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Item 8. Financial Statements and Supplementary Data

2024-09-27 compared with 2023-09-22 · 241 added, 252 removed, 302 unchanged (62% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Shareholders and Board of Directors of

NeoVolta, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets

of NeoVolta, Inc.

(the “Company”) as of June 30, 2023 and 2022, and the related statements of operations, stockholders’

equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

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

2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

To the Shareholders

and Board of Directors of

on the Financial Statements

audited the accompanying balance sheets of NeoVolta, Inc.

(the “Company”) as of June 30, 2024 and 2023, and the related statements

of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as

the “financial statements”).

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

position of the Company as of June 30, 2024 and 2023, and the results of its operations and its cash flows for the years then ended,

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

These financial

statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

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

our audits in accordance with the standards of the PCAOB.

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

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

The Company is not

required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we

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

on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

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

/s/ MaloneBailey, LLP

included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,

and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts

and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates

made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

/s/ MaloneBailey,

www.malonebailey.com

We have served as the Company’s auditor since 2018.

Houston, Texas

September 22, 2023

served as the Company's auditor since 2018.

NEOVOLTA INC.

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Accounts receivable, net

Inventory, net

Prepaid insurance and other current assets

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Accounts payable

Accrued interest payable

Other accrued liabilities

Convertible notes payable

Accrued liabilities

Total current liabilities

Convertible notes payable

Total liabilities

Commitments and contingencies (Note 4)

Stockholders' equity:

Common stock, $ 0.001 par value, 100,000,000 shares authorized, 33,155,127 and 21,977,251 shares issued and outstanding

Common stock, $ 0.001 par value, 100,000,000 shares authorized, 33,236,091 shares and 33,155,127 shares issued and outstanding, respectively

Additional paid-in capital

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( 2,635,699 )

Other expense:

Other income (expense):

Interest income

Interest expense

Total other expense

Total other income (expense)

$ ( 2,303,310 )

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$ ( 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 )

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( 18,439,228 )

Issuance of common stock in underwritten public offering

Issuance of common stock for conversion of debt and accrued interest

Stock compensation expense

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Stock compensation expense

Bad debt expense

Provision for expected credit losses/bad debt expense

Reserve for obsolete inventory

Changes in current assets and liabilities

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Prepaid expenses and other current assets

Accounts payable - others

Accounts payable

Accrued expenses

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Underwritten public offering of common stock

Proceeds from convertible notes payable

Net cash flows from financing activities

Net increase (decrease) in cash and cash equivalents

( 1,016,362 )

Cash and cash equivalents at beginning of period

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Convertible notes payable and accrued interest converted to common stock

Adjustment of debt discount related to adoption of new accounting principle

See Accompanying Notes to Financial Statements.

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limit of $250,000.

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 .

At June 30, 2024, the Company maintained all of its accounts at one bank and the combined balances of all accounts

at this bank was in excess of the FDIC insurance limit by $ 736,427 .

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

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

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:

The following table presents the components of inventory (net

of reserve for obsolescence on assembly parts of $ 90,000 and zero , respectively) as of June 30, 2024 and 2023:

Schedule of inventory

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Finished goods

Revenue Recognition

– The Company recognizes revenue in accordance with Accounting Standard Update ("ASU") 2014-09, Revenue from Contracts

with Customers (Topic 606).

Revenues are recognized when control of the promised goods is transferred to the customer in an amount that

reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services.

Revenue is recognized

based on the following five step model:

Recognition – The Company recognizes revenue in accordance with Accounting Standard Update ("ASU") 2014-09,

Revenue from Contracts with Customers (Topic 606).

Revenues are recognized when control of the promised goods is transferred to the

customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods

Revenue is recognized based on the following five step model:

· Identification of the contact with a customer

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

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

Accounts – The Company recognizes an allowance for doubtful accounts whenever a loss is expected to be incurred in the

realization of a customer’s account.

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

the year ended June 30, 2024, two such dealers represented approximately 20 % and 14 % of the Company’s revenues, however, no other

dealers accounted for more than 10% of the revenues in such period.

Those same two dealers plus one other one represented an aggregate

of approximately 22 %, 18 % and 14 % of the Company’s gross accounts receivable as of June 30, 2024, however, no other dealers accounted

for more than 10% of the accounts receivable as of June 30, 2024.

In the year ended June 30, 2023, three such dealers represented approximately

25 %, 15 % and 13 % 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, 2024

and 2023 is provided.

Allowance for Expected

Credit Losses – The Company recognizes an allowance for expected credit losses whenever a loss is expected to be incurred

in the realization of a customer’s account.

As of June 30, 2024 and 2023, our allowance for expected credit losses was $ 1,030,000

and $ 490,000 , respectively.

Income Taxes –

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(i) 1,348,181 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

to restricted stock units granted to an officer and another employee in April 2024;

(ii) 1,121,250 shares related to warrants issued to

investors in the public offering completed in August 2022;

(iii) 58,500 shares related to warrants issued to the underwriters in that

same offering;

and (iv) 50,000 shares related to restricted stock units granted to an officer in March 2022 (see Note 2).

Research and Development

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Actual results could differ from those estimates.

As a result of the continued spread

of the COVID-19 coronavirus since early 2020, economic uncertainties have arisen which could impact business operations, supply chains,

energy demand, and commodity prices that are beyond our control.

Overall, we have not experienced a material adverse impact to our economic

performance or ability to continue our business operations as a result of COVID-19.

We continue to monitor COVID-19, but do not believe

it will have a material unfavorable impact to our future financial performance at this time.

Related Parties - The

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the other to an extent that it might be prevented from fully pursuing its own separate interests is also a related party.

Value Measurements and Financial Instruments - ASC 820 defines fair value as the exchange price that would be received for an asset

or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly

transaction between market participants on the measurement date.

ASC 820 also establishes a fair value hierarchy that distinguishes between

(1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an

entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances

(unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted

prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

three levels of the fair value hierarchy are described below:

1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly,

including quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities

in markets that are not active;

Fair Value Measurements

and Financial Instruments - ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer

a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between

market participants on the measurement date.

ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant

assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions

about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for

identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair

value hierarchy are described below:

Level 1 - Unadjusted quoted

prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than

quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted

prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that

are not active;

inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates);

and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

3 - Inputs that are both significant to the fair value measurement and unobservable.

The carrying value of certain on-balance-sheet

financial instruments approximated their fair values due to the short-term nature of these instruments.

and inputs that

are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that

are both significant to the fair value measurement and unobservable.

The carrying value of certain on-balance-sheet financial

instruments approximated their fair values due to the short-term nature of these instruments.

These financial instruments include

cash and cash equivalents, accounts receivable, accounts payable, and long-term debt.

The carrying value of long-term debt approximates

fair value since the related rate of interest approximates current market rates.

The carrying value of long-term debt

approximates fair value since the related rate of interest approximates current market rates.

At June 30, 2024 and 2023,

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

the Company did not 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,

the Company early adopted the provisions of ASU 2020-06, Debt with Conversion and Other Options

(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible

Instruments and Contracts in an Entity’s Own Equity ).

As a result of the adoption of this new accounting principle, using

the modified retrospective method, the Company no longer recognized a beneficial conversion feature associated with the issuance of any

convertible debt.

Accordingly, the Company adjusted the beneficial conversion feature associated with the convertible notes issued in

2018 as of July 1, 2021 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 2).

Liquidity – These

financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge

its liabilities in the normal course of business.

The continuation of the Company as a going concern has been dependent upon the ability

of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations.

As disclosed in

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.

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 and prospective 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

newly effective accounting standard 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 July 1, 2023, the Company adopted the provisions of

ASC 326 ( Financial Instruments – Credit Losses ) pertaining to “current expected credit losses,” which had no

material impact on the Company’s financial statements .

– These financial statements have been prepared on a going concern basis, which assumes the Company will continue to

realize its assets and discharge its liabilities in the normal course of business.

The continuation of the Company as a going concern

has been dependent upon our ability to obtain necessary debt and equity financing to continue operations and the attainment of profitable

The Company has a history of recurring losses from operations and negative cash flows from operations which has raised substantial

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

Despite our history of recurring

operating losses and negative cash flows, we believe that based on our current business plan, which includes increased generation

of revenues and raising funds through debt financing, the above referenced substantial doubt has been alleviated.

As disclosed in Note 6, we recently entered into an agreement with a financing

entity whereby we have obtained a line of credit for borrowings of up to $5,000,000, in order to meet any near-term borrowing needs.

a result, we believe that we will have sufficient financial resources available to us in order to operate our business for

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

Common Stock –

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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 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).

conversion rate.

Warrants – The

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is an effective registration statement and current prospectus.

In June 2024, the Company filed an updated registration statement applicable

to the exercise of the Warrants.

The following table presents

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

Schedule of warrants activity

activity with respect to the Company’s warrants for the years ended June 30, 2024 and 2023:

Schedule of warrant activity

Outstanding at July 1, 2022

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Outstanding at June 30, 2023

Warrants issued

Warrants exercised/forfeited

Outstanding at June 30, 2024

Exercisable at June 30, 2024

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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:

Stock Compensation Expense

– In April 2024, we entered into an employment agreement with a new Chief Executive Officer (“CEO”), providing for an

initial term extending through June 30, 2027, which will be automatically renewed for additional one-year terms unless either party chooses

not to renew it.

Pursuant to the agreement, our new CEO received an initial equity grant equal to 1,280,000 restricted stock units (“RSU’s”),

with a grant date value of $2,854,000, which will vest over a four-year period,

subject to his continued employment with the Company, and will be entitled to earn additional RSU’s on each anniversary in

the form of three annual performance-based equity grants, beginning in the

year ending June 30, 2025, with a target value of up to $660,000 each.

In February 2022, we entered

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

As noted above, we engaged a new CEO effective April 29, 2024,

replacing our former CEO who remains as Chairman of the Board and chief technology officer.

Pursuant to the agreement, we issued our former

CEO an 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, 2023:

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.

As of December 31, 2023, Milestone 1 had been achieved, however, Milestone 2 had not been achieved and

was no longer achievable.

The underlying 50,000 shares of common stock earned under Milestone 1 were issued to our former CEO as of January

In February 2022, we entered

into a new employment agreement with our Chief Financial Officer (“CFO”), effective March 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 $125,000.

Pursuant to the agreement, we issued our CFO an RSU award

for up to 300,000 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

Pursuant to the agreement,

we issued our CFO an RSU award for up to 300,000 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:

250,000 shares;

and (ii) Milestone 2 - successfully complete and file the Company’s Form 10-K for the year ended June 30,

2023 no later than September 29, 2023 and continue his employment with our company until January 1, 2024:

and (ii) Milestone 2 - successfully complete and file the Company’s Form

10-K for the year ended June 30, 2023 no later than September 29, 2023 and continue his employment with our company until January 1, 2024:

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

assessment of the probability of the CEO and CFO ultimately achieving each milestone specified under the RSU awards indicated above, the

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

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.

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 our CFO as of that date.

Milestone 2 was achieved as of January 1, 2024, and the underlying 50,000 shares of common stock

earned under Milestone 2 are expected to be issued to our CFO at a later date.

Based upon our assessment

of the probability of our three executive officers noted above, plus a non-executive recipient of another RSU award issued in June 2024,

ultimately achieving any applicable milestones specified under the RSU awards indicated above, we have calculated the grant date value

of such awards and are amortizing it as stock compensation expense over the underlying performance periods.

We have recognized stock compensation

expense applicable to such RSU awards in the years ended June 30, 2024 and 2023 in the amounts of $ 214,992 and $ 1,241,563 , respectively.

In conjunction with our public

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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,

2024, we recognized total non-cash stock compensation expense of $ 432,367 as follows:

(i) $ 214,992 for the amortized value of the RSUs

granted to our three executive officers and a non-executive recipient, 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) $ 29,450 for the net amortized

value of the shares granted to various advisors under their annual service contracts;

and (iv) $ 12,425 for the fair value of incentive

shares earned by a wholesale dealer as of December 31, 2023 (see Note 4).

There was a total of 80,964 shares of common stock that were

issued to our independent directors in the year ended June 30, 2024, which were previously expensed in the year ended June 30, 2023.

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

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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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stock awards and stock unit awards to key employees and non-employee directors.

As of June 30, 2023, the Company has made awards totaling

450,000 shares for the RSU’s granted to two executives, as noted above, under the Plan.

As of June 30, 2024, we have made total awards of 1,893,779

shares under the Plan as follows:

(i) 1,798,181 shares for the RSUs granted to our three executive officers and a non-executive recipient,

as noted above;

(ii) 54,964 shares for the initial services of our three independent directors in the year ended June 30, 2023, pursuant

to the new compensation plan adopted in August 2022 for independent directors;

and (iii) 40,634 shares granted to several wholesale dealers

under an incentive sales program.

(3) Income Taxes

The Company is subject to

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Effective January 1, 2021,

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

we secured new corporate and manufacturing office space under a sublease agreement with a company that served as our contract manufacturer

at that time.

Under the terms of the sublease agreement, we were 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.

Further, under the terms of the sublease agreement, we were granted the right to renew the sublease for

additional terms of 12 months each 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, we were under no obligation to renew it.

of the sublease, management determined that exercise of the renewal option was not reasonably certain and, notwithstanding that the Company

elected to renew the agreement for additional one year periods as of January 1, 2022, 2023 and 2024, continues to believe that is the

Accordingly, we have accounted for it as a short-term lease under ASC 842, Leases .

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 (see

As indicated in Note 1, the

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to achieve quarterly sales above targeted levels by agreeing to grant them shares of the Company’s common stock for exceeding such

quarterly sales targets, subject to defined maximums.

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.

quarterly sales targets, subject to defined maximums, as determined annually on a calendar year basis.

We are dependent on our two

main component vendors for our suppliers of batteries, inverters and other raw materials and the inability of these single-source suppliers

to deliver necessary components of our products according to our schedule and at prices, quality levels and volumes acceptable to us,

or our inability to efficiently manage these components, could have a material adverse effect on our financial condition and operating

From time to time in the ordinary

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(5) Related Party Transactions

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 conjunction with our underwritten

public offering completed in August 2022, we appointed the former owner of our contract manufacturer to become a director of the Company.

At the time 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 .

However, we amended our agreement with our contract manufacturer,

effective April 1, 2023, 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 (see Note 4).

(6) Subsequent Events

In July 2024, we issued a

total of 9,776 shares of our common stock, consisting of 7,776 shares issued to a wholesale dealer under our incentive sales program and

2,000 shares issued to a non-employee adviser.

In September 2024, we entered

into an agreement with a newly formed financing entity whereby we obtained a line of credit for borrowings of up to $5,000,000.

this agreement, we will be required to make monthly payments to the lender of accrued interest, at the rate of 16% per annum, on any outstanding

borrowings that we make, with the principal and any unpaid accrued interest being due at maturity in September 2026.

In order to secure

such borrowings, we have granted a security interest in all of our assets to the lender.

As a condition of receiving this line of credit

from the lender, we have agreed not to issue any securities pursuant to the Company’s Form S-3 (file number 333-280400), without

the lender’s consent, so long as any borrowings remain outstanding.

CHANGES IN AND DISAGREEMENTS WITH

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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 8. Financial Statements and Supplementary Data