What changed in this filing

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Item 9A. Controls and Procedures

2026-08-20 compared with 2025-09-17 · 1793 added, 1201 removed, 540 unchanged (85% of the section changed)

1 unchanged sentence

of Disclosure Controls and Procedures

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

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

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

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

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

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

during the period when this report was being prepared.

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

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

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

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

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

Our disclosure controls and procedures

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

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

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

Previously, and as of June 30, 2025, our procedures were judged not effective because of the material weaknesses identified in our internal

control over financial reporting.

However, based upon our current evaluation, our Chief Executive Officer and Chief Financial Officer

have concluded that our disclosure controls and procedures were effective as of June 30, 2026.

Report on Internal Control over Financial Reporting

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

Under the supervision

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

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

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

for smaller public companies as of June 30, 2025.

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

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

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

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

override of controls.

In the Company’s Annual

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

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

in our internal controls over financial reporting.

We also concluded that the previously issued audited consolidated financial statements

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

September 30, 2023, December 31, 2023, and March 31, 2024, which were filed with the Securities and Exchange Commission (“SEC”)

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

in such financial statements relating to the improper accounting for inventory.

Accordingly, our Annual Report on Form 10-K filed for

the year ended June 30, 2024 included the restatement of those periods.

As a part of this restatement and evaluation process, we discovered

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

excess and obsolete inventory identified related to inventory components not recorded at the lower of cost or net realizable value, as

well as consigned inventory not reconciled in a timely manner;

(b) the Company had not properly recognized revenue in the periods in which the related performance obligations

had been satisfied for a contract with a certain customer, and that the Company had improperly recorded accounts receivable pertaining

to that contract as a reduction to its accounts payable owed to that customer although the right of offset conditions under ASC 210-20

had not been met, resulting in misstatements to revenues, accounts receivable and accounts payable;

although such expenses did not meet the classification criteria for research and development under ASC 730, resulting in an overstatement

of research and development expenses and a corresponding understatement of cost of sales;

(d) the Company had various clearing accounts that had not been reconciled in a timely manner, resulting in

misstatements of accounts payable, inventories and cost of sales;

(e) the Company had not included certain product warranty-related expenses within the proper periods in its

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

payable and an understatement of cost of sales;

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

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

have been recognized as a change in other assets.

The Company’s management

concluded that considering the errors described above, this represents an additional material weakness in the Company’s disclosure

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

The material weakness was based upon a lack

of sufficiently designed controls over the prevention of fraud and possible management override of controls.

In March 2024, the Company strengthened

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

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

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

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

In addition, in

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

fiscal 2025, the Company continued to remediate the identified material weaknesses through additional processes and controls, including

the timing of inventory audits, review of inventory for obsolescence and completeness of data used to estimate warranty liability.

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

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

in our internal control over financial reporting.

The material weaknesses were based on a lack of sufficient personnel resources with

technical accounting expertise related to certain aspects of the financial reporting process as well as the evaluation that our controls

over internal control were ineffective, including controls over the timing of inventory audits, the review of inventory for obsolescence

and the completeness of data compilation used to estimate warranty liability.

The weaknesses were remediated with the addition of a new

Chief Financial Officer and additional highly qualified accounting personnel, as well as by the implementation of specific and effective

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

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

by the Committee of Sponsoring Organizations of the Treadway Commission – Integrated Framework (2013) and subsequent guidance

prepared by the Commission specifically for smaller public companies as of June 30, 2026.

Based on that evaluation, our management concluded

that our internal control over financial reporting were effective as of June 30, 2026.

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

11 unchanged sentences

evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected,

and there is a risk that material misstatements may not be prevented or detected on a timely basis by internal controls over financial

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

regarding the effectiveness of the Company’s internal control over financial reporting, as such report is not required due to the

Company’s status as a smaller reporting company.

and there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial

Form does not include an attestation report of the Company’s independent registered public accounting firm regarding the effectiveness

of the Company’s internal control over financial reporting, as such report is not required due to the Company’s status as

a smaller reporting company.

in Internal Control over Financial Reporting

There have been no

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

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

as set forth above, there have been no changes in the Company’s internal control over financial reporting during the fiscal year

ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control

over financial reporting.

9B - OTHER INFORMATION

9C - DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENTS INSPECTIONS

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

This information is instead incorporated herein by reference to

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

for our next Annual Meeting of Stockholders.

10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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

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

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

following table and text set forth the names and ages of our current directors, executive officers and significant employees as of August

Our Board of Directors (“Board”) is comprised of only one class.

All of the directors will serve until the next

annual meeting of stockholders or until their successors are elected and qualified, or until their earlier death, retirement, resignation

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

From time to time, our directors have

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

Chief Executive Officer

Financial Officer

Operating Officer

Walters-Hoffert (3)(4)

Robinette (3)(5)

Leposky (3)(6)

Vanka was appointed as our Director, Chief Executive Officer and President, effective March 10, 2025.

Mason was promoted from Vice President of Operations to Chief Operating Officer effective August 1, 2025.

(3) Independent Director.

(4) Chairperson of the Audit Committee, Member of the Compensation Committee and the Nominating and Governance Committee.

(5) Chairman of the Board, Chairperson of the Compensation Committee, Member of the Audit Committee and the Nominating and Governance Committee.

(6) Chairperson of the Nominating and Governance Committee, Member of the Audit Committee and the Compensation Committee.

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

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

Vanka, Chief Executive Officer and President and Director .

Vanka was appointed as our Chief Executive Officer and President and

a director effective March 10, 2025.

Vanka has over 18 years of experience in building, scaling, managing and transforming technology

companies in sectors including renewable energy, electric vehicle charging, and others.

Vanka has served as SVP & Chief Digital

Officer (CEO of Digital Division) at Fluence Energy, Inc.

FLNC), from August 2022 to January 2024.

In this role, he was responsible

for the company’s strategic growth, profitability, and operational execution, achieving a 300% increase in Annual Recurring Revenue

(ARR) and overseeing a fivefold expansion in Assets Under Management (AUM).

He played a key role in integrating product lines of two

cloud-based software offerings, Mosaic and Nispera, into a unified platform, driving innovation in Fluence’s software offerings,

including Battery Management Systems (BMS), IoT devices, and Core OS.

Mosaic was recognized for its state-of-the-art machine learning

algorithms and AI-driven capabilities, winning Time magazine’s 2022 Best Innovations award in the software category.

Prior to joining

Vanka was a founding team member and Chief Product Officer at InCharge Energy from November 2020 to August 2022, where he led

product development and technology strategy for EV fleet charging solutions.

From April 2018 to November 2020, he was the founder and

Chief Executive Officer of MyShoperoo Inc, an enterprise-focused on-demand shopping platform that optimized last-mile delivery efficiency

through intelligent aggregation algorithms.

Vanka holds a Bachelor of Applied Science in Computer Engineering from the University

of Ottawa and an MBA from Georgia State University.

He has also completed executive leadership programs at UC Berkeley, including coursework

in Artificial Intelligence for Business Strategies.

Vanka’s executive and management experience, plus his experience

with the operations and strategy of the Company, the Company believes Mr.

Vanka is qualified to be on the Board.

Royal, Chief Financial Officer and Secretary.

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

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

Relations, and M&A.

Since 2023, Mr.

Royal has served as a consultant for MCA Financial group.

Prior to joining the Company, Mr.

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

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

September 2022.

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

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

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

within the semiconductor industry.

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

certified public accountant.

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

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

Mason, Chief Operating Officer.

Mason has served as our Chief Operating Officer since August 2025, our Vice President of Operations

from December 2021 to July 2025 and our Director of Manufacturing from January 2021 to December 2021.

Prior to joining the Company, Mr.

Mason was the plant manager at NEO Tech from March 2017 to January 2021 after being promoted from Director of Operations from December

2013 to March 2017.

Mason has also worked for Sumitomo Electric Interconnect Products, Inc., Radio Design Labs, Inc., and Motorola

during his career.

Mason received his Master of Business Administration in International Business in 2015 and his Bachelor of

Business Administration/Management in 2013 from North Central University.

Mason is also Total Productive Maintenance (TPM) Instructor

Certified by the Japan Institute of Plant Maintenance, Tokyo, Japan.

Walters-Hoffert, Director.

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

Walters-Hoffert was a co-founder

of Daré Bioscience, Inc.

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

in July of 2017, became Chief Financial

Officer of the surviving public company (Nasdaq:

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

For over twenty-five (25) years,

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

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

Walters-Hoffert

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

Rica and Oppenheimer & Co, Inc.

in New York City, New York.

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

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

of Planned Parenthood of the Pacific Southwest.

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

Institute of Science in San Diego.

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

in Management Sciences.

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

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

Walters-Hoffert is qualified to be on the Board.

Robinette, Director .

Robinette was appointed to our Board on June 28, 2019 and our Chairman on March 10, 2025.

previously served as our lead independent director from September 10, 2021 to March 10, 2025.

Robinette has been a CEO Coach and

Master Chair since 2013 as an independent contractor to Vistage Worldwide, Inc., an executive coaching company.

In addition, since 2013

Robinette has been providing business consulting related to top-line growth and bottom-line improvement through his company EPIQ

From 2013 to 2019, Mr.

Robinette was the Founder and CEO of EPIQ Space, a marketing website for the satellite industry,

a member-based community of suppliers promoting their offerings.

Robinette was with Peregrine Semiconductor, Inc., a manufacturer

of high-performance RF CMOS integrated circuits, from 2007 to 2013 in two roles as a Director of Worldwide Sales as well as the Director

of the High Reliability Business Unit.

Robinette started his career from 1991 to 2007 at Tyco Electronics Ltd.

(known today as TE

Connectivity Ltd.), a passive electronics manufacturer, in various sales, sales leadership and product development leadership roles.

Robinette received a Bachelor of Science degree in Business Administration, Marketing from San Diego State University.

Robinette’s executive and management experience, plus his experience building companies, the Company believes Mr.

qualified to be on the Board.

Johnson, Director.

Johnson has been our director since July 12, 2012.

Johnson has been a director of Flux Power since it

was incorporated.

Since 2002, Mr.

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

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

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

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

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

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

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

result of Mr.

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

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

Based on the foregoing, the Company believes Mr.

Johnson is qualified to be on the Board.

Leposky, Director.

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

Leposky has over 30 years of executive experience

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

Leposky is currently the Executive Vice President and Chief

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

among other responsibilities since 2012.

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

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

Prior to joining Topgolf Callaway Brands, Mr.

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

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

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

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

Graduate School of Management.

In addition, Mr.

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

an avid golfer.

Based on the above qualifications, the Board believes Mr.

Leposky’s extensive executive experience within the consumer

product and service industry qualifies Mr.

Leposky to serve on the Board.

in Certain Legal Proceedings

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

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

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

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

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

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

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

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

and (4) being found

by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal

or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Leadership Structure and Role in Risk Oversight

Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure to provide independent

oversight of management.

Our Board is currently led by a Chairman of the Board who also serves as our Chief Executive Officer.

understands that the right Board leadership structure may vary depending on the circumstances, and our independent directors periodically

assess these roles and the Board leadership to ensure the leadership structure best serves the interests of the Company and stockholders.

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

The Guidelines provide that

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

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

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

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

The responsibilities of the Lead Independent Director, if required under the Guidelines, include, among others:

(i) serving as primary

intermediary between non-employee directors and management;

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

schedules for the Board;

(iii) working with the Chairman of the Board as to the quality, quantity and timeliness of the information provided

to directors;

(iv) in consultation with the Nominating and Governance Committee, reviewing and reporting on the results of the Board

and Committee performance self-evaluations;

(v) calling additional meetings of independent directors;

and (vi) serving as liaison for

consultation and communication with stockholders.

to March 10, 2025, Mr.

Dutt, previously held the Chairman and Chief Executive Officer roles, and Mr.

Robinette previously served as the

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

March 10, 2025, Mr.

Dutt, our former chairman and Chief Executive Officer, notified the Company’s Board of his decision to retire

and resign from his position as director, Chairman of the Board, Chief Executive Officer and President of the Company and its wholly

owned subsidiary, Flux Power, effective March 10, 2025.

Dutt’s stepping down is for personal reasons and not due to any disagreement

with the Company’s management team or the Company’s Board on any matter relating to the operations, policies or practices

of the Company or any issues regarding the Company’s accounting policies or practices.

light of the anticipated transition, the Nominating and Governance Committee of the Board determined that it would be in the best interest

of the Company and its stockholders if the position of Chairman of the Board was held by a non-executive member of the Board on a going

forward basis.

Accordingly, upon Mr.

Dutt’s retirement on March 10, 2025, the Board appointed Mr.

Robinette as the new

Chairman of the Board, effective March 10, 2025.

Robinette is an independent director, we do not and will not have a Lead Independent

Director until required to have one under our Independent Director Guidelines.

connection with Mr.

Dutt’s retirement, the Board appointed Mr.

Robinette as the new Chairman of the Board, effective March 10,

Robinette also currently serves as an independent director, chairperson of the Compensation Committee, and a member of both

the Audit Committee and the Nominating and Governance Committee.

In addition, the Board appointed Mr.

Vanka as director, Chief Executive

Officer and President of the Company and Flux Power, effective March 10, 2025.

Robinette possesses understanding and knowledge of the business and affairs of the Company and has the ability to devote a substantial

amount of time to serve as our Chairman.

The Board believes the appointment of a strong independent director as Chairman and the use

of regular executive sessions of the non-management directors, along with a majority of the Board being composed of independent directors,

allow the Board to maintain effective oversight of management.

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

Our Board exercises this risk oversight responsibility directly

and through its committees.

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

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

risk mitigation strategies.

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

significant transactions.

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

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

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

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

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

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

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

Our Board has broad and ultimate

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

and management of risks to the Company.

Composition, Committees and Independence

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

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

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

Audit committee members must also satisfy the independence

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

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

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

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

Walters-Hoffert, and Messrs.

Robinette and Leposky are independent directors as

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

A majority of our directors are independent, as required under

applicable Nasdaq rules.

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

at which only independent directors are present.

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

The composition and responsibilities

of each of the committees is described below.

Our Board has determined that each member of the Audit Committee, the Compensation Committee,

and the Nominating and Governance Committee meets the applicable rules and regulations regarding “independence” and also

that each member of our Audit Committee, the Compensation Committee, and the Nominating and Governance Committee is free of any relationship

that would interfere with his or her individual exercise of independent judgment with regard to the Company.

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

the Audit Committee, Ms.

Walters-Hoffert, qualifies as an audit committee financial expert within the meaning of SEC regulations.

Robinette and Leposky serve as members of the Audit Committee.

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

the engagement of the independent registered public accounting firm to audit our consolidated financial statements and to review our

accounting and auditing principles.

The Audit Committee reviews the scope, timing and fees for the annual audit and the results of audit

examinations performed by any internal auditors and independent public accountants, including their recommendations to improve the system

of accounting and internal controls.

The Audit Committee will at all times be composed exclusively of directors who are, in the opinion

of our Board of Directors, free from any relationship that would interfere with the exercise of independent judgment as a committee member

and who possess an understanding of consolidated financial statements and generally accepted accounting principles.

Our Audit Committee

operates under a written charter, which is available on our website at www.fluxpower.com.

Compensation Committee currently consists of three independent directors.

The Compensation Committee establishes our executive compensation

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

equity awards for our executive officers.

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

Walters-Hoffert and

Leposky are members of the Compensation Committee.

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

independence standards for compensation committee members.

Our chief executive officer often makes recommendations to the Compensation

Committee and the Board concerning compensation of other executive officers.

The Compensation Committee seeks input on certain compensation

policies from the chief executive officer.

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

at www.fluxpower.com.

and Governance Committee

Nominating and Governance Committee currently consists of three independent directors.

The Nominating and Governance Committee is responsible

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

Leposky is the Chairperson of the Nominating and Governance Committee.

Walters-Hoffert and Mr.

Robinette are members of the Nominating

and Governance Committee.

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

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

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

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

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

We also seek directors who have the ability and commitment

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

We believe that all of our directors meet the foregoing

qualifications.

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

of Business Conduct and Ethics

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

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

by the Board.

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

officer or principal accounting officer.

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

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

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

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

Melrose Drive, Vista, California 92081.

Indemnification

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

officers (each, an “Indemnitee”).

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

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

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

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

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

his conduct was unlawful.

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

or gross negligence of the Indemnitee is alleged or proven.

Additionally, the Indemnification Agreement establishes processes and procedures

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

Trading Policy and Rule 10b5-1 Trading Programs

have adopted an Insider Trading Policy which prohibits directors, officers and all other employees, or consultants or contractors, as

well as family members of such persons (or any other person subject to the policy) from engaging in any transaction involving a purchase

or sale of our securities, including any offer to purchase or offer to sell, based on material nonpublic information regarding the Company

(“Material Nonpublic Information”).

our Insider Trading Policy and pursuant to SEC Rule 10b5-1, directors, officers and employees may establish written programs which permit

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

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

Under a Rule 10b5-1 plan,

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

the plan, without further direction from such insider.

Section 16(a) Reports

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

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

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

respectively.

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

of all Section 16(a) reports they file.

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

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

ended June 30, 2026 were timely filed.

11 - EXECUTIVE COMPENSATION

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

for our Named Executive Officers

following table sets forth information concerning all forms of compensation earned by our named executive officers during fiscal 2026

and fiscal 2025 for services provided to the Company and its subsidiary.

Principal Position

Executive Officer and President

Financial Officer and Corporate Secretary

Operating Officer

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

718 using the Black-Scholes valuation

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

Vanka was appointed as the Company’s Chief Executive Officer and President, as well as a member of the Board, effective

March 10, 2025.

Mason was promoted from Vice President of Operations to Chief Operating Officer, effective August 1, 2025.

Explanation of Compensation Arrangements with Named Executive Officers

On August 1, 2025, pursuant to the recommendation of the Compensation Committee of the Board (the “Compensation Committee”),

the Board approved the following salaries (the “Fiscal 2026 Annual Salary”) for the following named executive officers, effective

for fiscal 2026:

Executive Officer

Financial Officer

Operating Officer

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

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

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

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

The Annual Bonus

Plan was effective for the fiscal year ended June 30, 2021 and is effective each fiscal year thereafter (the “Plan Year”).

For each Plan Year, the Compensation Committee establishes an aggregate amount of allocable Bonus under the Annual Bonus Plan and determines

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

The Participation Criteria

may differ from Participant to Participant and from bonus to bonus.

The Participation Criteria for each Plan Year is based on the Company

achieving certain performance targets based on annual revenue, gross margin, operating expense and new business development.

Company’s executive officers are eligible to participate in the Annual Bonus Plan.

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

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

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

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

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

For each Plan Year,

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

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

The Participation Criteria may

differ from Participant to Participant and from bonus to bonus.

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

in the Amended Annual Bonus Plan.

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

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

2026 Bonuses Under the Amended Bonus Plan.

On August 1, 2025, pursuant to the recommendation of the Compensation Committee, the Board

also approved the bonus pool and performance criteria for the Amended Annual Bonus Plan for Fiscal 2026 (the “2026 Bonus”).

For fiscal 2026, the performance goals applicable to a bonus are based on the Company achieving certain targets based on the Company’s

full year revenue, Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization and stock-based compensation)

for fiscal 2026, and functional goals (the “Financial Targets”), in addition to individual performance objectives and goals

(the “2026 Performance Matrix”).

Board approved the following cash bonuses under the 2026 Bonus for the following executive officers.

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

Full maximum payout includes stock option grants and assumes targets reached as set forth in the 2026 Performance Matrix.

Incentive Awards.

We did not grant any stock options or other equity awards to any of our named executive officers in fiscal 2025.

On August 1, 2025 (the “Fiscal 2026 Grant Date”), pursuant to the recommendation of the Compensation Committee, the Board

approved the grant of (i) time-based restricted stock units (“Time RSUs”) and performance-based restricted stock units (“PSUs”)

Vanka under the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) and (ii) stock options (the “Fiscal

2026 Options”) under the 2021 Plan to certain of the Company’s then-current named executive officers, in each case, as set

forth in the table below.

Principal Position

over 3 years, with the first vesting date on July 1, 2026

Executive Officer and President

vest on the third anniversary of July 1, 2025, subject to achievement of performance goals

Financial Officer and Corporate Secretary

over 3 years from the date of grant

Operating Officer

over 3 years from the date of grant

Represents the maximum number of shares eligible to vest assuming achievement of the applicable performance goals.

122,562 shares would become eligible to vest upon achievement of the applicable revenue and net income goals.

60,365 shares would become

eligible to vest upon achievement of the applicable market price goals.

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

we may establish such a plan in the future.

their respective employment agreements, as described in further detail below, Messrs.

Vanka and Royal, among other things, are entitled

to reimbursement for all reasonable business expenses incurred in performing services.

They are also eligible to participate in all customary

employee benefit plans or programs generally made available to the senior executive officers.

Equity Awards at 2026 Fiscal Year End

following table sets forth certain information concerning unexercised options and unvested RSUs and PSUs held by our named executive

officers as of June 30, 2026.

Our named executive officers did not hold any other types of equity awards as of June 30, 2026.

Securities Underlying Unexercised Options

Equity Incentive

Number of Securities Underlying Unexercised Unearned

Securities That Have Not

of Securities That Have Not

Equity Incentive

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

Unexercisable

Market value is based on the fair market value of our common stock at the close of trading on June 30, 2026, the last trading day

of fiscal 2026, which was $0.86.

Vanka’s outstanding RSUs vest annually over 3 years on each of July 1, 2026, July 1, 2027 and July 1, 2028.

Vanka’s outstanding PSUs become eligible to vest based on the achievement of revenue performance, net income performance

and market price goals.

Any PSUs eligible to vest will cliff vest on the third anniversary of July 1, 2025.

As of June 30, 2026, achieving

the performance conditions is considered not probable.

From date of grant, Mr.

Royal’s 2024 option grant vests annually over 3 years and his 2025 option grant vests annually over two

From date of grant, Mr.

Mason’s 2022 option grant vests annually over 4 years, his 2023 option grant vests annually over three

years and his 2024 option grant vests annually over two years.

Compensation Plan Information.

On February 17, 2015, our stockholders approved our 2014 Equity Incentive Plan (“2014 Plan”),

which was amended on July 23, 2018 and on November 5, 2020.

The 2014 Plan authorizes the issuance of awards for up to 1,000,000 shares

of our common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock

units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to,

the Company or its affiliates.

We granted 100,192 stock options under the 2014 Plan during fiscal 2024.

We granted 51,171 restricted

stock units under the 2014 Plan during fiscal 2024.

The 2014 Plan expired on November 26, 2024, at which time no future stock or stock

option awards could be granted.

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

approved by our stockholders.

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

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

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

granted 934,012 stock options under the 2021 Plan during fiscal 2024.

We did not grant any stock options under the 2021 Plan during fiscal

We granted 200,000 and 17,057 restricted stock units under the 2021 Plan during fiscal 2025 and fiscal 2024, respectively.

May 28, 2025, our stockholders approved the 2025 Equity Incentive Plan (the “2025 Plan”).

The 2025 Plan authorizes the issuance

of awards for up to 1,000,000 shares of common stock in the form of incentive stock options, non-statutory stock options, stock appreciation

rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants

and advisors to, the Company or its affiliates.

of June 30, 2026, we had 368,997 options outstanding and exercisable and 121,951 RSUs outstanding under the 2025 Plan, the 2021 Plan

and the 2014 Plan.

of Employment Agreement with Mr.

Krishna Vanka.

On March 10, 2025, we entered into an executive employment agreement with Mr.

pursuant to which he agreed to serve as our Chief Executive Officer and President (the “Vanka Employment Agreement”).

to the terms of the Vanka Employment Agreement, Mr.

Vanka receives an annual base salary of $400,000, subject to annual performance reviews

by the Board or Compensation Committee.

As an initial incentive for achieving key financial milestones, we agreed to award Mr.

a cash bonus of $100,000 if the Company’s average EBITDA is net positive over the next nine months (end of the calendar year).

Beginning fiscal year 2026, Mr.

Vanka will have the ability to achieve a cash bonus of up to 150% of base salary based on budget performance

goals as determined by the Board or the Compensation Committee.

Beginning in fiscal year 2026, Mr.

Vanka will be granted Time RSUs equivalent

to 50% of his base salary, which are eligible to vest in three (3) equal annual installments over three (3) years.

He will also be eligible

for PSUs, with a target of 50% of his base salary and a maximum of 150%, based on budget performance goals.

Any earned PSUs will cliff-vest

on the third (3 rd ) anniversary of the grant date.

Additionally, the Vanka Employment Agreement provides that Mr.

be terminated at any time by the Company with or without cause.

Vanka is terminated without cause or upon a Change in Control

(as defined in the Vanka Employment Agreement), he will receive:

(a) twelve (12) months of base salary paid in a lump sum;

and (b) twelve

(12) months of continued life, medical, and dental insurance coverage, with the Company covering the cost subject to the same employee

contribution as active employees.

Additionally, in the event of a Change in Control termination, Time RSUs and any PSUs, for which the

performance criteria are satisfied, will be subject to double-trigger acceleration.

Vanka is subject to a non-compete obligation

during the term of his employment and confidentiality obligations that extend beyond termination.

The Vanka Employment Agreement also

includes other customary clauses and arrangements.

of Employment Agreement with Mr.

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

Royal, in connection with Mr.

Royal’s appointment as Chief Financial Officer and Corporate Secretary, which provides for an annual

base salary of $330,000, effective March 4, 2024 (the “Royal Employment Agreement”).

The Royal Employment Agreement includes

terms relating to change in control, termination, severance, benefits and the acceleration of vesting of options and restricted stock

units upon certain events.

In addition, Mr.

Royal will be eligible for a 60% cash bonus, as a percentage of base salary, and incentive

stock options to purchase up to 55,000 shares of the Company’s common stock (the “Options”) under the 2021 Plan.

Options will be subject to the terms and conditions provided in the form of Incentive Stock Option Agreement under the 2021 Plan, will

have an exercise price based on the Company’s 10-day volume weighted average price on the grant date, and will expire ten (10)

years from the grant date and vest in four (4) equal annual instalments commencing one year after the grant date.

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

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

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

with an effective date of October 2, 2023.

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

of the Clawback Policy.

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

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

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

Administration of the Clawback Policy will be by the Compensation

Committee of the Company.

is a summary of the total compensation of our non-employee directors during fiscal 2026.

Vanka, our chief executive officer and president,

received no compensation for his service as a director and is not included in the below table.

The compensation Mr.

Vanka received as

an employee of the Company is included in the section titled “Executive Compensation” above.

Fees Earned or

Walters-Hoffert

Represents the fair value of the RSUs granted.

of June 30, 2026, our non-employee directors held RSUs.

Lisa Walters-Hoffert and Dale Robinette each held 3,948 exercisable options

and Michael Johnson held 9,948.

Director Compensation Policy

to the compensation program for our non-employee directors that was approved by the Board on March 1, 2025 for fiscal 2026 and 2027,

each member of our Board of Directors who is not an employee is eligible to receive the following annual cash retainers for their service

on our Board:

Plus (as applicable):

Lead Independent Director

Audit Committee Chair

Compensation Committee

Nominating/Governance Committee

Audit Committee Member

Compensation Committee

Nominating/Governance Committee

addition, our non-employee directors are eligible to receive an annual equity grant of RSUs or stock options, at their option, equal

to the amount of $80,000 divided by the fair market value of the equity grant, with all grants subject to a one year vesting requirement

subject to their continued service on our Board.

The fair market value of the grants is based upon the closing stock price on the grant

issuance date.

On May 28, 2025, each of our non-executive directors was granted 50,000 RSUs under the 2021 Plan, which fully vested on

May 28, 2026.

On July 31, 2026, each of our non-executive directors was similarly granted RSUs or options under the 2021 Plan, which

are scheduled to vest in full on March 26, 2027.

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

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

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

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

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

or otherwise, subject to community property laws where applicable.

As of June 30, 2026, we had a total of 21,621,642 shares of common

stock issued and outstanding.

following table sets forth, as of June 30, 2026, information concerning the beneficial ownership of shares of our common stock held by

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

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

Unless otherwise indicated, the business address of each of our

directors, executive officers and beneficial owners of more than five percent (5%) of our outstanding common stock is c/o Flux Power

Holdings, Inc., 2685 S.

Melrose Drive, Vista, California 92081.

Each person has sole voting and investment power with respect to the

shares of our common stock, except as otherwise indicated.

Beneficial ownership consists of a direct interest in the shares of common

stock, except as otherwise indicated.

Name and Address of Beneficial Owner (1)

Shares Beneficially Owned

Percentage of Ownership

Officers and Directors

Michael Johnson, Director

4,506,045 (2)

Krishna Vanka, Chief Executive Officer, President, and Director

Royal, Chief Financial Officer and Secretary

Mason, Chief Operating Officer

Leposky, Director

Lisa Walters-Hoffert, Director

Dale Robinette, Director

All Officers and Directors as a group (7 people)

5% Stockholders

Esenjay Investments LLC

4,061,799 (2)

Cleveland Capital Management L.L.C.

1,521,809 (9)

1250 Linda Street, Suite 304

Rocky River, OH 44116

Formidable Asset Management, LLC

3,013,948 (10)

221 E Fourth Street, Suite 2700

Cincinnati OH 45202

less than 1% of shares outstanding.

addresses above are 2685 S.

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

(i) 106,311 shares of common stock held by Mr.

Johnson, (ii) 9,948 shares of common stock issuable upon exercise of stock options,(iii)

218,658 shares of common stock issuable upon the conversion of 23,233 shares of Series A Preferred Stock (as defined herein) issuable

upon the exercise of 23,233 Prefunded Warrants (as defined herein) held by Mr.

Johnson, (iv) 109,329 shares of common stock issuable

upon the exercise of 109,329 Common Warrants (as defined herein) held by Mr.

Johnson, and (v) 4,061,799 shares of common stock held

by Esenjay Investments LLC, of which Mr.

Johnson is the sole director and beneficial owner.

Vanka was appointed Chief Executive Officer, President and director on March 10, 2025.

Includes (i) 24,300 shares of common stock

issuable upon the conversion of 2,582 shares of Series A Preferred Stock issuable upon the exercise of 2,582 Prefunded Warrants,

and (ii) 12,150 shares of common stock issuable upon the exercise of 12,150 Common Warrants and (iii) 40,650 shares of common stock

issuable to Mr.

Vanka pursuant to restricted stock units vesting within 60 days.

(i) 36,663 shares of common stock issuable upon exercise of stock options exercisable within 60 days, (ii) 4,865 shares of common stock

issuable upon the conversion of 517 shares of Series A Preferred Stock issuable upon the exercise of 517 Prefunded Warrants and (iii)

2,433 shares of common stock issuable upon the exercise of 2,433 Common Warrants.

Mason was promoted from Vice President of Operations to Chief Operating Officer effective August 1, 2025.

Includes (i) 8,127 shares

of common stock, (ii) 62,858 shares of common stock issuable upon exercise of stock options, (iii) 4,865 shares of common stock issuable

upon the conversion of 517 shares of Series A Preferred Stock issuable upon the exercise of 517 Prefunded Warrants, and (iv) 2,433

shares of common stock issuable upon the exercise of 2,433 Common Warrants and (v) 81,558 shares of common stock issuable upon exercise

of stock options exercisable within 60 days.

of 67,057 shares of common stock.

(i) 94,107 shares of common stock and (ii) 3,948 shares of common stock issuable upon exercise of stock options.

(i) 106,311 shares of common stock, (ii) 3,948 shares of common stock issuable upon exercise of stock options, (iii) 12,150 shares

of common stock issuable upon the conversion of 1,291 shares of Series A Preferred Stock issuable upon the exercise of 1,291 Prefunded

Warrants and (iv) 6,075 shares of common stock issuable upon the exercise of 6,075 Common Warrants.

on Amendment No.

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

and Cleveland Capital Management, L.L.C.

with the SEC on July 24, 2026, reporting information as of June 30, 2026, reflects (i) 1,450,736

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

shared voting and dispositive power with respect to such shares, which includes (a) 1,272,522 shares of common stock beneficially

owned by Cleveland Capital L.P.

and (b) 178,214 shares of common stock beneficially owned by Rocky River Specific Opportunities Fund

LLC, (ii) 71,073 shares of common stock individually held by Mr.

Massad and (iii) 50,000 shares of common stock individually held

on Amendment No.

4 to Schedule 13G filed by Formidable Asset Management, LLC with the SEC on December 16, 2025.

Includes (i) 666,571

shares of common stock held by Formidable Asset Management, LLC and (ii) 2,347,377 shares of common stock held by certain accounts

managed by Formidable Asset Management, LLC, which hold shared dispositive power with respect to such shares.

Based on Schedule 13D

filed by Formidable Asset Management, LLC with the SEC on October 31, 2023 and additional information available to the Company from

the Private Placement (as defined herein).

Includes (i) 548,226 shares of common stock held by Formidable Asset Management, LLC,

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

and dispositive power with respect to such shares, (iii) 242,899 shares of common stock issuable upon the conversion of 25,809 shares

of Series A Preferred Stock issuable upon the exercise of 25,809 Prefunded Warrants held by certain accounts managed by Formidable

Asset Management, LLC and (iv) 124,649 shares of common stock issuable upon the exercise of 124,649 Common Warrants held by certain

accounts managed by Formidable Asset Management, LLC.

Compensation Plan Information

following table provides certain information with respect to our equity compensation plans in effect as of June 30, 2026:

securities to be issued upon exercise of outstanding options, and settlement of RSUs

Weighted-average

exercise price of outstanding options, and issuance price of RSUs

securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)

Equity compensation

plans approved by stockholders (1)

Equity compensation plans

approved by stockholders (2)

Equity compensation plans

approved by stockholders (3)

compensation plans approved by stockholders (4)

Represents shares of common stock reserved for issuance under the 2014 Equity Incentive Plan (the “2014 Plan”) which was

approved by our stockholders on February 17, 2015, amended on October 25, 2017 and expired on November 26, 2024.

No shares of the Company’s

common stock are available for future grants under the 2014 Plan.

Represents shares of common stock reserved for issuance under the 2021 Equity Incentive Plan (the “2021 Plan”) which

was approved by our stockholders on April 29, 2021.

Represents shares of common stock reserved for issuance under the 2025 Equity Incentive Plan (the “2025 Plan”) which

was approved by our stockholders on May 28, 2025.

Represents the number of shares of common stock reserved as authorized for the grant of options under the Flux Power Holdings,

2023 Employee Stock Purchase Plan (the “2023 ESPP”), which was approved by our stockholders on April 20, 2023.

13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

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

following includes a summary of certain relationships and transactions since July 1, 2024 and any currently proposed transactions, to

which we were or are to be a participant, in which (1) the amount involved exceeded or will exceed the lesser of (i) $120,000 or (ii)

one percent (1%) of the average of our total assets for the last two completed fiscal years, and (2) any of our directors, executive

officers or holders of more than five percent (5%) of our capital stock, or any affiliate or member of the immediate family of the foregoing

persons, had or will have a direct or indirect material interest other than compensation and other arrangements that are described under

the section titled “Executive Compensation.”

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

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

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

approval of related party transactions.

of Credit Facility and Subordinated Unsecured Promissory Note

November 2, 2023, we entered into a Credit Facility Agreement (the “Credit Facility”) with Cleveland, a related party due

to equity ownership.

The Credit Facility provides us with a line of credit of up to $2,000,000 for working capital purposes.

In connection

with the Subordinated LOC, we issued a subordinated unsecured promissory note for $2,000,000 (the “Commitment Amount”) in

favor of Cleveland.

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

Commitment Amount to us from time to time, until July 31, 2027 (the “Due Date”).

The Revolving Note accrues interest at Secured

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

of our indebtedness, obligations and liabilities to Cleveland are subject to the rights of GBC, pursuant to a Subordination Agreement

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

Subject to the Subordination

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

of the amount to be requested to be drawn down.

Subject to the Subordination Agreement, the Note is payable upon the earlier of (i) the

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

consideration of Cleveland’s commitment to provide the Advances to us, we issued Cleveland warrants to purchase 41,196 shares of

common stock (the “Advance Warrants”) which rights are represented by a warrant certificate (“Warrant Certificate”).

Subject to certain ownership limitations, the Advance Warrants are exercisable immediately from the date of issuance, expire on the five

(5) year anniversary of the date of issuance and have an exercise price of $3.24 per share.

The exercise price of the Advance Warrants

is subject to certain adjustments, including stock dividends, stock splits, combinations and reclassifications of the common stock.

the event of a Triggering Event (as defined in the Warrant Certificate), the holder of the Advance Warrants will be entitled to exercise

the Advance Warrants and receive the same amount and kind of securities, cash or property as such holder would have been entitled to

receive upon the occurrence of such Triggering Event if such holder had exercised the rights represented by the Warrant Certificate immediately

prior to the Triggering Event.

Additionally, upon the holder’s request, the continuing or surviving corporation as a result of

such Triggering Event will issue to such holder a new warrant of like tenor evidencing the right to purchase the adjusted amount of securities,

cash or property and the adjusted warrant price.

See Note 10 – Stockholders’ Equity (Deficit) in our audited consolidated

financial statements included in this Report.

July 16, 2025, we and Cleveland entered into a First Amendment to the Original Note (the “Note Amendment”).

The Note Amendment

amended the due date set forth in the Original Note issued by us to Cleveland in connection with the Subordinated LOC.

Pursuant to the

Note Amendment, the due date under the Original Note was changed from August 15, 2025 to September 30, 2025.

September 15, 2025, concurrent with the closing of the $5.0 million private placement described below, Cleveland purchased 89,323 Preferred

Stock Warrants and 420,335 Common Stock Warrants for approximately $1,730,000.

This purchase was partially funded by the conversion of

the carrying value of the outstanding principal and accrued interest of the Credit Facility on September 14, 2025, of $1,173,000.

entered into a Debt Satisfaction Agreement with us pursuant to which Cleveland represented full payment and satisfaction of any and all

of our obligations due to Cleveland under the Cleveland Note.

Cleveland paid the remaining amount it owed pursuant to the Private Placement

Purchase Agreement of $557,000 in cash.

July 18, 2025, we entered into the Private Placement Purchase Agreement with the Initial Purchaser(s) pursuant to which we agreed to

sell an initial aggregate amount of approximately $2.9 million in Preferred Stock Warrants at a purchase price equal to $19.369 per warrant.

Each Preferred Stock Warrant entitled the holder to purchase one share of the Series A Preferred Stock for $0.001 per share.

of Preferred Stock Warrants were also issued an additional five (5) year warrant to purchase a number of shares of common stock, par

value $0.001 per share equal to fifty percent (50%) of the number of shares of common stock issuable upon conversion of the Series A

Preferred Stock.

On September 15, 2025, we entered into the Amended and Restated Private Placement Purchase Agreement with certain of

the Initial Purchasers and certain additional investors pursuant to which, among other things, the Purchasers agreed to subscribe for

and purchase, and we agreed to issue and sell to the Purchasers, an aggregate of 258,144 Preferred Stock Warrants and 1,214,766 Common

Stock Warrants at the Purchase Price for gross proceeds of approximately $5.0 million.

The Purchase Price was paid in cash or, in lieu

of cash, cancellation of certain existing debt of the Company.

closing of the Private Placement contemplated by the Amended and Restated Private Placement Purchase Agreement occurred simultaneously

on September 15, 2025 upon the satisfaction of certain customary conditions.

As of June 30, 2026, there were no shares of Series A Preferred

Stock issued or outstanding.

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

growth capital.

Preferred Stock Warrants and the Common Stock Warrants were offered to a small select group of accredited investors, as defined in Rule

501 of Regulation D, all of whom had a substantial pre-existing relationship with us.

Certain of our affiliates participated in the Private

Placement, among which included Krishna Vanka, our Chief Executive Officer and director, Kevin Royal, our Chief Financial Officer, Jeffrey

Mason, our Chief Operating Officer, Dale Robinette, our director, Michael Johnson, our director, and Cleveland, which beneficially owns

approximately 7.1% of our common stock as of June 30, 2026.

Stock Warrant and Common Stock Warrant

Preferred Stock Warrant has an exercise price per share of Series A Preferred Stock equal to $0.001 per share.

The Preferred Stock Warrants

are immediately exercisable upon the closing of the Private Placement and expire when exercised in full.

The exercise price and the number

of shares of Series A Preferred Stock issuable upon exercise of each Preferred Stock Warrant is subject to appropriate adjustments in

the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting

the Series A Preferred Stock.

Common Stock Warrant has an initial exercise price of $1.715, which is equal to the 20-day VWAP per share of common stock immediately

preceding the closing of the Private Placement (subject to adjustment therein), is exercisable immediately following issuance and has

a term of five (5) years from the initial issuance date.

The Common Stock Warrant has a “cashless exercise” provision which

provides that the Common Stock Warrant can be exercised without further payment to us.

The exercise price and the number of shares of

common stock issuable upon exercise of each Common Stock Warrant is subject to appropriate adjustments in the event of certain stock

dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock.

addition, the Warrants may not be exercised in full and may not be exercised to the extent that immediately following such exercise,

the holder would beneficially own greater than 4.99% or, at the election of the holder, greater than 9.99% of the Company’s outstanding

common stock.

Placement Registration Rights Agreement

connection with the Amended and Restated Private Placement Purchase Agreement, we entered into the Private Placement Registration Rights

Agreement with the Purchasers, 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 (i) the Series A Preferred Stock underlying the Preferred Stock Warrants and (ii) the

Common Stock Warrants issued pursuant to the Amended and Restated Private Placement Purchase Agreement, and to use our commercially reasonable

efforts to cause such registration statement to be declared effective by the SEC within seventy-five (75) days following the date of

the registration statement.

We filed the registration statement in October 2025, which became effective in November 2025.

14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

Auditor for Fiscal Years 2026 and 2025

the fiscal years ended June 30, 2026 and 2025, the Company’s independent public accounting firm was Haskell & White LLP.

Paid to Principal Independent Registered Public Accounting Firm

aggregate fees billed by our Independent Registered Public Accounting Firm, for the fiscal years ended June 30, 2026 and 2025 are as

year ended June 30,

Audit fees (1)

Audit related fees (2)

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

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

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

This information is presented as of

the latest practicable date for this Report.

(2) Audit-related fees represent fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and not reported above under “Audit Fees.”

(3) Haskell & White LLP has not provided us with tax compliance, tax advice or tax planning services.

(4) All other fees include fees billed by our independent auditors for products or services other than as described in the immediately preceding three categories.

No such fees were incurred during the fiscal years ended June 30, 2026 or 2025.

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

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

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

to be performed.

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

Pre-approval is

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

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

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

the services performed to date.

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

15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) Financial Statements

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

and Baker Tilly US, LLP, registered public accounting

firm, are included in this report:

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

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

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

firm, are included in this Form:

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

Consolidated Balance Sheets as of June 30, 2026 and 2025

Consolidated Statements of Operations for the Years Ended June 30, 2026 and 2025

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

Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended June 30, 2026 and 2025

Consolidated Statements of Cash Flows for the Years Ended June 30, 2026 and 2025

4 unchanged sentences

exhibits required by Item 601 of Regulation S-K are listed in subparagraph (b) below.

The following exhibits are filed as part of this Report

The following exhibits are filed as part of this Form

Securities Exchange Agreement dated May 18, 2012.

8 unchanged sentences

Description of Securities.

Incorporated by reference to Exhibit 4(vi) on Form 10-K filed on August 20, 2026.

Form of Warrant.

16 unchanged sentences

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on March 5, 2020.

Form of Representative Warrant.

Incorporated by reference to Exhibit 10.1 on Form 10-Q filed with the SEC on November 12, 2020.

Flux Power Holdings, Inc.

16 unchanged sentences

Incorporated by reference to Exhibit 10.4 on Form 8-K filed with the SEC on November 9, 2020.

Amended and Restated Employment Agreement by and between Flux Power Holdings, Inc.

and Ronald F.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on February 17, 2021.

Employment Agreement by and between Flux Power Holdings, Inc.

and Charles A.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on February 17, 2021.

2021 Equity Incentive Plan.

38 unchanged sentences

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

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

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

Separation and Release Agreement with Ronald F.

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

Flux Power Holdings, Inc.

18 unchanged sentences

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

Common Stock Purchase Agreement, dated May 15, 2026, by and between Flux Power Holdings, Inc.

and Roth Principal Investments, LLC.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on May 18, 2026.

Registration Rights Agreement, dated May 15, 2026, by and between Flux Power Holdings, Inc.

and Roth Principal Investments, LLC.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on May 18, 2026.

Code of Business Conduct and Ethics.

4 unchanged sentences

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

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

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

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

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

13 unchanged sentences

16 – FORM 10-K SUMMARY

to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to

be signed on its behalf by the undersigned, thereunto duly authorized.

to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this Form to be

signed on its behalf by the undersigned, thereunto duly authorized.

Power Holdings, Inc.

September 16, 2025

August 20, 2026

Krishna Vanka

3 unchanged sentences

Financial Officer)

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

to the requirements of the Securities Exchange Act of 1934, this Form has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

9 unchanged sentences

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

the Board of Directors and Stockholders of

Power Holdings, Inc.

on the Consolidated Financial Statements

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

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

(the “Company”) as of June 30, 2026

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

the “consolidated financial statements”).

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

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

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

The consolidated financial statements of the Company

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

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

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

to continue as a going concern.

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

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

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

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

and 2025, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the two years in

the period ended June 30, 2026, and the related notes (collectively, the “consolidated financial statements”).

In our opinion,

the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30,

2026 and 2025, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2026, in conformity

with accounting principles generally accepted in the United States of America.

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

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

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

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

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

Management’s plans

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

The consolidated financial statements do not include any adjustments that

might result from the outcome of this uncertainty.

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

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

These conditions raise

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

Management’s plans regarding these matters

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

The consolidated financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

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

Our responsibility is to express an opinion

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

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

We are a public accounting firm registered with the Public

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

in accordance with the U.S.

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

and the PCAOB.

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

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

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

with the U.S.

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

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

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

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

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

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

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

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

Accordingly, we express no such opinion.

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

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

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

1 unchanged sentence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

Our audits also included evaluating the accounting principles

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

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

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

Audit Matters

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

required to be communicated to the audit committee and that:

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

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

We determined that

there are no critical audit matters.

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

to be communicated to the audit committee and that:

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

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

We determined that there are no critical audit

/s/ Haskell & White LLP

HASKELL & WHITE LLP

We have served as the Company’s auditor since

Irvine, California

September 16, 2025

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

on the Financial Statements

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

(the “Company”) as of June 30,

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

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

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

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

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

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

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

Those adjustments were audited

by other auditors.

Concern Uncertainty

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

in Note 2 to the consolidated financial statements, the Company’s current liquidity position and projected cash needs raise substantial

doubt about its ability to continue as a going concern.

Management’s plans regarding these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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

Our responsibility is to express an opinion

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

We are a public accounting firm registered with the Public

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

in accordance with the U.S.

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

and the PCAOB.

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

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

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

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

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

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

Accordingly, we express no such opinion.

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

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

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

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

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

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

communicated to the audit committee and that:

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

(2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

BAKER TILLY US, LLP

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

Diego, California

have served as the Company’s auditor since 2025.

POWER HOLDINGS, INC.

1 unchanged sentence

Current assets:

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

Accounts receivable, net

of allowance for credit losses of $ 70,000 and $ 68,000 at June 30, 2026 and 2025, respectively

Inventories, net

Other current assets

current assets

Total current assets

Right of use assets, net

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Fixed assets, net of accumulated depreciation

of $ 2,034,000 and $ 1,700,000 at June 30, 2026 and 2025, respectively

Intangible assets, net of accumulated amortization

of $ 2,459,000 and $ 1,969,000 at June 30, 2026 and 2025, respectively

LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

Current liabilities:

5 unchanged sentences

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Finance leases payable,

current portion

Office leases payable,

current portion

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Finance leases payable,

less current portion

Office leases payable,

less current portion

revenue, less current portion

Total liabilities

Commitments and contingencies (Note 12)

Commitments and contingencies (Note 9 and 13)

Stockholders’ equity (deficit):

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

Preferred stock, $ .001

3,000,000 and 500,000 shares authorized at June 30, 2026 and 2025, respectively;

none issued and outstanding

Common stock, $ 0.001 par value;

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

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

Common stock, $ 0.001

75,000,000 shares authorized;

21,580,992 and 16,835,698 issued and outstanding at June 30, 2026 and 2025, respectively

Additional paid-in capital

Accumulated deficit

( 113,834,000 )

( 106,386,000 )

Total stockholders’ equity (deficit)

stockholders’ equity (deficit)

( 5,404,000 )

Total liabilities and stockholders’ equity (deficit)

Total liabilities and

stockholders’ equity (deficit)

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

4 unchanged sentences

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Selling, general and administrative

and development

operating expenses

Operating loss

1 unchanged sentence

( 5,028,000 )

Other income (expense):

Interest income (expense), net

( 1,646,000 )

Other expense, net

Interest expense, net

( 1,565,000 )

1 unchanged sentence

$ ( 6,674,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

Net loss per share -

basic and diluted

Weighted average number

of common shares outstanding - basic and diluted

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

POWER HOLDING, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS

OF STOCKHOLDERS’ EQUITY (DEFICIT)

Balance at June 30, 2024

$ ( 99,712,000 )

Issuance of common stock – RSU settlements

Issuance of common stock – ESPP

Issuance of common stock

Stock-based compensation

5 unchanged sentences

$ ( 5,404,000 )

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance at June 30, 2023

$ ( 91,379,000 )

Issuance of common stock – exercised options and RSU settlements

Issuance of common stock – ESPP

Fair value of warrants issued

Issuance of Preferred Stock

Warrants and Common Stock Warrants under Private Placement, net of offering costs of $ 652,000

Issuance of common stock

– Public Offering, net of offering costs of $ 1,280,000

Issuance of common stock

– Public Offering, net of offering costs

Issuance of common stock

– CEF, net of offering costs of $ 2,000

Issuance of common stock

– CEF, net of offering costs

Issuance of common stock

Issuance of common stock – Exercise

Stock-based compensation

5 unchanged sentences

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

POWER HOLDING, INC.

STATEMENTS OF CASH FLOWS

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

year ended June 30,

Cash flows from operating activities:

Cash flows from operating

$ ( 7,448,000 )

$ ( 6,674,000 )

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

Adjustments to reconcile net loss to net cash

(used in) provided by operating activities:

Depreciation and amortization

Stock-based compensation

Amortization of debt issuance costs

Amortization of debt issuance

Allowance for credit losses

Non-cash lease expense

Inventory write downs

Changes in operating assets and liabilities:

Inventory write downs (See

Changes in operating assets

and liabilities:

Accounts receivable

1 unchanged sentence

( 1,085,000 )

Accounts payable

( 7,820,000 )

Accrued expenses

( 2,934,000 )

Accrued interest

1 unchanged sentence

Deferred revenue

Customer deposits

Net cash provided by (used in) operating activities

cash (used in) provided by operating activities

( 5,918,000 )

Cash flows from investing activities:

Cash flows from investing

Purchases of equipment

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from employee stock purchase plan exercises

Net cash used in investing

Cash flows from financing

Proceeds from issuance of preferred and common

stock warrants under Private Placement

Offering costs for issuance of preferred and

common stock warrants

Proceeds from issuance of common stock under

Public Offering

Offering costs for issuance of common stock

under the Public Offering

( 1,280,000 )

Proceeds from the issuance of common stock

under the CEF

Offering costs for issuance of common stock

under the CEF

Proceeds from subordinated debt borrowing

Proceeds from stock option exercises and employee

stock purchase plan purchases

Proceeds from revolving line of credit

2 unchanged sentences

( 64,670,000 )

Cost to amend line of credit agreement

Payment of finance leases

Net cash provided by financing activities

Net cash provided by financing

Net change in cash

2 unchanged sentences

Cash, end of period

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Common stock issued for vested RSUs

Warrants issued in connection with borrowing agreements, recorded as debt issuance cost

Supplemental Disclosures

of Non-Cash Investing and Financing Activities:

Right-of-use asset recognition

Preferred and common

stock warrants issued under Private Placement in exchange for settlement of subordinated debt, including interest accrued

Common stock issued

for vested RSUs

Supplemental Cash Flow Information:

Cash paid for income taxes, net of refunds,

by jurisdiction is as follows:

Interest paid

9 unchanged sentences

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

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

and industrial applications.

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

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

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

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

pack performance.

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

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

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

our mobile energy storage solutions provide our customers with a reliable, high performing, cost effective, and more environmentally

friendly alternative as compared to traditional lead acid and propane-based solutions.

Our modular and scalable design allows different

configurations of lithium-ion energy storage solutions to be paired with our proprietary wireless battery management system to provide

the level of energy storage required and “state of the art” real time monitoring of battery pack performance.

that the growing demand for lithium-ion energy storage solutions and more environmentally friendly energy storage solutions across a

range of industrial and commercial sectors should continue to drive our growth in the markets we serve.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

7 unchanged sentences

and Financial Condition

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

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

However, substantial doubt about the Company’s

ability to continue as a going concern exists.

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

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

The Company has

incurred an accumulated deficit of $ 106.4

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

million and incurred a net loss of $ 6.7

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

Business Capital (“GBC”) Credit Facility.

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

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

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

meet projected revenue targets and generate cash from operations.

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

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

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

2015, will not be sufficient to meet

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

this Annual Report on Form 10-K.

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

These steps include actual and planned

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

operating cost savings.

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

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

The planned gross margin improvement tasks include,

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

The Company also continues

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

from operations.

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

the planned gross margin improvement plan.

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

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

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

If such liquidity is not

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

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

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

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

However, substantial doubt about the Company’s ability to

continue as a going concern exists.

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

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

The Company has incurred an accumulated

deficit of $ 113.8 million through June 30, 2026, and for the year ended June 30, 2026, has generated negative cash flows from operations

of $ 5.9 million and incurred a net loss of $ 7.4 million.

As of June 30, 2026, the Company had a cash balance of $ 0.3 million.

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

of new forklift purchases mainly caused by lower capital spending in the market sector that the Company serves and by interest rate variability.

These conditions have affected selected large customer fleets, thereby impacting the Company’s ability to meet projected revenue

targets and to generate cash from operations.

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

and development, expected capital expenditures and expected working capital requirements.

Management believes the Company’s existing

cash, forecasted gross margins, additional cash proceeds that management believes are available from the Committed Equity Facility (as

defined herein) and additional funding that the management believes is available under the GBC Credit Facility (as defined herein) 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 Form, which raises substantial doubt about its ability to continue as a going concern over the 12 months

following the filing date of this Form.

Company has implemented reductions in labor and overhead costs and has increased selling prices of energy storage solutions, however,

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

These steps include

planned further price increases for our energy storage solutions, and the implementation of a number of cost saving initiatives including

product cost efficiencies and planned operational cost savings.

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

anticipates increased revenues which, together with improvements in gross margin, would move the Company closer to profitability.

planned gross margin improvement tasks include, but are not limited to, a plan to drive bill of material costs down while further increasing

price of the Company’s products for new orders.

The Company also continues to execute cost reduction, sourcing and pricing recovery

initiatives in efforts to increase gross margins and improve cash flow from operations.

Unforeseen factors beyond management’s

control, including economic uncertainty and the impact of global tariff initiatives could potentially have negative impact on the planned

gross margin improvement plan.

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

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

additional financing on terms favorable to the Company or at all when needed for sufficient liquidity in order to continue operations

over the next twelve months.

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

new product development, which may have a material adverse effect on future cash flows and results of operations and the Company’s

ability to continue operating as a going concern.

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

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

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

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

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

Significant estimates are made in determining inventory

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

While management

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

could differ from these estimates.

Reclassification

Adjustments were

made to the Company’s previously reported Financial Statements for the period ended June 30, 2025 in accordance with FASB ASC

250 – Accounting Changes and Error Corrections.

Such reclassifications consist of certain previously reported amounts in order

to conform on a comparable basis with the Company’s current Financial Statement presentation.

The reclassifications had no

effect on previously reported net income, total assets, stockholders’ equity or cash flows.

Management presents current and

comparative results of operations with a disaggregation of intangible assets from other fixed assets and a disaggregation of

interest expense from other expense.

and Cash Equivalents

of June 30, 2026 and 2025, cash was approximately $ 0.3 million and $ 1.3 million, respectively.

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

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

bank deposit account.

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Values of Financial Instruments

carrying amount of our cash, accounts payable, accounts receivable, and accrued liabilities approximate their estimated fair values due

to the short-term maturities of those financial instruments.

The carrying amount of the line of credit agreement approximates its fair

values as interest approximates current market interest rates for similar instruments.

Management has concluded that it is not practical

to determine the estimated fair value of amounts due to related parties because the transactions cannot be assumed to have been consummated

at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an

independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential

carrying amount of the Company’s cash, accounts payable, accounts receivable, and accrued liabilities approximate their

estimated fair values due to the short-term maturities of those financial instruments.

The carrying amount of the line of credit

approximates fair value as interest approximates current market interest rates for similar instruments.

Management has concluded

that it is not practical to determine the estimated fair value of subordinated debt due to related parties because the transactions

cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted

values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding

similar instruments, if any, and the associated potential costs.

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

receivable are evaluated according to the Financial Accounting Standards Board Accounting Standards Codification (“ASC”)

326-20 and Accounting Standards Update No.

2016-13 of Current Expected Credit Losses (“CECL”).

Under the CECL model, the

Company estimates expected credit losses over the lifetime of accounts receivable using forward-looking data.

receivable are carried at their estimated collectible amounts.

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of its accounts receivable.

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

As of June 30, 2026 and 2025, the Company had an allowance for credit losses of $ 70,000 and $ 68,000 , respectively.

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

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ended June 30, 2026 and 2025, respectively.

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

Plant and Equipment

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

Depreciation and amortization are provided using the

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

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

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

718-10, Compensation-Stock Compensation , which establishes accounting for equity instruments exchanged for employee

service, we utilize the Black-Scholes option pricing model to estimate the fair value of employee stock option awards at the date of

grant, which requires the input of highly subjective assumptions, including expected volatility and expected life.

Changes in these inputs

and assumptions can materially affect the measure of estimated fair value of our share-based compensation.

These assumptions are subjective

and generally require significant analysis and judgment to develop.

When estimating fair value, some of the assumptions will be based

on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements.

The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances.

stock or equity instruments such as warrants issued for services to non-employees are valued at their estimated fair value at the measurement

date (the date when a firm commitment for performance of the services is reached, typically the date of issuance, or when performance

is complete).

If the total value exceeds the par value of the stock issued, the value in excess of the par value is added to the additional

paid-in-capital.

Company recognizes revenue in accordance to the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) for

all contracts.

The Company derives its revenue from the sale of products to customers.

The Company sells its products primarily through

a distribution network of equipment dealers, OEMs and battery distributors in primarily North America.

The Company recognizes revenue

for the products when all significant risks and rewards have been transferred to the customer, there is no continuing managerial involvement

associated with ownership of the goods sold is retained, no effective control over the goods sold is retained, the amount of revenue

can be measured reliably, it is probable that the economic benefits associated with the transactions will flow to the Company and the

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

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

of our products.

Our customers do have a right to return product, but our returns have historically been minimal.

Company evaluates its exposure to product warranty obligations based on historical experience.

Our products, primarily lift equipment

packs, are warrantied for five years unless modified by a separate agreement.

As of June 30, 2025 and 2024, the Company carried warranty

liability of approximately $ 3,377,000 and $ 3,018,000 , respectively, which is included in accrued expenses on the Company’s consolidated

balance sheets.

Inventories at June 30, 2026 and 2025 are net of inventory obsolescence and reserve write-downs

of $ 1,607,000 and $ 1,531,000 , respectively.

Company does not pay any tariffs directly to the US Government.

The increased costs of inventory acquired from suppliers as a result

of tariffs are accounted for in the Company’s cost of inventory on the balance sheet and expensed in cost of goods sold.

shipping costs are added to the cost of inventory on the balance sheet and expensed as a cost of goods sold.

Outbound shipping costs

are expensed in the period incurred and are recoded in selling, general and administrative expense.

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

Depreciation and amortization

are expensed using the straight-line method over the estimated useful lives of the related assets ranging from 3 three to five years .

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

consists primarily of internally developed software incorporated into manufactured product, is stated at capitalized cost and is amortized

over five years .

of Long-lived Assets

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value of the expected future cash flows associated with the use of the asset.

The Company believes that no impairment indicators were

Management determined that no impairment indicators were

present and, accordingly, no impairment losses were recognized during the fiscal years ended June 30, 2026 and 2025.

Company reports leases on its consolidated financial statements in conformance with ASC 842 - Leases, which are classified as operating

leases and finance leases.

The Company has two operating leases for its warehouse facilities and three finance leases for a vehicle and

manufacturing equipment.

Company evaluates its exposure to product warranty obligations based on historical experience.

Our products, primarily lift equipment

packs, are warrantied for five years unless modified by a separate agreement.

As of June 30, 2026 and 2025, the Company carried warranty

liability of approximately $ 2.8 million and $ 3.4 million, respectively, included in accrued expenses on the Company’s consolidated

balance sheets.

Company recognizes revenue in accordance to the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) for

all contracts.

The Company derives its revenue from the sale of products to customers.

The Company sells its products primarily through

a distribution network of equipment dealers, OEMs and battery distributors located primarily in North America.

The Company recognizes

revenue for the products when all significant risks and rewards have been transferred to the customer, there exists no continuing managerial

involvement associated with ownership of the goods sold is retained, no effective control over the goods sold is retained, the amount

of revenue can be measured reliably, it is probable that the economic benefits associated with the transactions will flow to the Company

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

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

Customers do have a right to return product, but returns have historically been minimal.

and Development

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expensed as incurred.

of advertising and promotion consist primarily of trade show expenses.

Advertising is expensed as incurred and was $ 134,000 and $ 117,000

for the years ending June 30, 2026 and 2025, respectively.

to the provisions of the Financial Accounting Standards Board (“FASB”) ASC Topic No.

718-10, Compensation-Stock Compensation ,

which establishes accounting for equity instruments exchanged for employee service, we utilize the Black-Scholes option pricing model

to estimate the fair value of employee stock option awards at the date of grant, which requires the input of highly subjective assumptions,

including expected volatility and expected life.

Changes in these inputs and assumptions can materially affect the measure of estimated

fair value of our share-based compensation.

These assumptions are subjective and generally require significant analysis and judgment

When estimating fair value, some of the assumptions will be based on, or determined from, external data, and other assumptions

may be derived from our historical experience with stock-based payment arrangements.

The appropriate weight to place on historical experience

is a matter of judgment based on relevant facts and circumstances.

Stock-based compensation expense for the fiscal years ended June 30, 2026 and 2025 represents the estimated fair

value of stock options and RSUs at the time of the grant, and ESPP shares at the beginning of each offering period, amortized under the

straight-line method over the expected vesting period and reduced for estimated forfeitures of options and RSUs.

Forfeitures are estimated

at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from original estimates.

stock or equity instruments such as warrants issued for services to non-employees are valued at their estimated fair value at the measurement

date (the date when a firm commitment for performance of the services is reached, typically the date of issuance, or when performance

is complete).

If the total value exceeds the par value of the stock issued, the value in excess of the par value is added to the additional

paid-in-capital.

to FASB ASC Topic No.

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As a result, no unrecognized tax benefits have been identified

as of June 30, 2025 and 2024, and, accordingly, no additional tax liabilities have been recorded.

as of June 30, 2026 and 2025, and, accordingly, no additional tax liabilities were recorded.

Company records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets

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The potentially dilutive

common shares outstanding at June 30, 2025 and 2024 that were excluded from diluted weighted-average common shares outstanding represent

shares underlying outstanding stock options, RSUs and warrants, as follows:

SCHEDULE OF DILUTIVE COMMON SHARES OUTSTANDING EXCLUDED FROM DILUTIVE WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

common shares outstanding at June 30, 2026 and 2025 excluded from diluted weighted-average common shares outstanding represent shares

underlying outstanding stock options, RSUs and warrants, as follows:

SCHEDULE OF DILUTIVE WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Stock options

Antidilutive securities

Accounting Pronouncements

Common Stock Warrants convertible to common

Preferred Stock Warrants

convertible to common stock

Total potentially dilutive

(1) RSUs presented

include performance stock units with goals that management determined are not probable to be achieved.

Issued Accounting Pronouncements

November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

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Additionally, it requires disclosure of the title

and position of the Chief Operating Decision Maker (“CODM”).

This ASU is effective annually for the Company’s fiscal

year ended June 30, 2025 and for interim periods thereafter.

The Company adopted this standard for the year ended June 30, 2025 and the

adoption did not have a material impact on the Company’s consolidated financial statements.

See Note 13 – Segment Information

for further information.

Issued Accounting Pronouncements

Management has considered all recent accounting pronouncements not yet adopted in the Company’s consolidated

financial statements.

and position of the Company’s Chief Operating Decision Maker (“CODM”).

This ASU is effective annually beginning with

the Company’s fiscal year ended June 30, 2025 and for interim periods thereafter.

The Company adopted this standard for the year

ended June 30, 2025 and the adoption did not have a material impact on the Company’s consolidated financial statements.

14 – Segment Information.

has considered all recent accounting pronouncements not yet adopted in the Company’s consolidated financial statements.

2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements .

The ASU is effective for public business

entities for interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption is allowed.

October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure

Update and Simplification Initiative , to incorporate several SEC disclosure requirements into a variety of Topics in the FASB Codification.

When effective, ASU 2023-06 will not significantly affect the disclosure requirements for entities subject to SEC’s existing disclosure

requirements, given those entities’ requirement to comply with Regulation S-X.

The effective date of each amendment of the ASU

will be the date of the SEC’s removal of the related disclosure from its regulations, to prevent duplication.

Early adoption is

November 2024, the FASB issued Accounting Standards Update (“ASU”) 2024-03, Income Statement – Reporting Comprehensive

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selling expenses.

The ASU is effective on a prospective basis, with the option for retrospective application, for the Company’s fiscal year ending

The ASU is effective on a prospective basis, with the option for retrospective application, for our fiscal year ending

June 30, 2028 and interim periods thereafter.

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The Company is evaluating the disclosure requirements related to the new standard.

December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to

Income Tax Disclosures , which requires more detailed income tax disclosures.

The guidance requires entities to disclose disaggregated

information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction.

The disclosure

requirements will be applied on a prospective basis, with the option to apply them retrospectively.

The standard is effective for the Company’

fiscal year ending June 30, 2026, with early adoption permitted.

The Company is evaluating the disclosure requirements related to the

new standard.

Adopted Accounting Pronouncements

December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures ,

which requires more detailed income tax disclosures.

The standard is effective for this fiscal year ending June 30, 2026 and the financial

statements contained herein.

3 – INVENTORIES

consist of the following:

OF INVENTORIES

SCHEDULE OF INVENTORIES

Raw materials

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Finished goods

Total Inventories

consist primarily of our energy storage systems and the related subcomponents, and are stated at the lower of cost or net realizable

reserve for excess

and obsolete inventory

( 1,607,000 )

( 1,551,000 )

consist primarily of the Company’s energy storage systems and the related subcomponents, and are stated at the lower of cost or

net realizable value.

4 – OTHER CURRENT ASSETS

current assets consist of the following:

OF OTHER CURRENT ASSETS

SCHEDULE OF OTHER CURRENT ASSETS

Lawsuit insurance receivable

Prepaid computer support service

Prepaid insurance

Prepaid advertising, promotion and trade show

Prepaid expenses

Total other current assets

5 – ACCRUED EXPENSES

expenses consist of the following:

OF ACCRUED EXPENSES

Warranty liability

Lawsuit settlements liability

Payroll and bonus accrual

Total accrued expenses

6 – PROPERTY, PLANT AND EQUIPMENT, NET

plant and equipment, net consist of the following:

OF PROPERTY PLANT AND EQUIPMENT NET

Prepaid professional and consulting

other current assets

5 – FIXED AND INTANGIBLE ASSETS, NET

assets, net, consist of the following:

SCHEDULE OF FIXED ASSETS, NET

Machinery and equipment

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Leasehold improvements

Property, plant and equipment, gross

Construction in process

Property, plant and equipment

accumulated depreciation

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( 1,700,000 )

property, plant and equipment, net

fixed assets, net

expense on property, plant and equipment was approximately $ 334,000 and $ 359,000 for the fiscal years ended June 30, 2026 and 2025, respectively,

and is included in selling and administrative expenses in the accompanying consolidated statements of operations.

7 – NOTES PAYABLE

and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

expense is computed on a straight-line basis with useful lives between three 3 and five years .

Leasehold improvements are amortized over

the expected term of the lease.

Assets, net, consist of the following:

SCHEDULE OF INTANGIBLE ASSETS, NET

accumulated amortization

( 2,459,000 )

( 1,969,000 )

intangible assets, net

consisting primarily of internally developed software for resale is amortized over three years.

Software amortization expense is approximately

$ 490,000 and $ 490,000 for the fiscal years ended June 30, 2026 and 2025, respectively.

6 – ACCRUED EXPENSES

expenses consist of the following:

SCHEDULE OF ACCRUED EXPENSES

Warranty liability

Lawsuit settlements liability

Payroll and bonus accrual

Paid time off accrual

Total accrued expenses

7 – LINE OF CREDIT

Business Capital (“GBC”) Credit Facility

July 28, 2023, the Company entered into a Loan and Security Agreement (the “Agreement”) with GBC.

The Agreement provides

the Company with a senior secured revolving loan facility for up to $ 15.0

million (the “Revolving Loan Commitment”).

The revolving amount available under the GBC Credit Facility is equal to the

lesser of the Revolving Loan Commitment and the borrowing base amount (as defined in the Agreement).

The GBC Credit Facility is

evidenced by a revolving note, which, as amended, matures on July

31, 2027 (the “Maturity Date”), unless extended, modified or renewed (the “Revolving Note”).

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

renewal fee for each such extension in the amount of three-quarters of one percent ( 0.75 %)

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

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

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

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

five (5) increases are made.

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

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

due monthly on the last day of the month.

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

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

The Company paid GBC a non-refundable closing

fee for the GBC Credit Facility of $ 112,500 upon the execution of the Agreement.

In addition, the Company is required to pay a monthly

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

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

The obligations under the GBC Credit Facility may be prepaid in

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

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

Business Capital Credit Facility

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

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

The Loan and Security Agreement provides the Company with

a senior secured revolving loan facility for up to $ 15.0 million, which was increased by amendment, see below (the “Revolving Loan

Commitment”).

The revolving amount available under the GBC Credit Facility is equal to the lesser of the Revolving Loan Commitment

and the borrowing base amount (as defined in the Loan and Security Agreement).

The GBC Credit Facility is evidenced by a revolving note,

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

“Revolving Note”).

Concurrently, the Company entered into an Intellectual Property Security Agreement.

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

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

GBC, as long as:

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

and no more than five (5) increases are made.

On January 30, 2024, the Company entered into Amendment No.

2 to the Loan and Security

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

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

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

of the month.

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

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

The Company paid GBC a non-refundable closing fee

for the GBC Credit Facility of $ 112,500 upon the execution of the Loan and Security Agreement.

In addition, the Company is required to

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

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

The obligations under the GBC Credit Facility

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

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

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

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

November 2, 2023, the Company entered into the First Amendment to the Loan and Security Agreement (the “First Amendment”)

with GBC, which amended certain definition of the Subordinated Debt referenced in the

Loan and Security Agreement dated July 28, 2023 as Subordinated Debt owed by the Company to Cleveland Capital L.P.

(“Cleveland”)

pursuant to that certain Subordinated Unsecured Promissory Note, dated as of November 1, 2023, in the aggregate principal amount of $ 2,000,000 .

January 22, 2025, the Company entered into Amendment No.

2 to the Loan and Security Agreement (the “Second Amendment”)

with GBC, which amended certain terms of the Loan and Security Agreement dated July 28, 2023, including but not limited to, (i) increasing

the commitment amount from $ 15.0 million to $ 16.0 million, (ii) adding an additional non-refundable closing fee in the amount of $ 7,500

in cash for the increase in the commitment amount to $ 16 million, (iii) amending the definition of “Eligible Accounts;” and

(iv) amending the EBITDA Minimum financial covenant of the Company.

In consideration for the Second Amendment, the Company agreed to

pay GBC a non-refundable amendment fee of $ 10,000 in cash, in addition to the $ 7,500 non-refundable closing fee paid.

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

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

Property Security Agreement entered into by and among the Company and GBC on July 28, 2023.

During the years ended June 30, 2025 and

2024, the Company had multiple drawdowns under the GBC Credit Facility totaling $ 64.5 million and $ 65.8 million, respectively, inclusive

of the full repayment of the SVB Credit Facility, and made multiple repayments totaling $ 64.7 million and $ 52.0 million, respectively.

As of June 30, 2025, the outstanding balance under the GBC Credit Facility was approximately $ 13.6 million, with up to $ 2.4 million available

for future borrowings, subject to borrowing base limitations.

April 2024, the Company notified GBC of a certain event of default with respect to the Company’s anticipated failure to maintain

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

On May 8, 2024, the Company

received a Waiver, which waived the Default, subject to satisfaction of the following conditions:

(i) receipt of a counterpart of the

Waiver duly executed by the Company;

(ii) receipt of the waiver fee of $20,000;

(iii) receipt of the representations and warranties from

the Company that after giving effect to the Waiver, the representations and warranties contained in the Agreement, the Waiver and the

other Loan Documents shall be true and correct;

and (iv) after giving effect to the Waiver, no additional event of default shall have

occurred and be continuing on and as of the effective date of the Waiver.

May 31, 2024, the Company entered into Amendment No.

3 to the Loan and Security Agreement (the “Third Amendment”) with

GBC which amended certain terms of the Loan and Security Agreement dated July 28, 2023, including but not limited to amending the EBITDA

Minimum financial covenant of the Company.

In consideration for the Third Amendment, the Company agreed to pay GBC a non-refundable amendment

fee of $ 50,000 in cash.

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

financial covenants and non-financial covenants relating to our financial restatements (the “August Waiver”).

filing of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 with the SEC was due on September 30,

2024 but was not filed until January 29, 2025.

The Company’s failure to file its Annual Report in a timely manner resulted in an

event of default with respect to a covenant under the Loan and Security Agreement with GBC to timely deliver a copy of the Company’s

annual audited financial statements.

Additionally, the Company notified GBC that it appeared likely that as a result of the restatement

it would fail to maintain the EBITDA covenant for the trailing three (3) month periods ended May 31, 2024 and July 31, 2024, or Default.

On January 17, 2025, the Company received a Waiver (the “January Waiver”), which waived the Defaults, subject to satisfaction

of the following conditions, which have been met:

(i) receipt of a counterpart of the January Waiver duly executed by the Company;

(ii) receipt of a waiver fee of $25,000;

and (iii) receipt of the representations and warranties from the Company that after giving effect

to the Waiver, the representations and warranties contained in the Agreement, the Waiver and the other Loan Documents shall be true and

and (iv) after giving effect to the January Waiver, no additional event of default shall have occurred and be continuing on

and as of the effective date of the January Waiver.

January 22, 2025, the Company entered into Amendment No.

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

with GBC which amended certain terms of the Loan and Security Agreement dated July 28, 2023, as amended, relating to the EBITDA Minimum

financial covenant of the Company.

In consideration for the Fourth Amendment, the Company agreed to pay GBC a non-refundable amendment

fee of $ 50,000 in cash, as follows:

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

GBC which amended certain terms of the Loan and Security Agreement, as amended, relating to the EBITDA Minimum financial covenant of

In consideration for the Fourth Amendment, the Company agreed to pay GBC a non-refundable amendment fee of $ 50,000 in cash,

(i) $ 25,000 paid on March 1, 2025, and (ii) $ 25,000 paid on April 1, 2025.

July 16, 2025, the Company entered into Amendment No.

5 to the Loan and Security Agreement (the “Fifth Amendment”) with

GBC which amended certain terms relating to the maturity date set forth under the Loan and Security Agreement dated July 28, 2023, as

Pursuant to the Fifth Amendment, GBC and the Company agreed to amend the definition of the maturity date to August 31, 2025 ,

unless otherwise extended pursuant to the terms of the Loan Agreement, provided however, upon the occurrence of either (i) an extension

of the due date of the Company’s Subordinated Unsecured Promissory Note, as amended, with Cleveland Capital, L.P.

(“the Cleveland

Note”) to a date no earlier than September 29, 2027, or (ii) the conversion of all of the outstanding obligations under the Cleveland

Note into equity of the Registrant, the maturity date will automatically extend to July 31, 2027.

See Note 8 – Related Party

Debt Agreements for additional information pertaining to the Cleveland Note.

In consideration for the Fifth Amendment, we agreed to pay

GBC a non-refundable amendment fee of $ 112,500 .

On September 4, 2025, we

entered into Amendment No.

6 to Loan Agreement (the “Sixth Amendment”), with the effective date of August 31, 2025,

which amended certain terms of the Loan Agreement, including (i) modifications to the EBITDA minimum financial covenant of the

Company, and (ii) an extension of the maturity date from August 31, 2025 to September 15, 2025, subject to acceleration or further

extension pursuant to the terms of the Loan Agreement.

the closing of the Private Placement on September 15, 2025, all the outstanding obligations under the Cleveland Note were applied in

full towards satisfaction of the subscription by Cleveland in the Private Placement.

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

Company, the Maturity Date of the Revolving Note was automatically extended to July 31, 2027.

a result of the aforementioned waivers and amendments, and extension of the Maturity Date to July 31, 2027, we expect that the revolving credit facility will remain available subject

to meeting certain lending criteria under the Loan Agreement.

Valley Bank Credit Facility

November 9, 2020, the Company entered into a Loan and Security Agreement (“Loan and Security Agreement”) with Silicon Valley

Bank (“SVB”).

October 29, 2021, the Company entered into a First Amendment to the Loan and Security Agreement (“First Amendment” and together

with the Agreement, the “Loan Agreement”) with SVB which amended certain terms of the Agreement including, but not limited

to, increasing the amount of the revolving line of credit from $ 4.0 million to $ 6.0 million, and extending the maturity date to November

The First Amendment provided the Company with a senior secured credit facility for up to $ 6.0 million available on a revolving

basis (“Revolving LOC”).

Outstanding principal under the Revolving LOC accrued interest at a floating rate per annum equal

to the greater of (i) Prime Rate plus two and a half percent (2.50%), or (ii) five and three-quarters percent (5.75%).

The Company paid

a non-refundable commitment fee of $ 15,000 upon execution of the Agreement and an additional non-refundable commitment fee of $ 22,500

in connection with the First Amendment.

June 23, 2022, the Company entered into a Second Amendment to the Loan and Security Agreement (“Second Amendment” and together

with the Loan Agreement, the “Second Amended Loan Agreement”) with SVB, which amended certain terms of the Loan Agreement, including but not limited to, (i) increasing the amount of the revolving line of credit to $ 8.0 million, (ii) changing the financial

covenants of the Company from one based on tangible net worth to another based on adjusted EBITDA (as defined in the Second Amendment)

on a trailing six (6) month basis and liquidity ratio certified as of the end of each month pursuant to the calculations set forth therein,

and (iii) allowing for the assignment and transfer by SVB of all of its obligations, rights and benefits under the Agreement and Loan

Documents (as defined in the Agreement and except for the Warrants).

addition, under the Second Amendment, the interest rate terms for the outstanding principal under the Revolving LOC were amended to accrue

interest at a floating per annum rate equal to the greater of either (A) Prime Rate plus three and one-half of one percent (3.50%) or

(B) seven and one-half of one percent (7.50%).

Interest payments are due monthly on the last day of the month.

In addition, the Company

is required to pay a quarterly unused facility fee equal to one-quarter of one percent (0.25%) per annum of the average daily unused

portion of the $8.0 million commitment under the SVB Credit Facility, depending upon availability of borrowings under the Revolving LOC.

Pursuant to the Second Amendment, the Company paid SVB a non-refundable amendment fee of $ 5,000 and SVB’s legal fees and expenses

incurred in connection with the Second Amendment.

connection with the Second Amendment, the Company issued a 12 twelve-year warrant to SVB and its designee, SVB Financial Group, to

purchase up to 40,806 shares of common stock of the Company at an exercise price of $ 2.23 per share pursuant to the terms set forth

November 7, 2022, the Company entered into a Third Amendment to the Loan and Security Agreement (“Third Amendment”) with

SVB, which amended certain terms of the Second Amended Loan Agreement (together with the Third Amendment, the “Third Amended Loan

Agreement”), including but not limited to, (i) extending the maturity date from November 7, 2022 to May 7, 2023 (the “Extension

Period”), (ii) amending the financial covenants of the Company to cover the Extension Period and to include a liquidity ratio financial

covenant, and (iii) amending the definition of Permitted Liens (as defined in the Third Amendment).

Pursuant to the Third Amendment,

the Company paid SVB a non-refundable amendment fee of $ 12,500 and SVB’s legal fees and expenses incurred in connection with the

Third Amendment.

January 10, 2023, the Company entered into a Fourth Amendment to the Loan and Security Agreement (the “Fourth Amendment”)

with SVB, which amended certain terms of the Third Amended Loan Agreement including but not limited to, (i) increasing the amount of

the SVB Credit Facility from $ 8.0 million to $ 14.0 million, (ii) removing the liquidity ratio financial covenant of the Company under

Section 6.9 of the Third Amended Loan Agreement, (iii) amending the definition of Borrowing Base (as defined in the Fourth Amendment),

which includes a new defined term for Net Orderly Liquidation Value (as defined in the Fourth Amendment), and (iv) removing certain defined

liquidity terms under Section 13.1 of the Third Amended Loan Agreement.

Pursuant to the Fourth Amendment, the Company paid SVB a non-refundable

amendment fee of $ 10,000 and SVB’s legal fees and expenses incurred in connection with the Fourth Amendment.

April 27, 2023, the Company entered into a Fifth Amendment to the Loan and Security Agreement (the “Fifth Amendment”) with

SVB which further amended certain terms of the credit facility (together with the Fifth Amendment, the “Agreement”), including

but not limited to, (i) extending the maturity date from May 7, 2023 to December 31, 2023 (the “2023 Extension Period”),

(ii) amending the EBITDA financial covenant of the Company to cover the 2023 Extension Period, and (iii) amending the definition of EBITDA

(as defined in the Fifth Amendment).

Pursuant to the Fifth Amendment, the Company agreed to pay SVB a non-refundable amendment fee of

Thirty Thousand Dollars ($ 30,000 ) and SVB’s legal fees and expenses incurred in connection with the Fifth Amendment.

SVB also agreed to waive compliance by the Company of the former EBITDA financial covenant as of the month ended March 31, 2023.

July 28, 2023, the Company repaid in full all principal outstanding under the SVB Credit Facility, together with all accrued and unpaid

interest and related fees, with a portion of the funds from the GBC Credit Facility and terminated the Loan and Security Agreement with

SVB, as amended.

During the three months ended September 30, 2023, the Company had multiple Revolving LOC drawdowns totaling $ 1.4 million

and multiple Revolving LOC payments totaling $ 11.3 million inclusive of the final repayment of the LOC in full.

8 – RELATED PARTY DEBT AGREEMENTS

Line of Credit Facilities

Capital, L.P.

5 to the Loan and Security Agreement (the “Fifth Amendment”) with GBC

which amended certain terms relating to the maturity date set forth under the Loan and Security Agreement, as amended.

Pursuant to the

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

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

the Cleveland Note to a date no earlier than September 29, 2027, or (ii) the conversion of all of the outstanding obligations under the

Cleveland Note into equity of the Company, the maturity date will automatically extend to July 31, 2027.

In consideration for the Fifth

Amendment, the Company agreed to pay GBC a non-refundable amendment fee of $ 112,500 .

September 4, 2025, the Company entered into Amendment No.

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

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

financial covenant of the Company, and (ii) an extension of the maturity date from August 31, 2025 to September 15, 2025, subject to

acceleration or further extension pursuant to the terms of the Loan Agreement.

Upon the closing of the Private Placement on September

15, 2025, all the outstanding obligations under the Cleveland Note were applied in full towards satisfaction of the subscription by Cleveland

in the Private Placement.

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

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

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

assets of the Company (including, without limitation, intellectual property) pursuant to the terms of both the July 31, 2023 Loan and

Security Agreement and the Intellectual Property Security Agreement.

During the year ended June 30, 2026, the Company’s multiple

drawdowns and repayments under the GBC Credit Facility resulted in a net $ 7.3 million repayment.

As of June 30, 2026, the outstanding

balance under the GBC Credit Facility was approximately $ 6.3 million.

The Company’s borrowing base changes as qualified collateral

fluctuates and, therefore, available funding under the GBC Credit Facility could be substantially lower.

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.

is working with GBC to negotiate an amendment to the GBC Credit Facility or otherwise obtain a waiver from GBC, however, there can be

no assurance that it will be able to do so or that the Company will be able to obtain a waiver from GBC on terms favorable to the Company

GBC has allowed the Company to continue to use its line of credit under the GBC Credit Facility while negotiations continue,

however, GBC can choose to limit or discontinue availability at any time.

In addition, due to the Company’s event of default under

the GBC Credit Facility, GBC may, at its option, declare its commitments to the Company terminated and all the Company’s 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.

November 2, 2023, the Company entered into a Credit Facility Agreement (the “Credit Facility”) with Cleveland Capital, L.P.,

(“Cleveland”), a related party due to equity ownership.

The Credit Facility provides the Company with a line of credit of up to $ 2,000,000 for working capital purposes

(“2023 Subordinated LOC”).

In connection with the LOC, the Company issued a subordinated unsecured promissory note for $ 2,000,000

(the “Commitment Amount”) in favor of Cleveland (the “Note”).

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

Commitment Amount to the Company from time to time, until July 31, 2027 (the “Due Date”).

The Note accrues interest

8 – SUBORDINATED DEBT

Party Credit Facility - Cleveland Capital, L.P.

November 2, 2023, the Company entered into a Credit Facility Agreement (the “Cleveland Credit Facility”) with Cleveland Capital,

(“Cleveland”).

The Cleveland Credit Facility provides the Company with a line of credit of up to $ 2,000,000 for working

capital purposes and the Company issued a Subordinated Unsecured Promissory Note for $ 2,000,000 (the “Commitment Amount”)

in favor of Cleveland (the “Cleveland Note”).

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

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

The Cleveland Note accrues interest

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

All indebtedness, obligations and liabilities of the Company to Cleveland are subject to the rights of Gibraltar Business Capital,

LLC (together with its successors and assigns, “GBC”), pursuant to a Subordination Agreement dated on or about November 2,

2023, by and between Cleveland and GBC (the “Subordination Agreement”).

Subject to the Subordination Agreement, the Company

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

to be requested to be drawn down.

Subject to the Subordination Agreement, the Note is payable upon the earlier of (i) the Due Date or

(ii) on occurrence of an event of Default (as defined in the Note).

consideration of Cleveland’s commitment to provide the Advances to the Company, the Company issued Cleveland warrants to purchase

41,196 shares of common stock (the “Warrants”) which rights are represented by a warrant certificate (“Warrant Certificate”).

Subject to certain ownership limitations, the Warrants are exercisable immediately from the date of issuance, expire on the five ( 5 )

year anniversary of the date of issuance and have an exercise price of $ 3.24 per share.

The exercise price of the Warrants is subject

to certain adjustments, including stock dividends, stock splits, combinations and reclassifications of the common stock.

of a Triggering Event (as defined in the Warrant Certificate), the holder of the Warrants will be entitled to exercise the Warrants and

receive the same amount and kind of securities, cash or property as such holder would have been entitled to receive upon the occurrence

of such Triggering Event if such holder had exercised the rights represented by the Warrant Certificate immediately prior to the Triggering

Additionally, upon the holder’s request, the continuing or surviving corporation as a result of such Triggering Event will

issue to such holder a new warrant of like tenor evidencing the right to purchase the adjusted amount of securities, cash or property

and the adjusted warrant price.

See Note 9 – Stockholders’ Equity (Deficit).

July 16, 2025, the Company and Cleveland entered into the First Amendment to the Note (“First Amendment”).

The First Amendment

amended the due date set forth in the Note dated November 2, 2023 (“Original Note”) and as amended by the First Amendment,

the Note issued by the Registrant to Cleveland in connection with the Credit Facility Agreement dated November 2, 2023, by and between

Cleveland and the Registrant.

Pursuant to the First Amendment, the due date under the Original Note was changed from August 15, 2025

to September 30, 2025.

of June 30, 2025 and 2024, the outstanding balance under the Cleveland Credit Facility was $ 1,000,000 and zero , respectively.

Subordinated LOC

May 11, 2022, the Company entered into a Credit Facility Agreement (the “Subordinated LOC”) with Cleveland, Herndon Plant

Oakley, Ltd., (“HPO”), and other lenders (together with Cleveland and HPO, the “Lenders”).

The Subordinated LOC

provides the Company with a short-term line of credit not less than $ 3,000,000 and not more than $ 5,000,000 , the proceeds of which shall

be used by the Company for working capital purposes.

In connection with the Subordinated LOC, the Company issued a separate subordinated

unsecured promissory note in favor of each respective Lender (each promissory note, a “Note”) for each Lender’s commitment

amount (each such commitment amount, a “Commitment Amount”).

to the terms of the Subordinated LOC, each Lender severally agrees to make loans (each such loan, an “Advance”) up to such

Lender’s Commitment Amount to the Company from time to time, until December 31, 2022 (the “Due Date”).

15, 2022, the Board of Directors of the Company elected to extend the Due Date to December 31, 2023.

The Company may, from time to time,

prior to the Due Date, draw down, repay, and re-borrow on the Note, by giving notice to the Lenders of the amount to be requested to

be drawn down.

Note bears an interest rate of 15.0% per annum on each Advance from and after the date of disbursement of such Advance and is payable

on (i) the Due Date in cash or shares of common stock of the Company at the sole election of the Company,

unless such Due Date is extended pursuant to the Note, or (ii) on occurrence of an event of Default (as defined in the Note).

Date may be extended (i) at the sole election of the Company for one (1) additional year period from the Due Date upon the payment of

a commitment fee equal to two percent (2%) of the Commitment Amount to the Lender within thirty (30) days prior to the original Due Date,

or (ii) by the Lenders in writing.

In addition, each Lender signed a Subordination Agreement by and between the Lenders and SVB dated

as of May 11, 2022 (the “Subordination Agreement”) for the purposes of subordinating the right to payment under the Note

to SVB’s indebtedness by the Company now outstanding or hereinafter incurred.

On December 15, 2022, the Board of Directors of the

Company elected to extend the Due Date to December 31, 2023 and the Company paid the Lenders an extension fee in the aggregate amount

All indebtedness, obligations and liabilities of the Company to Cleveland are subject to the rights of GBC, pursuant to a Subordination

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

the Subordination Agreement, the Company may, from time to time, prior to the Due Date, draw down, repay, and re-borrow on the Cleveland

Note, by giving notice to Cleveland of the amount to be requested to be drawn down.

Subject to the Subordinated Unsecured Promissory

Note, the Cleveland Note is payable upon the earlier of (i) the Due Date or (ii) on occurrence of an event of Default (as defined in

the Cleveland Note).

consideration of Cleveland’s commitment to provide the Advances to the Company, the Company issued 41,196 Common Stock Warrants

to Cleveland (the “Cleveland Warrants”) which rights are represented by a warrant certificate (“Warrant Certificate”)

entitling Cleveland to purchase 41,196 shares of common stock for an exercise price of $ 3.24 per share.

Subject to certain ownership

limitations, the Cleveland Warrants are exercisable immediately from the date of issuance and expire on the 5 five-year anniversary of

the date of issuance of November 2, 2023.

The exercise price of the Cleveland Warrants is subject to certain adjustments, including stock

dividends, stock splits, combinations and reclassifications of the common stock.

In the event of a Triggering Event (as defined in the

Warrant Certificate), the holder will be entitled to exercise and receive the same amount and kind of securities, cash or property as

such holder would have been entitled to receive upon the occurrence of such Triggering Event if such holder had exercised the rights

represented by the Warrant Certificate immediately prior to the Triggering Event.

Additionally, upon the holder’s request, the

continuing or surviving corporation as a result of such Triggering Event will issue to such holder a new warrant of like tenor evidencing

the right to purchase the adjusted amount of securities, cash or property and the adjusted warrant price.

(See Note 10 – Stockholders’

Equity (Deficit)).

September 15, 2025, concurrent with the closing of the $ 5.0 million private placement described in Note 10 – Stockholders Equity

(Deficit), Cleveland purchased 89,323 Preferred Stock Warrants and 420,335 Common Stock Warrants for approximately $ 1,730,000 .

This purchase

was partially funded by the conversion of the carrying value of the outstanding principal and accrued interest of the Cleveland Credit

Facility on September 14, 2025, of $ 1,173,000 .

Cleveland entered into a Debt Satisfaction Agreement with the Company pursuant to which

Cleveland represented full payment and satisfaction of any and all obligations of the Company due to Cleveland under the Subordinated

Unsecured Promissory Note dated November 2, 2023, as amended.

Cleveland paid the remaining amount due under the placement of $ 557,000

outstanding balance of the Cleveland Credit Facility subordinated debt was zero and $ 1,000,000 as of June 30, 2026 and 2025, respectively.

9 – COMMITMENTS AND CONTINGENCIES

time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.

However, litigation is subject to inherent uncertainties and an adverse result in any legal proceedings that may arise from time to time

may harm the Company’s business.

To the best of its knowledge, except for the legal proceedings disclosed below, there are no other

material legal proceedings pending against the Company.

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

Flux Power Holdings, Inc.

3:25-cv-00113-JO-DDL), against the Company, its former chief executive officer, Ronald

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

Scheiwe (collectively, the “Defendants”).

The settlement was

subsequently memorialized in a definitive settlement agreement, executed on August 27, 2025, which was filed with the Court on August

28, 2025 in connection with an unopposed motion for preliminary approval of the settlement, heard by the Court on October 23, 2025.

settling the class action, the Company is not admitting any liability and the settlement agreement constitutes no admission of liability

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

settlement provides for, among other things, the final dismissal of the litigation and a release of claims against the Defendants in

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

fees and settlement administration expenses.

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

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

Derivative Action

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

captioned Pearl v.

Dutt, et al .

2:25-cv-00042), against current and former officers and directors of the Company, naming

the Company as a nominal defendant.

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

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

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

and maintaining certain corporate governance reforms and enhancements.

In connection with the settlement, defendants agreed to a payment

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

On April 7, 2026,

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

settling the derivative complaint, the defendants are not admitting any liability, and the settlement does not constitute an admission

regarding the accuracy of any allegation made by the plaintiffs.

As of June 30, 2026, the Company’s liability insurers directly

funded $ 187,000 of the agreed upon attorneys’ fees.

Employment-Related

April 30, 2024, a former employee (the “Employee”) filed a class action complaint against the Company and Insperity, its

third-party payroll service provider, in San Diego County Superior Court for various claims which he has purported to assert on behalf

of himself and all other individuals who worked for the Company or Insperity, amended to include a representative action complaint for

Violation of Private Attorneys’ General Act (“PAGA”), seeking an unspecified amount of penalties and attorneys’

fees based on allegations that the Company violated certain California employment laws.

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

of $ 164,000 .

On July 28, 2023, in conjunction with the concurrent termination of the SVB Revolving LOC and the entry into a new credit

facility with Gibraltar Business Capital (“GBC”), each Lender signed a Subordination Agreement by and between the Lenders

and GBC dated as of July 28, 2023 (the “GBC Subordination Agreement”) for the purposes of subordinating the right to payment

under the Note to GBC’s indebtedness by the Company then incurred and outstanding or thereinafter incurred.

Subordinated LOC includes customary representations, warranties and covenants by the Company and the Lenders.

The Company has also agreed

to pay the legal fees of Cleveland’s counsel in an amount up to $ 10,000 .

In addition, each Note also provides that, upon the occurrence

of a Default, at the option of the Lenders, the entire outstanding principal balance, all accrued but unpaid interest and/or Late Charges

(as defined in the Note) at once will become due and payable upon written notice to the Company by the Lenders.

connection with entry into the Subordinated LOC, the Company paid to each Lender a one-time commitment fee in cash equal to 3.5 % of such

Lender’s Commitment Amount.

In addition, in consideration of the Lenders’ commitment to provide the Advances to the Company,

the Company issued the Lenders five-year warrants to purchase an aggregate of 128,000 shares of common stock at an exercise price of

$ 2.53 per share that are, subject to certain ownership limitations, exercisable immediately (the “Warrants”) (the number

of warrants issued to each Lender is equal to the product of (i) 160,000 shares of common stock multiplied by (ii) the ratio represented

by each Lender’s Commitment Amount divided by the $5,000,000).

to a selling agreement, dated as of May 11, 2022, the Company retained HPO as its placement agent in connection with the Subordinated

As compensation for services rendered in conjunction with the Subordinated LOC, the Company paid HPO a finder fee equal to 3 % of

the Commitment Amount from each such Lender placed by HPO in cash.

November 2, 2023, the Subordinated LOC was terminated.

There were no borrowings or amounts outstanding under the Subordinated LOC at

any time during the year ended June 30, 2024.

Final settlement is subject to, among other things, court approval of such agreement.

If the settlement does not obtain

approval, the parties agree that the settlement class will be decertified without prejudice, and that all the parties will revert to

their pre-settlement positions.

settlement is subject to, among other things, court approval of such agreement.

If the settlement does not obtain approval, the parties

agree that the settlement class will be decertified without prejudice, and that all the parties will revert to their pre-settlement positions.

April 25, 2019 the Company signed a Standard Industrial/Commercial Multi-Tenant Lease with Accutek to rent approximately 45,600 square

feet of industrial space at 2685 S.

Melrose Drive, Vista, California.

Under the terms of the original lease, the monthly rental rate

escalates at 3% each year.

The Company has since signed additional amendments and extensions, most recently an extension through November

The Company rents 63,200 square feet of industrial space for a monthly rent of approximately $ 70,000 .

December 16, 2022, the Company signed a Lease Agreement with MM Parker Court Associates, LLC to rent approximately 4,900 square feet

of office space at Building 1959 Parker Court, Suite E, Atlanta, Georgia, set to expire in April 2028, with the monthly rate increasing

5 % each year.

Currently, the Company pays a monthly rent of approximately $ 6,000 .

rent expense was approximately $ 975,000 and $ 929,000 for the fiscal years ended June 30, 2026 and 2025, respectively.

Company has three finance leases outstanding as of June 30, 2026 as follows:

SCHEDULE OF FINANCE LEASES

Manufacturing equipment

(1) Excludes sales tax and other fees.

operating and finance leases, lease costs are amortized on a straight-line basis over their respective lease terms.

Lease amortization

related to leased assets was approximately $ 155,000 and $ 153,000 for the years ended June 30, 2026 and 2025, respectively.

Interest expense

was approximately $ 9,000 and $ 17,000 for the years ended June 30, 2026 and 2025, respectively.

May 20, 2026, the Company notified its equipment lessor of the exercise of its option to purchase two items of Manufacturing Equipment

currently under leases renewable in fiscal year 2027.

The first, exercisable in August 2026, is for a payment of $ 20,000 for transfer

of ownership.

The second, exercisable in January 2027, is for a payment of $ 17,000 for transfer of ownership.

minimum lease payments as of June 30, 2026 are as follows:

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Fiscal years ending June 30,

Total future minimum lease payments

Total lease liability

leases payable, current portion

Leases payable, noncurrent

weighted average remaining lease term for operating leases was 2.3 years and 1.6 years as of June 30, 2026 and 2025, respectively.

weighted average discount rate for operating leases was 7.2 % and 8.5 % as of June 30, 2026 and 2025, respectively.

weighted average remaining lease term for finance leases was 0.5 years and 0.8 years as of June 30, 2026 and 2025, respectively.

weighted average discount rate for finance leases was 8.2 % and 3.4 % as of June 30, 2026 and 2025, respectively.

Warranty Obligations

Company provides product warranties for goods sold.

Product warranties are negotiated separately with each customer.

Generally, the Company’s

product warranties have a five year term for electronics components and an eight year term for battery cells.

Other product components

have separate warranty periods, and all warranties are voided when the product is used outside certain defined limits.

Company evaluates its exposure to product warranty obligations based on historical experience.

As of June 30, 2026 and 2025, a warranty

liability of approximately $ 2,811,000 and $ 3,377,000 , respectively, is included in accrued expenses on the consolidated balance sheets.

Additionally,

the Company granted a certain customer a five-year right of return for goods purchased as a percentage of the original purchase price

upon return of the goods to the Company’s warehouse.

Management believes that, during the entire five-year period, the anticipated

fair value of the purchased goods will exceed the amount committed as a refund, it therefore being disadvantageous for the customer to

so exercise its right.

As such, management neither presently expects, nor in the future will expect, the customer to demand such a right

of return and refund, and no liability was accrued on our consolidated balance sheets therefor.

10 – STOCKHOLDERS’ EQUITY (DEFICIT)

July 18, 2025, the Company entered into a securities purchase agreement, which was amended and restated on September 15, 2025 (the “Amended

and Restated Purchase Agreement”) with certain accredited investors (collectively, the “Purchasers”) pursuant to which,

among other things, the Purchasers agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Purchasers,

an aggregate of 258,144 Preferred Stock Warrants and 1,214,766 Common Stock Warrants at the aggregate purchase price of approximately

$ 5.0 million (the “Private Placement”).

The purchase price was paid in cash or, in the case of purchaser Cleveland, cash

and the cancellation of certain existing debt of the Company held by Cleveland.

See Note 8 – Subordinated Debt for additional information.

Securities were offered to a small select group of accredited investors, as defined in Rule 501 of Regulation D, all of whom have a substantial

pre-existing relationship with the Company, including certain executives and affiliates of the Company.

closing of the Private Placement contemplated by the Amended and Restated Purchase Agreement occurred simultaneously on September 15,

2025 upon the satisfaction of certain customary conditions.

Proceeds received, net of offering costs of approximately $ 652,000 , were

approximately $ 4,348,000 consisting of $ 3,175,000 cash and the aforementioned cancellation of $ 1,173,000 of outstanding debt and accrued

The Private Placement Common Stock Warrants and Preferred Stock Warrants are classified as equity.

Accordingly, proceeds, net

of offering costs, are included in additional paid-in capital on the Company’s consolidated balance sheets.

November 3, 2025, the Company completed an underwritten public offering (the “Public Offering”) of 3,840,000 shares of its

common stock at a public offering price of $ 2.50 per share, and the Company granted the underwriter a 30-day option to purchase up to

an additional 576,000 shares of common stock at the public offering price, less underwriting discounts and commissions, to cover over-allotments

and which was subsequently exercised in full.

The Company received net proceeds of approximately $ 9,760,000 , after offering costs of

approximately $ 1,280,000 .

Equity Facility

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

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

providing a discretionary committed equity facility of up to $ 40.0 million (the “Committed Equity Facility”).

Beginning June

4, 2026, the Company may, at its option over 36 months, sell shares of common stock to Roth Principal Investments at a price based on

the volume weighted average price of the Company’s common stock as reported on the Nasdaq during a specific valuation period, less

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

discount in the case of a “Pre-Market Purchase” or a “Post-Market Purchase”, subject to ownership and other limitations

set forth in the CEF Purchase Agreement, including the requirement that the closing sale price of the Company’s common stock on

the trading day immediately prior to the applicable purchase date is not less than a threshold price of $0.50.

Pursuant to the CEF Registration

Rights Agreement, the Company filed a registration statement on Form S-1 to register the resale by Roth Principal Investments of up to

38,461,538 shares of common stock that the Company may direct Roth Principal Investments to purchase pursuant to the CEF Purchase Agreement.

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

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

price payable by Roth Principal Investments to the Company in connection with each purchase of shares of the Company’s common stock

effected under the CEF Purchase Agreement.

The Company also agreed to reimburse Roth Principal Investments’ legal fees in the amounts

specified in the CEF Purchase Agreement.

As of June 30, 2026, the Company issued and sold 19,609 shares of common stock at an average

price of $ 0.98 per share under the Committed Equity Facility.

The Company received net proceeds of approximately $ 17,000 , after offering

costs of approximately $ 2,000 .

Additionally, the Company expended an additional $ 389,000 in costs associated with the CEF, recorded as

a current asset on the balance sheet.

Shares of Preferred Stock

August 29, 2025, the Company’s stockholders approved the amendment and restatement of the Articles of Incorporation to, among other

things, (i) increase the aggregate number of authorized shares of preferred stock from 500,000 to 3,000,000 , $ 0.001 par value per share,

and (ii) grant the Board authority to fix the rights and preferences of the preferred stock by resolution from time to time, and (iii)

designate 1,000,000 shares of Preferred Stock as “Series A Convertible Preferred Stock”, $ 0.001 par value per share, with

rights, preferences, privileges and restrictions all as set forth in the Second Amended and Restated Certificate of Incorporation.

Second Amended and Restated Certificate of Incorporation was filed with the State of Nevada on September 10, 2025.

of June 30, 2026 and 2025, there were no shares of preferred stock outstanding.

Stock Warrants

September 2025 and in conjunction with the Private Placement, the Company issued Preferred Stock Warrants to purchase up to 258,144 shares

of the Company’s Series A Preferred Stock at an exercise price of $ 0.001 per share which are then convertible to 2,429,523 shares

of common stock, subject to certain adjustments.

The Preferred Stock Warrants do not expire.

Activity during the year ended June 30,

2026 is reflected below:

SCHEDULE OF STOCK WARRANT ACTIVITY

Preferred Warrants

Weighted Average

Exercise Price

Convertible to

Common Shares

Weighted Average

Remaining Contract

Outstanding and exercisable at June 30, 2025

and cancelled

Outstanding and exercisable

at June 30, 2026

Shares of Common Stock

May 28, 2025, the Company’s stockholders approved an increase in the number of authorized common shares to 75,000,000

shares from 30,000,000

Authorized Shares of Preferred Stock

As of June 30, 2025, there are

no outstanding shares of the Company’s preferred stock.

On August 29, 2025, our stockholders

approved the amendment and restatement of our Articles of Incorporation to, among other things, (i) increase the aggregate number of

authorized shares of preferred stock from 500,000

to 3,000,000 ,

par value per share (“Preferred Stock”), and (ii) grant the Board authority to fix the rights and preferences of the preferred

stock by resolution from time to time, and (iii) designate 1,000,000 shares of Preferred Stock as “Series A Convertible Preferred

Stock”, $0.001 par value per share (the “Series A Preferred Stock”), with rights, preferences, privileges and restrictions

all as set forth in the Second Amended and Restated Certificate of Incorporation.

The Second Amended and Restated Certificate of Incorporation

was filed with the State of Nevada on September 10, 2025.

connection with the Company’s Registered Direct Offering (“RDO”) in September 2021, the Company issued 5 five-year warrants to the RDO investors to purchase up

to 1,071,430 shares of the Company’s common stock at an exercise price of $ 7.00 per share and were estimated to have a fair value

of approximately $ 3,874,000 .

The warrants were exercisable immediately and are limited to beneficial ownership of 4.99 % at any point

in time in accordance with the warrant agreement.

May 2022 and in conjunction with entry into a credit facility with Cleveland, HPO, and other lenders (together with Cleveland and HPO,

the “Lenders”), the Company issued 5 five-year warrants to the Lenders to purchase up to 128,000 shares of the Company’s

common stock at an exercise price of $ 2.53 per share and had a fair value of approximately $ 173,000 .

June 2022 and in conjunction with the entry into the Second Amendment to the Loan and Security Agreement with SVB, the Company issued

twelve-year warrants to SVB and its designee, SVB Financial Group, to purchase up to 40,806 shares of the Company’s common stock

at an exercise price of $ 2.23 per share and had a fair value of approximately $ 80,000 .

May 28, 2025, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment of its Articles of Incorporation

to increase the number of shares of common stock to 75,000,000 from the 30,000,000 shares previously authorized.

As of June 30, 2026

and 2025, there are 21,580,992 and 16,835,698 shares, respectively, of the Company’s common stock outstanding, par value $ 0.001 .

Stock Warrants

connection with the Company’s Registered Direct Offering (“RDO”) in September 2021, the Company issued 5 five-year

warrants to the RDO investors to purchase up to 1,071,430 shares of the Company’s common stock at an exercise price of $ 7.00

per share with an estimated fair value of approximately $ 3,874,000 .

The warrants were exercisable immediately and are limited to

beneficial ownership of 4.99 % at any point in time in accordance with the warrant agreement.

May 2022 and in conjunction with entry into a credit facility with Cleveland, HPO and other lenders, the Company issued 5 five-year

warrants to the lenders to purchase up to 128,000 shares of the Company’s common stock at an exercise price of $ 2.53 per share

with a fair value of approximately $ 173,000 .

June 2022 and in conjunction with the entry into the Second Amendment to the Loan and Security Agreement with SVB, the Company

issued 12 twelve-year warrants to SVB and its designee, SVB Financial Group, to purchase up to 40,806 shares of the Company’s

common stock at an exercise price of $ 2.23 per share with a fair value of approximately $ 80,000 .

November 2023 and in conjunction with the entry into the 2023 Subordinated LOC, the Company issued five-year warrants to Cleveland Capital,

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approximately $ 92,000 .

detail for the year ended June 30, 2025 is reflected below:

September 2025 and in conjunction with the Private Placement, the Company issued Common Stock Warrants to purchase up to 1,214,766

shares of the Company’s common stock at an exercise price of $ 1.715

per share and exercisable for 5 five years from date of issuance with a fair value of $ 2,144,000 .

of the above issued common stock warrants are outstanding and exercisable as of June 30, 2026.

Activity in the Company’s Common

Stock Warrants during the year ended June 30, 2026 and 2025 are reflected below:

SCHEDULE OF STOCK WARRANT ACTIVITY

Number of Warrants

Weighted Average Exercise Price Per Warrant

Weighted Average Remaining Contract Term (# years)

Outstanding and exercisable at June 30, 2024

Forfeited and cancelled

Outstanding and exercisable at June 30, 2025

detail for the year ended June 30, 2024 is reflected below:

Number of Warrants

Weighted Average Exercise Price Per Warrant

Weighted Average Remaining Contract Term (# years)

Outstanding and exercisable at June 30, 2023

Forfeited and cancelled

Number of Common

Stock Warrants

Weighted Average

Exercise Price

Weighted Average

Remaining Contract

Outstanding and exercisable at

June 30, 2024

and cancelled

Outstanding and exercisable at June 30, 2025

Company uses the Black-Scholes valuation model to calculate the fair value of warrants.

The fair value of warrants was measured at the

issuance date using the assumptions in the table below:

and cancelled

Outstanding and exercisable

at June 30, 2026

Company uses the Black-Scholes valuation model to calculate the fair value of common stock.

The fair value of warrants was measured at

the issuance date using the assumptions in the table below:

SCHEDULE OF FAIR VALUE ASSUMPTIONS OF WARRANTS

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Expected term (years)

(1) No warrants were

issued during the year ended June 30, 2025.

(1) No common stock

warrants were issued during the twelve months ended June 30, 2025.

February 17, 2015, the Company’s stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”).

18 unchanged sentences

stock were available for future grants under the 2025 Plan.

in stock options during the year ended June 30, 2025 and related balances outstanding as of that date are reflected below:

Company awards stock options, restricted stock units and performance stock units.

in stock options during the year ended June 30, 2026 and 2025 and related balances outstanding are reflected below:

SCHEDULE OF STOCK OPTIONS ACTIVITY

Outstanding at June 30, 2024

Forfeited and cancelled

Number of Shares

Weighted Average

Exercise Price

Weighted Average

Remaining Contract

intrinsic Value

Weighted Average

Outstanding at June 30, 2024

Exercisable at June 30, 2025

in stock options during the year ended June 30, 2024 and related balances outstanding as of that date are reflected below:

and cancelled

Outstanding at June 30, 2025

Forfeited and cancelled

and cancelled

Outstanding at June 30, 2026

Exercisable at June 30, 2026

Company uses the Black-Scholes valuation model to calculate the fair value of warrants.

Weighted average annualized percentages and expected

term inputs used in Black-Scholes valuations during the periods are listed below:

recorded for stock options was $ 558,000 and $ 605,000 for the fiscal year ended June 30, 2026 and 2025, respectively.

Company uses the Black-Scholes valuation model to calculate the fair value of stock options.

Weighted average annualized percentages

and expected term inputs used in Black-Scholes valuations during the periods are listed below.

No stock options were issued during the

twelve months ended June 30, 2025.

SCHEDULE OF FAIR VALUE ASSUMPTIONS OF STOCK OPTIONS

5 unchanged sentences

(1) No stock options

were granted during the year ended June 30, 2025.

November 5, 2020, the Company’s Board of Directors approved an amendment to the 2014 Plan, to allow for grants of Restricted Stock

Units (“RSUs”).

Subject to vesting requirements set forth in the RSU Award Agreement, one share of common stock is issuable

for one vested RSU.

On April 18, 2024, a total of 68,228 time-based RSUs were authorized by the Company’s Board of Directors to

be granted to the Company’s four non-executive directors under the amended 2014 Plan and the 2021 Plan.

On May 28, 2025, a total

of 200,000 time-based RSUs were authorized by the Company’s Board of Directors to be granted to the Company’s four non-executive

directors under the 2021 Plan.

in RSUs during the year ended June 30, 2025 and related balances outstanding as of that date are reflected below:

were issued during the twelve months ended June 30, 2025.

Stock Units and Performance Stock Units

Company’s Equity Award Plans allows for grants of Restricted Stock Units (“RSUs”), which include performance-based

stock units (“PSUs”).

The awards are subject to the terms and conditions provided in (i) the Restricted Stock Unit Award

Agreement for time-based awards, and (ii) the Performance Restricted Stock Unit Award Agreement for PSUs.

Subject to vesting requirements

set forth in the applicable RSU or PSU award agreement, one share of common stock is issuable for one vested RSU or PSU, as applicable.

The fair value of time-based RSUs and PSUs without a market condition is the closing stock price of the Company’s common stock

on the date of grant.

The fair value of PSUs with market conditions is determined using the Monte Carlo valuation method.

recorded for RSUs and PSUs was $ 385,000 and $ 322,000 for the fiscal year ended June 30, 2026 and 2025, respectively.

Management determined

as of June 30, 2026 that achieving the performance conditions required for vesting of performance-based PSUs is not probable.

May 28, 2025, a total of 200,000

time-based RSUs were granted under the 2021 Plan to the Company’s Board of Directors as director compensation for the fiscal

year ended June 30, 2026.

The RSUs vested on May 28, 2026 at a grant date fair value of $ 320,000 .

August 1, 2025, a total of 121,951

time-based RSUs were granted by the Company’s Board of Directors under the 2021 Plan to the Company’s Chief Executive

Officer (“CEO”).

Also on August 1, 2025, a total of 182,927

PSUs were granted by the Company’s Board of Directors under the 2021 Plan to the Company’s CEO, of which 122,561

PSUs contained only performance conditions and 60,366

PSUs contained a stock appreciation condition.

The grants had a grant date fair value of $ 494,000 .

in RSUs and PSUs during the year ended June 30, 2026 and 2025 and related balances outstanding are reflected below:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Average Grant

Contract Term

Weighted Average

Remaining Contract

Outstanding at June 30, 2024

2 unchanged sentences

Outstanding at June 30, 2025

in RSUs during the year ended June 30, 2024 and related balances outstanding as of that date are reflected below:

Average Grant

Contract Term

Outstanding at June 30, 2023

Vested and settled

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least 90 days and (ii) is customarily employed for at least twenty (20) hours per week and more than five (5) months in any calendar

Each eligible employee may authorize payroll deductions of one to 15% of the eligible employee’s compensation on each pay

Each eligible employee may authorize payroll deductions of 1% to 15% of the eligible employee’s compensation on each pay

day to be used to purchase up to 1,500 shares of common stock for the employee’s account occurring during an offering period.

3 unchanged sentences

the start or end of each six-month offering period, whichever is lower.

On March 31, 2025, participants in the offering period ending

March 31, 2025 purchased 29,350 shares of common stock at $ 1.46 per share.

On March 28, 2025, participants in the offering period ending

September 30, 2024 purchased 20,987 shares of common stock at $ 2.58 per share.

While the purchase price for the offering period ending

September 30, 2024 under the 2023 ESPP had been established as of September 30, 2024, the Company was unable to issue shares of its common

stock until it became current with its required SEC filings.

On March 28, 2024, participants in the offering period ending March 28,

2024 purchased 37,543 shares of common stock at $ 2.80 per share.

At June 30, 2025, there were 252,120 shares of the Company’s

common stock available for grant under the 2023 ESPP.

compensation expense for the fiscal years ended June 30, 2025 and 2024 represents the estimated fair value of stock options and RSUs

at the time of grant, and ESPP shares at the beginning of each offering period, amortized under the straight-line method over the expected

vesting period and reduced for estimated forfeitures of options and RSUs.

Forfeitures are estimated at the time of grant and revised,

if necessary, in subsequent periods if actual forfeitures differ from original estimates.

At June 30, 2025, the aggregate intrinsic value

of exercisable stock options was zero .

following table summarizes stock-based compensation expense for employee and non-employee stock option and RSU grants and ESPP participation:

Compensation expense recorded for the ESPP was $ 32,000 and $ 52,000

for the fiscal year ended June 30, 2026 and 2025, respectively.

Common stock purchases under the 2023 ESPP are reflected below:

SCHEDULE OF EMPLOYEE STOCK PURCHASE PLAN

Shares authorized under the 2023

Purchase - March 28, 2024

Purchase - September 30, 2024

Purchase - March 31, 2025

Purchase - September 30, 2025

Purchase - March 31,

Available under the 2023 ESPP as of June

11 – STOCK-BASED COMPENSATION EXPENSE

compensation (“SBC”) expense represents the estimated fair value of stock options, RSUs, PSUs and ESPP shares at the beginning

of each offering period, amortized under the straight-line method over the requisite service period and reduced for estimated forfeitures.

For PSUs with only performance conditions, recognition of SBC expense is delayed until the performance-based vesting conditions are deemed

probable of being achieved, at which time the unrecognized SBC to date is recognized.

For PSUs with market conditions, SBC expense is

recognized beginning on the date of grant over the requisite service period regardless of whether the market condition is ultimately

June 30, 2026, none of the PSUs with performance only conditions were deemed to be probable of achievement and no related stock-based

compensation has been recognized to date.

The following table summarizes SBC expense:

SCHEDULE OF STOCK-BASED COMPENSATION EXPENSES

year ended June 30,

Research and development

Selling and administrative

Total stock-based compensation expense

June 30, 2025, the unamortized stock-based compensation expense relating to outstanding stock options and RSUs was approximately $ 729,000

and $ 312,000 , respectively, and these amounts are expected to be expensed over the weighted-average remaining recognition period of 1.1

years and 0.9 years, respectively.

Research and development

stock-based compensation expense

June 30, 2026 and 2025, the unamortized stock-based compensation expense relating to outstanding stock options, RSUs and PSUs (excluding

PSUs with performance conditions deemed “not probable”) was approximately $ 1,060,000 and $ 312,000 , respectively, which are

expected to be expensed over the weighted-average remaining term of 1.4 years and 0.9 years, respectively.

12 – INCOME TAXES

3 unchanged sentences

tax reporting purposes, and (b) net operating loss and tax credit carryforwards.

A valuation allowance of approximately $27,508,000 and

$ 26,483,000 has been established

to offset the net deferred tax assets as of June 30, 2025 and 2024, respectively, due to uncertainties surrounding the Company’s

ability to generate future taxable income to realize these assets.

Due to uncertainties surrounding the Company’s

ability to generate future taxable income to realize these assets, a valuation allowance of approximately $ 27,656,000 and $ 27,508,000

has been established to offset the net deferred tax assets as of June 30, 2026 and 2025, respectively,

Company is subject to taxation in the United States, California and Georgia.

The Company’s tax years from 2010 and forward are

subject to examination by the federal and state taxing authorities due to the carry forward of unutilized net operating losses

and research and development credits, as applicable.

Company has primarily incurred losses since inception.

A current state income tax provision of $ 4,000

has been recorded for state minimum and net worth taxes.

Significant components of the Company’s net deferred tax assets and

liabilities are shown in the table below.

OF DEFERRED TAX ASSETS AND LIABILITIES

subject to examination by the federal and state taxing authorities due to the carry forward of unutilized net operating losses and research

Company has incurred losses since inception.

A state income tax provision of $ 1,000 has been recorded for the year ended June 30, 2026

for state minimum and net worth taxes.

The provision for the previous year was $ 4,000 , as follows:

OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)

year ended June 30,

Current provision:

Total current

Deferred income tax provision:

Total income tax provision

provision for income taxes on earnings subject to income taxes differs from the statutory federal rate at June 30, 2026, due to the following:

SCHEDULE OF PROVISION FOR INCOME TAXES

% of net loss

before income taxes

year ended June 30, 2026

% of net loss

before income taxes

federal statutory tax rate

$ ( 1,564,000 )

State income taxes, net of

federal benefit (1)

Permanent differences and other

Other true ups

Non-taxable or non-deductible items

Stock-based compensation

Other adjustments

Changes in valuation allowance

Prior period adjustments

Provision for income

taxes in California make up the majority of the tax effect in this category.

previously disclosed for the year ended June 30, 2025, prior to the adoption of ASU 2023-09, the provision for income taxes on earnings

subject to income taxes differs from the statutory federal rate, due to the following:

June 30, 2025

Federal income taxes at 21 %

$ ( 1,401,000 )

federal statutory tax rate

$ ( 1,401,000 )

State income taxes, net

State income taxes, net of

federal benefit

Permanent differences and other

Other true ups

Change in valuation allowance

Changes in valuation allowance

for income taxes

components of the Company’s net deferred tax assets are shown in the table below.

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

year ended June 30,

Deferred tax assets:

Net operating loss carryforwards

Research and development credit carryforward

Capitalized research and development expenses

Net operating

loss carryforwards

Research and development

credit carryforward

Capitalized research and

development expenses

Stock compensation

2 unchanged sentences

Gross deferred tax assets

Less valuation allowance

valuation allowance

( 27,656,000 )

( 27,508,000 )

Total deferred tax assets

deferred tax assets

Deferred tax liabilities:

Right of use asset

Total deferred tax liabilities

Total net deferred tax liabilities

Capital lease asset

deferred tax liabilities

Total net deferred tax

June 30, 2026, the Company had unused net operating loss (“NOL”) carryovers of approximately $ 84,529,000 and $ 86,022,000

that are available to offset future federal and state taxable income, respectively.

available to offset future federal and state taxable income, respectively.

Federal NOL carryforwards arising after 2017 of approximately

$ 62,122,000 do not expire.

Federal NOL carryforwards arising before 2018 of approximately $ 22,408,000 and all of the state NOL carryforwards

begin to expire in 2030 .

provision for income taxes on earnings subject to income taxes differs from the statutory federal rate at June 30, 2025 and 2024, due

to the following:

OF EFFECTIVE INCOME TAX RATE RECONCILIATION

Year ended June 30,

Federal income taxes at 21 %

$ ( 1,401,000 )

$ ( 1,749,000 )

State income taxes, net

Permanent differences and other

Other true ups

Change in valuation allowance

Provision for income taxes

Federal NOL carryforwards arising before 2018 of approximately $ 22,408,000 and the California NOL carryforwards

of $ 83,234,000 begin to expire in 2030.

The Georgia NOL carryforwards of $ 2,789,000 do not expire.

Revenue Code Section 382 limits the use of our net operating loss carryforwards if there has been a cumulative change in ownership of

1 unchanged sentence

The Company has not yet completed a Section 382 study.

If such analysis

determines there is a limitation on the use of net operating loss carryforwards to offset future taxable income, the recorded deferred

tax asset relating to such net operating loss carryforwards will be reduced.

However, as the Company has recorded a full valuation allowance

against its net deferred tax assets, there would be no impact on the Company’s consolidated financial statements as of June 30,

2025 and 2024.

If such analysis determines there is

a limitation on the use of net operating loss carryforwards to offset future taxable income, the recorded deferred tax asset relating

to such net operating loss carryforwards will be reduced.

However, as the Company has recorded a full valuation allowance against its

net deferred tax assets, there would be no impact on the Company’s consolidated financial statements as of June 30, 2026 and 2025.

ASC 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not

4 unchanged sentences

accounting in interim periods, disclosure and transition.

In accordance with ASC 740, there are no unrecognized tax benefits as of June 30, 2025 and 2024.

In accordance with ASC 740, there are no unrecognized tax benefits as of June

30, 2026 and 2025.

One Big Beautiful Bill Act of 2025 (the “2025 Tax Act”) was signed into law on July 4, 2025.

The 2025 Tax Act, among other

things, allows for immediate expensing for domestic research and development expenditures.

These provisions did not have a material effect

on the Company’s financial statements for the year ended June 30, 2026.

13 – CONCENTRATIONS

instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and unsecured trade accounts

The Company maintains cash balances in non-interest-bearing bank deposit accounts at a California commercial bank.

The Company’s

cash balance at this institution is secured by the Federal Deposit Insurance Corporation up to $ 250,000 .

As of June 30, 2025 and 2024,

cash was approximately $ 1,334,000 and $ 643,000 , respectively.

The Company has not experienced any losses in such accounts.

believes that the Company is not exposed to any significant credit risk with respect to its cash.

Company is subject to potential concentrations in credit risk that consist principally of its cash deposits in banking institutions and

its unsecured trade accounts receivable.

Company maintains cash balances in non-interest-bearing bank deposit accounts at a California commercial bank.

The Company’s cash

balance at this institution is secured by the Federal Deposit Insurance Corporation up to $ 250,000 .

As of June 30, 2026 and 2025, cash

deposited was approximately $ 305,000 and $ 1,334,000 , respectively.

The Company has not experienced any losses in its cash accounts, and

therefore management believes that the Company is not exposed to any significant credit risk with respect to its cash deposits.

of June 30, 2026, the Company had three major customers that each represented more than 10 % of its accounts receivable on an individual

basis, and together represented approximately $ 3,525,000 or 73 % of its total accounts receivable.

Of that total, 96 % is outstanding for

less than 60 days from invoice date.

The Company has not experienced, nor does it expect to experience, any significant losses in such

Management therefore believes that the Company is not exposed to any significant credit risk with respect to its trade accounts

Concentrations

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

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

the year ended June 30, 2024, the Company had three (3) major customers that each represented more than 10% of its revenues on an individual

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

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

During the year ended June 30, 2025, the Company

had three major customers that each represented more than 10 % of its revenues on an individual basis, and together represented approximately

$ 48,288,000 or 73 % of its total revenues.

Suppliers/Vendor

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

the year ended June 30, 2024 the Company had one supplier who accounted for more than 10% of its total purchases which represented approximately

$ 12,437,000 or 27 % of its total purchases.

12 – COMMITMENTS AND CONTINGENCIES

time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.

However, litigation is subject to inherent uncertainties and an adverse result in any legal proceedings that may arise from time to time

may harm the Company’s business.

To the best of its knowledge, except for the legal proceedings disclosed below, there are no other

material legal proceedings pending against the Company.

November 1, 2024, plaintiff Asfa Kassam filed a purported federal securities class action complaint in the United States District

Court, District of Nevada, captioned Kassam v.

Flux Power Holdings, Inc.

2:24-cv-02051), against the Company, our

Chief Executive Officer, Ronald F.

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

The complaint generally alleges

that the defendants made false and misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of

1934, and Rule 10b-5 promulgated thereunder.

The action purports to be brought on behalf of those who purchased or otherwise

acquired the Company’s publicly traded securities between November 11, 2022 and September 30, 2024, and seeks unspecified

damages and other relief.

On January 14, 2025, the court granted an unopposed motion to transfer the case to the Southern District

of California for all further proceedings.

On February 20, 2025, the court appointed Brandon Paulson to act as lead plaintiff for the putative class.

21, 2025, lead plaintiff filed an amended complaint.

On May 12, 2025, the defendants filed motions to dismiss the amended complaint.

a mediation, on July 11, 2025, the parties entered into a settlement term sheet (the “Term Sheet”) to fully resolve the

class action litigation.

The settlement was subsequently memorialized in a definitive settlement agreement, executed on August 27,

2025, which was filed with the Court on August 28, 2025 in connection with an unopposed motion for preliminary approval of the

settlement, which motion will be heard by the Court on October 23, 2025.

In settling the class action, the Company is not admitting

any liability and neither the Term Sheet nor the definitive settlement agreement constitutes an admission of liability or an admission regarding the accuracy of any allegation made by the plaintiffs.

The settlement provides for, among other things, the final dismissal of the litigation and a release of claims against the Defendants in

exchange for the Company establishing a $ 1.75

million escrowed settlement fund to cover payments to the settlement class, attorneys’ fees and settlement administration

settlement class will consist of all persons or entities who purchased publicly traded common stock of the Company between November 15,

2021 and February 14, 2025, but will exclude (i) persons who suffered no compensable losses;

and (ii) the Defendants;

present and former

officers, directors, or control persons of the Company at all relevant times;

members of their immediate families and their legal representatives,

heirs, successors, predecessors, or assigns;

present and former parents, subsidiaries, assigns, successors, and predecessors of the Company;

and any entity in which any of the persons excluded hereunder has or had a controlling or majority ownership interest in the Company

The plaintiff’s motion seeks certification of the settlement class, and, for settlement purposes only, Defendants

will not object to certification of the action as a class action.

settlement is subject to, among other things, court approval of such agreement.

If the settlement does not obtain approval, the parties agree that the settlement class will be decertified

without prejudice, and that all the parties will revert to their pre-settlement positions.

expect the Company’s liability insurers to directly fund approximately $ 1.15 million of the settlement fund.

The Company estimates

that it will contribute approximately $ 600,000 to the settlement fund as its remaining retention/deductible related to its insurance

Derivative Action

January 7, 2025, plaintiff Ronald Pearl filed a purported s tock holder derivative complaint in the United States District Court,

District of Nevada, captioned Pearl v.

Dutt, et al .

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

directors of the Company, naming the Company as a nominal defendant.

The complaint generally arises out of the same allegations

contained in the Kassam securities class action and alleges claims for breach of fiduciary duties and related claims.

action purports to be brought derivatively on behalf of the Company and seeks damages and other various relief.

On February 19, 2025, the court granted an unopposed motion to transfer the case to the Southern District of California

for all further proceedings (Case No.

3:25-cv-00373-W-JLB).

On March 27, 2025, the parties filed a joint motion to stay the derivative

action pending the underlying class action, which motion was granted on May 1, 2025.

On April 1, 2025, the Court transferred the matter

to Judge Ohta, as related to the Kassam securities class action (now captioned Case No.

3:25-cv-00373-JO-DDL).

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

implementing and maintaining certain corporate governance reforms and enhancements.

In connection with the settlement, defendants

agreed not to oppose a payment of attorneys’ fees and reimbursement of expenses for plaintiff’s counsel, and a service

award for plaintiff, in the total amount of $ 425,000 ,

subject to Court approval.

On August 13, 2025, plaintiff filed an unopposed motion for preliminary approval of the settlement, which

will be heard by the Court on October 16, 2025.

In settling the derivative complaint, the defendants are not admitting any

liability, and the settlement does not constitute an admission regarding the accuracy of any allegation made by the plaintiffs.

Final settlement remains subject to, among other things, court approval.

We expect the Company’s liability insurers to

directly fund approximately $ 350,000 of

the agreed upon attorney’s fees.

Related Actions

April 30, 2024, a former employee (the “Employee”) filed a class action complaint against the Company and Insperity, our

third-party payroll service provider, in San Diego County Superior Court for claims including failure to pay minimum wage, failure to

pay overtime, failure to provide meal periods, failure to provide rest breaks, failure to pay wages at separation, failure to provide

accurate wage statements, failure to reimburse business expenses, failure to produce employment records and unfair competition, which

he has purported to assert on behalf of himself and all other individuals who worked for the Company or Insperity, as non-exempt employees

in California between April 30, 2020 and the present (the “Employment Proceeding”).

On July 1, 2024, the Company filed an

answer to the complaint that none of the asserted claims possessed any merit, contended that many of the asserted claims were subject

to immediate dismissal, and contended that certain of the asserted claims were subject to binding arbitration.

On October 14, 2024, the

Employee elected to dismiss Insperity from the action without prejudice.

July 5, 2024, the Employee filed a representative action complaint against the Company and Insperity in San Diego County Superior Court

for Violation of Private Attorneys’ General Act (“PAGA”), seeking an unspecified amount of penalties and attorneys’

fees based on allegations that the Company violated certain California employment laws (the “PAGA Proceeding”).

8, 2024, the Company filed an answer to the complaint in which the Company denied that any of the asserted claims possessed any merit

and contended that certain of the asserted claims were subject to binding arbitration.

December 10, 2024, the Company and the Employee stipulated to the consolidation of Employment Lawsuit and the PAGA Action.

date hereof, both proceedings are currently pending consolidation by the court.

Upon consolidation, the Company intends to move to have

the Employee’s action claims dismissed, the Employee’s individual claims compelled to binding arbitration and the Employee’s

representative PAGA claims stayed pending the arbitration of his individual claims.

On October 22, 2024, the Employee elected to dismiss

Insperity from the action without

January 25, 2024, in a separate action, a former CPM, LTD Inc.

(“CPM”) employee filed a complaint against CPM, a third-party

staffing service provider, Flux Power, Inc., and Flux Power Holdings, Inc.

(collectively, the “Defendants”) in San Diego

County Superior Court for claims including harassment, failure to prevent harassment, retaliation, wrongful termination, failure to provide

meal periods and rest breaks, failure to provide accurate wage statements, and failure to pay wages at separation.

CPM is a San Diego

based staffing company that provided employees (including the plaintiff) to us.

The plaintiff has alleged that we and CPM were “joint

employers” to the plaintiff under California law and are jointly liable for the plaintiff’s claims.

The plaintiff sought

an unspecified amount of unpaid wages, statutory penalties, emotional distress damages, punitive damages, and attorneys’ fees from

On June 21, 2024, the Company filed an answer to the complaint in which the Company denied that any of the asserted claims

possessed any merit and contended that certain of the asserted claims were subject to binding arbitration.

Following discussions,

on April 28, 2025, the parties entered into a written settlement agreement that resolved all of the asserted claims.

that settlement, Defendants received a general release from the plaintiff, while expressly denying any wrongdoing whatsoever.

on May 6, 2025, the plaintiff dismissed the action with prejudice.

April 25, 2019 the Company signed a Standard Industrial/Commercial Multi-Tenant Lease (“the Lease”) with Accutek to rent

approximately 45,600

square feet of industrial space at 2685 S.

Melrose Drive, Vista, California.

Lease has an initial term of seven years and four months and commenced on or about June 28, 2019.

lease contains an option to extend the term for two periods of 24 months each, and the right of first refusal to lease an additional

approximate 15,300 square feet.

The monthly rental rate was $ 42,400

for the first 12 months, escalating at 3 %

February 26, 2020, the Company entered into the First Amendment to the Lease to rent an additional 16,309

rentable square feet of space plus a residential unit of approximately

rentable square feet (for a total of approximately 17,539

rentable square feet).

lease for the additional space commenced 30 days following the occupancy date of the additional space and will terminate concurrently

with the term of the original lease, which expires on November

The base rent for the additional space is the same rate as

the space rented under the terms of the original lease, $ 0.93

per rentable square foot (subject to 3% annual increase).

December 16, 2022, the Company signed a Lease Agreement with MM Parker Court Associates, LLC to rent approximately 4,892 square feet of

office space at Building 1959 Parker Court, Suite E, Atlanta, Georgia.

The lease has an initial term of five years and three months and

commenced on or about February 1, 2023.

The monthly rental rate was approximately $ 2,300 for the first six months, and $ 4,700 for months

seven to 12, escalating at 5 % each year.

rent expense was approximately $ 929,000 and $ 942,000 for the fiscal years ended June 30, 2025 and 2024, respectively.

Company has finance leases outstanding as of June 30, 2025 as follows:

SCHEDULE OF FINANCE LEASES

Property Leased

Monthly Lease

Manufacturing equipment

(1) Excludes sales

tax and other fees.

costs are amortized on a straight-line basis over their respective lease terms.

Depreciation expense related to leased assets was

approximately $ 154,000

and $ 153,000

for the years ended June 30, 2025 and 2024, respectively.

Interest expense on lease liabilities was approximately $ 17,000

for the years ended June 30, 2025 and 2024, respectively.

minimum lease payments as of June 30, 2025 are as follows:

OF FUTURE MINIMUM LEASE PAYMENTS

Operating Leases

Finance Leases

Years ending June 30,

Total future minimum lease payments

Total lease liability

leases payable, current portion

Leases payable, noncurrent portion

weighted average remaining lease term for operating leases was 1.6 years and 2.6 years as of June 30, 2025 and 2024, respectively.

weighted average discount rate for operating leases was 8.5 % and 8.8 % as of June 30, 2025 and 2024, respectively.

weighted average remaining lease term for finance leases was 0.8 years and 1.6 years as of June 30, 2025 and 2024, respectively.

weighted average discount rate for finance leases was 3.4 % and 1.9 % as of June 30, 2025 and 2024, respectively.

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

10 % of its total purchases, which represented approximately $ 15,901,000 or 28 % of its total purchases.

14 – SEGMENT INFORMATION

6 unchanged sentences

CODM reviews financial information including operating results and assets on a consolidated basis.

evaluating the Company’s financial performance and making strategic decisions, the CODM uses net income (loss) and Adjusted EBITDA

to assess performance and allocate financial, capital and personnel resources.

Net income (loss) and Adjusted EBITDA are used in the

annual operating plan and forecasting process as well as ongoing decisions driven by the monthly or quarterly reviews of the plan versus

actual results.

evaluating the Company’s financial performance and making strategic decisions, the CODM uses net loss and Adjusted EBITDA to assess

performance and allocate financial, capital and personnel resources.

Net loss and Adjusted EBITDA are used in the annual operating plan

and forecasting process as well as ongoing decisions driven by the monthly or quarterly reviews of the plan versus actual results.

table below is a summary of the segment profit or loss, including significant segment expenses, for the periods presented:

OF SEGMENT INFORMATION

SCHEDULE OF SEGMENT INFORMATION

year ended June 30,

3 unchanged sentences

Research and development

Other expense, net

$ ( 7,448,000 )

4 unchanged sentences

15 – SUBSEQUENT EVENTS

Management evaluated events subsequent

to June 30, 2025 through the filing date of these consolidated financial statements and concluded there are no material subsequent events

to disclose other than those presented as follows.

of Delisting or Failure to Satisfy a Continued Listing Rule or Standard;

Transfer of Listing

January 31, 2025, the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”)

notified the Company that the Company did not comply with the minimum $2,500,000 stockholders’ equity requirement for continued listing

set forth in Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”).

On March 17, 2025, the

Company filed its plan with Nasdaq to regain compliance with the Stockholders’ Equity Requirement, which included requesting

an extension through July 30, 2025.

July 31, 2025, the Company received a determination letter from the Staff notifying the Company that based on the Company’s most

recent disclosure, the Company’s stockholders’ equity was a deficit of $ 4,372,000 as of March 31, 2025 and that the Staff

had determined that the Company had not regained compliance with the Stockholders’ Equity Requirement.

The Staff has informed the

company that trading of the Company’s common stock would be suspended at the opening of business on August 11, 2025, unless the

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

August 7, 2025, the Company submitted such hearing request to the Panel, which request will stay suspension of the Company’s

securities and the filing of the Form 25-NSE pending the Panel’s decision.

On September 4, 2025, the Company made its

presentation to the Panel.

On September 15, 2025, the Company raised $5.0 million through a private placement of its securities.

16, 2025, the Panel determined to grant the Company an exception to demonstrate compliance with the Stockholders’ Equity Requirement

and granted the Company’s request for continued listing, subject to the following:

(1) the Company shall file a Form 10-K for the

period ending June 30, 2025 on or before September 30, 2025, and (2), the Company shall demonstrate compliance with the Stockholder’s

Equity Requirement on or before October 31, 2025 through public disclosures describing the transactions undertaken by the Company to achieve

compliance and demonstrate long-term compliance.

In addition, the Company has taken steps to reduce its cash burn

rate through a reduction in force of approximately 15% of its work force.

The Company is also exploring additional avenues to raise

equity capital in order to be in compliance with Nasdaq’s continued listing requirements.

There can be no assurance that the

Panel will grant the Company’s request for continued listing, or stay the suspension of the Company’s securities.

Amendment to the Subordinated Unsecured Promissory Note

July 16, 2025, we entered into a First Amendment to the Subordinated Unsecured Promissory Note (“Note Amendment”) with Cleveland

Capital, L.P.

(“Cleveland”).

The Note Amendment amended the due date set forth in the Subordinated Unsecured Promissory Note

dated November 2, 2023 (“Original Note” and as amended by the First Amendment, the “Cleveland Note”) issued by

us to Cleveland in connection with a certain Credit Facility Agreement dated November 2, 2023 (the “Subordinated LOC”).

to the Note Amendment, the due date under the Original Note was changed from August 15, 2025 to September 30, 2025.

Debt Satisfaction Agreement

On September 15, 2025, concurrently

with the Closing of the Private Placement (discussed below), we entered into a Debt Satisfaction Agreement with Cleveland (the “Debt

Satisfaction Agreement”) pursuant to which Cleveland represented that the full subscription price for the Securities acquired and

issued in the Private Placement to Cleveland were in exchange for the full payment and settlement of any and all obligations of the Company

due to Cleveland the Cleveland Note and upon issuance of the Securities in the Private Placement to Cleveland, all obligations under the

Cleveland Note and Subordinated LOC were deemed paid in full and the Subordinated LOC was terminated.

In connection with such termination, the Cleveland Note was cancelled.

Facility Amendments

July 16, 2025, we entered into Amendment No.

5 to the Loan Agreement (the “Fifth Amendment”), which amended the definition

of the maturity date to August 31, 2025 unless otherwise extended pursuant to the terms of the Loan Agreement, provided however, upon

the occurrence of either (i) an extension of the due date of Cleveland Note to a date no earlier than September 29, 2027, or (ii) the

conversion of all of the outstanding obligations under the Cleveland Note into equity of the Registrant, the maturity date will automatically

extend to July 31, 2027.

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

September 4, 2025, we entered into Amendment No.

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

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

financial covenant of the Company, and (ii) an extension of the maturity date from August 31, 2025 to September 15, 2025, subject to

acceleration or further extension pursuant to the terms of the Loan Agreement.

Upon the closing of the Private Placement on

September 15, 2025, all the outstanding obligations under the Cleveland Note were applied in full towards satisfaction of the

subscription by Cleveland in the Private Placement.

Upon the conversion of all

of the outstanding obligations under the Cleveland Note into equity of the Company, the

Maturity Date of the Revolving Note was automatically extended to July 31, 2027.

Meeting of Stockholders

On August 29 2025, at a

Special Meeting of Stockholders, our stockholders approved the following proposals:

(1) the amendment and restatement of the

Company’s Amended and Restated Articles of Incorporation as amended and currently in effect (the “Articles”) to,

among other things, (i) increase the aggregate number of authorized shares of preferred stock from 500,000

to 3,000,000 ,

par value per share (“Preferred Stock”), (ii) grant the Board authority to fix the rights and preferences of the

preferred stock by resolution from time to time, and (iii) designate 1,000,000

shares of Preferred Stock as “Series A Convertible Preferred Stock”, $ 0.001

par value per share (the “Series A Preferred Stock”), with rights, preferences, privileges and restrictions all as set

forth in the Second Amended and Restated Certificate of Incorporation (the “Restated Articles”) in substantially the

form attached to the Proxy Statement, and (2) the reservation and issuance of such number of shares of common stock issuable in connection with the conversion of the shares of Series A Preferred Stock which are issuable upon exercise of certain

prefunded warrants, and exercise of certain common stock warrants issued and issuable in the Private Placement, which total issuance could

exceed 20% of the amount outstanding of common stock prior to the Private Placement for purposes of complying with Nasdaq Listing Rule

Second Amended

and Restated Articles of Incorporation and Establishment of Series A Preferred Stock

September 10, 2025, the Company filed a Second Amended and Restated Articles of Incorporation (the “Restated Articles”)

with the Secretary of State of the State of Nevada (“Nevada Secretary of State”) to among other things, (i) increase the

aggregate number of authorized shares of preferred stock from 500,000 to 3,000,000 , $ 0.001 par value per share (“Preferred

Stock”), (ii) grant the Board authority to fix the rights and preferences of the preferred stock by resolution from time to

time, and (iii) designate 1,000,000 shares of Preferred Stock as “Series A Convertible Preferred Stock ”, $ 0.001 par

value per share (the “Series A Preferred Stock”), with rights, preferences, privileges and restrictions set forth

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

The Restated Articles did not have any effect on the par value per share of the Company’s common stock.

A Preferred Stock

Series A Preferred Stock have the following material rights, features, privileges and limitations:

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

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

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

The holders of shares of Series A Preferred Stock have a right to vote as a single class with the holders of common stock

on an as-if-converted-to-Common-Stock-basis based on the greater of the (i) Conversion Price, or the (ii) Minimum Price as defined in

Rule 5635(d) of the Nasdaq Listing Rules, except that holders of Series A Preferred Stock shall have the right to vote as a separate

class with respect to certain specified matters.

The holders of each share of the Series A Preferred Stock then outstanding are entitled to receive cumulative cash dividends

at an annual dividend rate of 8.0%, payable quarterly on the last day of March, June, September, and December of each year, which may

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

Dissolution, or Winding Up.

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a

“Liquidation”), bankruptcy event, or change of control, the holders of shares of Series A Preferred Stock will be entitled

to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of $ 19.369 (adjusted

for any stock splits, stock dividends, recapitalizations, or similar transaction with respect to the Series A Preferred Stock) (“Liquidation

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

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

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

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

The holders of shares of Series A Preferred Stock have the right to convert all or any portion of the outstanding shares

of Series A Preferred Stock held by such holder multiplied by the Liquidation Value into shares of the Company’s common stock at

the initial conversion price equal to 120% of the 20-day volume weighted average price (“VWAP”) per share of common stock

immediately preceding the initial closing in which the warrants to purchase Series A Preferred Stock were first issued to such holders

(the “Initial Conversion Price”), with automatic conversion at the Initial Conversion Price upon (i)

the conversion of the shares of Series A Preferred Stock by a then majority of holders of Series A Preferred Stock (the “Majority

Holders”), (ii) the affirmative vote or written consent by the Majority Holder to convert all outstanding shares of Series A Preferred

Stock, and (iii) on the fifth (5th) anniversary of the initial closing date in which the warrants to purchase Series A Preferred Stock

are first issued to such holders of Series A Preferred Stock.

Adjustments to Conversion

Price and Conversion Shares .

The Conversion Price is subject to standard weighted average anti-dilution protection, and anti-dilution

protection against issuance of securities by the Company in certain incidences, such as (i) in the event of a stock dividend on, or a

subdivision, combination or reclassification of, common stock, and (ii) in the event of any capital reorganization, reclassification

of the capital stock, consolidation or merger of the Company.

July 18, 2025, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors

(the “Initial Purchaser(s)”) pursuant to which the Company agreed to sell an initial aggregate amount of approximately $ 2.9

million in Prefunded Warrants (the “Prefunded Warrants”) at a purchase price equal to $ 19.369 per warrant (the “Purchase

Each Prefunded Warrant entitles the holder to purchase shares of the Company’s Series A Convertible Preferred Stock,

par value $ 0.001 per share (the “Series A Preferred Stock”) for $ 0.001 per share.

Purchasers of Prefunded Warrants will also

be issued an additional five (5) year warrant to purchase a number of shares of common stock, par value $ 0.001 per share equal to fifty

percent (50%) of the number of shares of common stock issuable upon conversion of the Series A Preferred Stock (the “Common Warrants,”

and together with the Prefunded Warrants, the “Warrants”).

The Warrants, the shares of Series A Preferred Stock issuable

upon exercise of the Prefunded Warrants, and the shares of common stock issuable upon exercise of the Common Warrants are referred herein

as the “Securities”.

The Securities were offered to a small select group of accredited investors, as defined in Rule 501

of Regulation D, all of whom have a substantial pre-existing relationship with the Company.

September 15, 2025, the Company entered into an amended and restated securities purchase agreement (the “Amended and Restated Purchase

Agreement”) with certain of the Initial Purchasers and certain additional investors (collectively, the “Purchasers”)

pursuant to which, among other things, confirmed the filing of the Second Amended and Restated Articles of Incorporation of the Company

upon receipt of the requisite stockholder approval, and the Purchasers agreed to subscribe for and purchase, and the Company agreed to

issue and sell to the Purchasers, an aggregate of 258,144 Prefunded Warrants and 1,214,769 Common Warrants for approximately $ 5.0 million

(the “Private Placement”).

The Purchase Price was paid in cash or, in lieu of cash, cancellation of certain existing debt of the Company.

closing of the Private Placement contemplated by the Purchase Agreement occurred simultaneously on September 15, 2025 upon the satisfaction

of certain customary conditions (the “Closing”).

The Company intends to use the net proceeds from the Private Placement for

general corporate purposes and growth capital.

Warrant and Common Warrant

Prefunded Warrant will have an exercise price per share of Series A Preferred Stock equal to $ 0.001 per share.

The Prefunded Warrants

are immediately exercisable upon the Closing of the Private Placement and expire when exercised in full.

The exercise price and the number

of shares of Series A Preferred Stock issuable upon exercise of each Prefunded Warrant is subject to appropriate adjustments in

the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting

the Series A Preferred Stock.

Common Warrant will have an initial exercise price of $ 1.715 , which is equal to the 20-day VWAP per share of common stock immediately

preceding the Closing of the Private Placement (subject to adjustment therein), are exercisable immediately following issuance and have

a term of five (5) years from the initial issuance date.

The Common Warrant will have a “cashless exercise” provision which

provides that the Common Warrant can be exercised without further payment to the Company.

The exercise price and the number of shares

of common stock issuable upon exercise of each Common Warrant is subject to appropriate adjustments in the event of certain stock dividends

and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock.

addition, the Warrants may not be exercised in full and may not be exercised to the extent that immediately following such exercise,

the holder would beneficially own greater than 4.99% or, at the election of the holder, greater than 9.99% of the Company’s outstanding

common stock.

Rights Agreement

connection with the Purchase Agreement, the Company agreed to enter into a registration rights agreement with the Purchasers (the “Registration

Rights Agreement”), pursuant to which the Company will prepare and file a registration statement with the SEC covering the resale

of a number of shares of common stock underlying the Series A Preferred Stock and the Common Warrants issued pursuant to the Purchase

Agreement, and to use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC within

75 days following the date of the registration statement.

In connection with the Closing, the Company

entered into an Escrow Agreement, with David L.

Hill, II on behalf of Hill Innovative Law, LLC, as escrow agent (the “Escrow Agent”),

pursuant to which the Escrow Agent will disburse the total aggregate purchase price pursuant to the terms of the Escrow Agreement.

evaluated events subsequent to June 30, 2026 through the filing date of these consolidated financial statements and concluded there are

no material subsequent events to disclose other than those presented as follows.

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

the Company that for 30 consecutive business days preceding the date of the July 2026 Notice, the bid price of the Company’s common

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

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

The July 2026 Notice has no effect on the listing of the Company’s

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

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

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

If at any time during the Compliance Period the closing

bid price of the Company’s common stock is at least $ 1.00 for a minimum of 10 consecutive business days, the Company will regain

compliance with the Minimum Bid Price Requirement and the Company’s common stock will continue to be eligible for listing on the

Nasdaq Capital Market absent noncompliance with any other requirement for continued listing.

the Company does not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, the Company may be

afforded an additional 180 calendar days to regain compliance with the Minimum Bid Price Requirement (the “Additional Compliance

Period”) if on the last day of the Compliance Period the Company is in compliance with the market value of publicly held shares

requirement for continued listing as well as all other standards for initial listing of its common stock on the Nasdaq Capital Market

(other than the Minimum Bid Price Requirement), unless the Company does not indicate its intent to cure the deficiency, or if it appears

to Nasdaq that it is not possible for the Company to cure the deficiency.

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

Compliance Period, if applicable, the Company’s common stock will be subject to delisting.

Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options

to regain compliance with the Minimum Bid Price Requirement.

There can be no assurance that the Company will regain compliance within

the Minimum Bid Price Requirement during the Compliance Period, secure an Additional Compliance Period to regain compliance, or maintain

compliance with the other Nasdaq continued listing requirements.

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

What changed 10-K

Item 9A. Controls and Procedures