Item 1A. Risk Factors
ITEM
1A - RISK FACTORS
An
investment in our common stock involves a high degree of risk. You should carefully consider the summary of risk factors described below,
together with all of the other information included in this Form, before making an investment decision. If any of the following risks
actually occur, our business, financial condition or results of operations could suffer. In that case, the trading price of our common
stock could decline, and you may lose all or part of your investment. You also should read the section entitled “Special Note Regarding
Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance
of such statements in the context of this Form. The risk factors below do not address all the risks relating to securities, business
and operations and financial condition.
Risk
Factors Relating to Our Business
Our
independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern
in its report on our audited financial statements included in this Report. Our audited financial statements at June 30, 2026, and for
the year then ended, were prepared assuming that we will continue as a going concern.
Management
has evaluated our expected cash requirements, including investments in additional selling, general and marketing, research and development,
capital expenditures and working capital requirements, and believes our existing cash, along with the forecasted gross margin and the
proceeds that we believe are available under the Committed Equity Facility, will not be sufficient to meet our anticipated capital requirements
to fund planned operations for the next twelve months following the filing date of this Report. As described below, our ability to continue
as a going concern is partially contingent upon the availability of the GBC Credit Facility, which may become unavailable due to a covenant
breach by the Company.
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This
Report includes an explanatory paragraph stating that our current liquidity position and projected cash needs raise substantial doubt
about our ability to continue as a going concern, along with management’s assessment and strategies. The perception that we may
not be able to continue as a going concern may make it difficult for us to raise new funds and to operate our business due to concerns
about our ability to meet our contractual obligations. There is no assurance that sufficient financing will be available when needed
or on reasonable terms to allow us to continue our operations. Our ability to continue as a going concern is contingent upon, among other
factors, the availability of the GBC Credit Facility or obtaining alternate financing. As discussed in Note 7 – Line of Credit,
on March 31, 2026, we notified GBC that we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period
ended February 28, 2026 under the GBC Credit Facility, which resulted in an “event of default” under the GBC Credit Facility.
While GBC has allowed us to continue to use our line of credit under the GBC Credit Facility despite our event of default, GBC can choose
to limit or discontinue availability at any time. In addition, due to our event of default under the GBC Credit Facility, GBC may, at
its option, declare its commitments to us terminated and all our obligations under the GBC Credit Facility immediately due and payable,
all without demand, notice or further action of any kind required on the part of GBC, and/or exercise other remedies available to it,
which include, among other things, its rights as a secured party under the GBC Credit Facility. Since GBC can choose to limit our access
to our line of credit under the GBC Credit Facility and/or call the debt at any time, substantial doubt exists about our ability to continue
as a going concern. While we have entered into the CEF Purchase Agreement with Roth Principal Investments as a potential source of financing,
we can only direct Roth Principal Investments to purchase shares of our common stock pursuant to the CEF Purchase Agreement if the closing
sale price of our common stock on the prior trading day exceeds the Threshold price. On August 14, 2026, the closing sale price of our
common stock on the Nasdaq Capital Market was $0.595 and there can be no assurances that our common stock will continue to trade above
the Threshold Price. We cannot provide any assurance that we will be able to raise additional capital.
We
are currently in default under the Revolving Note under the GBC Credit Facility, and such default could adversely affect our business,
financial condition, results of operations or liquidity.
Our
loans and other obligations under the GBC Credit Facility are secured by substantially all of our tangible and intangible assets, including,
without limitation, intellectual property, pursuant to the terms the Loan and Security Agreement with GBC and the IP Security Agreement.
The GBC Credit Facility is evidenced by a revolving note (the “Revolving Note”), which maturity date was automatically extended
to July 31, 2027 (the “Maturity Date”), upon the conversion of all the outstanding obligations under the Cleveland Note into
equity of the Company at the closing of the Private Placement on September 15, 2025. Provided that there is no event of default, the
Maturity Date can automatically be extended for one (1) year period upon payment of a renewal fee for each such extension in the amount
of three-quarters of one percent (0.75%) of the Revolving Loan Commitment (as defined below), which fee will be due and payable on or
before the applicable Maturity Date. The holder of the Revolving Note is entitled to all of the benefits and security provided for in
the Loan and Security Agreement. All Revolving Loans shall be repaid by us on the Maturity Date, unless payable sooner pursuant to the
provisions of the Loan and Security Agreement. As a secured party, upon an event of default, GBC will have a first priority right to
the collateral granted to them under the Loan and Security Agreement and IP Security Agreement, and we may lose our ownership interest
in the assets pledged as security interest.
As
discussed in Note 7 – Line of Credit, on March 31, 2026, we notified GBC that we failed to comply with the minimum EBITDA financial
covenant for the trailing three-month period ended February 28, 2026 under the GBC Credit Facility, which resulted in an “event
of default” under the GBC Credit Facility. While GBC has allowed us to continue to use our line of credit under the GBC Credit
Facility despite our event of default, GBC can choose to limit or discontinue availability at any time. In addition, due to our event
of default under the GBC Credit Facility, GBC may also, at its option, declare its commitments to us terminated and all our obligations
under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required on the part
of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the GBC
Credit Facility. If GBC were to terminate their commitments under the GBC Credit Facility and foreclose against substantially all our
assets, we would likely be forced to seek bankruptcy protection and our investors could lose the full value of their investment in our
Common Stock. As such, our loss of access to our line of credit under the GBC Credit Facility or our collateral will have a material
adverse effect on our operations, business and financial condition.
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We
will need to raise additional capital or financing to continue to execute and expand our business.
We
expect that our existing cash, additional funding which we believe is available under our GBC Credit Facility, additional proceeds we
believe are available under the Committed Equity Facility, and cash generated from our operations, will not be sufficient to meet our
anticipated capital resources and to fund our planned operations for the next twelve months (see Liquidity and Financial Condition
in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional information).
Further, the use of our GBC Credit Facility remains subject to performance metrics, certain restrictions and compliance with loan covenants.
As discussed in Note 7 – Line of Credit, on March 31, 2026, the Company notified GBC that the Company failed to comply with the
minimum EBITDA financial covenant for the trailing three-month period ended February 28, 2026 under the GBC Credit Facility, which resulted
in an “event of default” under the GBC Credit Facility. We are working with GBC to negotiate an amendment to the GBC Credit
Facility or otherwise obtain a waiver from GBC. GBC has allowed us to continue to use our line of credit under the GBC Credit Facility
while negotiations continue, however, GBC can choose to limit or discontinue availability at any time. We continue to work with Gibraltar
Capital to renegotiate the terms of the GBC Credit Facility; however, there can be no assurance that we will be able to do so or that
we will be able to obtain a waiver from GBC on terms favorable to us or at all. In addition, due to our event of default under the GBC
Credit Facility, GBC may also, at its option, declare its commitments to us terminated and all our obligations under the GBC Credit Facility
immediately due and payable, all without demand, notice or further action of any kind required on the part of GBC, and/or exercise other
remedies available to it, which include, among other things, its rights as a secured party under the GBC Credit Facility. While we have
entered into the CEF Purchase Agreement with Roth Principal Investments as a potential source of financing, we can only direct Roth Principal
Investments to purchase shares of our common stock pursuant to the CEF Purchase Agreement if the closing sale price of our common stock
on the prior trading day exceeds the Threshold price of $0.50. On August 14, 2026, the closing sale price of our common stock on the
Nasdaq Capital Market was $0.595 and there can be no assurances that our common stock will continue to trade above the Threshold Price.
In addition, should there be any delays in the receipts of key component parts, due in part to supply chain disruptions, our ability
to fulfil the backlog of sales orders will be negatively impacted resulting in lower availability of cash resources from operations.
We may be required to access other forms of capital to support our operations and execute our business plan by issuing equity or convertible
debt securities, or by entering into another form of structured financing or strategic transaction. Our ability to access such forms
of capital will be impacted by investor confidence in our business strategy as well as market conditions. In addition, our failure to
timely file our amendment on Form 10-K/A to our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 means that we currently
are ineligible to use a registration statement on Form S-3. We will not be eligible to use a registration statement on Form S-3 again
until we have timely filed all materials and reports required to be filed pursuant to Section 13, 14 or 15(d) of the Securities Exchange
Act of 1934 for a period of at least twelve (12) calendar months immediately preceding the filing of a new registration statement on
Form S-3. The inability to use a Form S-3 registration statement will limit our ability to raise capital through sales of our securities
in a timely and cost-efficient manner.
In
the event we are required to obtain additional funds, there is no guarantee that additional funds will be available on a timely basis
or on acceptable terms. To the extent that we raise additional funds by issuing equity or convertible debt securities, our stockholders
may experience additional dilution, and such financing may involve restrictive covenants. Newly issued securities may include preferences,
superior voting rights and the issuance of warrants or other convertible securities that will have additional dilutive effects. We cannot
assure you that additional funds will be available when needed from any source or, if available, will be available on terms that are
acceptable to us. Further, we may incur substantial costs in pursuing future capital and/or financing. We may also be required to recognize
non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact
our financial condition and results of operations. Our ability to obtain needed financing may be impaired by such factors as the weakness
of capital markets and the fact that we have not been profitable, which could impact the availability and cost of future financings.
If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and
product development, which may have a material adverse effect on future cash flows and results of operations.
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We
have a history of losses and negative working capital.
For
the fiscal years ended June 30, 2026 and 2025, we had net losses of $7.4 million and $6.7 million, respectively. We have historically
experienced net losses and until we generate sufficient revenue, we anticipate that we will continue to experience losses in the near
future.
As
of June 30, 2026 and 2025, we had a cash balance of $0.3 million and $1.3 million, respectively. We currently believe that our
existing cash balances and cash resources from operations will not be sufficient to fund our existing and planned operations for the
next twelve months. Until such time as we generate sufficient cash to fund our operations, we will need additional capital to
continue our operations thereafter.
We
have historically relied on equity financing, including our Committed Equity Facility, borrowings under short-term loans with related
parties, credit facilities and/or cash resources from operating activities to fund our operations. Specifically, we have relied heavily
on the GBC Credit Facility, and while GBC has continued to grant us access to our line of credit under the GBC Credit Facility despite
our covenant default thereunder, there can be no assurance that we will be able to maintain access to our line of credit under the GBC
Credit Facility, obtain additional funds via a new facility or that funds will be available on terms acceptable to us, if at all. Failure
to maintain access to our line of credit under the GBC Credit Facility without a replacement facility would have material adverse impact
on our operations.
While
we recently entered into the CEF Purchase Agreement with Roth Principal Investments as a potential source of financing, we can only direct
Roth Principal Investments to purchase shares of our common stock pursuant to the CEF Purchase Agreement if the closing sale price of
our common stock on the prior trading day exceeds the Threshold Price. There can be no assurances that our common stock will continue
to trade above the Threshold Price and we will be able to continue to use the Committed Equity Facility as a source of financing.
If
we were to access additional capital via an equity or equity-linked financing, including under the Committed Equity Facility, such funding
would result in dilution of the ownership interests of our current stockholders. If funds are not available on acceptable terms, we may
be required to curtail our operations or take other actions to preserve our cash, which may have a material adverse effect on our future
cash flows and results of operations.
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The
U.S. government is currently imposing increased tariffs on certain products imported into the U.S., which includes lithium-ion batteries
and other component parts, which may have an adverse impact on our future operating results.
The
lithium-ion battery industry has been subjected to tariffs implemented by the United States government on goods imported from China.
Since all of our lithium-ion battery cells are manufactured in China, current and potential tariffs on lithium-ion battery cells imported
by us from China have increased and could continue to increase our costs, require us to further increase prices to our customers or,
if we are unable to sufficiently increase our prices to offset the tariff costs, result in lower gross margins on the products sold by
us. In April 2025, the U.S. government increased import tariffs across a wide range of countries at various rates, including on product
imports from almost all countries and individualized higher tariffs on certain countries. Some of these tariffs have since been followed
by announcements of limited exemptions and temporary pauses and all have been affected by various circuit court decisions and a key decision
by the U.S. Supreme Court, which invalidated certain tariffs. In response to the U.S. Supreme Court ruling, the current administration
debuted a system for repaying importers for tariffs struck down by the U.S. Supreme Court while also announcing the implementation of
new tariffs under an alternative statutory authority. Upon the expiration of such tariffs, the current administration announced new tariffs
under a different statutory authority. The full impact of the U.S. Supreme Court’s ruling and the administration’s response,
including the timing and extent of any refunds and the impact of the new tariffs, remains uncertain. Based on the tariffs enacted and
currently in effect, we have incurred and anticipate incurring incremental tariff costs, additional costs that we may incur on component
parts for our battery backs, and costs as a result of import pauses on certain of our product imports and supply-chain interruptions.
The uncertain impacts of higher tariffs on global economies and corporate cost structures have also led to order delays by customers.
As a result of such developments, we are actively seeking alternative sourcing arrangements. If we are unable to diversify our supply
chain and reduce China sourcing, we remain subject to substantial potential exposure to tariffs, which would have significant impacts
on our cost structure and product margins.
We
also import a portion of our raw materials and components from other countries that are subject to import tariffs imposed by the U.S.
government. These tariff changes and subsequent retaliatory actions have increased, with the potential to continue to increase, product
costs for us. China has already imposed tariffs on a wide range of American products in retaliation for the American tariffs on steel
and aluminum. Any resulting escalation of trade tensions, including any further escalation of “trade wars” with other countries,
could have a significant adverse effect on world trade and the world economy, lead to disruptions in our supply chain, and as such, adversely
impact our results of operations.
While
we believe that tariffs have already negatively impacted our revenues, profitability and cash flows, at this time, we cannot predict
how such enacted tariffs will continue to impact our business and operations. The imposed tariffs on components imported by us from China
or additional tariffs on other countries where we source components necessary for our products could have a material adverse effect on
our business and results of operations. In addition, any changes in tariffs or additional restrictions on various products may be announced
with little or no advance notice. The adoption and expansion of tariffs or other trade restrictions, increasing trade tensions, or other
changes in governmental policies related to tariffs, trade agreements, products or policies are difficult to anticipate or predict, which
makes it difficult for us to operate optimally. If we are unable to navigate further changes in U.S. or international trade policy, it
could have a material adverse impact on our business and results of operations. We are closely monitoring potential changes in international
trade policy and actively assessing the current and potential future impacts of these and other trade policy changes on our business
operations and financial performance.
Economic conditions may adversely affect consumer spending and the overall general health
of our customers, which, in turn, may adversely affect our financial condition, results of operations and cash resources.
Uncertainty
about the current and future global economic conditions have caused and may continue to cause our customers to defer purchases or cancel
purchase orders for our products in response to tighter credit, decreased cash availability and weakened consumer confidence. Our financial
success is sensitive to reductions or cancellations of purchase orders for our products by our customers and other affects from changes
in general economic conditions, both globally and nationally. Recessionary economic cycles, higher interest borrowing rates, higher fuel
and other energy costs, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher
tax rates and other changes in tax laws or other economic factors that have affected and may continue to affect consumer spending or
buying habits could continue to adversely affect the demand for our products. If credit pressures or other financial difficulties result
in insolvency for our customers, it could adversely impact our financial results. There can be no assurances that government and consumer
responses to the disruptions in the financial markets will restore consumer confidence.
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We
are dependent on one supplier in China for our battery cells, and the inability of this supplier to continue to deliver, or their refusal
to deliver, our battery cells at prices and volumes acceptable to us, or as a result of any supply chain disruption, would have a material
adverse effect on our business, prospects and operating results.
We
do not manufacture the battery cells used in our energy storage solutions. Our battery cells, which are an integral part of our energy
storage solutions, are sourced from a single manufacturer located in China. We have spent a great deal of time in developing and testing
our battery cells that we receive from our main supplier. Our operations are materially dependent upon the continued market acceptance
and quality of this manufacturer’s products and its ability to continue to manufacture products that are competitive and that comply
with laws relating to environmental and efficiency standards. We generally do not maintain long-term agreements with our current supplier
and the loss of this supplier could have a material adverse effect upon the Company’s business, operating results and financial
condition.
In
the near term, this relationship with our primary manufacturer is a critical component in our business and operations. To date, we have
no qualified alternative sources for our battery cells, although we research and assess cells from other suppliers on an ongoing basis.
We are currently actively assessing our options to diversify suppliers for our battery cells to lessen this concentration. However, qualifying
new battery cell suppliers may be time-consuming and costly. In addition, any new battery cell would also require us to obtain a new
UL listing, which could further extend the timeframe for introducing new products.
In
response to business uncertainties resulting from tariffs and increased tariff levels imposed by the U.S. government on goods imported
into the U.S., we temporarily paused imports from our supplier in China in 2025. The pause was short-lived as both parties quickly agreed
to modified terms. At this time, the modified terms have not materially affected our operations and we expect to continue sourcing and
importing our battery cells from this supplier. However, further escalation of tariffs between the U.S. and China could have a material
effect on our ability to cost-effectively source from our supplier in China, which could materially affect our business and operations.
The
restatement of our previously issued financial statements has had a material adverse impact on us, including increased costs, loss of
investor confidence, the increased possibility of legal or administrative proceedings and non-compliance with the Nasdaq listing rules.
In
connection with our previous financial restatements, we are subject to a number of additional risks and uncertainties. Although the matters
were substantially resolved, we have incurred unanticipated past costs for accounting, legal and consultancy fees in connection with
the restatements and our internal investigation. The resolution of these matters may affect costs associated with the indemnification
of our officers and directors, and has damaged our reputation and adversely affected our stock price. For additional information regarding
certain of the matters in which we are involved, see Recent Developments - Resolution of Legal Proceedings contained in Item I
– Business of this Form.
We
are subject to litigation and legal proceedings which could adversely affect our business, financial condition, results of operations
or cash flows.
We
are subject to lawsuits, legal proceedings and claims in the normal course of our business, which can be expensive, lengthy, and disruptive
to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. We have in the past and we
are currently the subject of complaints alleging violations of various laws, including but not limited to certain employment lawsuits,
which are further described under the heading “Legal Proceedings” elsewhere in this Form, and in the future could also be
subject to other proceedings. These proceedings and any other regulatory proceedings or actions may be time consuming, could cause us
to incur significant defense costs and could damage our reputation or adversely affect our stock price. Any adverse ruling or unfavorable
resolution in any legal or regulatory proceeding or action could have a material adverse effect on our business, operating results or
financial condition. For additional information regarding certain of the matters in which we are involved, see Recent Developments -
Resolution of Legal Proceedings contained in Item I – Business of this Form.
We
have previously identified material weaknesses in our internal control over financial reporting, which management has remediated. If
we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may
not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business
and stock price.
Based
on management’s evaluation of our disclosure controls and procedures as of June 30, 2026, we remediated the material weaknesses
in our internal controls over financial reporting. The material weaknesses were based on our ineffective oversight of our internal control
over financial reporting and a lack of sufficient personnel resources with technical accounting expertise related to certain aspects
of the financial reporting process. Such weaknesses were remediated by the implementation of specific and effective procedures, as well
as with the addition of a new Chief Financial Officer and additional highly-qualified accounting personnel. Additionally, management
intends to continue the use of third-party consultants and technical accounting experts to monitor measures designed to maintain our
internal control over financial reporting.
We
are committed to maintaining our internal control over the financial reporting process. However, there can be no assurance that additional
material weaknesses will not arise in the future. If we are unable to maintain effective internal control over financial reporting, our
ability to record, process and report financial information in a timely manner and accurately could be adversely affected and could result
in a material misstatement in our financial statements, which could subject us to litigation or investigations, require management resources,
increase our expenses, negatively affect investor confidence in our financial statements and adversely impact the trading price of our
common stock.
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Backlog
may not be indicative of future operating results.
Our
backlog consists of purchase orders from customers that we expect to fulfill in future periods. Backlog is not a measure defined by generally
accepted accounting principles and is not a measure of contract profitability. Our methodology for determining backlog may not be comparable
to methodologies used by other companies in determining their backlog amounts.
Backlog
may not be indicative of future operating results because orders included in backlog may be delayed, modified, cancelled or deferred
by customers, and the timing of revenue recognition from backlog depends on our ability to source battery cells and other key components,
manufacture and test our products, obtain required customer approvals and deliver products on schedule. In particular, our lithium-ion
energy storage solutions depend on the availability of battery cells, electronic components and other materials, including components
sourced from suppliers outside the United States. If we experience supply chain disruptions, tariff-related cost increases, manufacturing
delays, labor constraints, quality issues, changes in customer demand or customer-requested delivery changes, we may be unable to convert
backlog into revenue when anticipated or at all. As a result, backlog may fluctuate significantly from period to period and should not
be relied upon as a reliable indicator of future revenues, results of operations or cash flows.
We
are dependent on a few customers for the majority of our net revenues, and our success depends on demand from OEMs and other users of
our battery products.
Historically
a majority of our product sales have been generated from a small number of OEMs and customers, including two customers who, on an aggregate
basis, made up 71% of our sales for the fiscal year ended June 30, 2026, and three customers who, on an aggregate basis, made up 73%
of our sales for the fiscal year ended June 30, 2025. As a result, our success depends on continued demand from this small group of customers
and their willingness to incorporate our battery products in their equipment. The loss of a significant customer would have an adverse
effect on our revenues. For example, our revenues in fiscal 2026 were negatively impacted by our largest customer within material handling
significantly cutting their capital expense budget. There is no assurance that we will be successful in our efforts to convince end users
to accept our products. Our failure to gain acceptance of our products could have a material adverse effect on our financial condition
and results of operations.
Additionally,
OEMs, their dealers and battery distributors may be subject to changes in demand for their equipment which could significantly affect
our business, financial condition and results of operations.
We
do not have long-term contracts with our customers.
We
do not have long-term contracts with our customers. Future agreements with respect to pricing, returns, promotions, among other things,
are subject to periodic negotiation with each customer. No assurance can be given that our customers will continue to do business with
us. The loss of any of our significant customers will have a material adverse effect on our business, results of operations, financial
condition and liquidity. In addition, the uncertainty of product orders can make it difficult to forecast our sales and allocate our
resources in a manner consistent with actual sales, and our expense levels are based in part on our expectations of future sales. If
our expectations regarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls.
Real
or perceived hazards associated with lithium-ion battery technology may affect demand for our products.
Press
reports have highlighted situations in which lithium-ion batteries in automobiles and consumer products have caught fire or exploded.
In response, the use and transportation of lithium-ion batteries has been prohibited or restricted in certain circumstances. This publicity
has resulted in a public perception that lithium-ion batteries are dangerous and unpredictable. Although we believe our energy storage
solutions are safe, these perceived hazards may result in customer reluctance to adopt our lithium-ion based technology.
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Our
products may experience quality problems from time to time that could result in negative publicity, litigation, product recalls and warranty
claims, which could result in decreased revenues and harm to our brands.
A
failure of our battery modules could cause personal or property damages for which we would be potentially liable. Damage to or the failure
of our energy storage solutions to perform to customer specifications could result in unexpected warranty expenses or result in a product
recall, which would be time consuming and expensive. Such circumstances could result in negative publicity or lawsuits filed against
us related to the perceived quality of our products which could harm our brand and decrease demand for our products.
We
may be subject to product liability claims .
If
one of our products were to cause injury to someone or cause property damage, including as a result of product malfunctions, defects,
or improper installation, then we could be exposed to product liability claims. We could incur significant costs and liabilities if we
are sued and if damages are awarded against us. Further, any product liability claim we face could be expensive to defend and could divert
management’s attention. The successful assertion of a product liability claim against us could result in potentially significant
monetary damages, penalties or fines, subject us to adverse publicity, damage our reputation and competitive position, and adversely
affect sales of our products. In addition, product liability claims, injuries, defects or other problems experienced by other companies
in the battery industry could lead to unfavorable market conditions for the industry as a whole, and may have an adverse effect on our
ability to attract new customers, thus harming our growth and financial performance. Although we carry product liability insurance, it
may be insufficient in amount to cover our claims.
Increases
in costs, disruption of supply or shortage of raw materials, in particular lithium-ion phosphate cells, could harm our business.
We
may experience increases in the costs or a sustained interruption in the supply or shortage of raw materials. Any such cost increase
or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. For instance,
we are exposed to multiple risks relating to price fluctuations for lithium-iron phosphate cells.
These
risks include:
●
the
inability or unwillingness of battery manufacturers to supply the number of lithium-iron phosphate cells required to support our
sales as demand for such rechargeable battery cells increases;
●
disruption
in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and
●
an
increase in the cost of raw materials, such as iron and phosphate, used in lithium-iron phosphate cells.
Our
success depends on our ability to develop new products and capabilities that respond to customer demand, industry trends or actions by
our competitors, and failure to do so may cause us to lose our competitiveness in the battery industry and may cause our profits to decline.
Our
success will depend on our ability to develop new products and capabilities that respond to customer demand, industry trends or actions
by our competitors. There is no assurance that we will be able to successfully develop new products and capabilities that adequately
respond to these forces. In addition, changes in legislative, regulatory or industry requirements or in competitive technologies may
render certain of our products obsolete or less attractive. If we are unable to offer products and capabilities that satisfy customer
demand, respond adequately to changes in industry trends or legislative changes and maintain our competitive position in our markets,
our financial condition and results of operations would be materially and adversely affected .
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The
research and development of new products and technologies is costly and time consuming, and there are no assurances that our research
and development efforts will be either successful or completed within anticipated timeframes, if at all. Our failure to technologically
evolve and/or develop new or enhanced products may cause us to lose competitiveness in the battery market. In addition, in order to compete
effectively in the renewable battery industry, we must be able to launch new products to meet our customers’ demands in a timely
manner. However, we cannot provide assurance that we will be able to install and certify any equipment needed to produce new products
in a timely manner, or that the transitioning of our manufacturing facility and resources to full production under any new product programs
will not impact production rates or other operational efficiency measures at our manufacturing facility. In addition, new product introductions
and applications are risky and may suffer from a lack of market acceptance, delays in related product development and failure of new
products to operate properly. Any failure by us to successfully launch new products, or a failure by us to meet our customers’
criteria in order to accept such products, could adversely affect our results.
Our
business will be adversely affected if we are unable to protect our intellectual property rights from unauthorized use or infringement
by third parties.
Any
failure to protect our intellectual proprietary rights could result in our competitors offering similar products, potentially resulting
in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, prospects,
financial condition and operating results. Our success depends, at least in part, on our ability to protect our core technology and intellectual
property. To accomplish this, we rely on a combination of patents, patent applications, trade secrets including know-how, employee and
third-party nondisclosure agreements, copyright laws, trademarks, intellectual property licenses and other contractual rights to establish
and protect our proprietary rights in our technology.
The
protections provided by patent laws will be important to our future opportunities. However, such patents and agreements and various other
measures we take to protect our intellectual property from use by others may not be effective for various reasons, including the following:
●
The
patents we have been granted may be challenged, invalidated or circumvented because of the pre-existence of similar patented or unpatented
intellectual property rights or for other reasons;
●
The
costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make
aggressive enforcement impracticable; and
●
Existing
and future competitors may independently develop similar technology and/or duplicate our systems in a way that circumvents our patents.
Our
granted patents may not be enforceable, which may have a material adverse effect on our ability to prevent others from commercially exploiting
products similar to ours.
We
cannot be certain that we are the first creator of inventions covered by pending patent applications or the first to file patent applications
on these inventions, nor can we be certain that any of our issued patents will afford protection against a competitor. Furthermore, some
foreign countries provide significantly less effective patent enforcement than in the United States.
The
status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain. As a result, we cannot
be certain that our patents and any patents that may be issued to us in the future will afford protection against competitors with similar
technology. In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that we
need to license or design around, either of which would increase costs and may adversely affect our business, prospects, financial condition
and operating results.
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We
rely on trade secret protections through confidentiality agreements with our employees, customers and other parties; the breach of such
agreements could adversely affect our business and results of operations.
We
rely on trade secrets, which we seek to protect, in part, through confidentiality and non-disclosure agreements with our employees, customers
and other parties. There can be no assurance that these agreements will not be breached, that we would have adequate remedies for any
such breach or that our trade secrets will not otherwise become known to or independently developed by competitors. To the extent that
consultants, key employees or other third parties apply technological information independently developed by them or by others to our
proposed projects, disputes may arise as to the proprietary rights to such information that may not be resolved in our favor. We may
be involved from time to time in litigation to determine the enforceability, scope and validity of our proprietary rights. Any such litigation
could result in substantial cost and diversion of effort by our management and technical personnel.
Our
business depends substantially on the continuing efforts of the members of our senior management team and our business may be severely
disrupted if we lose their services or are unable to recruit qualified replacements in the event of departures.
We
believe that our success is largely dependent upon the continued service of the members of our senior management team, who are responsible
for establishing our corporate strategies and focus, for overseeing the execution of our business strategy and for ensuring our continued
growth. Our continued success will depend on our ability to attract and retain a qualified and competent management team in order to
manage our existing operations and support our expansion plans. If any of the members of our senior management team are unable or unwilling
to continue in their present positions, we may not be able to replace them readily. Therefore, our business may be severely disrupted,
and we may incur additional expenses to recruit and retain their replacement. In addition, if any of the members of our senior management
team joins a competitor or forms a competing company, we may lose some of our customers.
If
we are forced to implement workforce and other cost reductions, our staff resources will be stretched making our ability to comply with
legal and regulatory requirements as a public company difficult.
There
can be no assurance that our management team will be able to implement and affect programs and policies in an effective and timely manner
especially if subject to workforce and other cost reductions, that adequately respond to increased legal, regulatory compliance and reporting
requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition
of fines and penalties and further result in the deterioration of our business.
Compliance
with changing regulations concerning corporate governance and public disclosure may result in additional expenses.
There
have been changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley
Act of 2002, new regulations promulgated by the SEC and rules promulgated by the national securities exchanges. These new or changed
laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and, as a result,
their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result
in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance
practices. As a result, our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased
general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance
activities. Members of our Board of Directors and our chief executive officer and chief financial officer could face an increased risk
of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining
qualified directors and executive officers, which could harm our business. If the actions we take in our efforts to comply with new or
changed laws, regulations and standards differ from the actions intended by regulatory or governing bodies, we could be subject to liability
under applicable laws or our reputation may be harmed.
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In
addition, Sarbanes-Oxley specifically requires, among other things, that we maintain effective internal controls for financial reporting
and disclosure of controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control
over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required
by Section 404 of Sarbanes-Oxley. Our testing, or the subsequent testing by our independent registered public accounting firm, when required,
may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with
Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not
have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience
and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or
if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that
are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations
by the SEC or other regulatory authorities, which would require additional financial and management resources.
We
may face significant costs relating to environmental regulations for the storage and shipment of our lithium-ion energy storage solutions.
Federal,
state, and local regulations impose significant environmental requirements on the manufacture, storage, transportation, and disposal
of various components of advanced energy storage systems. Although we believe that our operations are in material compliance with applicable
environmental regulations, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements
on us or otherwise subject us to future liabilities. Moreover, Federal, state, and local governments may enact additional regulations
relating to the manufacture, storage, transportation, and disposal of components of advanced energy storage systems. Compliance with
such additional regulations could require us to devote significant time and resources and could adversely affect demand for our products.
There can be no assurance that additional or modified regulations relating to the manufacture, storage, transportation and disposal of
components of advanced energy systems will not be imposed.
Natural
disasters, public health crises, political crises and other catastrophic events or other events outside of our control may damage our
sole facility or the facilities of third parties on which we depend, and could impact consumer spending.
Our
sole production facility is located in southern California near major geologic faults that have experienced earthquakes in the past.
An earthquake or other natural disaster or power shortages or outages could disrupt our operations or impair critical systems. Any of
these disruptions or other events outside of our control could affect our business negatively, harming our operating results. In addition,
if our sole facility, or the facilities of our suppliers, third-party service providers or customers is affected by natural disasters,
such as earthquakes, tsunamis, power shortages or outages, floods or monsoons, public health crises such as pandemics and epidemics,
political crises such as terrorism, war, political instability or other conflict, or other events outside of our control, our business
and operating results could suffer. Moreover, these types of events could negatively impact consumer spending in the impacted regions
or, depending upon the severity, globally, which could adversely impact our operating results. Similar disasters occurring at our vendors’
manufacturing facilities could impact our reputation and our consumers’ perception of our brands.
Security
breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing
critical information or expose us to liability, which could adversely affect our business and our reputation.
We
utilize information technology systems and networks to process, transmit and store electronic information in connection with our business
activities. As the use of digital technologies has increased, cyber incidents including deliberate attacks and attempts to gain unauthorized
access to computer systems and networks and divert financial resources have increased in frequency and sophistication. These threats
pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data, all of which
are vital to our operations and business strategy. There can be no assurance we will succeed in preventing cyber-attacks or successfully
mitigating their effects.
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Despite
implementing security measures, any of the internal computer systems belonging to us or our suppliers are vulnerable to damage from computer
viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failure. Any system failure, accident,
security breach or data breach that causes interruptions could result in a material disruption of our product development programs. Further,
our information technology and other internal infrastructure systems, including firewalls, servers, leased lines and connection to the
Internet face the risk of systemic failure, which could disrupt our operations. If any disruption or security breach results in a loss
or damage to our data or applications or an inappropriate disclosure of confidential or proprietary information, we may incur resulting
liability and competitive position may be adversely affected, and the further development of our products may be delayed. Furthermore,
we may incur additional costs to remedy the damage caused by these disruptions or security breaches.
Risks
Related to Our Common Stock and Market
We
are not currently in compliance with the Rule 5550(a) continued listing requirements and the Staff of Nasdaq is continuing to monitor
our compliance with the Rule 5550(b) continued listing requirements for the Nasdaq Stock Market. If we fail to regain compliance with
the Rule 5550(a) continued listing requirements or to continue to meet at least one of the Rule 5550(b) continued listing requirements,
our common stock may be delisted, which could affect the market price of our common stock, hurt your ability to sell your shares and
negatively impact our ability to access the capital markets .
As
previously disclosed, on July 24, 2026, the Staff of Nasdaq notified us that we did not comply with the Minimum Bid Price Requirement.
The July 2026 Notice has no effect on the listing of our common stock at this time, and our common stock continues to trade on the Nasdaq
Capital Market under the symbol “FLUX”. Under Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days following the
date of the July 2026 Notice to regain compliance with the Minimum Bid Price Requirement. If at any time during the Compliance Period
the closing bid price of our common stock is at least $1.00 for a minimum of 10 consecutive business days, we will regain compliance
with the Minimum Bid Price Requirement and our common stock will continue to be eligible for listing on the Nasdaq Capital Market absent
noncompliance with any other requirement for continued listing.
If
we do not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, we may be afforded an additional
180 calendar days to regain compliance with the Minimum Bid Price Requirement if on the last day of the Compliance Period we are in compliance
with the market value of publicly held shares requirement for continued listing as well as all other standards for initial listing of
our common stock on the Nasdaq Capital Market (other than the Minimum Bid Price Requirement), unless we do not indicate our intent to
cure the deficiency or if it appears to Nasdaq that it is not possible for us to cure the deficiency.
If
we do not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period or the Additional Compliance Period,
if applicable, our common stock will be subject to delisting.
We
intend to monitor the closing bid price of our common stock and may, if appropriate, consider implementing available options to regain
compliance with the Minimum Bid Price Requirement, including the implementation of a reverse stock split. There can be no assurance that
we will regain compliance within the Minimum Bid Price Requirement during the Compliance Period or secure an Additional Compliance Period
to regain compliance.
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In
addition, we have failed to comply with the Nasdaq continued listing requirements in the past. Nasdaq requires that for continued listing
on the Nasdaq Capital Market, we must meet all the requirements set forth in Rule 5550(a) and at least one of the standards set forth
in Rule 5550(b). The standards set forth in 5550(b) include (i) the Stockholders’ Equity Requirement, (ii) the Market Equity Requirement,
or (iii) the Net Income Requirement. As previously disclosed, on January 31, 2025 the Staff of Nasdaq notified us that we did not comply
with the Stockholders’ Equity Requirement. On March 17, 2025, we filed our plan with Nasdaq to regain compliance with the Stockholders’
Equity Requirement, which included requesting an extension through July 30, 2025. On July 31, 2025, due to non-compliance with the Stockholders’
Equity Requirement, the Staff informed us that trading of the Company’s common stock would be suspended at the opening of business
on August 11, 2025 unless we requested an appeal of the Staff’s determination to the Panel. We requested an appeal hearing with
the Panel, and the Panel determined to grant us an exception to demonstrate compliance with the Stockholders’ Equity Requirement
and granted us our request for continued listing, which extension was subject to, among other requirements, the Company demonstrating
compliance with the Stockholder’s Equity Requirement on or before October 31, 2025. However, on October 14, 2025, we received a
notification from the Staff of Nasdaq that we had regained compliance with Nasdaq’s continued listing rules because we met the
Market Equity Requirement. The October 2025 Notification also provided that, for a period of one year, the Staff of Nasdaq will monitor
our compliance with the continued listing requirements. If, during such one-year period, we fail to comply with Rule 5550(b), the Staff
of Nasdaq will issue a delist determination letter and we will have an opportunity to request a new hearing. As of June 30, 2026, we
satisfied the Stockholder’s Equity Requirement, however, we can provide no assurances that we will be able to continue to
comply with the Stockholder’s Equity Requirement. We no longer satisfy the Market Equity Requirement.
We
cannot assure you that we will be able to regain compliance with the Minimum Bid Price Requirement or continue to comply with at least
one of the Rule 5550(b) continued listing requirements. Our failure to meet these requirements may result in our common stock being delisted
from the Nasdaq Capital Market. There can be no assurance that our common stock will continue to trade on the Nasdaq Capital Market or
trade on the over-the counter markets or any public market in the future. In the event our common stock is delisted, our stock price
and market liquidity of our stock will be adversely affected which will impact your ability to sell your securities in the market.
The
market price of our common stock could become volatile or our trading volume could become weak, either of which could lead to the price
of our stock being depressed at a time when you may want to sell.
Our
common stock is being traded on the Nasdaq Capital Market under the symbol “FLUX.” We cannot predict the extent to which
investor interest in our common stock will lead to the development of an active trading market on that stock exchange or any other exchange
in the future. An active market for our common stock may never develop. We cannot assure you that the volume of trading in shares of
our common stock will increase in the future. The trading price of our common stock has experienced volatility and is likely to continue
to be highly volatile in response to numerous factors which have been discussed in this Section 1A, and additional factors, many of which
are beyond our control, including, without limitation, the following:
●
Our
earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the
expectations of financial market analysts and investors;
●
Changes
in financial estimates by securities analysts, if any, who might cover our stock;
●
Speculation
about our business in the press or the investment community;
●
Significant
developments relating to our relationships with our customers or suppliers;
●
Stock
market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry;
●
Customer
demand for our products;
●
Investor
perceptions of our industry in general and our Company in particular;
●
General
economic conditions and trends;
●
Announcements
by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;
●
Changes
in accounting standards, policies, guidance, interpretation or principles;
●
Loss
of external funding sources;
●
Sales
of our common stock, including sales by our directors, officers or significant stockholders; and
●
Additions
or departures of key personnel, including but not limited to our chief financial officer.
The
trading price and volume of our common stock may impact your ability to sell your shares of common stock, causing you to lose all or
part of your investment.
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The
ownership of our stock is highly concentrated in one of our directors.
Michael
Johnson, our director and sole director of Esenjay Investments LLC (“Esenjay”), beneficially owns in excess of 20% of our
outstanding common stock on an as-converted basis as of June 30, 2026, which includes common stock underlying options, restricted stock
units and warrants that were exercisable or convertible or which would become exercisable or convertible or would vest, as applicable,
within 60 days. As a result of his ownership, Mr. Johnson and Esenjay are able to significantly influence all matters requiring stockholder
approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may
also have the effect of delaying or preventing a change in control.
We
do not intend to pay dividends on shares of our common stock for the foreseeable future.
We
have never declared or paid any cash dividends on shares of our common stock. We intend to retain any future earnings to fund the operation
and expansion of our business and, therefore, we do not anticipate paying cash dividends on shares of our common stock in the foreseeable
future.
Preferred
Stock may be issued under our Articles of Incorporation, which may have superior rights to our common stock.
Pursuant
to our Second Amended and Restated Articles of Incorporation, our board of directors have the authority to fix the rights and preferences
of the preferred stock by resolution from time to time without requiring the vote of the holders of our common stock or preferred stock
would, unless otherwise expressly required by the Articles, the preferred stock designation creating any series of preferred Stock, or
to the extent required by the Nevada Revised Statutes or Nasdaq (“Required Approval”). The Board could authorize the issuance
of preferred stock with voting or conversion rights that are superior to the rights of holders of common stock and issuance of such preferred
stock could dilute the voting power or rights of the holders of common stock. As such, the issuance of any preferred stock could diminish
the rights of holders of our common stock or delay or prevent a change of control of our Company and, therefore, could reduce the value
of such common stock.
The
issuance of shares of our Series A Preferred Stock would reduce the voting power and dilute the ownership of holders of our common stock,
and may adversely affect the market price of our common stock.
On
September 15, 2025, we completed a private placement of 258,144 pre-funded warrants to purchase up to 258,144 shares of our Series A
Preferred Stock (“Preferred Stock Warrants”) to certain accredited investors for gross proceeds of $5 million. Upon the exercise
of the Preferred Stock Warrants and issuance of the shares of Series A Preferred Stock, holders of the Series A Preferred Stock will
be entitled to vote as a single class with the holders of common stock on an as-if-converted-to-common-stock-basis based on the greater
of (i) the Conversion Price (initially $2.058, subject to adjustments), or (ii) the Minimum Price (as defined in Rule 5635(d) of the
Nasdaq Listing Rules). Holders of Series A Preferred Stock shall also have the right to vote as a separate class with respect to certain
specified matters. In addition, holders of our Series A Preferred Stock are entitled to receive cumulative cash dividends at an annual
dividend rate of 8.0%, which may be payable in kind or in cash at our option. The subsequent issuance of additional shares of Series
A Preferred Stock through the payment of dividends will reduce the relative voting power of the holders of our common stock.
With
respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary
or involuntary, all shares of Series A Preferred Stock rank senior to all the common stock and any other class of securities that is
specifically designated as junior to the Series A Preferred Stock (“Junior Securities”). Holders of Series A Convertible
Preferred Stock have the right to receive a liquidation preference entitling them to be paid out of our assets available for distribution
to stockholders before any payment may be made to holders of any other class or series of capital stock, an amount equal to the purchase
price per warrant to purchase Series A Preferred Stock paid for by the holders of Series A Preferred Stock (adjusted for any stock splits,
stock dividends, recapitalizations, or similar transaction with respect to the Series A Preferred Stock) for each share of Series A Preferred
Stock before any distribution or payment will be made to the holders of any Junior Securities, and if the assets of the Company will
be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of shares of Series A Preferred
Stock will be ratably distributed among such holders in accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. Holders of shares of Series A Preferred Stock will have conversion rights that are superior
to the rights of holders of common stock which issuance could dilute the voting power or rights of the holders of common stock, and anti-dilutive
protection, which our holders of common stock do not and will not have.
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In
addition, the conversion of the Series A Preferred Stock to our common stock would dilute the ownership interest of existing holders
of our common stock, and any sales in the public market of the common stock issuable upon conversion of the Series A Preferred Stock
could adversely affect prevailing market prices of our common stock. In connection with the Amended and Restated Private Placement Purchase
Agreement (as defined herein) and the Private Placement, we entered into a registration rights agreement (the “Private Placement
Registration Rights Agreement”) pursuant to which we prepared and filed a registration statement with the SEC in October 2025,
which became effective in November 2025 (the “October 2025 Resale Registration Statement”), covering the resale of a number
of shares of common stock underlying (i) the Series A Preferred Stock underlying the Preferred Stock Warrants and (ii) the Common Stock
Warrants (as defined herein) issued pursuant to the Amended and Restated Private Placement Purchase Agreement. The October 2025 Resale
Registration Statement facilitates the resale of such securities into the public market, and any such resale would increase the number
of shares of our common stock available for public trading. Sales by the investors in the Private Placement of a substantial number of
shares of our common stock in the public market, or the perception that such sales might occur, could have a material adverse effect
on the price of our common stock.
The
issuance and sale of our common stock to Roth Principal Investments under the Committed Equity Facility may cause dilution to our other
stockholders and the sale of the shares of common stock acquired by Roth Principal Investments, or the perception that such sales may
occur, could cause the price of our common stock to fall.
On
May 15, 2026, we entered into the CEF Purchase Agreement with Roth Principal Investments, pursuant to which Roth Principal Investments
has committed to purchase up to $40,000,000 of Purchase Shares, upon the terms and subject to the conditions set forth in the CEF Purchase
Agreement. The shares of our common stock that may be issued under the CEF Purchase Agreement may be sold by us to Roth Principal Investments
at our discretion from time to time over a 36-month period following June 4, 2026, subject to certain conditions. The purchase price
for the shares that we may sell to Roth Principal Investments under the CEF Purchase Agreement will fluctuate based on the market price
of our common stock. Depending on demand and market liquidity at the time, sales of such shares by Roth Principal Investments may cause
the trading price of our common stock to fall.
We
generally have the right to control the timing and amount of any future sales of our shares to Roth Principal Investments. Any sales
of our common stock to Roth Principal Investments will depend upon market conditions and other factors to be determined by us. We may
ultimately decide to sell to Roth Principal Investments all, some or none of the shares of our common stock that may be available for
us to sell pursuant to the CEF Purchase Agreement. If and when we sell shares to Roth Principal Investments, Roth Principal Investments
may then resell all, some or none of those shares at any time or from time to time in its discretion. Therefore, our sales to Roth Principal
Investments could result in substantial dilution to the interests of other holders of our common stock. Additionally, the sale of a substantial
number of shares of our common stock to Roth Principal Investments, or the anticipation of such sales, could make it more difficult for
us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
Because
the per share purchase price that Roth Principal Investments will pay for Purchase Shares in any Market Open Purchase, Intraday Purchase,
Pre-Market Purchase or Post-Market Purchase that we may elect to effect pursuant to the CEF Purchase Agreement will be determined by
reference to the VWAP during the applicable valuation period on the applicable purchase date for such purchase, it is not possible for
us to predict the number of shares of common stock that we will sell to Roth Principal Investments as Purchase Shares under the CEF Purchase
Agreement, the purchase price per share that Roth Principal Investments will pay for Purchase Shares purchased from us under the CEF
Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by Roth Principal Investments under the
CEF Purchase Agreement.
Moreover,
to the extent that the Exchange Cap remains applicable to issuances and sales of our common stock under the CEF Purchase Agreement, if
we elect to issue and sell to Roth Principal Investments more shares of common stock than the Exchange Cap (or 4,272,062 shares of common
stock) under the CEF Purchase Agreement, which we have the right, but not the obligation, to do, we must first obtain stockholder approval
to issue shares of common stock in excess of the Exchange Cap under the CEF Purchase Agreement in accordance with applicable Nasdaq rules.
Any issuance and sale by us under the CEF Purchase Agreement of a substantial amount of shares of common stock could cause additional
substantial dilution to our stockholders. The number of shares of common stock ultimately offered for resale by Roth Principal Investments
through the CEF Resale Registration Statement is dependent upon the number of shares of common stock, if any, we elect to sell to Roth
Principal Investments under the CEF Purchase Agreement.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.