What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-09-22 compared with 2022-09-27 · 210 added, 206 removed, 344 unchanged (55% of the section changed)

7 unchanged sentences

Statements of Cash Flows for the years ended June 30, 2023 and 2022

Notes to the Financial Statement

Notes to the Financial Statements

Report of Independent Registered Public Accounting

43 unchanged sentences

Cash and cash equivalents

Accounts receivable

Accounts receivable, net

Prepaid insurance and other current assets

7 unchanged sentences

Total current liabilities

Convertible notes payable (net of unamortized discount of $- 0 - and $ 41,307 as of June 30, 2022 and 2021, respectively)

Convertible notes payable

Total liabilities

21 unchanged sentences

( 5,755,290 )

Other income (expense):

Other expense:

Interest expense

Gain on forgiveness of debt

Total other income (expense)

Total other expense

$ ( 2,639,833 )

1 unchanged sentence

Weighted average shares outstanding - basic and diluted

Net loss per share

Net loss per share - basic and diluted

See Accompanying Notes to Financial Statements.

1 unchanged sentence

Statements of Stockholders' Equity

Years Ended June 30, 2023 and 2022

Stockholders'

3 unchanged sentences

Stock compensation expense

Adjustment for change in accounting principle

( 5,804,834 )

2 unchanged sentences

( 15,799,395 )

Issuance of common stock in underwritten public offering

Issuance of common stock for conversion of debt and accrued interest

Stock compensation expense

Adjustment for change in accounting principle

( 2,639,833 )

11 unchanged sentences

Stock compensation expense

Amortization of beneficial conversion feature

Gain on forgiveness of debt

Bad debt expense

Changes in current assets and liabilities

5 unchanged sentences

( 2,108,001 )

( 1,163,296 )

Cash flows from financing activities:

Underwritten public offering of common stock

Proceeds from convertible notes payable

Net cash flows from financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

10 unchanged sentences

June 30, 2023

(1) Business and Summary of Significant Accounting

Business and Summary of Significant Accounting Policies

Description of Business

3 unchanged sentences

and an inverter at residential sites.

The Company completed a public offering of shares of its common stock pursuant to Regulation A in

May 2019 (see Note 3), and began assembling and selling its proprietary ESS units through wholesale customers, primarily in California,

in the fiscal year ended June 30, 2020.

The Company sells its proprietary ESS units through wholesale customers, primarily in California,

and in an expanding number of other states.

In August 2022, the Company completed an underwritten public offering of its equity securities

10 unchanged sentences

limit of $250,000.

The amount in excess of the FDIC insurance at June 30, 2022 was $ 80,385 .

Inventory – Inventory

consists of batteries and inverters purchased from Asian suppliers and delivered to a location near the Company’s offices, for assembly

into ESS units.

At June 30, 2023, the Company maintained accounts at two different banks, of which the balance at the first bank was

within the FDIC insurance limit while the balance at the second bank was in excess of the FDIC insurance limit by $ 1,408,060 .

– Inventory consists of batteries and inverters purchased from Asian suppliers and delivered to a location near the

Company’s offices, for assembly into ESS units.

Additionally, we closed a bulk purchase of raw materials consisting of assembly

parts from our former contract manufacturer in April 2023, for a gross amount of $ 1.4

Inventory is stated at the lower of cost or net realizable value, cost being determined using the first-in, first out

4 unchanged sentences

Inventory write-downs are charged to cost of goods sold.

No inventory reserve was required as of June 30, 2022.

The following

table presents the components of inventory as of June 30, 2022 and 2021:

No inventory reserve was required as of June 30, 2023 and 2022.

The following table presents the components of inventory as of June 30, 2023 and 2022:

Schedule of inventory

Raw materials

Raw materials, consisting of assembly parts, batteries and inverters

Work in process

17 unchanged sentences

from contracts with customers, consisting of a relatively small number of wholesale dealers and installers, primarily in California.

the year ended June 30, 2022, two such dealers represented approximately 20 % each of the Company’s revenues whereas in the year

ended June 30, 2021, four such dealers represented approximately 18 %, 15 %, 13 % and 10 % of the Company’s revenues.

As of June 30,

2022, one dealer represented 33 % of the Company’s accounts receivable.

As of June 30, 2021, three dealers represented an aggregate

of 54 % of the Company’s accounts receivable.

Under its present contracts with customers, the Company’s sole performance obligation

is the delivery of products to the customer.

Since all of the Company’s revenue is currently generated from the sales of similar

products delivered to customers in domestic locations, no further disaggregation of revenue information for the years ended June 30, 2022

and 2021 is provided.

the year ended June 30, 2023, three such dealers represented approximately 25 %, 15 % and 13 % of the Company’s revenues, however,

no other dealers accounted for more than 10% of the revenues in such period.

Those same three dealers plus one other one represented an

aggregate of approximately 94 % of the Company’s accounts receivable as of June 30, 2023 (net of allowance), however, no other dealers

accounted for more than 10% of the accounts receivable as of June 30, 2023.

In the year ended June 30, 2022, two such dealers represented

approximately 20 % each of the Company’s revenues.

Under its present contracts with customers, the Company’s sole performance

obligation is the delivery of products to the customer.

Since all of the Company’s revenue is currently generated from the sales

of similar products delivered to customers in domestic locations, no further disaggregation of revenue information for the years ended

June 30, 2023 and 2022 is provided.

Allowance for Doubtful

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realization of a customer’s account.

As of June 30, 2022, no allowance for doubtful accounts has been recorded.

As of June 30, 2023 and 2022, our allowance for doubtful accounts was $ 490,000 and zero, respectively.

Income Taxes –

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weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

As of June 30, 2022, the Company had outstanding common stock equivalents of 9,404,867 shares related to convertible notes, including

accrued interest, issued in May 2018, and 267,000 shares related to convertible notes issued in October 2021 (see Notes 2 and 7).

As of June 30, 2023, the Company had total outstanding common stock equivalents of 1,229,750 shares as follows:

(i) 1,121,250 shares related

to warrants issued to investors in the public offering completed in August 2022;

(ii) 58,500 shares related to warrants issued to the

underwriters in that same offering;

and (iii) 50,000 shares related to restricted stock units granted to an officer in March 2022 (see

Research and Development

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At June 30, 2023 and 2022,

2021, the Company did no t have any financial assets or liabilities measured and recorded at fair value on the Company’s

balance sheets on a recurring basis.

Recent Accounting Pronouncements

– From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, (“FASB”),

or other standard setting bodies and adopted by us as of the specified effective date.

Unless otherwise discussed, the impact of recently

issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations

upon adoption.

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such

pronouncements will have a material impact on its financial statements.

the Company did no t have any financial assets or liabilities measured and recorded at fair value on the Company’s balance sheets

on a recurring basis.

Accounting Pronouncements – From time to time, new accounting pronouncements are issued by the Financial Accounting

Standards Board, (“FASB”), or other standard setting bodies and adopted by us as of the specified effective date.

otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s

financial position or results of operations upon adoption.

The Company has considered all other recently issued accounting pronouncements,

including the new provisions of ASC 326 (“Financial Instruments – Credit Losses”) pertaining to “current expected

credit losses,” and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

Effective as of July 1, 2021,

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As disclosed in

Note 7, we completed a public offering of our equity securities in August 2022 that raised net total proceeds of approximately $ 3,855,000 .

With the proceeds of this equity offering, we anticipate that we will have sufficient cash resources in order to operate our business

for at least the next 12 months from the date these financial statements are issued.

On various dates beginning

in May 2018, the Company entered into six unsecured convertible notes payable for aggregate proceeds of $104,688.

Each note bears interest

at 12% per annum and both principal and accrued interest are due at maturity five years from the date of issuance.

These notes are convertible

at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price of $0.0063 per share.

The Company performed an analysis to determine whether there was a beneficial conversion feature and noted none.

The notes are structured

to be converted into shares of the Company’s common stock at the conversion price, subject to a shareholder limitation of 4.99%

of the Company’s outstanding common stock.

This conversion feature resulted in the full repayment of the notes payable owed to two

such note holders in conjunction with the closing of an IPO in May 2019 and left the four remaining note holders with a total outstanding

principal balance of $87,116 (see Notes 3 and 7).

Effective May 19, 2019, the

remaining holders of the convertible notes payable agreed to prospectively amend the terms of the outstanding balance of their notes to

reduce the interest rate from 12% per annum to 3.99% per annum and to change the interest accrual method from a compound to a simple basis.

Due to this amendment, the Company was required to perform an updated debt modification analysis under ASC 470 and determined that the

amendment qualified as an extinguishment of debt and therefore a beneficial conversion feature was required to be evaluated as of the

date of the modification.

Since the fair value of the Company’s common stock at the time of the amendment was sufficiently higher

than the conversion price, it was determined that a beneficial conversion feature in the amount of $87,116 existed as of that date.

the Company recorded a debt discount, offset by a credit to additional paid-in capital, in the amount of $87,116 as of May 19, 2019, and

began amortizing the debt discount to interest expense over the remaining term of the notes.

As of July 1, 2021, the Company adopted a

new accounting standard for convertible debt by reversing the previously recorded cumulative amortization expense of $45,809 and the remaining

unamortized balance of the debt discount of $41,307, with an offsetting adjustment to reduce additional paid-in capital, in the amount

of $87,116 (see Note 1).

In the years ended June 30,

2022 and 2021, holders of certain convertible notes payable elected to convert portions of their notes, consisting of both principal and

accrued interest, in the aggregate amounts of $ 6,922 and $ 22,711 , respectively, into equity.

Based upon the stated conversion price of

$0.0063 per share, these investors elected to convert or exchange such convertible notes payable into a total of 1,098,630 and 3,604,830

shares of common stock for the years ended June 30, 2022 and 2021, respectively (see Notes 3 and 7).

October 18, 2021, the Company completed a new convertible debt offering with a group of accredited investors via the issuance of notes

in the total amount of $ 1,068,000 .

The unsecured notes bear interest at the rate of 6 % per annum and are due one year from the date of

In the event, however, of a qualified public offering of the Company’s common stock pursuant to which the Company’s

common stock becomes listed for trading on a national securities exchange, the principal amount of the notes and any accrued interest

will be automatically converted into shares of the Company’s common stock at a conversion price of $4.00 of principal per share ( see

As of June 30, 2022, the

future maturities of all notes payable are as follows (see Note 7):

Schedule of future maturities of long-term debt

Year ending June 30, 2023

Year ending June 30, 2024

Total long-term debt

As a result of the economic

impact of the coronavirus pandemic in early 2020, the Company applied for and received a loan under the U.S.

government sponsored Paycheck

Protection Program (“PPP”) in May 2020 in the amount of $29,600.

Under the terms of the PPP loan, the Company was allowed

to apply to have the PPP loan forgiven provided that it met certain documentation requirements.

The Company made such an application in

late 2020 and the loan was subsequently forgiven in full, effective February 26, 2021.

Accordingly, the Company recognized a gain on the

forgiveness of debt for the year ended June 30, 2021 in the amount of $ 29,600 .

Note 3, we completed a public offering of our equity securities in August 2022 that raised total net proceeds of approximately $3,780,000.

We anticipate that we will have sufficient cash resources in order to operate our business for at least the next 12 months from the date

these financial statements are issued.

Notes Payable

In conjunction with the closing

of our underwritten public offering in August 2022 (see Note 3), all holders of the Company’s two outstanding series of convertible

notes payable, which were originally issued to various accredited investors in May 2018 and October 2021, agreed to convert their debt

into a total of 9,671,867 shares of our common stock at the respective conversion rates.

Each of these two series of our converted notes

payable is further described below.

In May 2018, we entered into

convertible note payable agreements with a group of accredited investors for aggregate proceeds of $104,688.

Each unsecured note originally

bore interest at a rate of 12% per annum, which was later reduced by mutual agreement to 3.99% per annum in May 2019.

Subsequently, the

holders of certain of these notes elected to convert or exchange certain portions of their convertible notes payable into shares of our

common stock, based upon the stated conversion rate of $0.0063 per share.

As of the closing of our underwritten public offering in August

2022, the holders of the remaining balance of such unconverted notes in the total amount of $ 59,251 , including accrued interest, agreed

to convert their debt into a total of 9,404,867 shares of our common stock at the stated conversion rate of $0.0063 per share.

In October 2021, we

entered into convertible note payable agreements with a group of accredited investors for aggregate proceeds of $ 1,068,000 .

Each unsecured note bore interest at a rate of 6% per annum.

As of the closing of our underwritten public offering in August 2022,

pursuant to the terms of such convertible notes, the notes in the total amount of $1,120,035, including accrued interest, were

automatically converted into a total of 267,000

shares of our common stock at the stated conversion rate of $4.00 of principal per share.

Common Stock –

In the years ended June 30, 2022 and 2021, holders of certain convertible notes payable elected to convert portions of their notes, consisting

of both principal and accrued interest, in the aggregate amounts of $ 6,922 and $ 22,711 , respectively, into equity.

Based upon the stated

conversion price of $0.0063 per share, these investors elected to convert or exchange such convertible notes payable into a total of 1,098,630

and 3,604,830 shares of common stock for the years ended June 30, 2022 and 2021, respectively (see Notes 2 and 7).

Stock Compensation Expense

– In December 2019, the Company awarded a total of 700,000 shares of common stock to a company controlled by the Company’s

Chief Executive Officer (“CEO”) and a marketing consultant.

The Company valued the stock awards at a total amount of $ 700,000 ,

based on the above-noted public offering price of $1.00 per share.

For the 500,000 shares awarded to a company controlled by the Company’s

CEO, the Company immediately amortized $500,000 as a non-cash charge to expense as such shares were considered to have been earned by

the CEO under the Company’s milestone incentive compensation program, as of December 31, 2019, notwithstanding that issuance of

the shares was deferred until a later date (such shares were not issued until March 2022).

For the 200,000 shares awarded to a marketing

consultant, the Company amortized $200,000 as a non-cash charge to expense over his 24 month services agreement.

In June 2020, the Company

entered into new Board approved employment contracts with the Company’s two executive officers and also entered into a related contractor

agreement with a company controlled by the Company’s CEO.

Pursuant to such contracts, the company controlled by the Company’s

CEO and the Company’s Chief Financial Officer, in his individual capacity, met the necessary milestones to earn a total of 1,600,000

incentive shares of common stock, with a fair value of $6,976,000, as of December 31, 2020.

These shares, plus another 14,530 incentive

shares earned by a wholesale dealer (see Note 5), were issued in February 2021.

In the year ended June 30, 2021, the Company recognized

non-cash stock compensation expense for the fair value of such shares, along with the final amortization expense attributable to shares

previously granted to the marketing consultant, in the total amount of $ 7,437,389 , which also included the fair value of certain earned

shares subsequently issued to other grantees.

Pursuant to the above noted

contract with a company controlled by the Company’s CEO, such company met the necessary milestones to earn a total of an additional

500,000 incentive shares of common stock as of December 31, 2021, with a then current value of $3,505,000.

These shares, plus another

500,000 incentive shares previously earned by that company, were issued in the quarter ended March 31, 2022, at which time the agreement

with the company controlled by the Company’s CEO was terminated and the CEO entered into a new employment agreement, as described

in the following paragraph.

In the year ended June 30, 2022, the Company issued a total of 1,237,733 shares of common stock to all grantees,

including the aggregate 1,000,000 shares of common stock attributable to the company controlled by the CEO.

In August 2022, the Company completed an underwritten public offering of its equity securities in the form of Units with each Unit consisting

of one share of common stock and one warrant (each, a “Warrant” and collectively, the “Warrants”) to purchase

one share of common stock at an exercise price of $4.00 per share.

The shares of common stock and the Warrants comprising the Units were

immediately separated at closing of the offering and each is now independently listed on the NASDAQ Capital Market.

Each Warrant became

exercisable on the date of issuance and will expire five years from the date of issuance.

In the underwritten public

offering, a total of 1,121,250 Units, including exercise of the underwriter’s overallotment option, were sold at an offering price

to the public of $4.00 per Unit.

The gross proceeds of the offering were $ 4,485,000 and the net proceeds, after deduction of underwriting

discounts and other offering costs were approximately $ 3,780,000 .

The Company also granted the underwriter non-tradeable warrants to purchase

a total of 58,500 shares of common stock at an exercise price of $4.40 per share for a period of five years.

In conjunction with the public

offering, all holders of the Company’s 2018 convertible notes in the total amount of $ 59,251 , including accrued interest, converted

their debt into a total of 9,404,867 shares of common stock at the stated conversion rate, and all holders of the Company’s 2021

convertible notes in the total amount of $1,068,000 converted their debt into a total of 267,000 shares of common stock at the stated

conversion rate (see Note 2).

In the year ended June 30,

2022, the Company recognized total non-cash stock compensation expense of $ 5,307,809 as follows:

(i) $4,534,554 for the fair value of

the 500,000 newly earned shares by the CEO controlled company plus the fair value of earned shares issued to several other grantees, including

$278,750 for the amortized value of 50,000 shares attributable to a new independent director and $60,062 for 8,568 incentive shares earned

by a wholesale dealer (see Note 5);

and (ii) $773,255 for non-cash stock compensation attributable to the new employment contracts entered

into with the two executive officers, as further described in the next two paragraphs.

In February 2022, we entered

into a new employment agreement with our CEO, effective April 1, 2022.

The initial term of the employment agreement is one year and is

automatically renewable for additional one-year terms unless either party chooses not to renew the agreement.

The agreement provides for

an initial annual salary of $165,000.

Pursuant to the agreement, we issued our CEO a restricted stock unit (“RSU”) award for

up to 150,000 shares of our common stock upon achieving the following milestones (which achievements shall be determined by the Board):

(i) Milestone 1 - Successfully complete an uplisting of our common stock in 2022 and continue his employment with our company until January

2022, the holders of the 2018 convertible notes payable having total principal and accrued interest balances in the aggregate amount of

$ 6,922 elected to convert their notes.

Based upon the stated conversion price of $0.0063 per share, these holders converted their notes

payable into a total of 1,098,630 shares of common stock (see Note 2).

Warrants – The

Warrants for a total of 1,179,750 shares of common stock issued to investors and the underwriters are exercisable at any time after their

original issuance and at any time up to the date that is five years after their original issuance, or August 1, 2027.

The Warrants may

be exercised upon payment of the exercise price in cash on or prior to the expiration date.

Under the terms of the Warrant Agreement,

we must use our best efforts to maintain the effectiveness of the registration statement and current prospectus relating to common stock

issuable upon exercise of the Warrants until the expiration of the Warrants.

If we fail to maintain the effectiveness of the registration

statement and current prospectus relating to the common stock issuable upon exercise of the Warrants, the holders of the Warrants shall

have the right to exercise the Warrants solely via a cashless exercise feature provided for in the Warrants, until such time as there

is an effective registration statement and current prospectus.

The following table presents

activity with respect to the Company’s warrants for the year ended June 30, 2023:

Schedule of warrants activity

Outstanding at July 1, 2022

Warrants issued to Public Investors

Warrants issued to Underwriters

Outstanding at June 30, 2023

Exercisable at June 30, 2023

These warrants were issued

in conjunction with an underwritten public equity offering, therefore, there was no employee or non-employee compensation expense recognized.

Stock Compensation

Expense – In February 2022, we entered into a new employment agreement with our Chief Executive Officer (“CEO”),

effective April 1, 2022.

The initial term of the employment agreement was one year and is automatically renewable for additional one-year

terms unless either party chooses not to renew the agreement.

The agreement provides for an initial annual salary of $165,000.

to the agreement, we issued our CEO a restricted stock unit (“RSU”) award for up to 150,000 shares of our common stock upon

achieving the following milestones (which achievements shall be determined by the Board):

(i) Milestone 1 - Successfully complete an uplisting

of our common stock in 2022 and continue his employment with our company until January 1, 2023:

50,000 shares;

and (ii) Milestone 2 - Produce 2,000 ESSs in 2022 and continue his employment with our company until January 1,

and (ii) Milestone 2 -

Produce 2,000 ESSs in 2022 and continue his employment with our company until January 1, 2023:

100,000 shares.

As of January 1, 2023,

Milestone 1 was achieved, however, Milestone 2 was not achieved.

The underlying 50,000 shares of common stock earned under Milestone 1

were issued to the CEO as of that date.

In February 2022, we entered

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50,000 shares.

Milestone 1 was

achieved as of January 1, 2023, and the underlying 250,000 shares of common stock earned under Milestone 1 were issued to the CFO as of

Based upon the Company’s

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Company has calculated the grant date value of such awards and is amortizing it as stock compensation expense over the underlying performance

As previously indicated, the Company has recognized stock compensation expense applicable to such RSU awards in the amount of

$773,255 for the year ended June 30, 2022.

The Company has recognized stock compensation expense applicable to such RSU awards in the years ended June 30, 2023 and 2022

in the amounts of $ 1,241,563 and $ 773,255 , respectively.

In conjunction with our public

offering in August 2022, we appointed two new independent directors and adopted a new compensation plan for all independent directors

based on an annual compensation amount of $65,000 to be paid quarterly with not less than 70% of such amount paid in shares of our common

stock, calculated based on the share price at the end of such prior fiscal quarter, and up to 30% paid in cash, with such final amounts

to be determined by each director.

As of June 30, 2023, we booked an annual accrual of $ 195,000 of compensation expense (of which $175,500

will be settled through the issuance of shares) for our three independent directors under this plan.

At the same time, we also granted

26,000 shares, with a grant date value of $ 97,500 , to various advisors pursuant to annual contracts for their services.

In the year ended June 30,

2023, we recognized total non-cash stock compensation expense of $ 1,529,291 as follows:

(i) $ 1,241,563 for the amortized value of the

RSUs granted to our two executive officers, as previously described;

(ii) $ 175,500 for the amortized value of the portion of the new compensation

plan for our independent directors that is attributable to stock;

(iii) $ 85,000 for the net amortized value of the shares granted to various

advisors under their annual service contracts;

and (iv) $ 27,228 for the fair value of incentive shares earned by two wholesale dealers

as of December 31, 2022 (see Note 5).

There was a total of 384,759 shares of common stock that were issued to various grantees, including

our two executive officers, in the year ended June 30, 2023, of which 75,000 shares were previously expensed in the year ended June 30,

In the year ended June 30,

2022, we recognized total non-cash stock compensation expense of $ 5,307,809 as follows:

(i) $ 3,505,000 for the fair value of 500,000 incentive

shares earned as of December 31, 2021 by a company controlled by the Company’s CEO under a previous compensation plan (which were

not issued until early 2022);

(ii) $ 773,255 for the initial amortized value of the RSUs granted to our two executive officers, as previously

and (iii) $ 1,029,554 for the fair value of earned shares issued to several other grantees, including $ 278,750 for the amortized

value of 50,000 shares attributable to a new independent director and $ 60,062 for 8,568 incentive shares earned by a wholesale dealer

as of December 31, 2021 (see Note 5).

There was a total of 1,237,733 shares of common stock that were issued to various grantees in the

year ended June 30, 2022.

Other Matters –

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Effective January 1, 2021,

the Company secured new corporate and manufacturing office space under a sublease agreement with its contract manufacturer (see Note 6).

Under the terms of the sublease agreement, the Company is required to make rental payments of $10,350 per month during the initial one-year

term of the agreement.

The sublease agreement is renewable upon mutual agreement of both parties for up to four additional years at a

modest increase in the monthly rent, however, the Company is under is no obligation to renew it.

Management has determined that the exercise

of the renewal option is not reasonably certain and, as such, the Company has accounted for it as a short-term lease under ASC 842, Leases .

Effective January 1, 2022, the Company elected to renew the agreement for another one year period.

the Company secured new corporate and manufacturing office space under a sublease agreement with its former contract manufacturer (see

Under the terms of the sublease agreement, the Company is required to make rental payments of $10,350 per month during the initial

one-year term of the agreement.

The sublease is renewable for additional terms of 12 months upon mutual agreement of both parties, provided

thirty days’ notice is given for each subsequent term, at a modest increase in the monthly rent, through February 28, 2025, however,

the Company is under is no obligation to renew it.

Management has determined that the exercise of the renewal option is not reasonably

certain and, as such, the Company has accounted for it as a short-term lease under ASC 842, Leases .

Effective January 1, 2023,

the Company elected to renew the agreement for another one year period.

Under an amendment to our supply agreement with our former contract

manufacturer in April 2023, we took over direct responsibility for the manufacturing process surrounding our ESS units on June 1, 2023,

however, that amendment had no effect on the sublease agreement with our former contract manufacturer.

As indicated in Note 1, the

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quarterly sales targets, subject to defined maximums.

Pursuant to such agreements, one dealer met the necessary milestones to earn 14,530

incentive shares of common stock in December 2020, which were issued in February 2021, and also earned another 8,568 incentive shares

of common stock in December 2021, which were issued in March 2022.

Pursuant to such agreements, two dealers met the necessary milestones to earn a

total of 9,759 incentive shares of common stock in December 2022, which were issued in January 2023, and one dealer earned 8,568 incentive

shares of common stock in December 2021, which were issued in March 2022.

From time to time in the ordinary

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(6) Related Party Transactions

An executive officer of the

corporate parent company of our contract manufacturer (see Note 5) was nominated to become a director of the Company in January 2022 and

his appointment became effective upon our completion of a public offering in August 2022 (see Note 7).

Pursuant to an agreement that we

reached with our contract manufacturer prior to such nomination and appointment, we made payments to that company to assemble our energy

storage systems during the year ended June 30, 2022 in the total amount of $ 857,025 .

Additionally, we made contractual payments to that

company for our rental of office space during the year ended June 30, 2022 in the total amount of approximately $ 126,000 .

(7) Subsequent

On August 1, 2022, the Company

completed an underwritten public offering of its equity securities in the form of Units with each Unit consisting of one share of common

stock and one warrant (each, a “Warrant” and collectively, the “Warrants”) to purchase one share of common stock

at an exercise price of $4.00 per share.

The shares of common stock and the Warrants comprising the Units were immediately separated at

closing of the offering and each is now independently listed on the NASDAQ Capital Market.

Each Warrant became exercisable on the date

of issuance and will expire five years from the date of issuance.

At the initial closing, a

total of 975,000 Units were sold in the offering at an offering price to the public of $4.00 per Unit.

The gross proceeds of the offering

were $3,900,000 and the net proceeds, after deduction of underwriting discounts and other offering costs were approximately $3,315,000.

The Company granted the underwriter a 45-day option to purchase up to an additional 146,250 shares of common stock and/or 146,250 additional

Warrants solely to cover any overallotments at the public offering price, less underwriting discounts and commissions.

As of August 5,

2022, the underwriters had elected to exercise such option on both the common stock and Warrants resulting in additional net proceeds

to the Company of approximately $540,000.

The Company also granted the underwriter non-tradeable warrants to purchase a total of 58,500

shares of common stock at an exercise price of $4.40 per share for a period of five years.

conjunction with the public offering, all holders of the Company’s 2018 convertible notes in the total amount of $53,716 converted

their debt into a total of 9,404,867 shares of common stock at the stated conversion rate, and all holders of the Company’s 2021

convertible notes in the total amount of $1,068,000 converted their debt into a total of 267,000 shares of common stock at the stated

conversion rate (see Note 2).

As a result of the closing of the public offering and the conversion of both sets of convertible notes,

the Company has a total of 32,770,368 shares of common stock outstanding and has fully eliminated its convertible debt.

In the year ended June

30, 2022, we appointed the former owner of our contract manufacturer (see Note 5) to become a director of the Company.

of his appointment, the former owner of our contract manufacturer still had significant related party influence over its operations

in his capacity with the contract manufacturer’s new parent company.

Pursuant to an agreement that we reached with our

contract manufacturer prior to such appointment, we made payments to that company to assemble our energy storage systems during the

year ended June 30, 2022 in the total amount of $ 857,025 .

Additionally, we made contractual payments to that company for rental of our office space during the year ended June 30, 2022 in the

total amount of approximately $ 126,000 .

Effective April 1, 2023, we

amended our agreement with our contract manufacturer resulting in our taking over direct responsibility for our manufacturing operations

from that company, thus eliminating the related party relationship.

Prior to the termination of such relationship, we made contractual

payments to that company to assemble our energy storage systems during the period from July 1, 2022 to March 31, 2023 in the total amount

of $ 669,424 .

Additionally, we made contractual payments to that company for rental of our office space during the period from July 1,

2022 to March 31, 2023 in the total amount of $ 95,250 .

CHANGES IN AND DISAGREEMENTS WITH

1 unchanged sentence

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 8. Financial Statements and Supplementary Data