchase Agreement with Roth Principal Investments as a potential source of financing, we can only direct Roth Principal

Investments to purchase shares of our common stock pursuant to the CEF Purchase Agreement if the closing sale price of our common stock

on the prior trading day exceeds the Threshold price of $0.50.

On August 14, 2026, the closing sale price of our common stock on the

Nasdaq Capital Market was $0.595 and there can be no assurances that our common stock will continue to trade above the Threshold Price.

In addition, should there be any delays in the receipts of key component parts, due in part to supply chain disruptions, our ability

to fulfil the backlog of sales orders will be negatively impacted resulting in lower availability of cash resources from operations.

We may be required to access other forms of capital to support our operations and execute our business plan by issuing equity or convertible

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

Our ability to access such forms

of capital will be impacted by investor confidence in our business strategy as well as market conditions.

In addition, our failure to

timely file our amendment on Form 10-K/A to our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 means that we currently

are ineligible to use a registration statement on Form S-3.

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

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

Act of 1934 for a period of at least twelve (12) calendar months immediately preceding the filing of a new registration statement on

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

in a timely and cost-efficient manner.

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

or on acceptable terms.

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

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

Newly issued securities may include preferences,

superior voting rights and the issuance of warrants or other convertible securities that will have additional dilutive effects.

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

acceptable to us.

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

We may also be required to recognize

non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact

our financial condition and results of operations.

Our ability to obtain needed financing may be impaired by such factors as the weakness

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

If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and

product development, which may have a material adverse effect on future cash flows and results of operations.

have a history of losses and negative working capital.

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of June 30, 2026 and 2025, we had a cash balance of $0.3 million and $1.3 million, respectively.

We currently believe that our existing

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

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

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

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

resources from operating activities to fund our operations.

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

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

available on terms acceptable to us, if at all.

Failure to maintain the GBC debt facility without a replacement facility would have material

adverse impact on our operations.

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

interests of our current stockholders.

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

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

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

If we are unable to remediate these material weaknesses,

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

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

and stock price.

on management’s evaluation of our disclosure controls and procedures as of June 30, 2025, we identified material weaknesses in

our internal controls over financial reporting.

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

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

the financial reporting process.

While management intends to continue the use of third-party consultants

and technical accounting experts and to implement measures designed to improve our internal control over financial reporting to remediate

material weaknesses, there can be no assurance that these steps will be effective.

We concluded that the previously issued audited consolidated financial statements as of and for the

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

December 31, 2023, and March 31, 2024, which were filed with the Securities and Exchange Commission (“SEC”) on September

21, 2023, November 9, 2023, February 8, 2024 and May 13, 2024, respectively, should no longer be relied upon because of errors in such

financial statements relating to the improper accounting for inventory.

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

As a part of this restatement

and evaluation process, we also discovered that:

Company’s original estimate of the overstatement of inventories had risen due to additional excess and obsolete inventory identified

related to inventory components not recorded at the lower of cost or net realizable value, as well as consigned inventory not reconciled

in a timely manner;

Company had not properly recognized revenue in the periods in which the related performance obligations had been satisfied for a

contract with a certain customer, and that the Company had improperly recorded accounts receivable pertaining to that contract as

a reduction to its accounts payable owed to that customer although the right of offset conditions under ASC 210-20 had not been met,

resulting in misstatements to revenues, accounts receivable and accounts payable;

Company had improperly recorded various inventory write downs to research and development expenses although such expenses did not

meet the classification criteria for research and development under ASC 730, resulting in an overstatement of research and development

expenses and a corresponding understatement of cost of sales;

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

inventories and cost of sales;

Company had not included certain product warranty-related expenses within the proper periods in its calculation of its product warranty

reserve estimate, resulting in an understatement of accrued expenses, an understatement of accounts payable and an understatement

of cost of sales;

Company erroneously presented non-cash debt issuance cost incurred in conjunction with credit facility arrangements as a non-cash

adjustment to reconcile net loss to net cash used in operating activities in the consolidated cash flow statements when such cost

should have been recognized as a change in other assets.

As a result, our Annual Report on Form 10-K filed for the year ended June 30, 2024 included the restatement of our audited consolidated financial statements for the fiscal years ended June 30, 2023 and 2022,

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

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

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

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

To address this material weakness, management plans to continue to devote significant effort and resources to the remediation

and improvement of the Company’s internal control over financial reporting.

The design of any system of controls also is based

in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in

achieving its stated goals under all potential future conditions.

Moreover, the effectiveness of our controls and procedures may be limited

by a variety of factors, including faulty human judgment and simple errors, omissions or mistakes;

fraudulent action of an individual

or collusion of two or more people;

inappropriate management override of procedures;

and the possibility that any enhancements to controls

and procedures may still not be adequate to assure timely and accurate financial control.

Because of the inherent limitations in all

control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if

any, have been detected, and there is a risk that material misstatements may not be prevented or detected on a timely basis by internal

control over financial reporting.

are committed to remediating our material weakness and have continued to remediate the identified material weaknesses

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

of data used to estimate warranty liability.

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

material weaknesses have been fully remediated.

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

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

If we are unable to maintain effective internal control over financial

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

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

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

trading price of our common stock.

are not currently in compliance with the continued listing requirements for the Nasdaq Stock Market.

If we fail to regain compliance

or to meet the continued listing requirements, our common stock may be delisted, which could affect the market price of our common stock,

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

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

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

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

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

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

compliance with the Stockholders’ Equity requirement.

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

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

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

On July 31, 2025,

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

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

Equity Requirement.

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

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

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

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

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

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

approximately 15% of our work force.

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

Nasdaq’s continued listing requirements.

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

stay the suspension of our securities.

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

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

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

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

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

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

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

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

our ability to sell securities in the market.

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

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

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

in the future.

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

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

government is currently

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

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

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

by the United States government on goods imported from China.

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

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

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

We currently believe that our

existing cash balances and cash resources from operations will not be sufficient to fund our existing and planned operations for the

next twelve months.

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

continue our operations thereafter.

have historically relied on equity financing, including our Committed Equity Facility, borrowings under short-term loans with related

parties, credit facilities and/or cash resources from operating activities to fund our operations.

Specifically, we have relied heavily

on the GBC Credit Facility, and while GBC has continued to grant us access to our line of credit under the GBC Credit Facility despite

our covenant default thereunder, there can be no assurance that we will be able to maintain access to our line of credit under the GBC

Credit Facility, obtain additional funds via a new facility or that funds will be available on terms acceptable to us, if at all.

to maintain access to our line of credit under the GBC Credit Facility without a replacement facility would have material adverse impact

on our operations.

we recently entered into the CEF Purchase Agreement with Roth Principal Investments as a potential source of financing, we can only direct

Roth Principal Investments to purchase shares of our common stock pursuant to the CEF Purchase Agreement if the closing sale price of

our common stock on the prior trading day exceeds the Threshold Price.

There can be no assurances that our common stock will continue

to trade above the Threshold Price and we will be able to continue to use the Committed Equity Facility as a source of financing.

we were to access additional capital via an equity or equity-linked financing, including under the Committed Equity Facility, such funding

would result in dilution of the ownership interests of our current stockholders.

If funds are not available on acceptable terms, we may

be required to curtail our operations or take other actions to preserve our cash, which may have a material adverse effect on our future

cash flows and results of operations.

government is currently imposing increased tariffs on certain products imported into the U.S., which includes lithium-ion batteries

and other component parts, which may have an adverse impact on our future operating results.

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

Since all of our lithium-ion battery cells are manufactured in China, current and potential tariffs on lithium-ion battery cells imported

by us from China have increased and could continue to increase our costs, require us to further increase prices to our customers or,

if we are unable to sufficiently increase our prices to offset the tariff costs, result in lower gross margins on the products sold by

In April 2025, the U.S.

government increased import tariffs

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

on certain countries.

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

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

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

interruptions.

The uncertain impacts of higher tariffs on global economies and corporate

cost structures have also led to order delays by customers.

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

arrangements.

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

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

We also import a portion of our

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

These tariff changes

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

China has already imposed tariffs on a wide range

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

Any resulting escalation of trade tensions, including

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

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

At this time, we cannot predict

how such enacted tariffs will impact our business and operations.

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

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

and results of operations.

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

or no advance notice.

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

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

it difficult for us to operate optimally.

government increased import tariffs across a wide range of countries at various rates, including on product

imports from almost all countries and individualized higher tariffs on certain countries.

Some of these tariffs 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

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.

The full impact of the U.S.

Supreme Court’s ruling and the administration’s response,

including the timing and extent of any refunds and the impact of the new tariffs, remains uncertain.

Based on the tariffs enacted and

currently in effect, we have incurred and anticipate incurring incremental tariff costs, additional costs that we may incur on component

parts for our battery backs, and costs as a result of import pauses on certain of our product imports and supply-chain interruptions.

The uncertain impacts of higher tariffs on global economies and corporate cost structures have also led to order delays by customers.

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

If we are unable to diversify our supply

chain and reduce China sourcing, we remain subject to substantial potential exposure to tariffs, which would have significant impacts

on our cost structure and product margins.

also import a portion of our raw materials and components from other countries that are subject to import tariffs imposed by the U.S.

These tariff changes and subsequent retaliatory actions have increased, with the potential to continue to increase, product

costs for us.

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

and aluminum.

Any resulting escalation of trade tensions, including any further escalation of “trade wars” with other countries,

could have a significant adverse effect on world trade and the world economy, lead to disruptions in our supply chain, and as such, adversely

impact our results of operations.

we believe that tariffs have already negatively impacted our revenues, profitability and cash flows, at this time, we cannot predict

how such enacted tariffs will continue to impact our business and operations.

The imposed tariffs on components imported by us from China

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

our business and results of operations.

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

with little or no advance notice.

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

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

makes it difficult for us to operate optimally.

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

or international trade policy, it could

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

or international trade policy, it

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

We are closely monitoring potential changes in international

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

trade policy and actively assessing the current and potential future impacts of these and other trade policy changes on our business

operations and financial performance.

Economic conditions may adversely affect consumer spending and the overall general health

of our customers, which, in turn, may adversely affect our financial condition, results of operations and cash resources.

about the current and future global economic conditions have caused and may continue to cause our customers to defer purchases or cancel

purchase orders for our products in response to tighter credit, decreased cash availability and weakened consumer confidence.

Our financial

success is sensitive to reductions or cancellations of purchase orders for our products by our customers and other affects from changes

in general economic conditions, both globally and nationally.

Recessionary economic cycles, higher interest borrowing rates, higher fuel

and other energy costs, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher

tax rates and other changes in tax laws or other economic factors that have affected and may continue to affect consumer spending or

buying habits could continue to adversely affect the demand for our products.

If credit pressures or other financial difficulties result

in insolvency for our customers, it could adversely impact our financial results.

There can be no assurances that government and consumer

responses to the disruptions in the financial markets will restore consumer confidence.

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

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

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

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

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

To date, we have

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

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

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

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

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

In response to business uncertainties

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

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

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

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

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

However, further escalation of tariffs

between the U.S.

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

materially affect our business and operations.

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

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

listing rules.

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

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

internal investigation;

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

In such an event, investigation will divert

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

These investigations can also lead to fines or

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

related to a final settlement in connection with a class action litigation against us, our former chief executive officer, Ronald F.

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

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

such settlement.

In addition, we are also subject to other regulatory proceedings or actions which can be lengthy, time consuming

and disruptive to normal business operations and could cause us to incur significant defense costs, including costs associated with

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

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

business, operating results, or financial condition.

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

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

We are subject to litigation and legal proceedings which could adversely

affect our business, financial condition, results of operations or cash flows.

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

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

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

government on goods imported

into the U.S., we temporarily paused imports from our supplier in China in 2025.

The pause was short-lived as both parties quickly agreed

to modified terms.

At this time, the modified terms have not materially affected our operations and we expect to continue sourcing and

importing our battery cells from this supplier.

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

and China could have a material

effect on our ability to cost-effectively source from our supplier in China, which could materially affect our business and operations.

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

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

connection with our previous financial restatements, we are subject to a number of additional risks and uncertainties.

Although the matters

were substantially resolved, we have incurred unanticipated past costs for accounting, legal and consultancy fees in connection with

the restatements and our internal investigation.

The resolution of these matters may affect costs associated with the indemnification

of our officers and directors, and has damaged our reputation and adversely affected our stock price.

For additional information regarding

certain of the matters in which we are involved, see Recent Developments - Resolution of Legal Proceedings contained in Item I

– Business of this Form.

are subject to litigation and legal proceedings which could adversely affect our business, financial condition, results of operations

or cash flows.

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

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

We are currently the subject

of complaints alleging violations of various laws, including but not limited to certain employment lawsuits, which are further described under the heading “Legal Proceedings” elsewhere in this report,

and in the future could also be subject to other proceedings.

These proceedings and any other regulatory proceedings or actions may be

time consuming, could cause us to incur significant defense costs and could damage our reputation or adversely affect our stock price.

Any adverse ruling or unfavorable resolution in any legal or regulatory proceeding or action could have a material adverse effect on

our business, operating results or financial condition.

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

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

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

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

under our GBC Credit Facility, funds from our private placement, which closed on September 15, 2025, and cash generated from our operations

will not be sufficient to meet our anticipated

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

and Financial Condition in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial

statements for additional information).

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

restrictions and compliance with loan covenants.

If we are unable to meet the conditions provided in the loan documents, these funds

will not be available to us.

In addition, should there be any delays in the receipts of key component parts, due in part to supply

chain disruptions, our ability to fulfil the backlog of sales orders will be negatively impacted resulting in lower availability of

cash resources from operations.

We may be required to access other forms of capital to support our expanded operations and execute

our business plan by issuing equity or convertible debt securities, or by entering into another form of structured financing or

strategic transaction.

Our ability to access such forms of capital will be impacted by investor confidence in our business strategy

as well as market conditions In addition, our failure to timely file our annual report on form 10-K for the fiscal year ended June

30, 2024 and subsequent interim quarterly reports on Form 10-Q means that we currently are ineligible to use a

registration statement on Form S-3.

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

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

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

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

timely and cost-efficient manner.

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

or on acceptable terms.

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

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

Newly issued securities may include preferences,

superior voting rights, and the issuance of warrants or other convertible securities that will have additional dilutive effects.

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

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

We may also be required to recognize non-cash

expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our

financial condition and results of operations.

Our ability to obtain needed financing may be impaired by such factors as the weakness

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

If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and

product development, which may have a material adverse effect on future cash flows and results of operations.

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

business, financial condition, results of operations or liquidity.

loans and other obligations of the Company under the GBC Credit Facility

are secured by substantially all of our tangible and intangible assets, including, without limitation, intellectual property, pursuant

to the terms of a Loan and Security Agreement with GBC dated July 28, 2023 (the “Agreement”) and an Intellectual Property

Security Agreement (the “IP Security Agreement”).

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

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

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

Provided that there is no event of default, the Maturity Date can automatically be extended for one (1) year period upon payment

of a renewal fee for each such extension in the amount of three-quarters of one percent (0.75%) of the Revolving Loan Commitment, which

fee will be due and payable on or before the applicable Maturity Date.

The holder of the Revolving Note is entitled to all of the benefits

and security provided for in the Agreement.

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

pursuant to the provisions of the Agreement.

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

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

as security interest.

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

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

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

We have obtained waivers with

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

and non-financial covenants under the Agreement.

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

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

If we had not been able

to obtain such waivers, we would have had events of default under the GBC Credit Facility and GBC could terminate their commitments under

the facility and foreclose against substantially all our assets.

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

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

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

adverse effect on our operations, business and financial condition.

We have in the past and we

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

which are further described under the heading “Legal Proceedings” elsewhere in this Form, and in the future could also be

subject to other proceedings.

These proceedings and any other regulatory proceedings or actions may be time consuming, could cause us

to incur significant defense costs and could damage our reputation or adversely affect our stock price.

Any adverse ruling or unfavorable

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

financial condition.

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

Resolution of Legal Proceedings contained in Item I – Business of this Form.

have previously identified material weaknesses in our internal control over financial reporting, which management has remediated.

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

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

and stock price.

on management’s evaluation of our disclosure controls and procedures as of June 30, 2026, we remediated the material weaknesses

in our internal controls over financial reporting.

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

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

of the financial reporting process.

Such weaknesses were remediated by the implementation of specific and effective procedures, as well

as with the addition of a new Chief Financial Officer and additional highly-qualified accounting personnel.

Additionally, management

intends to continue the use of third-party consultants and technical accounting experts to monitor measures designed to maintain our

internal control over financial reporting.

are committed to maintaining our internal control over the financial reporting process.

However, there can be no assurance that additional

material weaknesses will not arise in the future.

If we are unable to maintain effective internal control over financial reporting, our

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

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

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

common stock.

may not be indicative of future operating results.

revenue for the Company can be influenced by order backlog.

Backlog represents the dollar amount of revenues we expect to recognize in

the future from contracts awarded and in progress.

Backlog substantially represents new orders.

backlog consists of purchase orders from customers that we expect to fulfill in future periods.

Backlog is not a measure defined by generally

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to methodologies used by other companies in determining their backlog amounts.

The backlog values we disclose include anticipated revenues

associated with:

(1) the original contract amounts;

(2) change orders for which we have received written confirmations from the applicable

(3) change orders for which we expect to receive confirmations in the ordinary course of business;

and (4) claims that we

have made against customers.

In addition, the timing of order placement, size, and customer delivery dates can create unusual fluctuations

include unapproved change orders for which we expect to receive confirmations in the ordinary course of business in backlog, generally

to the extent of the lesser of the amount management expects to recover or the associated costs incurred.

Any revenue that would represent

profit associated with unapproved change orders is generally excluded from backlog until written confirmation is obtained from the applicable

However, consideration is given to our history with the customer as well as the contractual basis under which we may be operating.

Accordingly, in certain cases based on our historical experience in resolving unapproved change orders with a customer, the associated

profit may be included in backlog.

However, if an unapproved change order is under dispute or has been previously rejected by the customer,

the associated amount of revenue is treated as a claim.

amounts included in backlog that are attributable to claims, we include unapproved claims in backlog when we have a legal basis to do

so, consider collection to be probable and believe we can reliably estimate the ultimate value.

Claims revenue is included in backlog

to the extent of the lesser of the amount management expects to recover or associated costs incurred.

may not be indicative of future operating results, and projects in our backlog may be cancelled, modified or otherwise altered by customers.

Our ability to realize revenue from the current backlog is dependent on among other things, the delivery of key parts from our vendors

in a timely manner.

We can provide no assurance as to the profitability of our contracts reflected in backlog.

conditions may adversely affect consumer spending and the overall general health of our customers, which, in turn, may adversely affect

our financial condition, results of operations and cash resources.

about the current and future global economic conditions may cause our customers to defer purchases or cancel purchase orders for our

products in response to tighter credit, decreased cash availability and weakened consumer confidence.

Our financial success is sensitive

to changes in general economic conditions, both globally and nationally.

Recessionary economic cycles, higher interest borrowing rates,

higher fuel and other energy costs, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels,

higher tax rates and other changes in tax laws or other economic factors that may affect consumer spending or buying habits could continue

to adversely affect the demand for our products.

If credit pressures or other financial difficulties result in insolvency for our customers,

it could adversely impact our financial results.

There can be no assurances that government and consumer responses to the disruptions

in the financial markets will restore consumer confidence.

may not be indicative of future operating results because orders included in backlog may be delayed, modified, cancelled or deferred

by customers, and the timing of revenue recognition from backlog depends on our ability to source battery cells and other key components,

manufacture and test our products, obtain required customer approvals and deliver products on schedule.

In particular, our lithium-ion

energy storage solutions depend on the availability of battery cells, electronic components and other materials, including components

sourced from suppliers outside the United States.

If we experience supply chain disruptions, tariff-related cost increases, manufacturing

delays, labor constraints, quality issues, changes in customer demand or customer-requested delivery changes, we may be unable to convert

backlog into revenue when anticipated or at all.

As a result, backlog may fluctuate significantly from period to period and should not

be relied upon as a reliable indicator of future revenues, results of operations or cash flows.

are dependent on a few customers for the majority of our net revenues, and our success depends on demand from OEMs and other users of

our battery products.

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

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

sales for the year ended June 30, 2024.

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

willingness to incorporate our battery products in their equipment.

The loss of a significant customer would have an adverse effect on

our revenues.

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

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

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

basis, made up 71% of our sales for the fiscal year ended June 30, 2026, and three customers who, on an aggregate basis, made up 73%

of our sales for the fiscal year ended June 30, 2025.

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

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

The loss of a significant customer would have an adverse

effect on our revenues.

For example, our revenues in fiscal 2026 were negatively impacted by our largest customer within material handling

significantly cutting their capital expense budget.

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

to accept our products.

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

and results of operations.

Additionally,

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

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

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

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

Such circumstances could result in negative publicity or

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

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

Damage to or the failure

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

recall, which would be time consuming and expensive.

Such circumstances could result in negative publicity or lawsuits filed against

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

may be subject to product liability claims .

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In addition, product liability claims, injuries, defects or other problems experienced by other companies

in the solar industry could lead to unfavorable market conditions for the industry as a whole, and may have an adverse effect on our

in the battery industry could lead to unfavorable market conditions for the industry as a whole, and may have an adverse effect on our

ability to attract new customers, thus harming our growth and financial performance.

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products to operate properly.

Any failure by us to successfully launch new products, or a failure by us to meet our customers criteria

in order to accept such products, could adversely affect our results.

Any failure by us to successfully launch new products, or a failure by us to meet our customers’

criteria in order to accept such products, could adversely affect our results.

business will be adversely affected if we are unable to protect our intellectual property rights from unauthorized use or infringement

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and future competitors may independently develop similar technology and/or duplicate our systems in a way that circumvents our patents.

patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from

commercially exploiting products similar to ours.

granted patents may not be enforceable, which may have a material adverse effect on our ability to prevent others from commercially exploiting

products similar to ours.

cannot be certain that we are the first creator of inventions covered by pending patent applications or the first to file patent applications

on these inventions, nor can we be certain that our pending patent applications will result in issued patents or that any of our issued

patents will afford protection against a competitor.

In addition, patent applications that we intend to file in foreign countries are

subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent

applications related to issue United States patents will be issued.

Furthermore, if these patent applications are issued, some foreign

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

on these inventions, nor can we be certain that any of our issued patents will afford protection against a competitor.

Furthermore, some

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

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

As a result, we cannot

be certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may

be issued to us in the near future will afford protection against competitors with similar technology.

In addition, patents issued to

us may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either

of which would increase costs and may adversely affect our business, prospects, financial condition and operating results.

be certain that our patents and any patents that may be issued to us in the future will afford protection against competitors with similar

In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that we

need to license or design around, either of which would increase costs and may adversely affect our business, prospects, financial condition

and operating results.

rely on trade secret protections through confidentiality agreements with our employees, customers and other parties;

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

for who establishing our corporate strategies and focus, overseeing the execution of our business strategy and ensuring our continued

for establishing our corporate strategies and focus, for overseeing the execution of our business strategy and for ensuring our continued

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

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

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

with legal and regulatory requirements as a public company difficult.

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

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

compliance and reporting requirements imposed by such laws and regulations.

Our failure to comply with such laws and regulations

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

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

legal and regulatory requirements as a public company difficult.

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

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

requirements imposed by such laws and regulations.

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

of fines and penalties and further result in the deterioration of our business.

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

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and disclosure of controls and procedures.

In particular, we must perform system and process evaluation and testing of our internal controls

over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required

In particular, we must perform system and process evaluation and testing of our internal control

over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required

by Section 404 of Sarbanes-Oxley.

Our testing, or the subsequent testing by our independent registered public accounting firm, when required,

may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses.

may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses.

Our compliance with

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Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or

if we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting

that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations

if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that

are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations

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

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such additional regulations could require us to devote significant time and resources and could adversely affect demand for our products.

There can be no assurance that additional or modified regulations relating to the manufacture, storage, transportation, and disposal

of components of advanced energy systems will not be imposed.

There can be no assurance that additional or modified regulations relating to the manufacture, storage, transportation and disposal of

components of advanced energy systems will not be imposed.

disasters, public health crises, political crises and other catastrophic events or other events outside of our control may damage our

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If any disruption or security breach results in a loss

or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur resulting

or damage to our data or applications or an inappropriate disclosure of confidential or proprietary information, we may incur resulting

liability and competitive position may be adversely affected, and the further development of our products may be delayed.

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Related to Our Common Stock and Market

market price of our common stock could become volatile, or our trading volume become weak, either of which could lead to the price of

our stock being depressed at a time when you may want to sell.

are not currently in compliance with the Rule 5550(a) continued listing requirements and the Staff of Nasdaq is continuing to monitor

our compliance with the Rule 5550(b) continued listing requirements for the Nasdaq Stock Market.

If we fail to regain compliance with

the Rule 5550(a) continued listing requirements or to continue to meet at least one of the Rule 5550(b) continued listing requirements,

our common stock may be delisted, which could affect the market price of our common stock, hurt your ability to sell your shares and

negatively impact our ability to access the capital markets .

previously disclosed, on July 24, 2026, the Staff of Nasdaq notified us that we did not comply with 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”.

Under 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.

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 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 to regain

compliance with the Minimum Bid Price Requirement, including the implementation of a reverse stock split.

There can be no assurance that

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

to regain compliance.

addition, we have failed to comply with the Nasdaq continued listing requirements in the past.

Nasdaq 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 (i) the Stockholders’ Equity Requirement, (ii) the Market Equity Requirement,

or (iii) 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 Requirement.

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 the Company’s 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 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 granted us our request for continued listing, which extension was subject to, among other requirements, the Company demonstrating

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

However, on October 14, 2025, we received a

notification from the Staff of Nasdaq that we had regained compliance with Nasdaq’s continued listing rules because we met 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.

As 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.

cannot assure you that we will be able to regain compliance with the Minimum Bid Price Requirement or continue to comply with at least

one of the Rule 5550(b) continued listing requirements.

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

from the Nasdaq Capital Market.

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

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

In the event our common stock is delisted, our stock price

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

market price of our common stock could become volatile or our trading volume could become weak, either of which could lead to the price

of our stock being depressed at a time when you may want to sell.

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

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

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

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

which would become exercisable or convertible within 60 days.

Johnson, our director and sole director of Esenjay Investments LLC (“Esenjay”), beneficially owns in excess of 20% of our

outstanding common stock on an as-converted basis as of June 30, 2026, which includes common stock underlying options, restricted stock

units and warrants that were exercisable or convertible or which would become exercisable or convertible or would vest, as applicable,

within 60 days.

As a result of his ownership, Mr.

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

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

This concentration of ownership may also

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

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

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

This concentration of ownership may

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

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

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

We are not currently in

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

If we fail to regain compliance or to meet the continued

listing requirements, our common stock may be delisted, which could affect the market price of our common stock, hurt your ability to

sell your shares and negatively impact our ability to access the capital markets

We cannot assure you that we will

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

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

Our failure to meet these requirements may result

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

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

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

In the event our common stock

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

securities in the market.

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

Pursuant to our Second Amended and Restated Articles of Incorporation,

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

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

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

(“Required Approval”).

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

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

holders of common stock.

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

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

The issuance of shares

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

adversely affect the market price of our common stock.

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

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

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

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

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

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

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

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

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

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

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

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

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

Securities”).

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

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

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

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

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

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

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

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

Holders of shares of Series

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

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

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

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

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

In connection

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

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

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

These registration rights would facilitate the resale

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

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

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

to our Second Amended and Restated Articles of Incorporation, our board of directors have the authority to fix the rights and preferences

of the preferred stock by resolution from time to time without requiring the vote of the holders of our common stock or preferred stock

would, unless otherwise expressly required by the Articles, the preferred stock designation creating any series of preferred Stock, or

to the extent required by the Nevada Revised Statutes or Nasdaq (“Required Approval”).

The Board could authorize the issuance

of preferred stock with voting or conversion rights that are superior to the rights of holders of common stock and issuance of such preferred

stock could dilute the voting power or rights of the holders of common stock.

As such, the issuance of any preferred stock could diminish

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

of such common stock.

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

and may adversely affect the market price of our common stock.

September 15, 2025, we completed a private placement of 258,144 pre-funded warrants to purchase up to 258,144 shares of our Series A

Preferred Stock (“Preferred Stock Warrants”) to certain accredited investors for gross proceeds of $5 million.

Upon the exercise

of the Preferred Stock Warrants and issuance of the shares of Series A Preferred Stock, holders of the Series A Preferred Stock will

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

of (i) the Conversion Price (initially $2.058, subject to adjustments), or (ii) the Minimum Price (as defined in Rule 5635(d) of the

Nasdaq Listing Rules).

Holders of Series A Preferred Stock shall also have the right to vote as a separate class with respect to certain

specified matters.

In addition, holders of our Series A Preferred Stock are entitled to receive cumulative cash dividends at an annual

dividend rate of 8.0%, which may be payable in kind or in cash at our option.

The subsequent issuance of additional shares of Series

A Preferred Stock through the payment of dividends will reduce the relative voting power of the holders of our common stock.

respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary

or involuntary, all shares of Series A Preferred Stock rank senior to all the common stock and any other class of securities that is

specifically designated as junior to the Series A Preferred Stock (“Junior Securities”).

Holders of Series A Convertible

Preferred Stock have the right to receive a liquidation preference entitling them to be paid out of our assets available for distribution

to stockholders before any payment may be made to holders of any other class or series of capital stock, an amount equal to the purchase

price per warrant to purchase Series A Preferred Stock paid for by the holders of Series A Preferred Stock (adjusted for any stock splits,

stock dividends, recapitalizations, or similar transaction with respect to the Series A Preferred Stock) for each share of Series A Preferred

Stock before any distribution or payment will be made to the holders of any Junior Securities, and if the assets of the Company will

be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of shares of Series A Preferred

Stock will be ratably distributed among such holders in accordance with the respective amounts that would be payable on such shares if

all amounts payable thereon were paid in full.

Holders of shares of Series A Preferred Stock will have conversion rights that are superior

to the rights of holders of common stock which issuance could dilute the voting power or rights of the holders of common stock, and anti-dilutive

protection, which our holders of common stock do not and will not have.

addition, the conversion of the Series A Preferred Stock to our common stock would dilute the ownership interest of existing holders

of our common stock, and any sales in the public market of the common stock issuable upon conversion of the Series A Preferred Stock

could adversely affect prevailing market prices of our common stock.

In connection with the Amended and Restated Private Placement Purchase

Agreement (as defined herein) and the Private Placement, we entered into a registration rights agreement (the “Private Placement

Registration Rights Agreement”) pursuant to which we prepared and filed a registration statement with the SEC in October 2025,

which became effective in November 2025 (the “October 2025 Resale Registration Statement”), covering the resale of a number

of shares of common stock underlying (i) the Series A Preferred Stock underlying the Preferred Stock Warrants and (ii) the Common Stock

Warrants (as defined herein) issued pursuant to the Amended and Restated Private Placement Purchase Agreement.

The October 2025 Resale

Registration Statement facilitates the resale of such securities into the public market, and any such resale would increase the number

of shares of our common stock available for public trading.

Sales by the investors in the Private Placement of a substantial number of

shares of our common stock in the public market, or the perception that such sales might occur, could have a material adverse effect

on the price of our common stock.

issuance and sale of our common stock to Roth Principal Investments under the Committed Equity Facility may cause dilution to our other

stockholders and the sale of the shares of common stock acquired by Roth Principal Investments, or the perception that such sales may

occur, could cause the price of our common stock to fall.

May 15, 2026, we entered into the CEF Purchase Agreement with Roth Principal Investments, pursuant to which Roth Principal Investments

has committed to purchase up to $40,000,000 of Purchase Shares, upon the terms and subject to the conditions set forth in the CEF Purchase

The shares of our common stock that may be issued under the CEF Purchase Agreement may be sold by us to Roth Principal Investments

at our discretion from time to time over a 36-month period following June 4, 2026, subject to certain conditions.

The purchase price

for the shares that we may sell to Roth Principal Investments under the CEF Purchase Agreement will fluctuate based on the market price

of our common stock.

Depending on demand and market liquidity at the time, sales of such shares by Roth Principal Investments may cause

the trading price of our common stock to fall.

generally have the right to control the timing and amount of any future sales of our shares to Roth Principal Investments.

of our common stock to Roth Principal Investments will depend upon market conditions and other factors to be determined by us.

ultimately decide to sell to Roth Principal Investments all, some or none of the shares of our common stock that may be available for

us to sell pursuant to the CEF Purchase Agreement.

If and when we sell shares to Roth Principal Investments, Roth Principal Investments

may then resell all, some or none of those shares at any time or from time to time in its discretion.

Therefore, our sales to Roth Principal

Investments could result in substantial dilution to the interests of other holders of our common stock.

Additionally, the sale of a substantial

number of shares of our common stock to Roth Principal Investments, or the anticipation of such sales, could make it more difficult for

us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

the per share purchase price that Roth Principal Investments will pay for Purchase Shares in any Market Open Purchase, Intraday Purchase,

Pre-Market Purchase or Post-Market Purchase that we may elect to effect pursuant to the CEF Purchase Agreement will be determined by

reference to the VWAP during the applicable valuation period on the applicable purchase date for such purchase, it is not possible for

us to predict the number of shares of common stock that we will sell to Roth Principal Investments as Purchase Shares under the CEF Purchase

Agreement, the purchase price per share that Roth Principal Investments will pay for Purchase Shares purchased from us under the CEF

Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by Roth Principal Investments under the

CEF Purchase Agreement.

to the extent that the Exchange Cap remains applicable to issuances and sales of our common stock under the CEF Purchase Agreement, if

we elect to issue and sell to Roth Principal Investments more shares of common stock than the Exchange Cap (or 4,272,062 shares of common

stock) under the CEF Purchase Agreement, which we have the right, but not the obligation, to do, we must first obtain stockholder approval

to issue shares of common stock in excess of the Exchange Cap under the CEF Purchase Agreement in accordance with applicable Nasdaq rules.

Any issuance and sale by us under the CEF Purchase Agreement of a substantial amount of shares of common stock could cause additional

substantial dilution to our stockholders.

The number of shares of common stock ultimately offered for resale by Roth Principal Investments

through the CEF Resale Registration Statement is dependent upon the number of shares of common stock, if any, we elect to sell to Roth

Principal Investments under the CEF Purchase Agreement.

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

What changed 10-K

Item 1A. Risk Factors