FLUX 10-K & 10-Q changes, risk factors and insider trading
Flux Power Holdings, Inc. · Nasdaq · Miscellaneous Electrical Machinery, Equipment & Supplies · CIK 1083743 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We are currently in default under the Revolving Note under the GBC Credit Facility, and such default could adversely affect our business, financial condition, results of operations or liquidity.”
New heading “We have previously identified material weaknesses in our internal control over financial reporting, which management has remediated. If we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.”
New heading “We are not currently in compliance with the Rule 5550(a) continued listing requirements and the Staff of Nasdaq is continuing to monitor our compliance with the Rule 5550(b) continued listing requirements for the Nasdaq Stock Market. If we fail to regain compliance with the Rule 5550(a) continued listing requirements or to continue to meet at least one of the Rule 5550(b) continued listing requirements, our common stock may be delisted, which could affect the market price of our common stock, hurt your ability to sell your shares and negatively impact our ability to access the capital markets.”
New heading “The issuance and sale of our common stock to Roth Principal Investments under the Committed Equity Facility may cause dilution to our other stockholders and the sale of the shares of common stock acquired by Roth Principal Investments, or the perception that such sales may occur, could cause the price of our common stock to fall.”
Removed heading “We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.”
Removed heading “We are not currently in compliance with the continued listing requirements for the Nasdaq Stock Market. If we fail to regain compliance or to meet the continued listing requirements, our common stock may be delisted, which could affect the market price of our common stock, negatively impact stockholders’ ability to sell shares and negatively impact our ability to access the capital markets.”
Removed heading “In the event of default of the Revolving Note under the GBC Credit Facility, such default could adversely affect our business, financial condition, results of operations or liquidity.”
Removed heading “We are not currently in compliance with the continued listing requirements for the Nasdaq Stock Market. If we fail to regain compliance or to meet the continued listing requirements, our common stock may be delisted, which could affect the market price of our common stock, hurt your ability to sell your shares and negatively impact our ability to access the capital markets”
Largest changes
“The loans and other obligations of the Company under the GBC Credit Facility are secured by substantially all of our tangible and intangible assets, including, without limitation, intellectual property, pursuant to the terms of a Loan and Security Agreement with GBC dated July 28, 2023 (the “Agreement”) and an Intellectual Property Security Agreement (the “IP Security Agreement”). …”see in full comparison
“This Report includes an explanatory paragraph stating that our current liquidity position and projected cash needs raise substantial doubt about our ability to continue as a going concern, along with management’s assessment and strategies. The perception that we may not be able to continue as a going concern may make it difficult for us to raise new funds and to operate our business due to concerns about our ability to meet our contractual obligations. There is no assurance that sufficient financing will be available when needed or on reasonable terms to allow us to continue our operations. …”see in full comparison
“We expect that our existing cash, additional funding which we believe is available under our GBC Credit Facility, additional proceeds we believe are available under the Committed Equity Facility, and cash generated from our operations, will not be sufficient to meet our anticipated capital resources and to fund our planned operations for the next twelve months (see Liquidity and Financial Condition in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional information). …”see in full comparison
“As discussed in Note 7 – Line of Credit, on March 31, 2026, we notified GBC that we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended February 28, 2026 under the GBC Credit Facility, which resulted in an “event of default” under the GBC Credit Facility. While GBC has allowed us to continue to use our line of credit under the GBC Credit Facility despite our event of default, GBC can choose to limit or discontinue availability at any time. …”see in full comparison
“We are currently in default under the Revolving Note under the GBC Credit Facility, and such default could adversely affect our business, financial condition, results of operations or liquidity.”see in full comparison
“In the event of default of the Revolving Note under the GBC Credit Facility, such default could adversely affect our business, financial condition, results of operations or liquidity.”see in full comparison
Full comparison: every changed paragraph (83)
An
investment in our common stock involves a high degree of risk. You should carefully consider the summary of risk factors described below,
together with all of the other information included in this report,Form, before making an investment decision. If any of the following risks
actually occur, our business, financial condition or results of operations could suffer. In that case, the trading price of our common
stock could decline, and you may lose all or part of your investment. You also should read the section entitled “Special Note Regarding
Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance
of such statements in the context of this report.Form. The risk factors below do not address all the risks relating to securities, business
and operations,operations and financial condition.
Management
has evaluated the Company’sour expected cash requirements, including investments in additional salesselling, general and marketing, research and development,
development, capital expenditures and working capital requirements, and believes the Company’sour existing cash and funding available
under the GBC Credit Facility,cash, along with the forecasted gross margin,margin and the
proceeds that we believe are available under the Committed Equity Facility, will not be sufficient to meet theour Company’s
anticipated capital requirements
to fund planned operations for the next twelve months following the filing date of this AnnualReport. ReportAs described below, our ability to continue
onas Forma 10-K.going concern is partially contingent upon the availability of the GBC Credit Facility, which may become unavailable due to a covenant
breach by the Company.
This Report includes an explanatory paragraph stating that our current liquidity position and projected cash needs raise substantial doubt about our ability to continue as a going concern, along with management’s assessment and strategies. The perception that we may not be able to continue as a going concern may make it difficult for us to raise new funds and to operate our business due to concerns about our ability to meet our contractual obligations. There is no assurance that sufficient financing will be available when needed or on reasonable terms to allow us to continue our operations. Our ability to continue as a going concern is contingent upon, among other factors, the availability of the GBC Credit Facility or obtaining alternate financing. As discussed in Note 7 – Line of Credit, on March 31, 2026, we notified GBC that we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended February 28, 2026 under the GBC Credit Facility, which resulted in an “event of default” under the GBC Credit Facility. While GBC has allowed us to continue to use our line of credit under the GBC Credit Facility despite our event of default, GBC can choose to limit or discontinue availability at any time. In addition, due to our event of default under the GBC Credit Facility, GBC may, at its option, declare its commitments to us terminated and all our obligations under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required on the part of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the GBC Credit Facility. Since GBC can choose to limit our access to our line of credit under the GBC Credit Facility and/or call the debt at any time, substantial doubt exists about our ability to continue as a going concern. While we have entered into the CEF Purchase Agreement with Roth Principal Investments as a potential source of financing, we can only direct Roth Principal Investments to purchase shares of our common stock pursuant to the CEF Purchase Agreement if the closing sale price of our common stock on the prior trading day exceeds the Threshold price. On August 14, 2026, the closing sale price of our common stock on the Nasdaq Capital Market was $0.595 and there can be no assurances that our common stock will continue to trade above the Threshold Price. We cannot provide any assurance that we will be able to raise additional capital.
We are currently in default under the Revolving Note under the GBC Credit Facility, and such default could adversely affect our business, financial condition, results of operations or liquidity.
Our loans and other obligations under the GBC Credit Facility are secured by substantially all of our tangible and intangible assets, including, without limitation, intellectual property, pursuant to the terms the Loan and Security Agreement with GBC and the IP Security Agreement. The GBC Credit Facility is evidenced by a revolving note (the “Revolving Note”), which maturity date was automatically extended to July 31, 2027 (the “Maturity Date”), upon the conversion of all the outstanding obligations under the Cleveland Note into equity of the Company at the closing of the Private Placement on September 15, 2025. Provided that there is no event of default, the Maturity Date can automatically be extended for one (1) year period upon payment of a renewal fee for each such extension in the amount of three-quarters of one percent (0.75%) of the Revolving Loan Commitment (as defined below), which fee will be due and payable on or before the applicable Maturity Date. The holder of the Revolving Note is entitled to all of the benefits and security provided for in the Loan and Security Agreement. All Revolving Loans shall be repaid by us on the Maturity Date, unless payable sooner pursuant to the provisions of the Loan and Security Agreement. As a secured party, upon an event of default, GBC will have a first priority right to the collateral granted to them under the Loan and Security Agreement and IP Security Agreement, and we may lose our ownership interest in the assets pledged as security interest.
As discussed in Note 7 – Line of Credit, on March 31, 2026, we notified GBC that we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended February 28, 2026 under the GBC Credit Facility, which resulted in an “event of default” under the GBC Credit Facility. While GBC has allowed us to continue to use our line of credit under the GBC Credit Facility despite our event of default, GBC can choose to limit or discontinue availability at any time. In addition, due to our event of default under the GBC Credit Facility, GBC may also, at its option, declare its commitments to us terminated and all our obligations under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required on the part of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the GBC Credit Facility. If GBC were to terminate their commitments under the GBC Credit Facility and foreclose against substantially all our assets, we would likely be forced to seek bankruptcy protection and our investors could lose the full value of their investment in our Common Stock. As such, our loss of access to our line of credit under the GBC Credit Facility or our collateral will have a material adverse effect on our operations, business and financial condition.
We expect that our existing cash, additional funding which we believe is available under our GBC Credit Facility, additional proceeds we believe are available under the Committed Equity Facility, and cash generated from our operations, will not be sufficient to meet our anticipated capital resources and to fund our planned operations for the next twelve months (see Liquidity and Financial Condition in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional information). Further, the use of our GBC Credit Facility remains subject to performance metrics, certain restrictions and compliance with loan covenants. As discussed in Note 7 – Line of Credit, on March 31, 2026, the Company notified GBC that the Company failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended February 28, 2026 under the GBC Credit Facility, which resulted in an “event of default” under the GBC Credit Facility. We are working with GBC to negotiate an amendment to the GBC Credit Facility or otherwise obtain a waiver from GBC. GBC has allowed us to continue to use our line of credit under the GBC Credit Facility while negotiations continue, however, GBC can choose to limit or discontinue availability at any time. We continue to work with Gibraltar Capital to renegotiate the terms of the GBC Credit Facility; however, there can be no assurance that we will be able to do so or that we will be able to obtain a waiver from GBC on terms favorable to us or at all. In addition, due to our event of default under the GBC Credit Facility, GBC may also, at its option, declare its commitments to us terminated and all our obligations under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required on the part of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the GBC Credit Facility. While we have entered into the CEF Purchase Agreement with Roth Principal Investments as a potential source of financing, we can only direct Roth Principal Investments to purchase shares of our common stock pursuant to the CEF Purchase Agreement if the closing sale price of our common stock on the prior trading day exceeds the Threshold price of $0.50. On August 14, 2026, the closing sale price of our common stock on the Nasdaq Capital Market was $0.595 and there can be no assurances that our common stock will continue to trade above the Threshold Price. In addition, should there be any delays in the receipts of key component parts, due in part to supply chain disruptions, our ability to fulfil the backlog of sales orders will be negatively impacted resulting in lower availability of cash resources from operations. We may be required to access other forms of capital to support our operations and execute our business plan by issuing equity or convertible debt securities, or by entering into another form of structured financing or strategic transaction. Our ability to access such forms of capital will be impacted by investor confidence in our business strategy as well as market conditions. In addition, our failure to timely file our amendment on Form 10-K/A to our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 means that we currently are ineligible to use a registration statement on Form S-3. We will not be eligible to use a registration statement on Form S-3 again until we have timely filed all materials and reports required to be filed pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934 for a period of at least twelve (12) calendar months immediately preceding the filing of a new registration statement on Form S-3. The inability to use a Form S-3 registration statement will limit our ability to raise capital through sales of our securities in a timely and cost-efficient manner.
In the event we are required to obtain additional funds, there is no guarantee that additional funds will be available on a timely basis or on acceptable terms. To the extent that we raise additional funds by issuing equity or convertible debt securities, our stockholders may experience additional dilution, and such financing may involve restrictive covenants. Newly issued securities may include preferences, superior voting rights and the issuance of warrants or other convertible securities that will have additional dilutive effects. We cannot assure you that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. Further, we may incur substantial costs in pursuing future capital and/or financing. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations. Our ability to obtain needed financing may be impaired by such factors as the weakness of capital markets and the fact that we have not been profitable, which could impact the availability and cost of future financings. If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and product development, which may have a material adverse effect on future cash flows and results of operations.
The
report from our independent registered public accounting firm for the year ended June 30, 2025 includes an explanatory paragraph stating
that our current liquidity position and projected cash needs raise substantial doubt about our ability to continue as a going concern,
along with management’s assessment and strategies. The perception that we may not be able to continue as a going concern may make
it difficult for us to raise new funds and to operate our business due to concerns about our ability to meet our contractual obligations.
There is no assurance that sufficient financing will be available when needed or on reasonable terms to allow us to continue our operations.
Our ability to continue as a going concern is contingent upon, among other factors, the availability of the GBC Credit Facility or obtaining
alternate financing. We cannot provide any assurance that we will be able to raise additional capital. See Liquidity and Financial
Condition in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional
information.
As
of June 30, 20252026 and 2024,2025, we had a cash balance of $1.3$0.3 million and $0.6$1.3 million, respectively. We currently believe that our
existing existing
cash balances,balances availability of our GBC credit facility,and cash resources from operations and gross proceeds
from our recent private placement will not be sufficient to fund our existing and planned operations for the
next twelve months. Until
such time as we generate sufficient cash to fund our operations, we will need additional capital to
continue our operations thereafter.
We
have historically relied on equity financing, including our Committed Equity Facility, borrowings under short-term loans with related
parties, credit facilities and/or cash
resources from operating activities to fund our operations. Specifically, we have relied heavily
on athe GBC Credit Facility, and while GBC has continued to grant us access to our line of credit facilityunder withthe GBC,GBC andCredit Facility despite
our covenant default thereunder, there
can be no assurance that we will be able to maintain thisaccess facility,to our line of credit under the GBC
Credit Facility, obtain additional funds via a new facility or that funds will be
available on terms acceptable to us, if at all. Failure
to maintain access to maintainour line of credit under the GBC debtCredit facilityFacility without a replacement facility would have material
adverse impact
on our operations.
While we recently entered into the CEF Purchase Agreement with Roth Principal Investments as a potential source of financing, we can only direct Roth Principal Investments to purchase shares of our common stock pursuant to the CEF Purchase Agreement if the closing sale price of our common stock on the prior trading day exceeds the Threshold Price. There can be no assurances that our common stock will continue to trade above the Threshold Price and we will be able to continue to use the Committed Equity Facility as a source of financing.
If we were to access additional capital via an equity or equity-linked financing, including under the Committed Equity Facility, such funding would result in dilution of the ownership interests of our current stockholders. If funds are not available on acceptable terms, we may be required to curtail our operations or take other actions to preserve our cash, which may have a material adverse effect on our future cash flows and results of operations.
We
have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses,
or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls,
we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business
and stock price.
Based
on management’s evaluation of our disclosure controls and procedures as of June 30, 2025, we identified material weaknesses in
our internal controls over financial reporting. The material weaknesses were based on our ineffective oversight of our internal control
over financial reporting and lack of sufficient personnel resources with technical accounting expertise related to certain aspects of
the financial reporting process. While management intends to continue the use of third-party consultants
and technical accounting experts and to implement measures designed to improve our internal control over financial reporting to remediate
material weaknesses, there can be no assurance that these steps will be effective.
We concluded that the previously issued audited consolidated financial statements as of and for the
fiscal year ended June 30, 2023 and the unaudited consolidated financial statements as of and for the quarters ended September 30, 2023,
December 31, 2023, and March 31, 2024, which were filed with the Securities and Exchange Commission (“SEC”) on September
21, 2023, November 9, 2023, February 8, 2024 and May 13, 2024, respectively, should no longer be relied upon because of errors in such
financial statements relating to the improper accounting for inventory. Our Annual Report on Form 10-K filed for the year ended June 30, 2024 included the restatement of those periods. As a part of this restatement
and evaluation process, we also discovered that:
As a result, our Annual Report on Form 10-K filed for the year ended June 30, 2024 included the restatement of our audited consolidated financial statements for the fiscal years ended June 30, 2023 and 2022,
including all related unaudited consolidated interim financial statements within the fiscal years ended June 30, 2024, 2023 and 2022.
After
re-evaluation, the Company’s management concluded that considering the errors described above, this represents an additional
material weakness in the Company’s disclosure controls and procedures and the Company’s internal control over financial reporting.
The material weakness was based upon a lack of sufficiently designed controls over the prevention of fraud and possible management override
of controls. To address this material weakness, management plans to continue to devote significant effort and resources to the remediation
and improvement of the Company’s internal control over financial reporting. The design of any system of controls also is based
in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Moreover, the effectiveness of our controls and procedures may be limited
by a variety of factors, including faulty human judgment and simple errors, omissions or mistakes; fraudulent action of an individual
or collusion of two or more people; inappropriate management override of procedures; and the possibility that any enhancements to controls
and procedures may still not be adequate to assure timely and accurate financial control. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if
any, have been detected, and there is a risk that material misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting.
We
are committed to remediating our material weakness and have continued to remediate the identified material weaknesses
through additional processes and controls, including the timing of inventory audits, review of inventory for obsolescence and completeness
of data used to estimate warranty liability. We intend to continue to strengthen our internal processes and procedures until the identified
material weaknesses have been fully remediated. However, there can be no assurance as to when this material weakness will be remediated
or that additional material weaknesses will not arise in the future. If we are unable to maintain effective internal control over financial
reporting, our ability to record, process and report financial information in a timely manner and accurately could be adversely affected
and could result in a material misstatement in our financial statements, which could subject us to litigation or investigations, require
management resources, increase our expenses, negatively affect investor confidence in our financial statements and adversely impact the
trading price of our common stock.
We
are not currently in compliance with the continued listing requirements for the Nasdaq Stock Market. If we fail to regain compliance
or to meet the continued listing requirements, our common stock may be delisted, which could affect the market price of our common stock,
negatively impact stockholders’ ability to sell shares and negatively impact our ability to access the capital markets.
On
January 31, 2025, we received a notice (the “Stockholders’ Equity Notice”) from the Nasdaq Stock Market (“Nasdaq”)
LLC notifying the Company that based on its stockholders’ equity of $194,000 as reported in its Form 10-K for the fiscal year ended
June 30, 2024, the Company is no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires the Company to maintain a minimum
of $2,500,000 in stockholders’ equity for continued listing on Nasdaq (the “Stockholders’ Equity Requirement”).
Under
the Nasdaq rules and pursuant to the Stockholders’ Equity Notice, we had until March 17, 2025 to submit to Nasdaq a plan to regain
compliance with the Stockholders’ Equity requirement. On March 17, 2025, we filed such plan with Nasdaq to regain compliance with
the Stockholders’ Equity requirement, including requesting an extension through July 30, 2025, which is 180 calendar days from
the date of the Stockholders’ Equity Notice to regain compliance of the Stockholders’ Equity Requirement. On July 31, 2025,
we received a determination letter from the Staff notifying us that based on our most recent disclosure, our stockholders’ equity
was a deficit of $4,372,000 as of March 31, 2025 and that the Staff had determined that we had not regained compliance with the Stockholders’
Equity Requirement. The Staff informed us that trading of our common stock would be suspended at the opening of business on August 11,
2025, unless we requested an appeal of the Staff’s determination to a Nasdaq Hearings Panel (the “Panel”).
On
August 7, 2025, we submitted such hearing request to the Panel, which request will stay suspension of our securities and the filing of
the Form 25-NSE pending the Panel’s decision. On September 15, 2025, we raised $5.0 million in capital through
a private placement of Company securities In addition, we have taken steps to reduce our cash burn rate through a reduction in force of
approximately 15% of our work force. We are also exploring additional avenues to raise equity capital in order to be in compliance with
Nasdaq’s continued listing requirements. There can be no assurance that the Panel will grant our request for continued listing or
stay the suspension of our securities.
On September 4, 2025, the Company made its presentation to the Panel. On September 16, 2025, the Panel determined to grant the Company an exception to demonstrate compliance with the
Stockholders’ Equity Requirement and granted the Company’s request for continued listing, which extension is subject to the
following: (1) the Company shall file a Form 10-K for the period ending June 30, 2025 on or before September 30, 2025, and (2), the Company
shall demonstrate compliance with the Stockholder’s Equity Requirement on or before October 31, 2025 through public disclosures
describing the transactions undertaken by the Company to achieve compliance and demonstrate long-term compliance. If we fail
to comply with the Nasdaq listing requirements and do not regain compliance, our common stock will be subject to delisting by Nasdaq.
In the event our common stock is delisted, our stock price and market liquidity of our stock will be adversely affected, which will impact
our ability to sell securities in the market. Further, delisting from Nasdaq could also have other negative effects, including potential
loss of confidence by partners, lenders, suppliers and employees.
There
can be no assurance that our common stock will continue to trade on Nasdaq or trade on the over-the counter markets or any public market
in the future. In the event our common stock is delisted, our stock price and market liquidity of our stock will be adversely affected
which will impact your ability to sell your securities in the market.
The
lithium-ion battery industry has been subjected to tariffs implemented
by the United States government on goods imported from China.
Since all of our lithium-ion battery cells are manufactured in China, current
and potential tariffs on lithium-ion battery cells imported
by us from China have increased and could continue to increase our costs, require us to further increase prices to our customers or,
if we are
unable to dosufficiently so,increase our prices to offset the tariff costs, result in lower gross margins on the products sold by
us. In April 2025, the U.S. government increased import tariffs
across a wide range of countries at various rates, including on product
imports from almost all countries and individualized higher tariffs
on certain countries. Some of these tariff announcementstariffs have since been followed
by announcements of limited exemptions and temporary pauses and all have been affected by various circuit court decisions and a key decision
pauses.by the U.S. Supreme Court, which invalidated certain tariffs. In response to the U.S. Supreme Court ruling, the current administration
debuted a system for repaying importers for tariffs struck down by the U.S. Supreme Court while also announcing the implementation of
new tariffs under an alternative statutory authority. Upon the expiration of such tariffs, the current administration announced new tariffs
under a different statutory authority. The full impact of the U.S. Supreme Court’s ruling and the administration’s response,
including the timing and extent of any refunds and the impact of the new tariffs, remains uncertain. Based on the tariffs enacted and
currently in effect, we have incurred and anticipate incurring incremental tariff costs, additional costs that
we may incur on component
parts for our battery backs, and costs as a result of import pauses on certain of our product imports and supply-chain interruptions.
interruptions. The uncertain impacts of higher tariffs on global economies and corporate
cost structures have also led to order delays by customers.
As a result of such developments, we are actively seeking alternative sourcing
arrangements. If we are unable to diversify our supply
chain and reduce China sourcing,
we remain subject to substantial potential exposure to tariffs, which would have significant impacts
on our cost structure and product
margins.
We
also import a portion of our
raw materials and components from other countries that are subject to import tariffs imposed by the U.S.
government. These tariff changes
and subsequent retaliatory actions have increased, with the potential to increasecontinue to increase, product
costs for us. China has already imposed tariffs on a wide range
of American products in retaliation for the American tariffs on steel
and aluminum. Any resulting escalation of trade tensions, including
any further escalation of “trade wars” with other countries,
could have a significant adverse effect on world trade and the
world economy, lead to disruptions in our supply chain, and as such, adversely
impact our results of operations.
AtWhile
we believe that tariffs have already negatively impacted our revenues, profitability and cash flows, at this time, we cannot predict
how such enacted tariffs will continue to impact our business and operations. The imposed tariffs on components imported by us from China
or additional
tariffs on other countries where we source components necessary for our products could have a material adverse effect on
our business
and results of operations. In addition, any changes in tariffs or additional restrictions on various products may be announced
with little
or no advance notice. The adoption and expansion of tariffs or other trade restrictions, increasing trade tensions, or other
changes in
governmental policies related to tariffs, trade agreements, products or policies,policies are difficult to anticipate or predict, which
makes makes
it difficult for us to operate optimally. If we are unable to navigate further changes in U.S. or international trade policy, it
could could
have a material adverse impact on our business and results of operations. We are closely monitoring potential changes in international
trade policy and actively assessing the current and potential impactfuture impacts of these and other trade policy changes on our business
operations and financial
performance.
Uncertainty about the current and future global economic conditions have caused and may continue to cause our customers to defer purchases or cancel purchase orders for our products in response to tighter credit, decreased cash availability and weakened consumer confidence. Our financial success is sensitive to reductions or cancellations of purchase orders for our products by our customers and other affects from changes in general economic conditions, both globally and nationally. Recessionary economic cycles, higher interest borrowing rates, higher fuel and other energy costs, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws or other economic factors that have affected and may continue to affect consumer spending or buying habits could continue to adversely affect the demand for our products. If credit pressures or other financial difficulties result in insolvency for our customers, it could adversely impact our financial results. There can be no assurances that government and consumer responses to the disruptions in the financial markets will restore consumer confidence.
In
the near term, this relationship with our primary manufacturer is a critical component in our business and operations. To date, we have
have no qualified alternative sources for our battery cellscells, although we research and assess cells from other suppliers on an ongoing basis.
We are currently actively assessing our options to diversify suppliers for our battery cells to lessen this concentration. However, qualifying
new battery cell suppliers may be time-consuming and costly. In addition, any new battery cell would also require us to obtain a new
UL UL
listing, which could further extend the timeframe for introducing new products.
In
response to business uncertainties
resulting from tariffs and increased tariff levels imposed by the U.S. government on goods imported
into the U.S,U.S., we temporarily paused imports from our supplier in China.China in 2025. The pause
was short-lived as both parties quickly agreed
to modified terms. At this time, the modified terms have not materially affected theour Company’s
operations and we expect to continue sourcing and
importing our battery cells from this supplier. However, further escalation of tariffs
between the U.S. and China could have a material
effect on our ability to cost-effectively source from our supplier in China, which could
materially affect our business and operations.
In connection with our previous financial restatements, we are subject to a number of additional risks and uncertainties. Although the matters were substantially resolved, we have incurred unanticipated past costs for accounting, legal and consultancy fees in connection with the restatements and our internal investigation. The resolution of these matters may affect costs associated with the indemnification of our officers and directors, and has damaged our reputation and adversely affected our stock price. For additional information regarding certain of the matters in which we are involved, see Recent Developments - Resolution of Legal Proceedings contained in Item I – Business of this Form.
In
connection with our previous financial restatements, we have become subject to a number of additional risks and uncertainties, including:
We
are subject to lawsuits, legal proceedings and claims in the normal course of our business, which can be expensive, lengthy, and disruptive
to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. We have in the past and we
are currently the subject
of complaints alleging violations of various laws, including but not limited to certain employment lawsuits,
which are further described under the heading “Legal Proceedings” elsewhere in this report,
Form, and in the future could also be
subject to other proceedings. These proceedings and any other regulatory proceedings or actions may be
time consuming, could cause us
to incur significant defense costs and could damage our reputation or adversely affect our stock price.
Any adverse ruling or unfavorable
resolution in any legal or regulatory proceeding or action could have a material adverse effect on
our business, operating results or
financial condition. For additional information regarding certain of the matters in which we are involved,
see ItemRecent 3,Developments “-
Resolution of Legal Proceedings,”Proceedings contained in PartItem I – Business of this report.Form.
We have previously identified material weaknesses in our internal control over financial reporting, which management has remediated. If we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.
Based on management’s evaluation of our disclosure controls and procedures as of June 30, 2026, we remediated the material weaknesses in our internal controls over financial reporting. The material weaknesses were based on our ineffective oversight of our internal control over financial reporting and a lack of sufficient personnel resources with technical accounting expertise related to certain aspects of the financial reporting process. Such weaknesses were remediated by the implementation of specific and effective procedures, as well as with the addition of a new Chief Financial Officer and additional highly-qualified accounting personnel. Additionally, management intends to continue the use of third-party consultants and technical accounting experts to monitor measures designed to maintain our internal control over financial reporting.
We are committed to maintaining our internal control over the financial reporting process. However, there can be no assurance that additional material weaknesses will not arise in the future. If we are unable to maintain effective internal control over financial reporting, our ability to record, process and report financial information in a timely manner and accurately could be adversely affected and could result in a material misstatement in our financial statements, which could subject us to litigation or investigations, require management resources, increase our expenses, negatively affect investor confidence in our financial statements and adversely impact the trading price of our common stock.
We
expect that our existing cash, additional funding which we believe is available
under our GBC Credit Facility, funds from our private placement, which closed on September 15, 2025, and cash generated from our operations
will not be sufficient to meet our anticipated
capital resources and to fund our planned operations for the next twelve months (see Liquidity
and Financial Condition in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial
statements for additional information). Further, the use of such credit facilities remains subject to performance metrics, certain
restrictions and compliance with loan covenants. If we are unable to meet the conditions provided in the loan documents, these funds
will not be available to us. In addition, should there be any delays in the receipts of key component parts, due in part to supply
chain disruptions, our ability to fulfil the backlog of sales orders will be negatively impacted resulting in lower availability of
cash resources from operations. We may be required to access other forms of capital to support our expanded operations and execute
our business plan by issuing equity or convertible debt securities, or by entering into another form of structured financing or
strategic transaction. Our ability to access such forms of capital will be impacted by investor confidence in our business strategy
as well as market conditions In addition, our failure to timely file our annual report on form 10-K for the fiscal year ended June
30, 2024 and subsequent interim quarterly reports on Form 10-Q means that we currently are ineligible to use a
registration statement on Form S-3. We will not be eligible to use a registration statement on Form S-3 again until we have timely
filed all materials and reports required to be filed pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934 for
a period of at least twelve (12) calendar months immediately preceding the filing of a new registration statement on Form S-3. The
inability to use a Form S-3 registration statement will limit our ability to raise capital through sales of our securities in a
timely and cost-efficient manner.
In
the event we are required to obtain additional funds, there is no guarantee that additional funds will be available on a timely basis
or on acceptable terms. To the extent that we raise additional funds by issuing equity or convertible debt securities, our stockholders
may experience additional dilution and such financing may involve restrictive covenants. Newly issued securities may include preferences,
superior voting rights, and the issuance of warrants or other convertible securities that will have additional dilutive effects. We cannot
assure that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable
to us. Further, we may incur substantial costs in pursuing future capital and/or financing. We may also be required to recognize non-cash
expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our
financial condition and results of operations. Our ability to obtain needed financing may be impaired by such factors as the weakness
of capital markets, and the fact that we have not been profitable, which could impact the availability and cost of future financings.
If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and
product development, which may have a material adverse effect on future cash flows and results of operations.
In
the event of default of the Revolving Note under the GBC Credit Facility, such default could adversely affect our
business, financial condition, results of operations or liquidity.
The
loans and other obligations of the Company under the GBC Credit Facility
are secured by substantially all of our tangible and intangible assets, including, without limitation, intellectual property, pursuant
to the terms of a Loan and Security Agreement with GBC dated July 28, 2023 (the “Agreement”) and an Intellectual Property
Security Agreement (the “IP Security Agreement”). The GBC Credit Facility is evidenced by a revolving note (the “Revolving
Note”), which maturity date was automatically extended to July 31, 2027 (the “Maturity Date”) upon the conversion of
all the outstanding obligations under the Cleveland Note into equity of the Company at the closing of the Private Placement on September
15, 2025. Provided that there is no event of default, the Maturity Date can automatically be extended for one (1) year period upon payment
of a renewal fee for each such extension in the amount of three-quarters of one percent (0.75%) of the Revolving Loan Commitment, which
fee will be due and payable on or before the applicable Maturity Date. The holder of the Revolving Note is entitled to all of the benefits
and security provided for in the Agreement. All Revolving Loans shall be repaid by the Borrower on the Maturity Date, unless payable sooner
pursuant to the provisions of the Agreement. As a secured party, upon an event of default, GBC will have a first priority right to the
collateral granted to them under the Agreement and IP Security Agreement, and we may lose our ownership interest in the assets pledged
as security interest. Events of default have occurred under the GBC Credit Facility associated with certain EBITDA requirements that were
not achieved for the three-month period ending April 30, 2024, May 31, 2024 and July 31, 2024, non-compliance with various representations,
financial covenants and non-financial covenants relating to our financial restatements under the Agreement. We have obtained waivers with
respect to such defaults, which each waive any failure of the Company to be in compliance with such representations, financial covenants
and non-financial covenants under the Agreement. We may need to seek waivers in the future and we cannot provide any assurance that such
waivers will be available should we not be in compliance with the terms of the GBC Credit Facility in the future. If we had not been able
to obtain such waivers, we would have had events of default under the GBC Credit Facility and GBC could terminate their commitments under
the facility and foreclose against substantially all our assets. We would likely be forced to seek bankruptcy protection and our investors
could lose the full value of their investment in our common stock. As such, a default and/or loss of our collateral will have a material
adverse effect on our operations, business and financial condition.
Our backlog consists of purchase orders from customers that we expect to fulfill in future periods. Backlog is not a measure defined by generally accepted accounting principles and is not a measure of contract profitability. Our methodology for determining backlog may not be comparable to methodologies used by other companies in determining their backlog amounts.
Backlog may not be indicative of future operating results because orders included in backlog may be delayed, modified, cancelled or deferred by customers, and the timing of revenue recognition from backlog depends on our ability to source battery cells and other key components, manufacture and test our products, obtain required customer approvals and deliver products on schedule. In particular, our lithium-ion energy storage solutions depend on the availability of battery cells, electronic components and other materials, including components sourced from suppliers outside the United States. If we experience supply chain disruptions, tariff-related cost increases, manufacturing delays, labor constraints, quality issues, changes in customer demand or customer-requested delivery changes, we may be unable to convert backlog into revenue when anticipated or at all. As a result, backlog may fluctuate significantly from period to period and should not be relied upon as a reliable indicator of future revenues, results of operations or cash flows.
Future
revenue for the Company can be influenced by order backlog. Backlog represents the dollar amount of revenues we expect to recognize in
the future from contracts awarded and in progress. Backlog substantially represents new orders. Backlog is not a measure defined by generally
accepted accounting principles and is not a measure of contract profitability. Our methodology for determining backlog may not be comparable
to methodologies used by other companies in determining their backlog amounts. The backlog values we disclose include anticipated revenues
associated with: (1) the original contract amounts; (2) change orders for which we have received written confirmations from the applicable
customers; (3) change orders for which we expect to receive confirmations in the ordinary course of business; and (4) claims that we
have made against customers. In addition, the timing of order placement, size, and customer delivery dates can create unusual fluctuations
in backlog.
We
include unapproved change orders for which we expect to receive confirmations in the ordinary course of business in backlog, generally
to the extent of the lesser of the amount management expects to recover or the associated costs incurred. Any revenue that would represent
profit associated with unapproved change orders is generally excluded from backlog until written confirmation is obtained from the applicable
customer. However, consideration is given to our history with the customer as well as the contractual basis under which we may be operating.
Accordingly, in certain cases based on our historical experience in resolving unapproved change orders with a customer, the associated
profit may be included in backlog. However, if an unapproved change order is under dispute or has been previously rejected by the customer,
the associated amount of revenue is treated as a claim.
For
amounts included in backlog that are attributable to claims, we include unapproved claims in backlog when we have a legal basis to do
so, consider collection to be probable and believe we can reliably estimate the ultimate value. Claims revenue is included in backlog
to the extent of the lesser of the amount management expects to recover or associated costs incurred.
Backlog
may not be indicative of future operating results, and projects in our backlog may be cancelled, modified or otherwise altered by customers.
Our ability to realize revenue from the current backlog is dependent on among other things, the delivery of key parts from our vendors
in a timely manner. We can provide no assurance as to the profitability of our contracts reflected in backlog.
Uncertainty
about the current and future global economic conditions may cause our customers to defer purchases or cancel purchase orders for our
products in response to tighter credit, decreased cash availability and weakened consumer confidence. Our financial success is sensitive
to changes in general economic conditions, both globally and nationally. Recessionary economic cycles, higher interest borrowing rates,
higher fuel and other energy costs, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels,
higher tax rates and other changes in tax laws or other economic factors that may affect consumer spending or buying habits could continue
to adversely affect the demand for our products. If credit pressures or other financial difficulties result in insolvency for our customers,
it could adversely impact our financial results. There can be no assurances that government and consumer responses to the disruptions
in the financial markets will restore consumer confidence.
Historically
a majority of our product sales have been generated from a small number of OEMs and customers, including threetwo customers who, on an aggregate
basis, made up 73%71% of our sales for the fiscal year ended June 30, 2025,2026, and three customers who, on an aggregate basis, made up 78% 73%
of our
sales for the fiscal year ended June 30, 2024.2025. As a result, our success depends on continued demand from this small group of customers
and their
willingness to incorporate our battery products in their equipment. The loss of a significant customer would have an adverse
effect on
our revenues. For example, our revenues in fiscal 2026 were negatively impacted by our largest customer within material handling
significantly cutting their capital expense budget. There is no assurance that we will be successful in our efforts to convince end users
to accept our products. Our failure
to gain acceptance of our products could have a material adverse effect on our financial condition
and results of operations.
If
one of our products were to cause injury to someone or cause property damage, including as a result of product malfunctions, defects,
or improper installation, then we could be exposed to product liability claims. We could incur significant costs and liabilities if we
are sued and if damages are awarded against us. Further, any product liability claim we face could be expensive to defend and could divert
management’s attention. The successful assertion of a product liability claim against us could result in potentially significant
monetary damages, penalties or fines, subject us to adverse publicity, damage our reputation and competitive position, and adversely
affect sales of our products. In addition, product liability claims, injuries, defects,defects or other problems experienced by other companies
in the solarbattery industry could lead to unfavorable market conditions for the industry as a whole, and may have an adverse effect on our
ability to attract new customers, thus harming our growth and financial performance. Although we carry product liability insurance, it
may be insufficient in amount to cover our claims.
We
may experience increases in the costs,costs or a sustained interruption in the supply or shortage,shortage of raw materials. Any such cost increase
or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. For instance,
we are exposed to multiple risks relating to price fluctuations for lithium-iron phosphate cells.
Our
success depends on our ability to develop new products and capabilities that respond to customer demand, industry trends or actions by
our competitorscompetitors, and failure to do so may cause us to lose our competitiveness in the battery industry and may cause our profits to decline.
The
research and development of new products and technologies is costly and time consuming, and there are no assurances that our research
and development efforts will be either successful or completed within anticipated timeframes, if at all. Our failure to technologically
evolve and/or develop new or enhanced products may cause us to lose competitiveness in the battery market. In addition, in order to compete
effectively in the renewable battery industry, we must be able to launch new products to meet our customers’ demands in a timely
manner. However, we cannot provide assurance that we will be able to install and certify any equipment needed to produce new products
in a timely manner, or that the transitioning of our manufacturing facility and resources to full production under any new product programs
will not impact production rates or other operational efficiency measures at our manufacturing facility. In addition, new product introductions
and applications are risky,risky and may suffer from a lack of market acceptance, delays in related product development and failure of new
products to operate properly. Any failure by us to successfully launch new products, or a failure by us to meet our customerscustomers’
criteria criteria
in order to accept such products, could adversely affect our results.
Any
failure to protect our intellectual proprietary rights could result in our competitors offering similar products, potentially resulting
in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, prospects,
financial condition and operating results. Our success depends, at least in part, on our ability to protect our core technology and intellectual
property. To accomplish this, we rely on a combination of patents, patent applications, trade secrets,secrets including know-how, employee and
third-party nondisclosure agreements, copyright laws, trademarks, intellectual property licenses and other contractual rights to establish
and protect our proprietary rights in our technology.
Our
patentgranted applicationspatents may not resultbe in issued patents,enforceable, which may have a material adverse effect on our ability to prevent others from
commercially exploiting
products similar to ours.
We
cannot be certain that we are the first creator of inventions covered by pending patent applications or the first to file patent applications
on these inventions, nor can we be certain that our pending patent applications will result in issued patents or that any of our issued
patents will afford protection against a competitor. InFurthermore, addition, patent applications that we intend to file in some
foreign countries are
subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent
applications related to issue United States patents will be issued. Furthermore, if these patent applications are issued, some foreign
countries provide significantly less effective patent enforcement than in the United States.
The
status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain. As a result, we cannot
be certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may
be issued to us in the near future will afford protection against competitors with similar
technology. In addition, patents issued to
us may be infringed upon or designed around by others and others may obtain patents that we
need to license or design around, either
of which would increase costs and may adversely affect our business, prospects, financial condition
and operating results.
We
believe that our success is largely dependent upon the continued service of the members of our senior management team, who are responsible
for who establishing our corporate strategies and focus, for overseeing the execution of our business strategy and for ensuring our continued
growth. Our continued success will depend on our ability to attract and retain a qualified and competent management team in order to
manage our existing operations and support our expansion plans. If any of the members of our senior management team are unable or unwilling
to continue in their present positions, we may not be able to replace them readily. Therefore, our business may be severely disrupted,
and we may incur additional expenses to recruit and retain their replacement. In addition, if any of the members of our senior management
team joins a competitor or forms a competing company, we may lose some of our customers.
There
have been changing laws, regulations and standards relating to corporate governance and public disclosure, including the (Sarbanes-Oxley)
Act of 2002, new regulations promulgated by the SEC and rules promulgated by the national securities exchanges. These new or changed
laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and, as a result,
their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result
in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance
practices. As a result, our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased
general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance
activities. Members of our Board of Directors and our chief executive officer and chief financial officer could face an increased risk
of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining
qualified directors and executive officers, which could harm our business. If the actions we take in our efforts to comply with new or
changed laws, regulations and standards differ from the actions intended by regulatory or governing bodies, we could be subject to liability
under applicable laws or our reputation may be harmed.
In
addition, Sarbanes-Oxley specifically requires, among other things, that we maintain effective internal controls for financial reporting
and disclosure of controls and procedures. In particular, we must perform system and process evaluation and testing of our internal controlscontrol
over financial reporting to allow management to report on the effectiveness of our internal controlscontrol over financial reporting, as required
by Section 404 of Sarbanes-Oxley. Our testing, or the subsequent testing by our independent registered public accounting firm, when required,
may reveal deficiencies in our internal controlscontrol over financial reporting that are deemed to be material weaknesses. Our compliance with
Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not
have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience
and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or
if we or our independent registered public accounting firm identifies deficiencies in our internal controlscontrol over financial reporting that
that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations
by the SEC or other regulatory authorities, which would require additional financial and management resources.
Management's Discussion & Analysis (MD&A)
New heading “Recently Adopted Accounting Pronouncements”
New heading “Fair Values of Financial Instruments”
New heading “Intangible Assets”
New heading “Impairment of Long-lived Assets”
New heading “Interest Expense, net”
Removed heading “Adopted Accounting Pronouncements”
Largest changes
“Our ability to draw funds from the GBC Credit Facility is subject to certain restrictions, covenants and borrowing base limitations. In light of the Default under the GBC Credit Facility, the financial covenants in the Agreement were modified to help prevent future defaults. If we are unable to meet the conditions provided in the loan documents, the funds may not be available to us. …”see in full comparison
“Management has evaluated our expected cash and working capital requirements, which include, but are not limited to, investments in additional selling and marketing, research and development and capital equipment, as well as our expected funding sources, which include, but are not limited to, our existing cash, forecasted gross margin, proceeds we believe are available under the Committed Equity Facility, and funding we believe is available under the GBC Credit Facility, subject to certain restrictions, covenants and borrowing base limitations. …”see in full comparison
“As of June 30, 2026, we had an existing cash balance of $0.3 million and $9.7 million remaining available under our $16.0 million GBC Credit Facility subject to borrowing base limitations. As discussed in Note 7 – Line of Credit, on March 31, 2026, we notified GBC that we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended February 28, 2026 under the GBC Credit Facility, which resulted in an “event of default” under the GBC Credit Facility. …”see in full comparison
“Furthermore, should there be any delays in the receipts of key component parts, due in part to supply change disruptions, our ability to fulfill the backlog of sales orders will be negatively impacted resulting in lower availability of cash resources from operations. In that event, we may be required to raise additional funds by issuing equity or convertible debt securities. …”see in full comparison
“Since January 2025, the U.S. government has increased certain existing import tariffs and has implemented new import tariffs across a wide range of countries at various rates, including on product imports from almost all countries, and individualized higher tariffs on certain countries, notably China. …”see in full comparison
“As of June 30, 2025, we had an existing cash balance of $1.3 million and $2.4 million remaining available under our $16.0 million GBC Credit Facility subject to borrowing base limitations. However, if the Company were to experience an event of default, as defined by the loan agreements, as amended, such additional funds may not be made available.”see in full comparison
Full comparison: every changed paragraph (97)
The
discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in this Annual Report
on Form 10-K.Form. Some of
the statements contained in the following discussion of the Company’s financial condition and results of
operations refer to future
expectations or include other “forward-looking” information. Those statements are subject to known
and unknown risks, uncertainties
and other factors that could cause the actual results to differ materially from those contemplated,
including, but not limited to, those
discussed in Part I, Item 1A of this reportForm under the heading “Risk Factors,” which
are incorporated herein by reference. See
“Special Note regarding Forward-Looking Statements” included in this Report on
Form 10-K for a discussion of factors to be considered when
evaluating forward-looking information detailed below. These factors could
cause our actual results to differ materially from the forward-looking
statements.
We
design, develop, manufacture and sell a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of
industrial and commercial sectors which include material handling,handling and airport ground support equipment (“GSE”). We
believe our
mobile energy storage solutions provide our customers with a reliable, high performing, cost effective, and more
environmentally friendly
alternative as compared to traditional lead acid and propane-based solutions. Our modular and scalable
design allows different configurations
of lithium-ion energy storage solutions to be paired with our proprietary wireless battery
management system to provide the level of
energy storage required and “state of the art” real timereal-time monitoring of battery
pack performance. We believe that the increasinggrowing demand
for lithium-ion energy storage solutions and more environmentally friendly
energy storage solutions inacross thea materialrange handlingof sectorindustrial and commercial sectors should
continue to drive ourgrowth revenuein growth.the markets we
serve.
Our
long-term strategy is to meet the rapidly growing demand for lithium-ion energy solutions and to be the supplier of choice,
targeting targeting
large companies having energy storage needs. We have established selling relationships with customers with large fleets of
forklifts forklifts
and GSEs.GSE. We intend to reach this goal by investing in research and development to expand our product mix, by expanding our
sales and
marketing efforts, improving our customer support efforts and improving production efficiencies. Our research and
development efforts
will continue to focus on providing adaptable, reliable and cost-effective energy storage solutions for our
customers. We have filed
received three new patents on advanced technology related to lithium-ion energy storage solutions. The technology
behind these pendingpatents patents
is designed to:
Our
largest sector of penetration thus far has been the material handling sectorsector, which we believe is a multi-billion-dollar addressable
market. market.
We believe the sector will provide us with an opportunity to grow our business as we enhance our product mix and service levels
and grow
our sales to large fleets of forklifts and GSEs.GSE. Applications of our modular packs for other industrial and commercial uses,
such as
mobile energy storage systems, are providing additional current growth and further opportunities. We intend to continue to expand
our our
supply chain and customer partnerships and seek further partnerships and/or acquisitions that provide synergy in order to meetingmeet our
growth and
“building scale” objectives.
The
following table summarizes the new orders, shipments, and backlog activities for the following fiscal quarters:
A useful measure of our relative financial condition consists of the analysis of our historical backlog in comparison to the current period. “Backlog” represents the amount of anticipated revenues we may recognize in the future from existing contractual orders with customers that are in progress and have not yet shipped. Backlog values may not be indicative of future operating results as orders may be cancelled, modified or otherwise altered by customers. In addition, our ability to realize revenue from our backlog will be dependent on the delivery of key parts from our suppliers and our ability to manufacture and ship our products to customers in a timely manner. There can be no assurance that outstanding customer orders will be fulfilled as expected and that our backlog will result in future revenues.
As of June 30, 2026 our order backlog was approximately $3.7 million. The following table presents our order, shipment and backlog history for the current and last five quarters:
As
of September 12, 2025, our order backlog was approximately $7.5 million.
WeToward
the havesecond recentlyhalf experienced
someof delaysfiscal 2025, we began experiencing a slowdown in new orders for our energy storage solutions,solutions. reflectingThe correspondingslowdown reflected
deferrals of new forklift purchases by selected
large customer fleets due to lower capital spending and interest rate variability, and
it morecontinued recently, global tariff uncertainties.
While we have had very few cancellations of existing purchase orders, some customers have revised their order terms tothroughout fiscal 2026.
Some customers haveattributed attributedtheir lower capital spending to concerns over the economy and theeconomy, uncertainty
of higher interest rates, as
well as broader geopolitical uncertainty. More recently, the economic impacts and costs of higher global
tariffs implemented by the U.SU.S. government have affected
negatively impacted new purchase orders. The impact of order deferrals hasby our customers
required additionalus to implement new selling strategies and to supportfocus our
targetedon salescost trajectory.controls and expense reduction.
We
have seen improvements in our
sourcing and purchasing activity, reflecting our efforts to expand and optimize our vendor strategy. Additional
improvements include more
secondary sources to minimize stock-outs, lower costs from increasing sources,sources and controlled delivery times,
as asare now reflected in our current
inventory levels. With strategic supply chain and profitability improvement initiatives, lower costs
and higher volume purchasing, we
are targetinglowering grossthe margincost improvementof our products in order to continue.improve our competitive position. We are highly focused
on expanding salesselling and marketing initiatives to secure new customer
relationships and support continued migration to lithium of current
customers. We recently have added our second tier one OEMtwo private
label battery programprograms and recently hired a Director of OEM Business Development to supplementfurther strengthen
our strong OEM relationships and approvals.to This collaboration marks a a significant milestone for
our S-Series line, which now includes productsassist with theOEM UL Type EE certification, which provides added safetycertifications and durabilityapprovals. capabilities.
We are also working with our distribution network to expand
customer acquisition with direct-to-customer initiatives.
We also announced a new partnership
aimed at enhancing the recycling process for end-of-life lithium-ion batteries with the largest critical battery components recycling
company in the U.S. This collaboration represents a significant step forward in our ongoing commitment to environmental responsibility.
Since January 2025, the U.S. government has increased certain existing import tariffs and has implemented new import tariffs across a wide range of countries at various rates, including on product imports from almost all countries, and individualized higher tariffs on certain countries, notably China. While we have been able to offset some of the impact of the enacted tariffs with supply chain adjustments, alternative manufacturing locations, cost reduction actions and by increasing the selling prices of our products, we believe that tariffs have negatively impacted our revenues, profitability and cash flows. Some of these tariff announcements have since been followed by announcements of limited exemptions and temporary pauses, and all have been affected by various circuit court decisions and a key decision by the U.S. Supreme Court, which invalidated certain tariffs. In response to the U.S. Supreme Court ruling, the current administration debuted a system for repaying importers for tariffs struck down by the U.S. Supreme Court while also announcing the implementation of new tariffs under an alternative statutory authority. Upon the expiration of such tariffs, the current administration announced new tariffs under a different statutory authority.
Management continues to actively evaluate ways to mitigate the impacts of tariffs on our business and financial results, however, due to the uncertainties pertaining to tariffs and tariff levels, it is difficult for us to reliably forecast the extent of the ongoing impact to our business or customers.
In 2025, the U.S. government
increased certain existing tariffs and implemented new tariffs on imported products. In April 2025, the U.S. government increased
import tariffs across a wide range of countries at various rates, including on product imports from almost all countries, and
individualized higher tariffs on certain countries, notably China. Some of these tariff announcements have since been followed by
announcements of limited exemptions and temporary pauses. Due to the uncertainties pertaining to tariffs and tariff levels, it is
difficult for us to reliably forecast the ongoing impact to our business or that of our customers but is expected that
tariffs would negatively impact our revenues, profitability and cash flows. Management is actively evaluating ways to mitigate
potential impacts of tariffs.
We import
a portion of our raw materials and components from countries that are subject to import tariffs imposed by the U.S. government, in particular
materials and components that are from China. We expect to be able to offset some of the impact of the enacted tariffs with supply chain
adjustments, alternative manufacturing locations and cost reduction actions. However, at current and anticipated tariff levels, we will
also need to increase the selling prices of our products in order to achieve an acceptable profit margin.
In response to business uncertainties
resulting from tariffs and increased tariff levels imposed by the U.S. government on goods imported into the U.S., we temporarily paused
imports from our battery cell supplier in China. The pause was short-lived as both parties quickly agreed to modified terms. At this time,
neither the pause in shipments nor the modified terms have materially affected the Company’s operations. However, further escalation
of tariffs between the U.S. and China could have a material effect on our ability to cost-effectively source from our supplier in China.
Trade-related
disruptions can
create further uncertainty and supply chain interruptions, which may result in last-minute procurement efforts at elevated
cost. We are
closely monitoring the fluid nature of proposed tariffs and any further impact they may have on our operationsoperations, and will
continue to monitor macroeconomic
conditions and evaluate the financial and operational impact of ongoing trade policy shifts. These
risks could intensify depending on
future developments and we are actively incorporating these considerations into our future operation
planning, including assessing pricing
actions, cost-control measures,measures and long-term sourcing strategies.
If
tariffs tariffscontinue to escalate or global
inflationary trends persist, our customers may face greater economic strain, which could in turn
affect demand for our products. We remain
focused on maintaining operational flexibility and adapting our supply chain to navigate these
uncertainties andto support long-term business
performance. See “Risk Factors” under Part II,I, Item 1A – Risk Factors for additional information.
Adopted
Accounting Pronouncements
In
November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.
2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires retrospective disclosure
of significant segment expenses and other segment items on an annual and interim basis. Additionally, it requires disclosure of the title
and position of our Chief Operating Decision Maker (“CODM”). This ASU is effective annually beginning with our fiscal year
ended June 30, 2025 and for interim periods thereafter. We adopted this standard for the year ended June 30, 2025 and the adoption did
not have a material impact on our consolidated financial statements. See Note 13 – Segment Information included in the notes to
our consolidated financial statements included in this Annual Report.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires retrospective disclosure of significant segment expenses and other segment items on an annual and interim basis. Additionally, it requires disclosure of the title and position of our Chief Operating Decision Maker (“CODM”). This ASU is effective annually beginning with our fiscal year ended June 30, 2025 and for interim periods thereafter. We adopted this standard for the year ended June 30, 2025 and the adoption did not have a material impact on our consolidated financial statements. See Note 14 – Segment Information included in the notes to our consolidated financial statements included in this Form.
Management has considered all recent accounting pronouncements not yet adopted in our consolidated financial statements. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU is effective for public business entities for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is allowed.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to incorporate several SEC disclosure requirements into a variety of Topics in the FASB Codification. When effective, ASU 2023-06 will not significantly affect the disclosure requirements for entities subject to SEC’s existing disclosure requirements, given those entities’ requirement to comply with Regulation S-X. The effective date of each amendment of the ASU will be the date of the SEC’s removal of the related disclosure from its regulations, to prevent duplication. Early adoption is prohibited.
Management has consideredIn
all recent accounting pronouncements not yet adopted in our consolidated financial statements. In November 2024, the FASB issued Accounting
Standards Update (“ASU”) 2024-03, Income Statement – Reporting Comprehensive
Income – Expense Disaggregation
Disclosures (Topic 220): Disaggregation of Income Statement Expenses, which requires additional
disclosure of certain amounts included
in the expense captions presented on the statement of operations, as well as disclosures about
selling expenses. The ASU is effective
on a prospective basis, with the option for retrospective application, for our fiscal year ending
June 30, 2028 and interim periods thereafter.
Early adoption is permitted for annual financial statements that have not yet been issued.
We are evaluating the disclosure requirements
related to the new standard.
Recently Adopted Accounting Pronouncements
In
December 2023, the FASB issued Accounting Standards Update 2023-09,
Income Taxes (Topic 740), Improvements to Income Tax Disclosures,
which requires more detailed income tax disclosures. The guidance
requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information
on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them
retrospectively. The standard is effective for ourthis fiscal year ending June 30, 2026,2026 with early adoption permitted. We are evaluating
the disclosure requirements related toand the newfinancial
statements standard.contained herein.
Critical Accounting Policies and Estimates updates
Our
discussion and analysis of our financial condition and results of operations are based upon our Financial Statements, which have been
prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation
of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues,
and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on
its historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which
which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
sources. Actual results may differ from these estimates under different assumptions or conditions.
In addition, adjustments were made to our previously reported Financial Statements for the period ended June 30, 2025 in accordance with FASB ASC 250 – Accounting Changes and Error Corrections. Such reclassifications consist of certain previously reported amounts in order to conform on a comparable basis with our current Financial Statement presentation. The reclassifications had no effect on previously reported net income, total assets, stockholders’ equity or cash flows. Management presents current and comparative results of operations with a disaggregation of intangible assets from other fixed assets and a disaggregation of interest expense from other expense.
WeWhat
believefollows theis followinga discussion of key areas where critical accounting policies and estimates affect the preparation of our financial statements:statements.
Fair Values of Financial Instruments
The carrying amount of our cash, accounts payable, accounts receivable, and accrued liabilities approximate their estimated fair values due to the short-term maturities of those financial instruments. The carrying amount of the line of credit approximates fair value as interest approximates current market interest rates for similar instruments. Management has concluded that it is not practical to determine the estimated fair value of subordinated debt due to related parties because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
We do not have any other assets or liabilities that are measured at fair value on a recurring or non-recurring basis.
Accounts receivable are evaluated according to the Financial Accounting Standards Board ASC 326-20 and Accounting Standards Update No. 2016-13 of Current Expected Credit Losses (“CECL”). Under the CECL model, we estimate expected credit losses over the lifetime of accounts receivable using forward-looking data.
Fixed Assets
Machinery and equipment, office equipment and furniture and equipment are stated at cost, net of accumulated depreciation. Depreciation and amortization are expensed using the straight-line method over the estimated useful lives of the related assets ranging from three to five years. Leasehold Improvements are amortized over the lesser of the useful life of the related asset or the lease term.
Intangible Assets
Software consists primarily of internally developed software incorporated into manufactured product, is stated at capitalized cost and is amortized over five years.
Impairment of Long-lived Assets
In accordance with authoritative guidance for the impairment or disposal of long-lived assets, if indicators of impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through the undiscounted future operating cash flows.
If impairment is indicated, we measure the amount of such impairment by comparing the carrying value of the asset to the present value of the expected future cash flows associated with the use of the asset. Management determined that no impairment indicators were present and, accordingly, no impairment losses were recognized during the fiscal years ended June 30, 2026 and 2025.
Leases
We report leases on our consolidated financial statements in conformance with ASC 842 - Leases, which are classified as operating leases and finance leases. We have two operating leases for our warehouse facilities and three finance leases for a vehicle and manufacturing equipment.
We evaluate our exposure to product warranty obligations based on historical experience. Our products, primarily lift equipment packs, are warrantied for five years unless modified by a separate agreement. As of June 30, 2026 and 2025, we carried warranty liability of approximately $2.8 million and $3.4 million, respectively, included in accrued expenses on our consolidated balance sheets.
We
recognize revenue in accordance to the Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with
Customers (“ASC 606”) for all contracts.
We derive our revenue from the sale of products to customers. We sell our products
primarily through a distribution network of equipment
dealers, OEMs and battery distributors inlocated primarily in North America. We recognize
revenue for the products when all significant
risks and rewards have been transferred to the customer, there isexists no continuing managerial
involvement associated with ownership
of the goods sold is retained, no effective control over the goods sold is retained, the amount
of revenue can be measured reliably,
it is probable that the economic benefits associated with the transactions will flow to us and the
costs incurred or to be incurred with
respect to the transaction can be measured reliably.
Product
revenue is recognized as a distinct single performance obligation which occurs atrepresents the point in time that titlea passescustomer toreceives thedelivery
of customer.
Ourproducts. customersCustomers do have a right to return product, but our returns have historically been minimal.
We
evaluate our exposure to product warranty obligations based on historical experience. Our products, primarily forklift equipment packs, are
warrantied for five years unless modified by a separate agreement. As of June 30, 2025 and 2024, we carried warranty liability of approximately
$3,377,000 and $3,018,000, respectively, which is included in accrued expenses on our consolidated balance sheets.
Pursuant
to the provisions of the Financial Accounting Standards Board (“FASB”) ASC Topic No. 718-10, Compensation-Stock Compensation,
which establishes accounting for equity instruments exchanged for employee service, we utilize the Black-Scholes option pricing model
to estimate the fair value of employee stock option awards at the date of grant, which requires the input of highly subjective assumptions,
including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated
fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment
to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external datadata, and other assumptions
may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience
is a matter of judgment,judgment based on relevant facts and circumstances.
Income Taxes
Pursuant to FASB ASC Topic No. 740, Income Taxes, deferred tax assets or liabilities are recorded to reflect the future tax consequences of temporary differences between the financial reporting basis of assets and liabilities and their tax basis at each year-end. These amounts are adjusted, as appropriate, to reflect enacted changes in tax rates expected to be in effect when the temporary differences reverse. We have analyzed filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. As a result, no unrecognized tax benefits have been identified as of June 30, 2026 and 2025, and, accordingly, no additional tax liabilities were recorded.
We record deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities and on operating loss carry forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Comparison
of Results of Operations of the Fiscal Years Ended June 30, 20252026 and 20242025
The
following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this
Annual Report.
The
followingdiscussions that follow should be read in conjunction with our financial statements and the related notes that appear in this Form. The
table below represents our statement of operations for the fiscal years ended June 30, 2026 (“fiscal 2026”) and June 30,
2025 (“fiscal 2025”) and June
30, 2024 (“fiscal 2024”).
Historically
our product focus has been on material handling equipment, reflecting a mix of walkie pallet jacks and higher capacity packs for Class
1, 2, and 3 forklifts. Over the past twothree years, we expanded our product offering into adjacent applications, including airport GSE.ground
support equipment. The
launch of larger packs over the past twothree years has shifted our portfolio mix to include packs with higher average
selling prices as compared
to our historical mix. We believe that we are well positioned to address the needs of many segments within
the material handling sector
in light of our modular and scalable energy storage solution design coupled with our proprietary battery
management system “SkyBMS” that can be
coupled with our telemetry based “SkyBMS” product offering.
Revenues for fiscal 2026 decreased $24,302,000 or 37%, to $42,132,000, compared to $66,434,000 for fiscal 2025. The decrease in revenues was driven by our largest customer within material handling significantly cutting their capital expense budget, an increasing number of competitive market participants within the GSE market, and overall pricing pressures which were driven by cost increases from tariffs.
Revenues
for fiscal 2025 increased $5,610,000 or 9%, to $66,434,000, compared to $60,824,000 for fiscal 2024. The
increase in revenues was driven by increased demand in both the material handling and GSE markets. The material handling revenue increase
was attributed to increased unit demand for our private label walkie packs. The GSE revenue increase was attributed to new customer acquisition
and higher average selling prices.
Cost of sales for fiscal 2026 decreased $15,279,000, or 34%, to $29,415,000, compared to $44,694,000 for fiscal 2025. The decrease was mostly attributed to lower sales volume, lower labor costs from a lower headcount and lower warranty related costs. Cost of sales as a percent of revenues increased 2.5% from higher per unit costs due to tariffs and a loss in operating leverage within labor and overhead due to lower revenue, but were slightly offset by lower warranty related costs per unit.
Cost
of sales for fiscal 2025 increased $1,103,000, or 3%, to $44,694,000, compared to $43,591,000 for fiscal 2024. The
increase in cost of sales was directly associated with higher sales of energy storage solutions, partially offset by lower average cost
of sales per unit achieved during the current year as a result of our gross margin improvement initiatives, including design enhancements
to lower cost, improve serviceability, simplify bill of materials and supply chain initiatives to improve inventory turns and create
part commonality across multiple product lines. Cost of sales as a percentage of revenues for fiscal 2025 was 67%, a decrease
of five percentage points, compared to 72% for fiscal 2024.
Gross profit for fiscal 2026 decreased $9,023,000 or 42%, to $12,717,000, compared to $21,740,000 for fiscal 2025 primarily due to lower sales volumes. Gross profit margin decreased 254 basis points year over year as a result of higher per unit costs due to tariffs, a loss in operating leverage within labor and overhead due to lower revenue, but were slightly offset by lower warranty related costs per unit.
What changed in the latest 10-Q
Risk Factors
New heading “Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Our audited financial statements at June 30, 2025, and for the year then ended, were prepared assuming that we will continue as a going concern.”
New heading “We will need to raise additional capital or financing to continue to execute and expand our business.”
New heading “We are currently in default under the Revolving Note under the GBC Credit Facility, and such default could adversely affect our business, financial condition, results of operations or liquidity.”
Removed heading “In the past we have not been in compliance with the continued listing requirements for The Nasdaq Capital Market. If we fail to meet the continued listing requirements, our Common Stock may be delisted, which could affect the market price of our Common Stock, negatively impact stockholders’ ability to sell shares and negatively impact our ability to access the capital markets.”
Largest changes
“The report from our independent registered public accounting firm for the year ended June 30, 2025 includes an explanatory paragraph stating that our current liquidity position and projected cash needs raise substantial doubt about our ability to continue as a going concern, along with management’s assessment and strategies. The perception that we may not be able to continue as a going concern may make it difficult for us to raise new funds and to operate our business due to concerns about our ability to meet our contractual obligations. …”see in full comparison
“We expect that our existing cash, additional funding which we believe is available under our GBC Credit Facility, and cash generated from our operations, will not be sufficient to meet our anticipated capital resources and to fund our planned operations for the next twelve months (see Liquidity and Financial Condition in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional information). Further, the use of our GBC Credit Facility remains subject to performance metrics, certain restrictions and compliance with loan covenants. …”see in full comparison
“On March 31, 2026, we determined that we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended March 31, 2026 under the GBC Credit Facility, which resulted in an event of default under the GBC Credit Facility. We are currently working with GBC to negotiate an amendment to the GBC Credit Facility or otherwise obtain a waiver from GBC. …”see in full comparison
“We are currently in default under the Revolving Note under the GBC Credit Facility, and such default could adversely affect our business, financial condition, results of operations or liquidity.”see in full comparison
“Management has evaluated the Company’s expected cash requirements, including investments in additional sales and marketing, research and development, capital expenditures and working capital requirements, and believes the Company’s existing cash, along with the forecasted gross margin, will not be sufficient to meet the Company’s anticipated capital requirements to fund planned operations for the next twelve months following the filing date of this Quarterly Report on Form 10-Q. …”see in full comparison
“Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Our audited financial statements at June 30, 2025, and for the year then ended, were prepared assuming that we will continue as a going concern.”see in full comparison
Full comparison: every changed paragraph (15)
An
investment in our common stock involves a high degree of risk. You should carefully consider the risks set forth below and in the section
captioned “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed with the SEC on
September 17, 2025, before making an investment decision. If any of the risks actually occur, our business, financial condition or results
of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
You should read the section captioned “Special Note Regarding Forward Looking Statements” above for a discussion of what
types of statements are forward-looking statements, as well as the significance of such statements in the context of this report. There
have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025,
exceptas thatupdated the following risk factor replaces the similarly titled risk factor contained inby our Quarterly Report on Form 10-Q for the
period ended SeptemberDecember 30,31, 2025, filed with the SEC on NovemberFebruary 13,12, 2026, except
that the following risk factors replace the similarly titled risk factor in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2025.
Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Our audited financial statements at June 30, 2025, and for the year then ended, were prepared assuming that we will continue as a going concern.
Management has evaluated the Company’s expected cash requirements, including investments in additional sales and marketing, research and development, capital expenditures and working capital requirements, and believes the Company’s existing cash, along with the forecasted gross margin, will not be sufficient to meet the Company’s anticipated capital requirements to fund planned operations for the next twelve months following the filing date of this Quarterly Report on Form 10-Q. As described below, our ability to continue as a going concern is partially contingent upon the availability of the GBC Credit Facility, which may become unavailable due to a covenant breach by the Company.
The report from our independent registered public accounting firm for the year ended June 30, 2025 includes an explanatory paragraph stating that our current liquidity position and projected cash needs raise substantial doubt about our ability to continue as a going concern, along with management’s assessment and strategies. The perception that we may not be able to continue as a going concern may make it difficult for us to raise new funds and to operate our business due to concerns about our ability to meet our contractual obligations. There is no assurance that sufficient financing will be available when needed or on reasonable terms to allow us to continue our operations. Our ability to continue as a going concern is contingent upon, among other factors, the availability of the GBC Credit Facility or obtaining alternate financing. On March 31, 2026, we determined that we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended March 31, 2026 under the GBC Credit Facility, which resulted in an “event of default” under the GBC Credit Facility. We are working with GBC to negotiate an amendment to the GBC Credit Facility or otherwise obtain a waiver from GBC. GBC has allowed us to continue to have access to our line of credit under the GBC Credit Facility while negotiations continue, however, GBC can choose to limit this access at any time until we can successfully negotiate an amendment to the GBC Credit Facility or obtain a waiver from GBC. While we have in the past successfully renegotiated the terms of the GBC Credit Facility, and are optimistic about our ability to do so again, there can be no assurances that we will be able to negotiate an amendment to the GBC Credit Facility or obtain a waiver from GBC on terms favorable to us or at all. In addition, upon the occurrence of an event of default under the GBC Credit Facility, GBC may, at its option, declare its commitments to us terminated and all our obligations under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required on the part of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the GBC Credit Facility. Since GBC can choose to limit our access to our line of credit under the GBC Credit Facility at any time and successful negotiation of an amendment to the GBC Credit Facility or a waiver from GBC cannot be guaranteed, substantial doubt exists about our ability to continue as a going concern. In addition, we cannot provide any assurance that we will be able to raise additional capital.
We will need to raise additional capital or financing to continue to execute and expand our business.
We expect that our existing cash, additional funding which we believe is available under our GBC Credit Facility, and cash generated from our operations, will not be sufficient to meet our anticipated capital resources and to fund our planned operations for the next twelve months (see Liquidity and Financial Condition in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional information). Further, the use of our GBC Credit Facility remains subject to performance metrics, certain restrictions and compliance with loan covenants. On March 31, 2026, we determined that we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended March 31, 2026 under the GBC Credit Facility, which resulted in an event of default under the GBC Credit Facility. We are working with GBC to negotiate an amendment to the GBC Credit Facility or otherwise obtain a waiver from GBC. GBC has allowed us to continue to have access to our line of credit under the GBC Credit Facility while negotiations continue, however, GBC can choose to limit this access at any time until we can successfully negotiate an amendment to the GBC Credit Facility or obtain a waiver from GBC. Upon the occurrence of an event of default under the GBC Credit Facility, GBC may also, at its option, declare its commitments to us terminated and all our obligations under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required on the part of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the GBC Credit Facility. In addition, should there be any delays in the receipts of key component parts, due in part to supply chain disruptions, our ability to fulfil the backlog of sales orders will be negatively impacted resulting in lower availability of cash resources from operations. We may be required to access other forms of capital to support our expanded operations and execute our business plan by issuing equity or convertible debt securities, or by entering into another form of structured financing or strategic transaction. Our ability to access such forms of capital will be impacted by investor confidence in our business strategy as well as market conditions. In addition, our failure to timely file certain of our interim quarterly reports on Form 10-Q during the fiscal year ended June 30, 2025 and our amendment on Form 10-K/A to our Annual Report for the fiscal year ended June 30, 2025 means that we currently are ineligible to use a registration statement on Form S-3. We will not be eligible to use a registration statement on Form S-3 again until we have timely filed all materials and reports required to be filed pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934 for a period of at least twelve (12) calendar months immediately preceding the filing of a new registration statement on Form S-3. The inability to use a Form S-3 registration statement will limit our ability to raise capital through sales of our securities in a timely and cost-efficient manner.
In the event we are required to obtain additional funds, there is no guarantee that additional funds will be available on a timely basis or on acceptable terms. To the extent that we raise additional funds by issuing equity or convertible debt securities, our stockholders may experience additional dilution and such financing may involve restrictive covenants. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other convertible securities that will have additional dilutive effects. We cannot assure you that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. Further, we may incur substantial costs in pursuing future capital and/or financing. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations. Our ability to obtain needed financing may be impaired by such factors as the weakness of capital markets, and the fact that we have not been profitable, which could impact the availability and cost of future financings. If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and product development, which may have a material adverse effect on future cash flows and results of operations.
We are currently in default under the Revolving Note under the GBC Credit Facility, and such default could adversely affect our business, financial condition, results of operations or liquidity.
The loans and other obligations of the Company under the GBC Credit Facility are secured by substantially all of our tangible and intangible assets, including, without limitation, intellectual property, pursuant to the terms of a Loan and Security Agreement with GBC dated July 28, 2023 (the “Loan Agreement”) and an Intellectual Property Security Agreement (the “IP Security Agreement”). The GBC Credit Facility is evidenced by a revolving note (the “Revolving Note”), which maturity date was automatically extended to July 31, 2027 (the “Maturity Date”), upon the conversion of all the outstanding obligations under the Cleveland Note into equity of the Company at the closing of the Private Placement on September 15, 2025. Provided that there is no event of default, the Maturity Date can automatically be extended for one (1) year period upon payment of a renewal fee for each such extension in the amount of three-quarters of one percent (0.75%) of the Revolving Loan Commitment (as defined below), which fee will be due and payable on or before the applicable Maturity Date. The holder of the Revolving Note is entitled to all of the benefits and security provided for in the Loan Agreement. All Revolving Loans shall be repaid by the Company on the Maturity Date, unless payable sooner pursuant to the provisions of the Loan Agreement. As a secured party, upon an event of default, GBC will have a first priority right to the collateral granted to them under the Loan Agreement and IP Security Agreement, and we may lose our ownership interest in the assets pledged as security interest.
On March 31, 2026, we determined that we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended March 31, 2026 under the GBC Credit Facility, which resulted in an event of default under the GBC Credit Facility. We are currently working with GBC to negotiate an amendment to the GBC Credit Facility or otherwise obtain a waiver from GBC. GBC has allowed us to continue to have access to our line of credit under the GBC Credit Facility while negotiations continue, however, GBC can choose to limit this access at any time until we can successfully negotiate an amendment to the GBC Credit Facility or obtain a waiver from GBC. While we have in the past successfully renegotiated the terms of the GBC Credit Facility, and are optimistic about our ability to do so again, there can be no assurances that we will be able to negotiate an amendment to the GBC Credit Facility or obtain a waiver from GBC on terms favorable to us or at all. In addition, upon the occurrence of an event of default under the GBC Credit Facility, GBC may also, at its option, declare its commitments to us terminated and all our obligations under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required on the part of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the GBC Credit Facility. If GBC were to terminate their commitments under the GBC Credit Facility and foreclose against substantially all our assets, we would likely be forced to seek bankruptcy protection and our investors could lose the full value of their investment in our Common Stock. As such, our loss of access to our line of credit under the GBC Credit Facility or our collateral will have a material adverse effect on our operations, business and financial condition.
In
the past we have not been in compliance with the continued listing requirements for The Nasdaq Capital Market. If we fail to meet the
continued listing requirements, our Common Stock may be delisted, which could affect the market price of our Common Stock, negatively
impact stockholders’ ability to sell shares and negatively impact our ability to access the capital markets.
On
October 14, 2025, we received a notification (the “Notification”) from the Listing Qualifications Department (the “Staff”)
of Nasdaq that we had regained compliance with Nasdaq’s continued listing rules because we met the requirement to have a market
value of listed securities of at least $35,000,000 (the “Market Equity Requirement”). Nasdaq requires that for continued
listing on the Nasdaq Capital Market, the Company must continue to meet all the requirements set forth in Rule 5550(a) and at least one
of the standards set forth in Rule 5550(b). The standards set forth in 5550(b) include (i) having a minimum of $2,500,000 in stockholders’
equity (the “Stockholders’ Equity Requirement”), (ii) the Market Equity Requirement, or (iii) net income from continuing
operations of $500,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years (the “Net
Income Requirement”). The Notification also provided that, for a period of one year, the Staff of Nasdaq will monitor our compliance
with the continued listing requirements. If, during such one-year period, we fail to comply with Rule 5550(b), the Staff of Nasdaq will
issue a delist determination letter and we will have an opportunity to request a new hearing.
As
previously disclosed, on January 31, 2025 the Staff of Nasdaq notified us that we did not comply with the Stockholders’ Equity
Requirement. On March 17, 2025, we filed our plan with Nasdaq to regain compliance with the Stockholders’ Equity Requirement, which
included requesting an extension through July 30, 2025. On July 31, 2025, due to non-compliance with the Stockholders’ Equity Requirement,
the Staff informed us that trading of the Company’s common stock would be suspended at the opening of business on August 11, 2025,
unless we requested an appeal of the Staff’s determination to a Nasdaq Hearings Panel (the “Panel”). We requested an
appeal hearing with the Panel and the Panel determined to grant us an exception to demonstrate compliance with the Stockholders’
Equity Requirement and granted us our request for continued listing, which extension was subject to, among other requirements, the Company
demonstrating compliance with the Stockholder’s Equity Requirement on or before October 31, 2025. However, as disclosed above,
the Company was able to comply with the Market Equity Requirement.
As
of December 31, 2025, we also satisfy the Stockholder’s Equity Requirement, however, we can provide no assurances that we will
be able to continue to comply with either the Market Equity Requirement or the Stockholder’s Equity Requirement. If we fail to
comply with the Nasdaq continued listing requirements, our common stock will be subject to delisting by Nasdaq. In the event our
common stock is delisted, our stock price and market liquidity of our stock will be adversely affected, which will impact our
ability to sell securities in the market. Further, delisting from Nasdaq could also have other negative effects, including potential
loss of confidence by partners, lenders, suppliers and employees.
There
can be no assurance that our common stock will continue to trade on Nasdaq or trade on the over-the counter markets or any public market
in the future. In the event our common stock is delisted, our stock price and market liquidity of our common stock will be adversely
affected which will impact your ability to sell your securities in the market.
Management's Discussion & Analysis (MD&A)
Removed heading “Cash Flow Summary”
Largest changes
Management has evaluated our expected cash and working capital requirements, which include, but are not limited to, investments in additional salessee in full comparisonsalesand marketing, research and development and capital equipment, as well as our expected funding sources, which include, but are not limited to, our existing cash, forecasted gross margin and funding available under the GBC Credit Facility, subject to certain restrictions,restrictions,covenants and borrowing base limitations.WhileOurweborrowingarebaseinchangescompliance with debt covenants under the GBC Credit FacilityasofqualifiedDecembercollateral31,fluctuates2025and,andtherefore,upavailablethrough and including the date of filing of this Report on Form 10-Q, we expect to be subject to afundingcompliance covenant breachunder the GBC Credit FacilityincouldlatebeFebruarysubstantially2026.lower.Therefore,In addition, on March 31, 2026, wewilldeterminedneedthat we failed to comply with the minimum EBITDA financial covenant for the trailing three-month period ended March 31, 2026 under the GBC Credit Facility, which resulted in an “event of default” under the GBC Credit Facility. We are working with GBC to negotiate an amendment to the GBC Credit Facility or otherwise obtain a waiver from GBC. GBC has allowed us to continue to have access to our line of credit under the GBC Credit Facility while negotiations continue, however, GBC can choose to limit this access at any time until we can successfully negotiate an amendment to the GBC Credit Facilityinororderobtaintoa waiver from GBC. While we have in the past successfully renegotiated the terms of the GBC Credit Facility, and are optimistic about our ability todrawdofundsso again, there can be no assurances that we will be able to negotiate an amendment to the GBC Credit Facility or obtain a waiver from GBC on terms favorable to us or at all. In addition, upon the occurrence of an event of default under thefacility.GBCBecauseCreditsuccessfulFacility,negotiationGBC may, at its option, declare its commitments to us terminated and all our obligations under the GBC Credit Facility immediately due and payable, all without demand, notice or further action ofanany kind required on the partamendmentofcannot be guaranteedGBC, and/orweexercisemayotherloseremedies available to it, which include, among other things, its rights as a secured party under the GBC Credit Facility. Since GBC can choose to limit our access totheour line of credit under the GBC Credit Facilityafterat any time and successful negotiation of an amendment to thecovenantGBCbreach,Credit Facility or a waiver from GBC cannot be guaranteed, substantial doubt exists about our ability to continue as a going concern over the 12 months following the filing date of thisQuarterly Reportreport on Form 10-Q.
Management has evaluated our expected cash and working capital requirements, which include, but are not limited to, investments in additional salessee in full comparisonsalesand marketing, research and development and capital equipment, as well as our expected funding sources, which include, but are not limited to, our existing cash, forecasted gross margin and funding available under the GBC Credit Facility, subject to certain restrictions,restrictions,covenants and borrowing base limitations. Our borrowing base changes as qualified collateral fluctuates and, therefore, available funding under the GBC Credit Facility could be substantially lower.WhileIn addition, on March 31, 2026, wearedeterminedinthatcompliancewe failed to comply with thedebt covenantsminimum EBITDA financial covenant for the trailing three-month period ended March 31, 2026 under the GBC CreditFacilityFacility,aswhich resulted in an “Event ofDecember 31, 2025 and up through and including the date of filing of this Report on Form 10-Q, we expect to be subject to a compliance covenant breachDefault” under the GBC CreditFacilityFacility.inWelateareFebruaryworking2026.withTherefore, we will needGBC to negotiate an amendment to the GBC Credit Facilityinororderotherwise obtain a waiver from GBC. GBC has allowed us to continue to havethe ability to draw funds under the facility. Because successful negotiation of an amendment cannot be guaranteed and we may loseaccess totheour line of credit under the GBC Credit Facility while negotiations continue, however, GBC can choose to limit this access at any time we can successfully negotiate an amendment to the GBC Credit Facilityafteror obtain a waiver from GBC. While we have in thecovenantpastbreach,successfully renegotiated the terms of the GBC Credit Facility, and are optimistic about our ability to do so again, there can be no assurances that we will be able to negotiate an amendment to the GBC Credit Facility or obtain a waiver from GBC on terms favorable to us or at all. In addition, upon the occurrence of an Event of Default under the GBC Credit Facility, GBC may, at its option, declare its commitments to us terminated and all of our obligations under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required on the part of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the GBC Credit Facility. Since GBC can choose to limit our access to our line of credit under the GBC Credit Facility at any time and successful negotiation of an amendment to the GBC Credit Facility or a waiver from GBC cannot be guaranteed, substantial doubt exists about our ability to continue as a going concern over the 12 months following the filing date of thisQuarterly Reportreport on Form 10-Q. See “Future Liquidity Needs” below and Liquidity and Financial Condition in Note21 – Summary of Significant Accounting Policies tothethese unaudited condensed consolidated financial statements for additional information.
“While we have experienced lower sales in the first nine months of fiscal 2026, we have not experienced a substantial difference in our year-over-year net loss, attributable primarily to two factors. First, management anticipated the potential global economic effects and the consequent business impacts of the imposition of U.S. tariffs and adjusted our business strategy and spending accordingly. Second, we are no longer burdened with the expenses associated with our financial statement restatement, which positively affected to our bottom line as compared to previous periods.”see in full comparison
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is calculated by taking net income (loss) and adding back the expenses relatedsee in full comparisonrelatedto interest, income taxes, depreciation, amortization and stock-based compensation, each of which has been calculated in accordance with GAAP. Additionally, costs to restate prior periods, as presented in our Annual Report on Form 10-K filed for the year ended June 30, 2024, and litigation resulting from such restatements are also added back. Adjusted EBITDA was againloss of $2,508,000 for the quarter ended$1,463,000March 31, 2026, an increased loss of $1,973,000 compared to a loss of $535,000 for the quarter endedDecemberMarch 31,2025,2025 primarily resulting from an increase in net loss of$1,333,000$1,236,000comparedcombinedtowith$130,000no add-back for restatement costs, offset by $34,000 in stock-based compensation expense increase over thequarterpreviousendedyear’sDecember 31, 2024.quarter. Adjusted EBITDA was againloss of approximately$55,000$2,994,000 for thesixnine months endedDecemberMarch 31,2025,2026, animprovementincreased loss of$297,000$2,217,000 over a loss of$242,000$777,000 for thesixnine months endedDecemberMarch 31,2024.2025.
Gross profit for the quarter endedsee in full comparisonDecemberMarch 31,20252026 was$4,895,000,$1,800,000, or35%27% of revenues, compared to$5,463,000,$5,287,000, or 32% of revenues, for the quarter endedDecemberMarch 31,2024.2025. The300-basis500-basis pointincreasedecrease in gross profit margin (gross profit as a percent of revenues) was primarily due to an increase in E&O reserve, asaleslossmixinshiftoperating leverage in labor, overhead, and warranty due tohigherlowermarginrevenueproductswithwithina slight offset from lower raw materialhandling and lower warranty related costs, while slightly offset by higher material costs resulting from import tariffs.costs.
Cost of sales for the quarter endedsee in full comparisonDecemberMarch 31,20252026 was9,226,000,$4,788,000, or65%73% of revenues, compared to$11,367,000,$11,455,000, or 68% of revenues, for the quarter endedDecemberMarch 31,2024.2025. Thedecreaseincrease in cost of sales as a percent of revenues was primarily due to an increase in E&O reserve, a loss in operating leverage in labor and overhead due to lower revenue, with an increased warrantyrelatedexpensecosts, whichandwereaslightlyslight offsetbyfrom lowerhigherraw materialcosts resulting from import tariffs.costs.
Full comparison: every changed paragraph (51)
Our
largest sector of penetration thus far has been the material handling sector which we believe is a multi-billion-dollar addressable market.
We believe this sector will provide us with an opportunity to grow our business as we enhance both our product mix and service levels
and and
to grow our sales to large fleets of forklifts and GSE. Applications of our modular packs for other industrial and commercial uses,
such such
as mobile energy storage systems, are providing additional current growth and furtherfurthering opportunities. We intend to continue to
expand expand
our supply chain and customer partnerships and seek further partnerships and/or acquisitions that provide synergy in order to
meet our
growth and “building scale” objectives.
As
of DecemberMarch 31, 2025,2026, our order backlog was approximately $3.8$5.3 million. Historical comparisons are difficult due to changing business conditions.
The historical decrease in part reflects certain significant customers
reducing order patterns and other customers shifting to shorter
order lead times in response to uncertainty over the economic impact
of higher costs of global tariffs implemented by the U.S. government,
as well as broader concerns over the economy and geopolitical
uncertainty.
InToward
the second half of fiscal 2025, we experiencedbegan experiencing a slow downslowdown in new orders for our energy storage solutions, reflecting corresponding
deferrals of new forklift purchases by selected large customer fleets due to lower capital spending and interest rate variability,variability. Customers
and more recently, global tariff uncertainties. While we have had very few cancellations of existing purchase orders, some customers
have revised their order terms to fiscal 2026. In addition, customers are placing fewer new orders forduring fiscal 2026. Some customers
have attributed lower capital spending to concerns over the economy and
the uncertainty of higher interest rates, as well as broader
geopolitical uncertainty. More recently, the economic impacts and costs
of higher global tariffs implemented by the U.S. government
have negatively impacted new purchase orders. The impact of order deferrals
has required additional selling strategies to support
our targeted sales trajectory, as well as a continued focus on cost controls and
reduced spending.
While we have experienced lower sales in the first nine months of fiscal 2026, we have not experienced a substantial difference in our year-over-year net loss, attributable primarily to two factors. First, management anticipated the potential global economic effects and the consequent business impacts of the imposition of U.S. tariffs and adjusted our business strategy and spending accordingly. Second, we are no longer burdened with the expenses associated with our financial statement restatement, which positively affected to our bottom line as compared to previous periods.
We
have seen improvements in our sourcing and purchasing activity, reflecting our efforts to expand and optimize our vendor strategy. Additional
improvements include more secondary sources to minimize stock-outs, lower costs from increasing sources, and controlled delivery times,
as reflected in our current inventory levels. With strategic supply chain and profitability improvement initiatives, lower costs and
higher volume purchasing, we are targetinglowering continuedthe grosscost marginof improvement.our products in order to improve our competitive positioning. We are highly focused
on expanding sales and marketing
initiatives to secure new customer relationships and support the continued migration of current customers
to lithium. We have recently
added our second tier-one OEMtwo private label battery programprograms and recently hired a Director of OEM Business Development to supplementfurther strengthen
our strong OEM relationships and approvals.to This collaboration
marks a significant milestone for our S-Series line, which now includes productsassist with theOEM UL Type EE certification, which provides added
safetycertifications and durability capabilities.approvals. We are also working with our distribution network to expand
customer acquisition with direct-to-customer
initiatives.
Since
January 2025, the U.S. government has increased certain existing import tariffs and implemented new import tariffs across a wide range
of countries at various rates, including on product imports from almost all countries, and individualized higher tariffs on certain countries,
notably China. Some of these tariff announcements have since been followed by announcements of limited exemptions and temporary pauses.pauses
and all have been affected by various circuit court decisions and a key decision by the U.S. Supreme Court, which invalidated certain
tariffs. In response to the U.S. Supreme Court ruling, the Trump administration debuted a system for repaying importers for tariffs struck
down by the U.S. Supreme Court while also announcing the implementation of new tariffs under an alternative statutory authority and indicating
a desire to further increase such tariffs and to seek to extend such tariffs under other statutes. The full impact of the U.S. Supreme
Court’s ruling and the administration’s response, including the timing and extent of any refunds and the impact of the new
tariffs, remains uncertain.
Trade-related
disruptions can create further uncertainty and supply chain interruptions, which may result in last-minute procurement efforts at elevated
cost. We are closely monitoring the fluid nature of proposed tariffs and any impact they may have on our operations and will continue
to monitor macroeconomic conditions and to evaluate the financial and operational impact of ongoing trade policy shifts. These risks
could could
intensify depending on future developments and we are actively incorporating these considerations into our future operation planning,
including assessing pricing actions, cost-control measures, and long-term sourcing strategies.
On
September 15, 2025, we completed a Private Placement pursuant toin which we sold 258,144 prefundedPreferred preferredStock stock
warrantsWarrants and 1,214,766 commonCommon warrantsStock Warrants
for approximately $4,355,000,$4,348,000, net of offering costs of $645,000.$652,000, and consisting of $3,175,000 cash and $1,173,000 debt relief.
On
November 3, 2025, we completed an underwritten public offering (the “Public Offering”) of 3,840,000 shares of our common
stock at a public offering price of $2.50 per share, before underwriting discounts and commissions.share. In addition, we granted the
underwriter a 30-day option to purchase up to an additional
576,000 shares of common stock at the public offering price, less
underwriting discounts and commissions, to cover over-allotments, which
was subsequently exercised in full. Net proceeds
received were approximately $9,760,000, after offering costs of approximately $1,280,000.
See
Note 8 – Stockholders’ Equity (Deficit) to the
these unaudited condensed consolidated financial
statements for additional information pertaining to the Private Placement
and Public Offering.
As
of DecemberMarch 31, 2025,2026, we also satisfied the Stockholder’s Equity Requirement, however, we can provide no assurances that we
will be
able to continue to comply with either the Market Equity Requirement or the Stockholder’s Equity Requirement. If the
Company fails
to comply with the Nasdaq continued listing requirements, the Company’s common
stock will be subject to delisting by Nasdaq. In
the event our common stock is delisted, our stock price and market liquidity of our
stock will be adversely affected which will impact
the ability of the Company’s stockholders to sell securities in the market.
Further, delisting from Nasdaq could also have other
negative effects, including potential loss of confidence by partners, lenders,
suppliers and employees.
The
following table represents our unaudited condensed consolidated statement of operations for the three months ended DecemberMarch 31, 20252026 and
and 2024.2025.
Revenues
Revenues for the quarter ended March 31, 2026 were $6,588,000 compared to $16,742,000 for the quarter ended March 31, 2025. The decrease of $10,154,000, or 61%, was driven by our largest customer within material handling significantly cutting their capital expense budget, an increasing number of competitive market participants within the GSE market, and overall pricing pressures which were driven by cost increases from tariffs.
Revenues
for the quarter ended December 31, 2025 were $14,121,000 compared to $16,830,000 for the quarter ended December 31, 2024. The decrease
of $2,709,000, or 16%, was driven by a sales mix shift to lower-priced products and lower volume in the material handling market, partially
offset by higher volumes in the ground support equipment market. The overall reduced volume can be attributed to business uncertainties
affecting our customers, as discussed in “Business Updates” above.
Cost
of sales for the quarter ended DecemberMarch 31, 20252026 was 9,226,000,$4,788,000, or 65%73% of revenues, compared to $11,367,000,$11,455,000, or 68% of revenues, for the
quarter ended DecemberMarch 31, 2024.2025. The decreaseincrease in cost of sales as a percent of revenues was primarily due to an increase in E&O reserve,
a loss in operating leverage in labor and overhead due to lower revenue, with an increased warranty relatedexpense costs,
whichand werea slightlyslight offset byfrom
lower higherraw material costs resulting from import tariffs.costs.
Gross
profit for the quarter ended DecemberMarch 31, 20252026 was $4,895,000,$1,800,000, or 35%27% of revenues, compared to $5,463,000,$5,287,000, or 32% of revenues, for
the quarter
ended DecemberMarch 31, 2024.2025. The 300-basis500-basis point increasedecrease in gross profit margin (gross profit as a percent of revenues) was
primarily due to
an increase in E&O reserve, a salesloss mixin shiftoperating leverage in labor, overhead, and warranty due to higherlower marginrevenue productswith withina slight offset
from lower raw material handling and lower warranty related costs, while
slightly offset by higher material costs resulting from import tariffs.costs.
Selling
and administrative expenses for the quarter ended DecemberMarch 31, 20252026 were $3,564,000$4,168,000 compared to $5,985,000$5,717,000 for the quarter ended DecemberMarch 31,
31, 2024.2025. The decrease of $2,421,000,$1,549,000, or 40%,27%, was primarily due to reductionsa reduction in salaries and wages from lower headcount, bonuses, executive severance,recruitment
fees, commission expenses, shipping
expenses and professional fees, as the prior year included the cost of the multi-year restatement
of previously filed financial statements.
Research
and development expenses for the quarter ended DecemberMarch 31, 20252026 were $536,000$623,000 compared to $957,000$1,147,000 for the quarter ended DecemberMarch 31, 2025.
2024. The decrease of $421,000,$524,000, or 44%,46%, was primarily due to decreased salaries and wages from a lower headcount and a lower level of research
and development project
activity based upon business needs.
Interest
Income (Expense),Expense, net
Interest
income (expense),expense, net for the quarter ended DecemberMarch 31, 20252026 was $194,000$184,000 compared to $$408,000$362,000 for the quarter ended DecemberMarch 31, 2024.
2025. The decrease
of $214,000,$178,000, or 52%,49%, was primarily due to lower average balances outstanding under our credit facilities during the quarter
ended December March
31, 20252026 as compared to the same period a year ago.
Net
Income (Loss)
Net
incomeloss for the quarter ended DecemberMarch 31, 20252026 was $601,000$3,175,000 compared to a net loss of $1,887,000$1,939,000 for the quarter ended DecemberMarch 31, 2024.2025. The
The$1,236,000 $2,488,000 improvementincrease to net income from net loss was primarily driven by the decrease in operatinggross expenses and lower interest
expense,profit, partially offset by thea decrease in grossoperating profit.expenses
and lower interest expense.
The
following table represents our unaudited condensed consolidated statement of operations for the sixnine months ended DecemberMarch 31, 20252026 and
2024.2025.
Revenues
Revenues for the nine months ended March 31, 2026 were $33,884,000 compared to $49,697,000 for the nine months ended March 31, 2025. The decrease of $15,813,000, or 32%, was driven by our largest customer within material handling significantly cutting their capital expense budget, an increasing number of competitive market participants within the GSE market, and overall pricing pressures which were driven by cost increases from tariffs.
Revenues
for the six months ended December 31, 2025 were $27,296,000 compared to $32,955,000 for the six months ended December 31, 2024. The decrease
of $5,659,000, or 17%, was mainly attributed to lower volumes and a sales mix shift to lower priced models in material handling.
Cost
of sales for the sixnine months ended DecemberMarch 31, 20252026 was $18,836,000,$23,424,000, or 68%69% of revenues, compared to $22,274,000,$33,729,000, or 68%, of revenues,
revenues, for the sixnine months ended DecemberMarch 31, 2024.2025. The decrease of $3,638,000$10,305,000 was mostly attributed to lower sales volumevolume, lower labor from a
lower headcount, and
lower warranty related costs. Cost of sales as a percent of revenues remained at 68%increased as higher per unit costs due to tariffs
were were
offset by lower warranty related costs per unit.
Gross
profit for the sixnine months ended DecemberMarch 31, 20252026 was $8,660,000,$10,460,000, or 32%31% of revenues, compared to $10,681,000$15,968,000 or 32% of revenues for the
the sixnine months ended DecemberMarch 31, 20242025 primarily due to lower sales volumes. Gross profit margin wasdecreased unchanged100 basis points year over year
as a
result of maintaininghigher costtariff ofcosts salesper atunit 68%slightly ofoffset revenues.by lower warranty costs per unit.
Selling
and administrative expenses for the sixnine months ended DecemberMarch 31, 20252026 were $8,470,000$12,638,000 compared to $11,100,000$16,817,000 for the sixnine months ended
ended DecemberMarch 31, 2024.2025. The decrease of $2,630,000,$4,179,000, or 24%,25%, was primarily due to reductions in salaries and wages from a lower headcount and
reductions in bonuses, executive severance,
commission expenses, shipping expenses and professional fees, as the prior year included
the cost of the multi-year restatement of
previously filed financial statements.
Research
and development expenses for the sixnine months ended DecemberMarch 31, 20252026 were $1,573,000$2,196,000 compared to $2,272,000$3,419,000 for the sixnine months ended DecemberMarch
31, 2024.2025. The decrease of $699,000,$1,223,000, or 31%,36%, was primarily due to decreased headcountsalaries and wages from a lower headcount, lower bonuses,
and a lower level of research and development project
activity based upon business needs.
Interest
Income (Expense),Expense, net
Interest
income (expense),expense, net for the sixnine months ended DecemberMarch 31, 20252026 was $578,000$762,000 compared to $865,000$1,227,000 for the sixnine months ended December
March 31, 2024.2025. The
decrease of $287,000,$465,000, or 33%,38%, was primarily due to lower average borrowings under our credit facilities during the sixnine months ended
DecemberMarch 31, 20252026 as compared to the same period a year ago.
Net
loss for the sixnine months ended DecemberMarch 31, 2025,2026, was $1,961,000$5,136,000 compared to $3,556,000$5,495,000 for the sixnine months ended DecemberMarch 31, 2024.2025. The decrease
decrease in net loss was primarily attributable to the decrease in operating expenses and interest, partially offset by the reduction
in gross
profit due to lower revenues.
Adjusted
EBITDA is a non-GAAP financial measure. Adjusted EBITDA is calculated by taking net income (loss) and adding back the expenses related
related to interest, income taxes, depreciation, amortization and stock-based compensation, each of which has been calculated in
accordance with
GAAP. Additionally, costs to restate prior periods, as presented in our Annual Report on Form 10-K filed for the
year ended June 30,
2024, and litigation resulting from such restatements are also added back. Adjusted EBITDA was a gainloss of $2,508,000 for the quarter ended
$1,463,000March 31, 2026, an increased loss of $1,973,000 compared to a loss of $535,000 for the quarter ended DecemberMarch 31, 2025,2025 primarily resulting
from an increase in net loss of $1,333,000$1,236,000 comparedcombined towith $130,000no add-back for restatement costs, offset by $34,000 in stock-based compensation
expense increase over the quarterprevious endedyear’s December
31, 2024.quarter. Adjusted EBITDA was a gainloss of approximately $55,000$2,994,000 for the sixnine months ended December
March 31, 2025,2026, an improvementincreased loss of
$297,000 $2,217,000 over a loss of $242,000$777,000 for the sixnine months ended DecemberMarch 31, 2024.2025.
On
September 15, 2025, we completed a Private Placement pursuant toin which we sold 258,144 prefundedPreferred preferredStock stock
warrantsWarrants and 1,214,766 commonCommon warrantsStock Warrants
for approximately $4,355,000, net of offering costs of $645,000.
On
November 3, 2025, we completed an underwritten public offering (the “Public Offering”) of 3,840,000 shares of our common
stock at a public offering price of $2.50 per share, before underwriting discounts and commissions.share. In addition, we granted the
underwriter a 30-day option to purchase up to an additional
576,000 shares of common stock at the public offering price, less
underwriting discounts and commissions, to cover over-allotments, which
was subsequently exercised in full. In total, proceeds
received were approximately $9,760,000, net of offering costs of approximately
$1,280,000.
See
Note 8 – Stockholders’ Equity (Deficit) to the
these unaudited condensed consolidated financial
statements for additional information pertaining to the Private Placement
and Public Offering.
Management
has evaluated our expected cash and working capital requirements, which include, but are not limited to, investments in additional sales
sales and marketing, research and development and capital equipment, as well as our expected funding sources, which include, but are
not limited
to, our existing cash, forecasted gross margin and funding available under the GBC Credit Facility, subject to certain restrictions,
restrictions, covenants and borrowing base limitations. Our borrowing base changes as qualified collateral fluctuates and,
therefore, available funding
under the GBC Credit Facility could be substantially lower. WhileIn addition, on March 31, 2026, we aredetermined inthat compliancewe failed to comply with
the debt
covenantsminimum EBITDA financial covenant for the trailing three-month period ended March 31, 2026 under the GBC Credit FacilityFacility, aswhich resulted
in an “Event of December 31, 2025 and up through and including the date of filing of this Report on
Form 10-Q, we expect to be subject to a compliance covenant breachDefault” under the GBC Credit FacilityFacility. inWe lateare Februaryworking 2026.with Therefore,
we will needGBC to negotiate an amendment to the GBC Credit
Facility inor orderotherwise obtain a waiver from GBC. GBC has allowed us to continue to have the ability to draw funds under the facility.
Because successful negotiation of an amendment cannot be guaranteed and we may lose access to theour line of credit under the GBC Credit
Facility while negotiations continue, however, GBC can choose to limit this access at any time we can successfully negotiate an amendment
to the GBC Credit Facility afteror obtain a waiver from GBC. While we have in the covenantpast breach,successfully renegotiated the terms of the GBC Credit
Facility, and are optimistic about our ability to do so again, there can be no assurances that we will be able to negotiate an amendment
to the GBC Credit Facility or obtain a waiver from GBC on terms favorable to us or at all. In addition, upon the occurrence of an Event
of Default under the GBC Credit Facility, GBC may, at its option, declare its commitments to us terminated and all of our obligations
under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of any kind required on the part
of GBC, and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the GBC
Credit Facility. Since GBC can choose to limit our access to our line of credit under the GBC Credit Facility at any time and successful
negotiation of an amendment to the GBC Credit Facility or a waiver from GBC cannot be guaranteed, substantial doubt exists about our
ability to continue as a going concern over the 12
months following the filing date of this Quarterly Reportreport on Form 10-Q. See
“Future
Liquidity Needs” below and Liquidity and Financial Condition in Note 21 – Summary of Significant Accounting
Policies to thethese unaudited condensed consolidated financial statements for additional information.
The following table represents a summary of our unaudited condensed consolidated statement of cash flows for the nine months ended March 31, 2026 and 2025.
Cash
Flow Summary
Net
cash used in operating activities was $4,274,000$5,665,000 for the sixnine months ended DecemberMarch 31, 2025,2026, which consisted of $1,961,000$5,136,000 net loss and
$3,997,000$2,700,000 in changes in operating assets and liabilities, partially offset by $1,684,000$2,171,000 of non-cash operating costs. The primary changes
in operating assets and liabilities were reductions in accounts receivable and inventories, partially offset by a decrease in accounts
payable and accrued liabilities combined, office lease payments and an increase in other assets.
Net
cash provided by operating activities was $3,774,000$2,208,000 for the sixnine months ended DecemberMarch 31, 2024,2025, which consisted of $5,389,000$4,914,000 provided
by changes in operating assets and liabilities and $1,941,000$2,789,000 of non-cash operating costs, partially offset by net loss of $3,556,000.$5,495,000.
The primary changes in operating assets and liabilities were a decrease in accounts receivable, a decrease in inventoriesreceivable and an increase
in accounts payable and
accrued expenses combined, partially offset by office lease payable payments.
Net
cash used in investing activities for the sixnine months ended DecemberMarch 31, 20252026 was $285,000,$405,000, which consisted primarily of equipment purchases.
Net
cash used in investing activities for the sixnine months ended DecemberMarch 31, 20242025 was $317,000,$498,000, which consisted primarily of equipment purchases.
Net
cash provided by financing activities for the sixnine months ended DecemberMarch 31, 20252026 was $4,153,000,$5,108,000, which primarily consisted of $12,935,000
$12,942,000 net cash proceeds from the Public Offering and the Private Placement, partially offset by $8,887,000$7,900,000 of net repayments under the working
capital line
of credit.
Net
cash used in financing activities for the sixnine months ended DecemberMarch 31, 20242025 was $3,217,000,$1,848,000, which primarily consisted of $4,141,000$2,830,000 in
in net repayments under the working capital line of credit, partially offset by $1,000,000 of subordinated debt borrowings.
Historically,
our revenues and operating cash flows have not been sufficient to sustain our operations and we have relied on debt and equity financing
for additional funds. We have incurred an accumulated deficit of $108.3$111.5 million through DecemberMarch 31, 2025,2026, and for the sixnine months ended
DecemberMarch 31, 20252026 incurred a net loss of $2.0$5.1 million and utilized $4.3$5.7 million of cash in operating activities. As of DecemberMarch 31, 2025,2026, we
we had a cash balance of $0.9$0.4 million and $11.3$10.3 million of available funding under the Gibraltar Business Capital (“GBC”) Credit
Credit Facility, subject to borrowing base limitations. Our borrowing base changes as qualified collateral fluctuates and, therefore, available
available funding under the GBC Credit Facility could be substantially lower.
In
addition, our ability to meet projected revenue targets and generate cash from operations has been impacted by delays in new orders for
our energy storage solutions, reflecting corresponding deferrals of new forklift purchases by selected large customer fleets due to lower
capital spending and interest rate variability,variability andand, more recently, global tariff uncertainties.
Management
has evaluated our expected cash and working capital requirements, which include, but are not limited to, investments in additional sales
sales and marketing, research and development and capital equipment, as well as our expected funding sources, which include, but are
not limited
to, our existing cash, forecasted gross margin and funding available under the GBC Credit Facility, subject to certain restrictions,
restrictions, covenants and borrowing base limitations. WhileOur weborrowing arebase inchanges compliance with debt covenants under the GBC Credit Facility
as ofqualified Decembercollateral 31,fluctuates 2025and, andtherefore, upavailable through and including the date of filing of this Report on Form 10-Q, we expect to be subject to afunding
compliance covenant breach under the GBC Credit Facility incould latebe Februarysubstantially 2026.lower. Therefore,In addition, on March 31, 2026, we willdetermined needthat we failed to comply with
the minimum EBITDA financial covenant for the trailing three-month period ended March 31, 2026 under the GBC Credit Facility, which resulted
in an “event of default” under the GBC Credit Facility. We are working with GBC to negotiate an amendment to the GBC Credit
Facility or otherwise obtain a waiver from GBC. GBC has allowed us to continue to have access to our line of credit under the GBC Credit
Facility while negotiations continue, however, GBC can choose to limit this access at any time until we can successfully negotiate an
amendment to the GBC Credit Facility inor orderobtain toa waiver from GBC. While we have in the past successfully renegotiated the terms of the
GBC Credit Facility, and are optimistic about our ability to drawdo fundsso again, there can be no assurances that we will be able to negotiate
an amendment to the GBC Credit Facility or obtain a waiver from GBC on terms favorable to us or at all. In addition, upon the occurrence
of an event of default under the facility.GBC BecauseCredit successfulFacility, negotiationGBC may, at its option, declare its commitments to us terminated and all our obligations
under the GBC Credit Facility immediately due and payable, all without demand, notice or further action of anany kind required on the part
amendmentof cannot be guaranteedGBC, and/or weexercise mayother loseremedies available to it, which include, among other things, its rights as a secured party under the GBC
Credit Facility. Since GBC can choose to limit our access to theour line of credit under the GBC Credit Facility afterat any time and successful
negotiation of an amendment to the covenantGBC breach,
Credit Facility or a waiver from GBC cannot be guaranteed, substantial doubt exists about our
ability to continue as a going concern over the 12 months following the filing
date of this Quarterly Reportreport on Form 10-Q.
The
unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date
of the unaudited financial statements and revenues and expenses during the periods reported. Management has considered the implications
of ongoing global events and related economic impacts to the estimates and assumptions used in the preparation of the consolidated financial
statements. There is heightened volatility and uncertainty around tariff actions, supply chain performance and customer demand. However,
the magnitude of such impact on the Company’s business and its duration is uncertain. The Company is not aware of any specific
event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities
as of DecemberMarch 31, 20252026 through the filing date of this quarterly report on Form 10-Q. Actual results could differ from those estimates.
Information with respect to our critical accounting policies which we believe could have the most significant effect on our reported
results and require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 filed with
the SEC on September 17, 2025.
FLUX insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 1 trade date, 20,633 shares, about $18.0K). Net open-market shares: -20,633 (purchases minus sales); net value about -$18.0K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-07-02 | Vanka Krishna C |
Open-market sale | 20,633 | $0.87 | $18.0K |
| 2026-07-01 | Vanka Krishna C |
Option exercise | 40,650 | — | — |
| 2026-05-28 | Walters-Hoffert Lisa |
Option exercise | 50,000 | — | — |
| 2026-05-28 | Robinette Dale Thomas |
Option exercise | 50,000 | — | — |
| 2026-05-28 | Leposky Mark F |
Option exercise | 50,000 | — | — |
| 2026-05-28 | Johnson Michael |
Option exercise | 50,000 | — | — |
Well-known investors holding FLUX (13F)
None of the 59 investors we track reported a position in their latest 13F.