What changed in this filing

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Item 1A. Risk Factors

2024-09-27 compared with 2023-09-22 · 90 added, 93 removed, 559 unchanged (25% of the section changed)

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have a material adverse effect on our financial condition and operating results.

The duration and scope of the impacts of

the COVID-19 pandemic are uncertain and may continue to adversely affect our operations, supply chain, distribution, and demand for our

While the global designation

of COVID-19 as a pandemic has recently ended, the Company is assessing any potential factors that may continue to impact its business.

Thus far, the impact of COVID-19 on the global economy and our customers has not affected us materially.

To date, we have not experienced

any issues with our supply chain, but delays through international ports have been experienced in the industry.

If we were to encounter

a significant disruption due to COVID-19 at one or more of our locations or suppliers, we may not be able to satisfy customer demand for

a period of time.

Furthermore, the impact of

COVID-19 on the economy, demand for our products and impacts to our operations, including the measures taken by governmental authorities

to address it, may precipitate or exacerbate other risks and/or uncertainties, including specifically many of the risk factors set forth

herein, which may have a significant impact on our operating results and financial condition, although we are unable to predict the extent

or nature of these impacts at this time.

We are currently selling two products and

if these products that we sell or install fail to perform as expected, our reputation could be harmed and our ability to develop, market

and sell our products and services could be harmed.

We are currently selling two primary products

and if these products that we sell or install fail to perform as expected, our reputation could be harmed and our ability to develop,

market and sell our products and services could be harmed.

If our energy products were

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history, we depend on a relatively small number of wholesale dealers and installers, primarily in California, for our revenue.

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

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

As of June 30, 2023, four

such dealers represented approximately 94% of the Company’s accounts receivable.

Our limited customer base and concentration could

expose us to the risk of substantial losses if a single dominant customer stops purchasing, or significantly reduces orders for, our products.

Our ability to maintain close relationships with these top customers is essential to the growth and profitability of our business.

we fail to sell our products to one or more of these top customers in any particular period, or if a large customer purchases fewer of

our products, defers orders or fails to place additional orders with us, or if we fail to develop additional major customers, our revenue

could decline, and our results of operations could be adversely affected.

year ended June 30, 2024, two such dealers represented approximately 20% and 14% of the Company’s revenues whereas in the year ended

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

As of June 30, 2024, three

such dealers represented approximately 22%, 18% and 14% of the Company’s accounts receivable.

Our limited customer base and concentration

could expose us to the risk of substantial losses if a single dominant customer stops purchasing, or significantly reduces orders for,

our products.

Our ability to maintain close relationships with these top customers is essential to the growth and profitability of our

If we fail to sell our products to one or more of these top customers in any particular period, or if a large customer purchases

fewer of our products, defers orders or fails to place additional orders with us, or if we fail to develop additional major customers,

our revenue could decline, and our results of operations could be adversely affected.

If we fail to scale our business operations

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economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing

military conflict between Russia and Ukraine.

Our business, financial condition and results of operations may be materially and adversely

affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical

military conflicts between Russia and Ukraine and between Gaza and Israel.

Our business, financial condition and results of operations

may be materially and adversely affected by any negative impact on the global economy and capital markets resulting from these conflicts

or any other geopolitical tensions.

and global markets are

experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between

Russia and Ukraine.

On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported and the conflict is

continuing at an intense level.

Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict

in Ukraine could lead to further market disruptions, including significant volatility in commodity prices, credit and capital markets,

as well as supply chain interruptions.

We are continuing to monitor the situation in Ukraine and globally and assessing its potential

impact on our business.

In addition, Russian military actions and the resulting sanctions could adversely affect the global economy and

financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain

additional funds.

experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflicts between

Russia and Ukraine, beginning in in February 2022, and between Gaza and Israel, beginning in in October 2023.

Although the length and

impact of these ongoing military conflicts are highly unpredictable, they could lead to further market disruptions, including significant

volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.

We are continuing to monitor the situations

in both of these areas and globally and assessing any potential impacts on our business.

Any of the above mentioned

factors could affect our business, prospects, financial condition, and operating results.

The extent and duration of the military action,

The extent and duration of the military actions,

sanctions and resulting market disruptions are impossible to predict, but could be substantial.

Any such disruptions may also magnify

the impact of other risks described in this registration statement.

the impact of other risks described in this report.

We may become subject to product liability

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financial condition and results of operations.

In particular, the California

Public Energy Commission (“CPUC”) passed Net Energy Metering 3 (“NEM3”) in November 2022 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

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

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

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

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.

Our business and

operations would suffer in the event of third-party computer system failures, cyber-attacks on third-party systems or deficiency in our

cyber security.

rely on information technology (“IT”) systems, including third-party “cloud based” service providers, to keep

financial records, maintain product support data, and corporate records, to communicate with staff and external parties and to operate

other critical functions.

This includes critical systems such as email, other communication tools, electronic document repositories and

If any of these third-party information technology providers are compromised due to computer viruses, unauthorized access, malware,

natural disasters, fire, terrorism, war and telecommunication failures, electrical failures, cyber-attacks or cyber-intrusions over the

internet, then sensitive emails or documents could be exposed or deleted.

Similarly, we could incur business disruption if our access

to the internet is compromised, and we are unable to connect with third-party IT providers.

The risk of a security breach or disruption,

particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally

increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure

of confidential or proprietary information, we could incur liability and delay of our product development and support efforts.

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.

Typically, 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

Our business and operations would suffer

in the event of third-party computer system failures, cyber-attacks on third-party systems or deficiency in our cyber security.

We rely on information technology

(“IT”) systems, including third-party “cloud based” service providers, to keep financial records, maintain product

support data, and corporate records, to communicate with staff and external parties and to operate other critical functions.

This includes

critical systems such as email, other communication tools, electronic document repositories and archives.

If any of these third-party

information technology providers are compromised due to computer viruses, unauthorized access, malware, natural disasters, fire, terrorism,

war and telecommunication failures, electrical failures, cyber-attacks or cyber-intrusions over the internet, then sensitive emails or

documents could be exposed or deleted.

Similarly, we could incur business disruption if our access to the internet is compromised, and

we are unable to connect with third-party IT providers.

The risk of a security breach or disruption, particularly through cyber-attacks

or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity

and sophistication of attempted attacks and intrusions from around the world have increased.

To the extent that any disruption or security

breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information,

we could incur liability and delay of our product development and support efforts.

We may need to assert intellectual property-related

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and financial condition.

We are heavily reliant on Brent Willson,

our Chief Executive Officer and President, and the departure or loss of Brent Willson could disrupt our business.

We are heavily reliant on the services of

both Ardes Johnson, our Chief Executive Officer, and Brent Willson, our former CEO and current chief technology officer, and the departure

or loss of either officer could disrupt our business.

We depend heavily on the continued

efforts of Brent Willson, our Chief Executive Officer and President and a director.

Willson, who is also a director, is the founder

of NeoVolta and is essential to our strategic vision and day-to-day operations and would be difficult to replace.

The departure or loss

Willson, or the inability to timely hire and retain a qualified replacement, could negatively impact our ability to manage our

efforts of Ardes Johnson, our Chief Executive Officer, who joined the Company in April 2024, and Brent Willson, our former CEO and current

chief technology officer , who are essential to our strategic vision and day-to-day operations and would be difficult to

The departure or loss of either Mr.

Johnson or Mr.

Willson, or the inability to timely hire and retain qualified replacements,

could negatively impact our ability to manage our business.

If we are unable to recruit and retain key

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for our business to succeed.

Artificial intelligence presents risks and

challenges that can impact our business, including by posing security risks to our confidential information, proprietary information and

personal data.

Issues in the development

and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability, or

other adverse consequences to our business operations.

As with many technological innovations, artificial intelligence presents risks

and challenges that could impact our business.

We may adopt and integrate generative artificial intelligence tools into our systems for

specific use cases.

Our vendors may incorporate generative artificial intelligence tools into their offerings without disclosing this

use to us, and the providers of these generative artificial intelligence tools may not meet existing or rapidly evolving regulatory or

industry standards with respect to privacy and data protection and may inhibit our or our vendors’ ability to maintain an adequate

level of service and experience.

If we, our vendors, or our third-party partners experience an actual or perceived breach or privacy or

security incident because of the use of generative artificial intelligence, we may lose valuable intellectual property and confidential

information and our reputation and the public perception of the effectiveness of our security measures could be harmed.

Further, bad actors

around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities

involving the theft and misuse of personal information, confidential information, and intellectual property.

Any of these outcomes could

damage our reputation, result in the loss of valuable property and information, and adversely impact our business.

Risks Related to Our Securities

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a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.

Future sales of shares by existing stockholders

could cause our stock price to decline.

If our existing stockholders,

who acquired their shares of common stock at prices substantially below our current trading price, sell, or indicate an intention to sell,

substantial amounts of our common stock in the public market after the contractual lock-up agreements such stockholders entered into in

connection with our July 2022 offering expire and other restrictions on resale lapse, the trading price of our common stock could be adversely

Certain of our stockholders

holding an aggregate of 13,907,867 shares at the time of our July 2022 public offering and our officers and directors, agreed not to offer,

sell, dispose of or hedge such shares of our common stock through January 23, 2023.

Upon the expiration of the lock-up agreements, all

such shares became eligible for resale in the public market, subject to applicable securities laws, including the Securities Act.

ability to sell shares pursuant to Rule 144, the trading price of our common stock could be adversely impacted if these stockholders sell,

or indicate an intention to sell, substantial amounts of our common stock in the public market.

Nevada law and provisions in our articles

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senior management from the pursuit of our business strategies, which could adversely affect our results of operations and financial condition.

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors