NeoVolta Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II. Other Information - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contained in our Annual Report on Form 10-K for the year ended June 30, 2025, filed with the Securities and Exchange Commission on September 29, 2025 (the “Annual Report”). Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited financial statements included above under “Part I - Financial Information” - “Item 1. Financial Statements”. Unless the context requires otherwise, references to the “Company , ” “we , ” “us,” “our , ” “NEOV”, refer specifically to NeoVolta, Inc. In addition, unless the context otherwise requires and for the purposes of this Report only: · “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; · “SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and · “Securities Act” refers to the Securities Act of 1933, as amended. Overview We are a designer, manufacturer, and seller of high-end Energy Storage Systems (or ESS), primarily our NeoVolta NV14, NV14-K, and NV-24, which can store and use energy via batteries and an inverter at residential or commercial sites. We were founded to identify new ways to leverage emerging technologies with the dynamic changes that are taking place in the energy delivery space. We primarily market and sell our products directly to our certified solar installers and solar equipment distributors. We are also pursuing agreements with residential developers, commercial developers, and other commercial opportunities. Because we are purely dedicated to energy solar systems, virtually all our current resources and efforts go into further developing our flagship NV14, NV14-K, and NV-24 products, while focusing on specific industry needs for our next generation of products. We believe we are unique in the marketplace due to our low cost, our innovative battery chemistry, our product versatility and our commitment to installer service. Because of these factors, we believe NeoVolta is uniquely equipped to establish itself as a major player in the energy storage market. As further discussed below under “Liquidity and Capital Resources,” we completed an underwritten public offering of our equity securities in the form of Units in August 2022. We sold a total of 1,121,250 Units in the offering at an offering price to the public of $4.00 per Unit. The gross proceeds of the offering were $4,485,000 and the net proceeds, after deduction of underwriting discounts and other offering costs, were approximately $3,780,000. We have used the proceeds of this public offering to increase our current production capacity, expand our product portfolio, enlarge our product marketing and sales efforts, and for other general corporate purposes. Results of Operations The following discussion reflects the Company’s revenues and expenses for the three-month periods ended September 30, 2025 and 2024, as reported in our financial statements included in Item 1. Comparison of three months ended September 30, 2025 versus three months ended September 30, 2024 Revenues - Revenues from contracts with customers for the three months ended September 30, 2025 were $6,650,258 compared to $590,236 for the three months ended September 30, 2024. Such increase in our revenues was primarily due to the rapid expansion of various new sales channels outside of our traditional focus on the local installer market in the Southern California area while maintaining essentially the same price points since the engagement of our new chief executive officer in April 2024 . 14 Cost of Goods Sold - Cost of goods sold for the three months ended September 30, 2025 were $5,073,006 compared to $497,389 for the three months ended September 30, 2024. The cost of goods sold in both periods reflected the cost of procuring and assembling the component parts of the energy storage systems that were sold in each fiscal year and resulted in gross profits on such sales of approximately 24% and 16%, respectively, with the increase due to manufacturing efficiencies and the correction of a prior period entry. General and Administrative Expense - General and administrative expenses for the three months ended September 30, 2025 were $2,374,668 compared to $1,050,119 for the three months ended September 30, 2024. Such increase was mainly due to our engagement of a new chief executive officer, who was engaged at an annual salary of $350,000 and also received a 4 year amortizing equity award of $2,854,000, as well as the hiring of several other employees since April 2024. The addition of these personnel has resulted in a higher level of both cash compensation expense and other associated expenses, such as marketing and travel, as well as non-cash stock compensation expenses related to the Company’s equity incentive programs. Research and Development Expense - Research and development expenses for the three months ended September 30, 2025 were $56,912 compared to $8,617 for the three months ended September 30, 2024. Such fluctuation was largely due to timing differences in the level of the Company’s recent product development efforts. Other Income and Expense - Interest expense for the three months ended September 30, 2025 was $389,134 compared to zero for the three months ended September 30, 2024, reflecting interest attributable to borrowings made under our lender credit arrangements obtained since September 30, 2024. Interest income for the three months ended September 30, 2025 was $140 compared to $1,395 for the three months ended September 30, 2024. This decrease was due to our lower level of investable cash in the three months ended September 30, 2025. Net Loss - Net loss for the three months ended September 30, 2025 was $1,243,322 compared to $964,494 for the three months ended September 30, 2024, representing the aggregate of the various revenue and expense categories indicated above. The Company has not recognized any income tax benefit for these net losses due to the uncertainty of its ultimate realization. Liquidity and Capital Resources Operating activities. Net cash used in operating activities in the three months ended September 30, 2025 was $2,494,069 compared to $593,031 in the three months ended September 30, 2024. This increase was largely due to the current period increase in our comparative net loss, primarily resulting from an increase in our previously noted cash operating expenses for personnel and related costs, as well as the relatively higher changes in our net working capital needs, including recent stockpiling and prepayment of inventory, on a comparative basis. Financing activities. Net cash provided by financing activities in the three months ended September 30, 2025 was $2,589,052, compared to zero in the three months ended September 30, 2024. Beginning in November 2024, we have made short-term borrowings from two private lenders, primarily to finance inventory purchases. In the three months ended September 30, 2025 we made borrowings from these lenders in the amount of $4,199,549 and repayments in the amount of $2,660,497. Additionally, we received a cash deposit from an investor for an advance subscription under our planned new private equity offering. As of September 30, 2025, we had a cash balance of approximately $0.9 million and net working capital of approximately $2.7 million. Currently, we are not generating a break-even level of net operating cash flow from our net sales. However, we anticipate that demand for our products will ultimately increase over time and that, with our current credit sources, we will have sufficient cash to operate for at least the next 12 months. Other Developments We continue to monitor current international developments occurring in Ukraine and Israel. However, we do not believe that they will have a significant impact on either the domestic markets for our products or the international supply chains for our product components, which are largely sourced from Asia. 15 Presently, our two main raw material components, batteries and inverters, are imported from different suppliers in China and, until recently, were subject to fairly low tariff rates that had been in effect for several years. 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 been extended to November 2025, subject to judicial review. 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. In the event, however, that such a mutual trade agreement is not reached between the parties within the next several months and we find it necessary to begin purchasing a significant level of our inventory components from China at post-tariff prices, we would be faced with a decision as to whether we should attempt to pass along such tariff increases to our customers through higher prices for our products or absorbing them internally, or some combination of those two alternatives. Either circumstance would likely materially adversely affect our sales and/or our profitability. Off-Balance Sheet Arrangements We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as defined in Item 303 of Regulation S-K. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We believe that certain accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. See “Note 1. Business and Summary of Significant Accounting Policies” of the Notes to Financial Statements set forth above and under “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended June 30, 2025, as filed with the SEC on September 29, 2025, for a further description of our critical accounting policies and estimates. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information for this Item is not required as the Registrant is a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.