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Item 8. Financial Statements and Supplementary Data

2025-09-29 compared with 2024-09-27 · 278 added, 234 removed, 309 unchanged (62% of the section changed)

9 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

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.

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, 2025 and 2024, 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,

2025 and 2024, 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.

Accordingly, we express no such opinion.

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,

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

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

www.malonebailey.com

served as the Company's auditor since 2018.

We have served as the Company's auditor

Houston, Texas

September 29, 2025

NEOVOLTA INC.

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Inventory, net

Prepaid insurance and other current assets

Prepaid expenses and other current assets (including prepaid

inventory in amount of $ 535,938 and

- 0 - as of June 30, 2025 and 2024, respectively)

Total current assets

Lease right-of-use asset, net

Liabilities and Stockholders' Equity

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Accrued liabilities

Lease liability

Short-term notes payable

Total current liabilities

Payable to line of credit lender

Total liabilities

Commitments and contingencies (Note 5)

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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

Exercise of common stock warrants

Issuance of common stock in private offering

( 5,034,596 )

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Stock compensation expense

Amortization of ROU asset

Provision for expected credit losses/bad debt expense

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Accounts receivable

( 1,630,876 )

Prepaid expenses and other current assets

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Accrued expenses

Operating lease obligation

Net cash flows used in operating activities

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Cash flows from financing activities:

Underwritten public offering of common stock

Proceeds of private equity offering

Borrowings under line of credit

Repayments of line of credit

Borrowings under short-term nots payable

Repayments of short-term nots payable

( 2,503,120 )

Proceeds from exercise of common stock warrants

Net cash flows from financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

( 1,016,362 )

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Cash paid for income taxes

Supplemental non-cash financing activities:

Convertible notes payable and accrued interest converted to common stock

Supplemental investing and financing activities:

ROU asset recognized from operating lease

See Accompanying Notes to Financial Statements.

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June 30, 2025

(1) Business and Summary of Significant Accounting Policies

(1) Business and Summary of Significant Accounting

Description of Business

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and an inverter at residential sites.

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

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

and in an expanding number of other states.

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limit of $250,000.

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

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

(FIFO) method.

The Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value

of inventory to the lower of cost or net realizable value based on its assessment of market conditions, inventory turnover and current

stock levels.

As of June 30, 2025, the Company maintained all of its accounts at one bank and the combined balances of all accounts

at this bank were in excess of the FDIC insurance limit by $ 544,836 .

– 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.

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

first-in, first out (FIFO) method.

The Company periodically reviews the value of items in inventory and records an allowance to reduce

the carrying value of inventory to the lower of cost or net realizable value based on its assessment of market conditions, inventory

turnover and current stock levels.

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

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:

The following table presents the components

of inventory (net of reserve for obsolescence on assembly parts of zero and $90,000, respectively) as of June 30, 2025 and 2024:

Schedule of inventory

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Finished goods

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

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:

· Identification of the contract with a customer

· Identification of the performance obligations

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The Company generates revenues

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

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

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

other states.

In the year ended June 30, 2025, two such dealers represented approximately 41 % and 23 % 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

approximately 39 %, 12 % and 12 % of the Company’s net accounts receivable as of June 30, 2025, however, no other dealers accounted

for more than 10% of the accounts receivable as of June 30, 2025.

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

In the year ended June 30, 2024, two such dealers represented approximately

20 % and 14 % of the Company’s revenues.

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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).

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

in March 2022 (see Note 3).

Research and Development

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Actual results could differ from those estimates.

Related Parties - The

Company accounts for related party transactions in accordance with ASC 850 (“Related Party Disclosures”).

A party is considered

to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or

is under common control with the Company.

Related parties also include principal owners of the Company, its management, members of the

immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party

controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties

might be prevented from fully pursuing its own separate interests.

A party which can significantly influence the management or operating

policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence

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

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.

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.

At June 30, 2024 and 2023,

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.

Segment Information

– Management has determined that the Company operates in one reportable segment, which is the development and commercialization

of energy storage products.

The Company's chief operating decision maker (CODM) is its Chief Executive Officer, who reviews financial

information presented on a company-wide basis.

The CODM primarily uses net loss, which is reported in the Statements of Operations, to

assess financial performance and allocate resources.

These financial metrics are used by the CODM to make key operating decisions, such

as the assessment of segment performance and allocation of resources.

The significant categories within net loss that the CODM regularly

reviews are revenues from customers, cost of goods sold, and general and administrative expenses.

Other expenses reported in the Company’s

net loss include interest expense and research and development expenses.

Recent Accounting Pronouncements

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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.

issued standards, including ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, and prospective

standards that are not yet effective, including ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense

disaggregation disclosures (Topic 220-40):

Disaggregation of Income Statement Expenses, 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.

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 our ability

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

As disclosed in Note 2, we

entered into an agreement with a financing entity in September 2024 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.

As 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.

On September 3, 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 .

Under this agreement, we are obligated to make periodic 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,

which was subsequently extended to September

3, 2028 (see Note 6).

In order to secure such borrowings, we have granted a security interest in all of our assets to the

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.

As of June 30, 2025, we had made net borrowings under this credit agreement in the amount of $ 383,538 ,

leaving an available balance of $ 4,616,462 .

Accrued interest as of June 30, 2025 was $ 30,767 .

On October 4, 2024, we made

an initial borrowing of $ 250,000 under this line of credit largely in order to fund a short-term loan in the same amount to a new customer

which has a government-backed contract to install a large number of our units in Puerto Rico over a two year period.

The purpose of the

loan was to provide working capital to the customer in conjunction with the startup of the contract in Puerto Rico.

The loan was structured

to be non-interest bearing, if repaid prior to December 31, 2024.

The loan was fully repaid in December 2024.

In the month of November 2024,

we initiated short-term borrowings from a commercial accounts receivable lender under a loan agreement allowing for borrowings, secured

by certain property interests, of up to $ 4,000,000 .

As of June 30, 2025, we had made borrowings from this lender to finance customer shipments

and related costs in the total amount of $ 5,106,343 .

The lender charges a placement fee of 1% on each borrowing and assesses interest

at the rate of 2.5% per month on the outstanding borrowings.

Borrowings are to be repaid upon the earlier of:

(i) 120 days from the borrowing

or (ii) receipt of payment from the customer.

In the event of default, interest is assessed at the default rate of 1% per 7 days.

Through June 30, 2025, we had repaid $ 2,503,120 of such borrowings, including accrued interest and fees, leaving an outstanding balance

as of that date, including accrued interest and fees, of $ 2,603,223 .

Common Stock –

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 February 2025, the Company closed a private equity offering under which the Company issued a total of 543,500 shares of its common

stock to the investors at an offering price of $ 2.00 per share resulting in gross proceeds to the Company in the amount of $ 1,087,000 .

The Company is using the proceeds of this private offering to meet working capital needs and for other general corporate purposes.

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

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Outstanding at July 1, 2023

Warrants issued to Public Investors

Warrants issued to Underwriters

Warrants issued

Warrants exercised/forfeited

Outstanding 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.

In November 2024, the underwriter elected to exercise all 58,500 Warrants at an exercise price of $4.40 per share, via a cashless exercise,

as permitted under the warrant agreement, resulting in the issuance of 15,312 shares of our common stock.

Additionally, the holders of

publicly issued Warrants to purchase an aggregate of 40,100 shares of our common stock elected to exercise their Warrants by a cash payment

of a total of $ 160,400 resulting in the issuance of the underlying shares of our common stock in December 2024.

Stock Compensation Expense

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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”),

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

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.

subject to his continued employment with the Company, and will be entitled to earn additional RSUs on each anniversary in the form

of three annual performance-based equity grants.

However, our Compensation

Committee has not set any definitive targets, therefore, no additional grants have been made as of June 30, 2025.

In February 2025, 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:

100,000 shares.

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

into an amended and restated employment agreement with our Chief Financial Officer (“CFO”).

The initial term of the employment

agreement ends on December 31, 2027 and will be automatically renewable for additional one-year terms unless either party chooses not

to renew the agreement.

Pursuant to the agreement, we issued our CFO an award of 240,000 RSUs vesting in four annual installments on each

In February 2022, we entered

into a new employment agreement with our Chief Financial Officer (“CFO”), effective March 1, 2022.

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:

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 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.

into a new employment agreement with our CFO pursuant to which we issued him an RSU award for up to 300,000 shares of our common stock

upon achieving two defined milestones.

The first milestone was achieved as of January 1, 2023, and the underlying 250,000 shares of common

stock were issued to our CFO as of that date.

The second milestone was achieved as of January 1, 2024, and the underlying 50,000 shares

of common stock are expected to be issued to our CFO at a later date.

In January 2025, we entered

into an employment agreement with our new Chief Operating Officer (“COO”).

The initial term of the employment agreement ends

on December 31, 2027 and will be automatically renewable for additional one-year terms unless either party chooses not to renew the agreement.

Pursuant to the agreement, we issued our COO an award of 150,000 RSUs vesting in three annual installments.

Additionally, we entered into

employment agreements with two other individuals in June 2024 and October 2024, and we issued them a total of 136,362 RSUs vesting in

four annual installments.

As a result, we presently have a total of 1,806,362 RSUs that have been issued to our three officers and two

other individuals.

For all of these awards, we have calculated the grant date value of such awards and are amortizing it as stock compensation

expense over the underlying vesting periods.

We have recognized stock compensation expense applicable to such RSU awards in the years

ended June 30, 2025 and 2024 in the amounts of $ 1,011,405 and $ 214,992 , respectively.

In February 2025, we entered

into a referral agreement with a marketing company to market our products to qualified solar and energy storage system installers.

term of the referral agreement ends on December 31, 2026.

Pursuant to the agreement, the only compensation that the marketing company

will be entitled to receive will be through the issuance of shares of our common stock in exchange for reaching specified target levels

of product sales, up to a maximum total of 2,000,000 shares for reaching a total of 2,500 units sold and paid for.

In accordance with

ASC 718, we are accounting for this agreement based on our periodic assessments of the probability of reaching such target levels.

on that approach, we have recognized stock compensation expense as of June 30, 2025, in the amount of $165,000.

In conjunction with our public

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to be determined by each director.

As of June 30, 2024, we booked an annual accrual of $ 195,000 of compensation expense (of which $175,500

As of June 30, 2025 and 2024, 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.

In the year ended June

30, 2025, we recognized total non-cash stock compensation expense of $ 2,101,488

(i) $ 1,011,405

for the amortized value of the RSUs granted to our three officers and two other individuals;

(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) $ 515,498

for the fair value of the issuance of 174,650 shares of our common stock to two consultants for their advisory services in

the area of energy regulatory and marketing matters;

(iv) $ 234,085

for the grant date value of 78,565

shares of common stock to be issued to a distributor as a sales incentive pursuant to a February 2025 distribution agreement;

(v) $ 165,000

for the amortized value of the shares potentially issuable to a marketing company pursuant to a February 2025 referral agreement.

There was a total of 289,870

shares of our common stock that were issued to various grantees for services in the year ended June 30, 2025, of which 125,620

shares were previously expensed in the year ended June 30, 2024.

In the year ended June 30,

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

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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

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 4).

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,

Other Matters –

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for the issuance of up to 2,500,000 shares of common stock.

In December 2024, the Plan was amended to increase the number of shares of

common stock authorized for issuance by 5,000,000 shares.

The Plan is designed to provide for future discretionary grants of stock options,

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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,

(i) 2,256,362 shares for the RSUs granted to our three executive officers and two non-executive recipients,

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.

(ii) 153,808 shares for the services of our three independent directors in the years ended June 30, 2024 and 2023, pursuant

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

and (iii) 204,884 shares granted to various consultants

for their services and to wholesale dealers under an incentive sales program.

(4) Income Taxes

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Valuation allowance

( 1,570,000 )

Net deferred income tax assets

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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.

term, at a modest increase in the monthly rent, through December 31, 2024.

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

elected to renew the agreement for additional one year periods as of January 1, 2022, 2023 and 2024.

Accordingly, we have accounted for

it as a short-term lease under ASC 842, Leases .

Effective December 31, 2024, the parties mutually agreed to a short-term extension

of the sublease agreement, on essentially the same terms, through February 28, 2025.

Prior to expiration of the extended sublease, the

Company relocated its corporate and manufacturing office space to another facility in the same vicinity under a 13 month sublease agreement

with the sublandlord, at a base rental of $ 18,638 per month.

We are accounting for the lease agreement as an operating lease under ASU

2016-02, Leases (Topic 842) .

Accordingly, the Company has capitalized the present value of the future lease obligations and is

amortizing the related right-of-use asset on a straight-line basis each month over the term of the lease.

As indicated in Note 1, the

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

Beginning in April 2025, the Trump Administration implemented a significant increase in tariff rates on all goods imported from

China, although it was temporarily suspended for 90 days in April 2025 and the suspension has recently been extended to early November

Prior to the tariff escalation in April 2025, we had anticipated the likelihood of facing such a tariff increase and began stockpiling

our inventory of these two components.

As a result, we do not anticipate having to purchase a significant level of such components at

post-tariff prices for the next several months.

From time to time in the ordinary

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matters for which losses are not probable and estimable.

(5) Related Party Transactions

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.

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.

On July 4, 2025, Congress

passed, and the President signed into law the One Big Beautiful Bill Act (“OBBB”).

Among other provisions, it extends

many of the expiring provisions from the Tax Cuts and Jobs Act of 2017 and phases out a number

of clean energy tax incentives, including credits for the installation of residential solar panels.

Based on our preliminary analysis,

however, we do not expect passage of the OBBB to have a material impact on our business.

On July 23, 2025, we issued

78,565 shares of common stock to a wholesale distributor as a sales incentive pursuant to a February 2025 distribution agreement and 10,400

shares of common stock to a product marketing consultant pursuant to a February 2025 letter agreement, which were previously expensed

in the year ended June 30, 2025 (see Note 3).

On August 22, 2025, we issued

Non-Qualified Stock Options to a group of our employees to purchase a total of 144,000 shares of our common stock at the current stock

price of $3.60 per share, pursuant to the provisions of our 2019 Stock Option Plan.

These options are exercisable for a period of 5 years

from the date of issuance and will become vested on a ratable basis over a period of 3 years from the date of issuance.

Using the Black-Scholes

valuation model, we have calculated that the total fair value of these options as of the date of issuance was approximately $342,400,

and we will amortize this total amount to stock compensation expense on a straight-line basis over the 3-year vesting period of the options.

On September 5, 2025, we obtained

a two year extension of the maturity date of our $5 million line of credit agreement from the lender to September 3, 2028 (see Note 2).

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