What changed in this filing

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Item 1. Business

2024-09-27 compared with 2023-09-22 · 163 added, 151 removed, 339 unchanged (48% of the section changed)

We are a designer, manufacturer,

and seller of high-end Energy Storage Systems (or ESS), primarily our NeoVolta NV14, NV14-K, and NV 24, which can store and use energy

via batteries and an inverter at residential or commercial sites.

We were founded to identify new ways to leverage emerging technologies

with the dynamic changes that are taking place in the energy delivery space.

We primarily market and sell our products directly to our

certified solar installers and solar equipment distributors.

In the future, we intend to expand multiple opportunities with residential

developers, commercial developers, and other commercial opportunities.

Because we are purely dedicated to energy solar systems, virtually

all of our current resources and efforts go into further developing our flagship NV14, NV14-K, and NV 24 products, while focusing on specific

industry needs for our next generation of products.

We believe we are unique in the marketplace due to our low cost, our innovative battery

chemistry, our product versatility, and our commitment to installer service.

Because of these factors, we believe NeoVolta is uniquely

equipped to establish ourselves as a major player in the energy storage market.

and seller of high-end Energy Storage Systems (or ESS), primarily our NeoVolta NV14, NV 24 and, to a lesser extent, our NV14-K, which

can store and use energy via batteries and an inverter at residential or commercial sites.

We were founded to identify new ways to leverage

emerging technologies with the dynamic changes that are taking place in the energy delivery space.

We primarily market and sell our products

directly to our certified solar installers and solar equipment distributors.

In the future, we intend to expand multiple opportunities

with residential developers, commercial developers, and other commercial opportunities.

Because we are purely dedicated to energy solar

systems, virtually all of our current resources and efforts go into further developing our flagship NV14, NV14-K, and NV 24 products,

while focusing on specific industry needs for our next generation of products.

We believe we are unique in the marketplace due to our

low cost, our innovative battery chemistry, our product versatility, and our commitment to installer service.

Because of these factors,

we believe NeoVolta is uniquely equipped to establish ourselves as a major player in the energy storage market.

Our NV14 ESS contains a 7,680

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up 50% from 19 million in 2018.

Since then, the number of major power outages in California reached a peak in 2020 before declining slightly

Our NV14 is capable of “Islanding” when used with AC or DC photovoltaic (PV) systems.

can be dangerous to utility workers, who may not realize that a circuit is still powered, an ESS capable of “islanding” must

be capable of physically disconnecting from the grid power when it senses that grid supply is not present, has an over current, or an

undercurrent condition.

As islanding can be dangerous

to utility workers, who may not realize that a circuit is still powered, an ESS capable of “islanding” must be capable of

physically disconnecting from the grid power when it senses that grid supply is not present, has an over current, or an undercurrent condition.

The NV14 includes “islanding” relays that are approved to perform this function.

Islanding also allows

solar production to function and power the residence or facility thereby decreasing the impact of a grid outage.

Islanding also allows solar production to

function and power the residence or facility thereby decreasing the impact of a grid outage.

Our NV14 currently includes

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Solar Installer Market .

The bulk of NeoVolta’s revenue and recurring customer base is residential and commercial solar system installers.

According to IBIS

Worldwide, there are over 13,000 solar installers in the US employing almost 55,000 employees.

With SunRun and Tesla Energy representing

approximately 20% of the market combined, and the top 10 companies representing about 38%.

Most solar installers in the US are very small,

independently owned operators and are generally not serviced by the larger companies.

These underserved installers have been NeoVolta’s

target market.

Based on IBIS’ figures, we estimate this to be at least 13,000 installers with less than 25 employees.

recurring installer customer purchases 1-2 systems a month.

They generally sell their systems and install and pay for them within the

same month, and typically do not stock inventory, so we believe NeoVolta’s “just in time” product availability makes

us an ideal fit.

Once these customers become certified NeoVolta installers, they become recurring customers.

We built our company based

on servicing small installers and will continue to do so by focusing on product availability, installer service, and, most importantly,

the characteristics of our product while we capture market share.

As we gain market acceptance, we expect larger installers to take notice.

The bulk of NeoVolta’s present revenue and recurring customer base is residential and commercial solar system installers.

January 2024, IBIS World estimates that there are approximately 11,100 solar panel installation companies operating in the US.

secure supply chain backed by tax incentives, this number is expected to rise as both the commercial and residential markets continue

The impact of the Inflation Reduction Act (see, “ Market Drivers – Regulation ”) on just residential solar

panel installation is expected to grow at a compound annual growth rate of 14.4% from 2024 to 2030.

Most solar installers in the US are

very small, independently owned operators and are generally not serviced by the larger companies.

These underserved installers have been

NeoVolta’s target market.

Our average recurring installer customer purchases 1-2 systems a month.

They generally sell their systems

and install and pay for them within the same month, and typically do not stock inventory, so we believe NeoVolta’s “just in

time” product availability makes us an ideal fit.

Once these customers become certified NeoVolta installers, they become recurring

We built our company based on servicing small installers and will continue to do so by focusing on product availability, installer

service, and, most importantly, the characteristics of our product while we capture market share.

As we gain market acceptance, we expect

larger installers to take notice.

This is especially true when considering repeated product availability challenges within the industry.

Installer storage installation

activity has grown over time, with 50% of all active residential installers in 2020 having completed at least one solar + storage system,

up from less than 20% in 2016 according to Berkeley Labs.

activity has grown over time, with approximately one-half of all active residential installers in recent years having completed at least

one solar + storage system, according to Berkeley Labs.

The rate of attachment, or number of PV systems installed with storage, is growing

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ESSs, revealing what we believe to be a compelling market in existing solar system retrofits.

According to Berkeley Lab’s Tracking

the Sun dataset, there are over 3 million solar systems installed in the US and only 6.8% of those have energy solar installed.

This marketplace

scenario presents small installer customers almost 3 million households to revisit for a storage retrofit especially when their 10-15

year old inverter experiences end of life.

According to a December 2023 report from

Berkeley Lab, there are over 3.4 million solar systems installed in the US with only a relatively small percentage of those having energy

storage installed.

This marketplace scenario presents small installer customers almost 3 million households to revisit for a storage retrofit

especially when their 10-15 year old inverter experiences end of life.

We believe that our 100% commitment

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residential solar PV market.

Wood Mackenzie forecasts that there

will be 3 million installations in 2021 growing to 4 million in 2023.

According to Mordor Intelligence, the global residential energy

storage systems market is expected to register a compound annual growth rate (CAGR) of more than 19% during the forecast period of 2021

- 2026, reaching a market value of more than $8.5 billion by 2026 from $2.2 billion in 2019.

The growth of the ESS market comes from a

combination of retrofits to existing solar installations and more widespread adoption of storage as part of new solar installations.

According to Mordor Intelligence,

the global residential energy storage systems market is expected to register a compound annual growth rate (CAGR) of more than 19% during

the forecast period of 2021 - 2026, reaching a market value of more than $8.5 billion by 2026 from $2.2 billion in 2019.

The growth of

the ESS market comes from a combination of retrofits to existing solar installations and more widespread adoption of storage as part of

new solar installations.

According to Wood Mackenzie’s

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Market Drivers

The regulatory

drivers regarding ESS come in the form of an increasing number of mandates and incentives.

On the mandate side, in August of 2021, California

became the first state in the country to require builders to install solar and battery storage on new commercial buildings and high-rise

multifamily buildings.

This state approved Energy Code also includes requirements for builders to design single-family homes so battery

storage can be easily added to the already existing solar system in the future as well as incentives to eliminate natural gas from new

On the incentive side, the federal Investment Tax Credit, or ITC, has been the most impactful providing a 26% credit for the

cost of a unit if you pair the battery with an on-site renewable resource.

For a typical ESS, the ITC can reduce the cost of the system

by $4,500 to $6,000.

This has become even more beneficial with the enactment of The Inflation Reduction Act, increasing the credit to

30% for all ESS.

Many states are also putting incentive systems in place.

Beyond states taking steps to encourage greater adoption of

energy storage technologies, some utilities are now also offering incentives to home and business owners who install storage.

most of these utility-specific storage incentives are in the Northeast.

We anticipate more of these programs being put in place in the

In November 2022, the California Public Energy Commission (CPUC) passed Net Energy Metering 3 (NEM3) with phase in date of April

NEM3 significantly reduces the value to “excess” solar that a customer sends to the Utility during the day.

NEM2, customer typically achieved a pay back period of 5-6 years.

Under NEM3, solar pay back is 10-12 years depending on the Utility.

As a result, most solar installers focused on installing as much solar as possible prior to the April 14, 2023 deadline.

This resulted

in a delay of battery and ESS installations since adding these capabilities do not affect NEM status, however, the impact of the temporary

market distortion has been largely reversed since that date.

At the federal level, the most

significant recent regulatory development regarding ESS has been, by far, the passage of the Inflation Reduction Act (“IRA”)

in August 2022.

Due to its extensive investment-related incentives, the IRA is expected to have a wide-ranging impact

on both public and private investment in the clean energy space in the US, on a long-term basis.

Additionally, there have been

a rapidly expanding number of mandates at the state and local level that have also been directed toward the solar industry in recent years.

On the incentive side, the IRA has increased the

federal Investment Tax Credit, or ITC, from 26% to 30% for qualifying investments, including energy storage.

For a typical ESS, the ITC

can reduce the cost of the system by $4,500 to $6,000.

In certain instances, the incentives of the ITC can be potentially increased up

to as much as 60% of the qualifying project cost.

Finally, the IRA also expands the federal Production Tax Credit, which was first enacted

in 2007, primarily for the benefit of the wind industry, to the solar power industry.

On the mandate side, California became the first

state in the country to require builders to install solar and battery storage on new commercial buildings and high-rise multifamily buildings

in August of 2021.

This state approved Energy Code also includes requirements for builders to design single-family homes so battery storage

can be easily added to the already existing solar system in the future as well as related incentives to eliminate natural gas from new

Many other states are also implementing various measures in order to encourage greater adoption of energy storage technologies.

For example, some utilities are now also offering incentives to home and business owners who install storage.

To date, most of these

utility-specific storage incentives are in the Northeast.

We anticipate more of these programs being put in place in the future.

Of further note on the state regulatory level,

California implemented Net Energy Metering 3 (NEM3) for subsequent new solar installations on April 14, 2023.

NEM3 reduces the amount

of NEM credit for each kilowatt (KW) of solar power sent to the utility from a rate of approximately $0.20 per KW to $0.09 per KW (each

Utility varies).

NEM3 effectively increases the average solar Return of Investment (ROI) from 5-6 years to 10-12 years (each Utility varies).

Effectively, the Company believes that solar installation in California currently makes little financial sense without also including

a battery system.

Installing NeoVolta nets a ROI of 4-6 years.

We estimate that NEM3 reduced our sales from the enactment date in December

2022 continuing through our last fiscal quarter, as solar installers worked off their permitted NEM2 installs.

We expect our sales to

gradually increase going forward.

Utilities can also impact

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Growth Strategy

Our growth strategy is focused

on expanding our core business of distributing our products on a recurring basis to small and medium sized installers and to continue

expanding the application of our product into various commercial applications through development partnerships.

Sungage Financial and

GoodLeap finance NeoVolta installations with or without solar.

We are working to add additional financing and leasing options.

to do this through an increase in targeted direct sales and marketing to installers in ripe regional markets, concentrating efforts on

adding to our national distributor partners, and marketing in ESS industry circles to identify new potential applications of our systems.

Our growth thus far has been through word of mouth and networking mainly in Southern California.

We have been successful in consistently

growing both our installer base and our number of installs through these means, but recognize that to succeed in the national marketplace,

we will need to bring on a team of sales and marketing professionals to reach our goals.

We have plans to start to build out this team

relatively soon.

Non-Residential / Commercial

Our all-in-one system was engineered with the intent to be easily configurable to the needs of the client and easily serviced

and updated for our installers.

Flexibility due to the close contact with the manufacturing process and the adaptability of the product,

along with our ability to handle commercial 208V 3-phse power, have opened up a number of new opportunities for us.

In that regard, various

stakeholders have sought us out to create an energy storage system for their unique needs specifically because others would not or could

not accept the challenge.

NeoVolta was and continues to be open to customizing our products for energy storage contracts should they meet

our volume, profitability, and system requirements.

This strategy of flexibility in R&D is affording NeoVolta access into markets

that would normally be closed to companies of our size.

We will continue to leverage this customer-driven approach in the future.

New opportunities in this

sector are difficult to forecast, but are a core focus of our current sales and marketing plan.

As these projects roll out and begin to

be publicized, we believe NeoVolta can establish itself as an energy storage system engineering firm for large projects in applications

We intend to take advantage of our adaptability and the nascent industry to fill these diverse and complicated needs.

previously announced partnerships with PMP Energy, EOS Linx, and American Development Partners.

We continue to explore other than residential

opportunities that NeoVolta is uniquely suited for.

With the addition of Ardes

Johnson to NeoVolta’s management team as our CEO in April 2024, we have implemented an entirely new growth strategy that is designed

to greatly expand our market penetration and product sales.

Johnson is a seasoned industry executive who most recently, served as

the President of the U.S.

subsidiary of Meyer Burger, a major manufacturer of

solar cells and solar modules based in Switzerland, for three years.

His previous experience includes high level sales positions with

both Tesla and General Electric.

Johnson’s direction and leadership, we intend to vigorously pursue three major growth objectives as follows (i) Expanding revenue

through strategic sales channel development, (ii) Broadening financing options through partnerships with major industry players, and (iii)

Initiating development of the next generation of batteries.

In furtherance of these key growth

objectives , Mr.

Johnson has recently undertaken the following significant tactical initiatives:

Sales Team Formation :

NeoVolta has successfully assembled a national sales team targeting key renewable energy

distribution centers, ensuring a robust presence across the U.S.

Collaborations Initiated :

We have begun collaborations with leading solar installers in California, Nevada, and

Florida, positioning ourselves to attempt to capture a larger market share.

Conversations for Next-Gen Systems :

We have initiated discussions with entities to develop the next generation

of NeoVolta’s energy storage systems, setting the stage for future innovation.

Additionally, we are planning

to adopt a number of other near-term strategic moves that are designed to rapidly increase the growth of our product sales.

NeoVolta is actively expanding into high-potential regions such as Hawaii, Texas, Florida, and Puerto Rico, with regionally based sales

teams to maximize reach and service.

Also, another of our key initiatives is to make NeoVolta’s products more accessible and affordable,

driving increased adoption and sales in the residential energy storage market.

With regard to the

expanding commercial market for our products, we are planning to enhance our existing R&D technology to create

complementary solutions tailored for the commercial sector, expanding NeoVolta’s market footprint, beginning in 2025.

we will be launching our Virtual Peaker Solution in order to a ddress the growing demand for

storage-only solutions from utilities and aggregators, seeking to position NeoVolta at the forefront of energy storage

We compete with several large

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introduced to NeoVolta.

Since December 2021, NeoVolta has been delivering on orders in under one week, very often the same day.

this by maintaining a high level of inventory relative to projected sales, component consolidation prior to shipment, and a small lot,

recurring freight strategy, which we believe allows for more flexibility in getting through the supply chain.

Our strategy of maintaining

higher levels of inventory based on projected sales means that to the extent our sales expectations in any periods are incorrect we may

suffer cash flow constraints for such periods.

LG Chem recently experienced a large recall of their older systems due to fire risk and

product defects associated with their lithium-ion chemistry.

Inability to secure reliable product delivery, fire risk, and recalls have

harmed reputations of our competitors.

Since December 2021, NeoVolta has been delivering on orders in usually less than two weeks, very often the same

We achieve this by maintaining a high level of parts inventory relative to projected sales, component consolidation prior to shipment,

and a small lot, recurring freight strategy, which we believe allows for more flexibility in getting through the supply chain.

of maintaining higher levels of inventory based on projected sales means that to the extent our sales expectations in any periods are

incorrect we may suffer cash flow constraints for such periods.

Inability to secure reliable product delivery, fire risk, and recalls

have harmed reputations of our competitors.

Installer Service .

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in California - where regulatory standards in energy are generally set.

In November 2022, the CPUC

passed Net Energy Metering 3 (“NEM3”) with a phase in date of April 14, 2023.

NEM3 significantly reduces the value to “excess”

solar that a customer sends to the Utility during the day.

Under NEM2, customer typically achieved a pay back period of 5-6 years.

NEM3, solar pay back is 10-12 years depending on the Utility.

As a result, most solar installers focused on installing as much solar as

possible prior to the April 14, 2023 deadline.

This resulted in a delay of battery and ESS installations since adding these capabilities

do not affect NEM status.

The full impact of NEM3 to both the solar and ESS industry will not be known for several months.

On April 14, 2023, California

implemented Net Energy Metering 3 (NEM3) for subsequent new solar installations.

NEM3 reduces the amount of NEM credit for each kilowatt

(KW) of solar power sent to the utility from a rate of approximately $0.20 per KW to $0.09 per KW (each Utility varies).

NEM3 effectively

increases the average solar Return of Investment (ROI) from 5-6 years to 10-12 years (each Utility varies).

Effectively, the Company believes

that solar installation in California currently makes little financial sense without also including a battery system.

Installing NeoVolta

nets a ROI of 4-6 years.

We estimate that NEM3 reduced our sales from the enactment date in December 2022 continuing through our last

fiscal quarter, as solar installers worked off their permitted NEM2 installs.

We expect our sales to gradually increase going forward.

Manufacturing

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throughout the process and have systems to track components and end-units from Asia to San Diego to the end-user’s location.

record all component serial numbers, all torque settings, and annotates all required item numbers and functionality prior to packaging.

Recent Assembly Inventory Purchase

record all component serial numbers, all torque settings, and annotate all required item numbers and functionality prior to packaging.

Assembly Inventory Purchase

In April 2023, we closed the

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assumed such responsibility for the manufacturing process surrounding our ESS units from our contract manufacturer on June 1, 2023.

conjunction with assuming this responsibility, we hired the two employees of our contract manufacturer who previously performed contract

manufacturing services for us.

We plan to hire three additional “assemblers” in the near future.

All of our manufacturing

certifications are listed under NeoVolta.

This amended agreement had no effect on our present Sublease Agreement with our contract manufacturer,

pertaining to our existing manufacturing location in Poway, CA (see “Item 2 – Properties”).

conjunction with assuming this responsibility, we hired the employees of our contract manufacturer who previously performed contract manufacturing

services for us.

We plan to hire up to three additional “assemblers” in the future.

All of our manufacturing certifications

are listed under NeoVolta.

This amended agreement had no effect on our present Sublease Agreement with our contract manufacturer, pertaining

to our existing manufacturing location in Poway, CA (see “Item 2 – Properties”).

As of June 30, 2024, we have

seven full-time employees.

Our CEO manages all Company strategy, sales and R&D, our CFO manages all finance and administration.

manufacturing operations are performed by the four new employees that we recently hired from our former contract operator, as noted above.

10 full-time employees.

Our CEO, who joined the Company in April 2024, manages all Company strategy, sales and R&D, our CFO manages

all finance and administration.

Our manufacturing operations are performed by the new employees that we have hired from our former contract

operator, as noted above.

The balance of the staff manages supply chain, technical support and marketing/sales support.

We also contract for hire with four outside

consultants and contractors on an ongoing basis.

Also, we enter into specific contracts for non-recurring R&D projects, as needed.

Our intent is to hire any new executive level leaders in the coming year as necessary.

We also contract

for hire with four outside consultants and contractors on an ongoing basis.

Also, we enter into specific contracts for non-recurring R&D

projects, as needed.

Access to Information

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

What changed 10-K

Item 1. Business