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 and six month periods ended December 31, 2025 and 2024, as reported in our financial statements included in Item 1. 19 Comparison of three months ended December 31, 2025 versus three months ended December 31, 2024 Revenues - Revenues from contracts with customers for the three months ended December 31, 2025 were $4,645,517 compared to $1,071,581 for the three months ended December 31, 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 . Cost of Goods Sold - Cost of goods sold for the three months ended December 31, 2025 were $3,872,995 compared to $747,670 for the three months ended December 31, 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 17% and 30%, respectively, with the decrease largely being due to the reversal in December 2024 of a prior year reserve for obsolescence on component parts of our NV-14Ks of $90,000. General and Administrative Expense - General and administrative expenses for the three months ended December 31, 2025 were $5,081,966 compared to $1,228,517 for the three months ended December 31, 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 and other equity incentives, 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 December 31, 2025 were $58,795 compared to $42,324 for the three months ended December 31, 2024. Such fluctuation was largely due to timing differences in the level of the Company’s recent product development efforts. Depreciation and Amortization Expense - Depreciation and amortization expenses for the three months ended December 31, 2025 were $108,283 compared to zero for the three months ended December 31, 2024. Such fluctuation was attributable to our closing of an acquisition of intangible and tangible assets from Neubau Energy Inc., which closed in October 2025. Other Income and Expense – Loss on debt exchanges for the three months ended December 31, 2025 was $858,002 compared to zero for the three months ended December 31, 2024, and resulted from two exchange agreements entered into with one of our lenders in October and November 2025. Interest expense for the three months ended December 31, 2025 was $204,700 compared to $24,546 for the three months ended December 31, 2024, reflecting interest attributable to a higher level of borrowings made under our lender credit arrangements obtained since September 30, 2024. Interest income for the three months ended December 31, 2025 was $425 compared to $339 for the three months ended December 31, 2024, due to a slightly higher average level of investable cash in the three months ended December 31, 2025. Net Loss - Net loss for the three months ended December 31, 2025 was $5,538,799 compared to $971,137 for the three months ended December 31, 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. Comparison of six months ended December 31, 2025 versus six months ended December 31, 2024 Revenues - Revenues from contracts with customers for the six months ended December 31, 2025 were $11,295,775 compared to $1,661,817 for the six months ended December 31, 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 . 20 Cost of Goods Sold - Cost of goods sold for the six months ended December 31, 2025 were $8,946,001 compared to $1,245,059 for the six months ended December 31, 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 21% and 25%, respectively, with the decrease partially being due to the reversal in December 2024 of a prior year reserve for obsolescence on component parts of our NV-14Ks of $90,000. General and Administrative Expense - General and administrative expenses for the six months ended December 31, 2025 were $7,456,634 compared to $2,278,636 for the six months ended December 31, 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 and other equity incentives, 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 six months ended December 31, 2025 were $115,707 compared to $50,941 for the six months ended December 31, 2024. Such fluctuation was largely due to timing differences in the level of the Company’s recent product development efforts. Depreciation and Amortization Expense - Depreciation and amortization expenses for the six months ended December 31, 2025 were $108,283 compared to zero for the six months ended December 31, 2024. Such fluctuation was attributable to our closing of an acquisition of intangible and tangible assets from Neubau Energy Inc., which closed in October 2025. Other Income and Expense - Loss on debt exchange for the six months ended December 31, 2025 was $858,002 compared to zero for the six months ended December 31, 2024, and resulted from two exchange agreements entered into with one of our lenders in October and November 2025. Interest expense for the six months ended December 31, 2025 was $593,834 compared to $24,546 for the six months ended December 31, 2024, reflecting interest attributable to a higher level of borrowings made under our lender credit arrangements obtained since September 30, 2024. Interest income for the six months ended December 31, 2025 was $565 compared to $1,734 for the six months ended December 31, 2024 due to a lower average level of investable cash in the six months ended December 31, 2025. Net Loss - Net loss for the six months ended December 31, 2025 was $6,782,121 compared to $1,935,631 for the six months ended December 31, 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 six months ended December 31, 2025 was $4,578,069 compared to $1,451,330 in the six months ended December 31, 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. Investing activities. Net cash used in investing activities in the six months ended December 31, 2025 was $500,000, compared to zero in the six months ended December 31, 2024. Such fluctuation was entirely due to the cash portion of our purchase price of an acquisition of intangible and tangible assets from Neubau Energy Inc., which closed in October 2025. 21 Financing activities. Net cash provided by financing activities in the six months ended December 31, 2025 was $4,525,667, compared to $793,649 in the six months ended December 31, 2024. Beginning in November 2024, we have made short-term borrowings from two private lenders, primarily to finance inventory purchases. In the six months ended December 31, 2025, we made borrowings from these lenders in the total amount of $6,698,725 and repayments in the amount of $5,173,058. In December 2025, we also partially closed a private equity offering pursuant to agreements entered into in November 2025 with an accredited investor group under which we issued a total of 1,200,000 shares of our common stock to the investor group at an offering price of $2.50 per share resulting in gross proceeds of $3,000,000. In the six months ended December 31, 2024, we made borrowings from these lenders in the total amount of $889,732 and repayments in the amount of $256,483. In December 2024, we also received proceeds from the exercise of warrants issued in our August 2022 public offering in the amount of $160,400. As of December 31, 2025, we had a cash balance of approximately $0.2 million and net working capital of approximately $4.1 million, an increase of approximately $1.4 million in the recent quarter. 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 and the proceeds of our registered direct offering in January 2026 (see “Other Developments ”) , we will have sufficient cash to operate for at least the next 12 months. Other Developments In January 2026, we closed a securities purchase agreement with a group of purchasers, pursuant to which we sold to the purchasers, in a registered direct offering, a total of 2,100,841 shares of our common stock at an offering price of $4.76 per share. The gross proceeds to the Company from the registered direct offering were $10,000,000 and the net proceeds were $9,350,000, after deducting offering expenses payable by the Company. We intend to use the net proceeds from this offering for working capital and general corporate purposes. In January 2026, we also executed a series of joint venture agreements with the U.S. affiliates of a foreign entity for the formation of a new domestic limited liability company to jointly own and operate a planned battery manufacturing facility in the southeastern United States. Pursuant to these agreements, the Company has a 60% ownership interest in the joint venture company, and the two U.S. affiliates of the foreign entity each have a 20% ownership interest. In January and February, we closed the remainder of our November 2025 private equity offering, and issued a total of 4,000,000 shares of our common stock at an offering price of $2.50 per share resulting in gross proceeds of $10,000,000. We utilized $7,000,000 of those proceeds in the joint venture company in order to satisfy our initial capital contribution, as required under the joint venture agreements, and the remainder for general corporate purposes. Further, we are expected to make additional capital contributions to the joint venture company through June 30, 2027 in total amounts of up to $33,000,000, pursuant to the joint venture agreements. The next scheduled capital contribution we will be required to make will be in the amount of $8.0 million on or before April 30, 2026. We presently anticipate funding those additional capital contributions from the proceeds of one or more private offerings of our common stock, subject to market conditions. However, there can be no assurance that we will be successful in raising sufficient proceeds from such private offerings in order to fully satisfy our obligations for the additional capital contributions to the joint venture company. To the extent that we may be unable to raise sufficient proceeds in order to fully satisfy our obligations for the additional capital contributions to the joint venture company, the parent company of the same foreign entity will be permitted to bring in one of more new members of the joint venture company to fund such additional capital contributions which would dilute our present 60% majority ownership of the joint venture company. 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. 22 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 tariff rate was lowered in 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. 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. None of those policies are deemed to be critical accounting policies nor critical accounting 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.