Flux Power Holdings, Inc.

Item****1 –Financial Statements**

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2026

NOTE 1 –NATURE OF BUSINESS

Flux Power Holdings, Inc. (the “Company” or “Flux”) was incorporated in 1998 in the State of Nevada, and Flux’s operations are conducted through its wholly owned subsidiary, Flux Power, Inc., a California corporation. The Company designs, develops, manufactures, and sells a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of industrial and commercial sectors which include material handling and airport ground support equipment (“GSE”). Management believes the Company’s 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. The Company’s modular and scalable design allows different configurations of lithium-ion energy storage solutions which are paired with a proprietary wireless battery management system to provide the level of energy storage required and “state of the art” real time monitoring of battery pack performance. Management believes that the growing demand for lithium-ion energy storage solutions and more environmentally friendly energy storage solutions across a range of industrial and commercial sectors should continue to drive growth in the markets served.

Business Trends and Uncertainties

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 the Company has been able to offset some of the impact of enacted tariffs with supply chain adjustments, alternative manufacturing locations, cost reduction actions and by also increasing the selling prices of products, management believes that tariffs have negatively impacted the Company’s 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 invalidating 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 the Company’s business and financial results, however, due to the uncertainties pertaining to tariffs and tariff levels, it is difficult for the Company to reliably forecast the extent of the ongoing impact to business or customers.

Trade-related disruptions can create further uncertainty and supply chain interruptions, which may result in last-minute procurement efforts at elevated cost. Management is closely monitoring the fluid nature of proposed tariffs and any further impact they may have on operations, 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 management is actively incorporating these considerations into future operation planning, including assessing pricing actions, cost-control measures and long-term sourcing strategies.

If tariffs continue to escalate or global inflationary trends persist, customers may face greater economic strain, which could in turn affect demand for Company products. Management remains focused on maintaining operational flexibility and adapting the supply chain to navigate these uncertainties to support long-term business performance. See “Risk Factors” under Part I, Item 1A of this Form for additional information.

The Company is also expanding the deployment of a telemetry solution providing customers with state of health, better asset management and a platform for more timely management of service and maintenance requirements.

Liquidity and Financial Condition

The accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern exists. Historically, the Company’s revenues and operating cash flows have not been sufficient to sustain its operations, and the Company has relied on debt and equity financing for additional funds. The Company has incurred an accumulated deficit of $117.0 million through September 30, 2026. For the three months ended September 30, 2026, the Company generated cash flows from operations of $0.4 million and a net loss of $3.2 million. For the year ended June 30, 2026, the Company generated negative cash flows from operations of $5.9 million and a net loss of $7.4 million. Cash balance as of September 30, 2026 was $0.4 million. In addition, the Company’s operations have been impacted by delays in new orders of its energy storage solutions due to corresponding deferrals of new forklift purchases mainly caused by lower capital spending in the market sector that the Company serves and by interest rate variability. These conditions have affected selected large customer fleets, thereby impacting the Company’s ability to meet projected revenue targets and to generate cash from operations.

Management has evaluated the Company’s expected cash requirements, including investments in additional selling and marketing and in research and development, its expected capital expenditures and its expected working capital requirements. Management believes the Company’s existing cash, forecasted gross margins and additional funding that the management believes is available under the GBC Credit Facility (as defined herein) 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 Form, which raises substantial doubt about its ability to continue as a going concern over the twelve months following the filing date of this Form.

The Company has implemented reductions in labor and overhead costs and has increased selling prices of energy storage solutions; however, management is evaluating strategies to further improve profitability of operations and to obtain additional funding. These steps include planned further price increases for our energy storage solutions, and the implementation of a number of cost saving initiatives including product cost efficiencies and planned operational cost savings. Based on the Company’s existing backlog and customer orders, management anticipates increased revenues which, together with improvements in gross margin, would move the Company closer to profitability. The planned gross margin improvement tasks include, but are not limited to, a plan to drive bill of material costs down while further increasing price of the Company’s products for new orders. The Company also continues to execute cost reduction and sourcing and pricing recovery initiatives in efforts to increase gross margins and improve cash flow from operations. Unforeseen factors beyond management’s control, including economic uncertainty and the impact of global tariff initiatives, could potentially have negative impact on the planned gross margin improvement plan. Management is continuing to evaluate other sources of capital to fund the Company’s operations and growth. However, there can be no assurance that the Company will be able to realize its plans for improved operations or to access necessary additional financing on terms favorable to the Company or at all when needed for sufficient liquidity in order to continue operations over the next twelve months. If such liquidity is not available when required, management will be required to curtail investments in new product development, which may have a material adverse effect on future cash flows and results of operations and the Company’s ability to continue operating as a going concern.

The accompanying condensed consolidated financial statements do not include any adjustments that would be necessary should the Company be unable to continue as a going concern and, therefore, be required to liquidate its assets and discharge its liabilities in other than the normal course of business and at amounts that may differ from those reflected in the accompanying consolidated financial statements.

Nasdaq Stock Market Notices

As previously disclosed, on July 24, 2026, the Listing Qualifications Department (the “Staff”) of Nasdaq notified (the “July 2026 Notice”) the Company that for 30 consecutive business days preceding the date of the July 2026 Notice, the bid price of the Company’s common stock had closed below the $1.00 per share minimum required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The July 2026 Notice has no effect on the listing of the common stock at this time, and shares of common stock continue to trade on the Nasdaq Capital Market under the symbol “FLUX”.

Under Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days following the date of the July 2026 Notice to regain compliance with the Minimum Bid Price Requirement (the “Compliance Period”). If at any time during the Compliance Period the closing bid price of shares of common stock is at least $1.00 for a minimum of 10 consecutive business days, compliance with the Minimum Bid Price Requirement will be regained and the Company’s common stock will continue to be eligible for listing on the Nasdaq Capital Market absent noncompliance with any other requirement for continued listing.

If the Company does not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, the Nasdaq may afford an additional 180 calendar days to regain compliance with the Minimum Bid Price Requirement (the “Additional Compliance Period”) if, on the last day of the Compliance Period, the stock price is in compliance with the market value of publicly held shares requirement for continued listing as well as all other standards for initial listing of the Company’s common stock on the Nasdaq Capital Market (other than the Minimum Bid Price Requirement), unless management does not indicate its intent to cure the deficiency, or if it appears to Nasdaq that it is not possible for the deficiency to be cured.

Management intends to monitor the closing bid price of the Company’s common stock and may, if appropriate, consider implementing available options including the option to implement a reverse stock split in order to regain compliance with the Minimum Bid Price Requirement. There can be no assurance that the Company will regain compliance within the Minimum Bid Price Requirement during the Compliance Period, will secure an Additional Compliance Period, will regain compliance or will maintain compliance with the other Nasdaq continued listing requirements.

In addition, in the past the Company has failed to comply with and is currently not in compliance with other Nasdaq continued listing requirements. Nasdaq requires that for continued listing on the Nasdaq Capital Market, the Company must 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 having (i) a minimum of $2,500,000 in stockholders’ equity (the “Stockholders’ Equity Requirement”), (ii) a market value of listed securities of at least $35 million (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”). As previously disclosed, on January 31, 2025 the Staff of Nasdaq notified the Company that it did not comply with the Stockholders’ Equity Requirement. On March 17, 2025, the Company filed its 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 the Company that trading of its common stock would be suspended at the opening of business on August 11, 2025 unless the Company requested an appeal of the Staff’s determination to the Panel. The Company requested an appeal hearing with the Panel, and the Panel determined to grant the Company an exception to demonstrate compliance with the Stockholders’ Equity Requirement and granted the Company its 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, on October 14, 2025, the Company received a notification from the Staff of Nasdaq that it had regained compliance with Nasdaq’s continued listing requirements because the Company met the Market Equity Requirement. The October 2025 Notification also provided that, for a period of one year (the “Monitoring Period”), the Staff of Nasdaq will monitor the Company’s compliance with the continued listing requirements. If, during the Monitoring Period, the Company fails to comply with Rule 5550(b), the Staff of Nasdaq will issue a delist determination letter and the Company will have an opportunity to request a new hearing.

The Monitoring Period expired on October 14, 2026, however, the Company’s stockholders’ deficit as of September 30, 2026 did not comply with the Stockholders’ Equity Requirement and the Company no longer complied with the Market Equity Requirement or any of the other standards set forth in Rule 5550(b). While the Company did not receive any notifications from the Staff of Nasdaq with respect to its noncompliance with the standards set forth in Rule 5550(b) prior to the expiration of the Monitoring Period and has not received any such notifications as of the date of this Quarterly Report, the Company cannot predict how the Staff of Nasdaq will view the timing of its noncompliance with the Stockholder’s Equity Requirement reported in this Quarterly Report. While this Quarterly Report was filed after the expiration of the Monitoring Period, this Quarterly Report reports the Company’s stockholders’ deficit as of September 30, 2026, a date prior to the expiration of the Monitoring Period. If the Staff of Nasdaq were to view the Company’s noncompliance with the Stockholder’s Equity Requirement reported in this Quarterly Report as occurring prior to the expiration of the Monitoring Period, then the Staff of Nasdaq will issue a delist determination letter and the Company will have an opportunity to request a new hearing. If the Staff of Nasdaq were to view the Company’s noncompliance with the Stockholder’s Equity Requirement reported in this Quarterly Report as occurring after the expiration of the Monitoring Period, then the Company would likely instead receive a notice of noncompliance from the Staff of Nasdaq affording the Company an opportunity to submit a plan to regain compliance.

If the Company fails to regain compliance with the Minimum Bid Price Requirement and/ fails to regain compliance with at least one of the Rule 5550(b) continued listing requirements, the Company’s common stock will be subject to delisting by Nasdaq. In the event the Company’s common stock is delisted, the stock price and market liquidity of the common 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.

Resignation of Officer

On September 8, 2026, Mr. Jeff Mason, Chief Operating Officer, tendered his resignation effective September 25, 2026. Mr. Mason and the Company failed to enter into a separation and release agreement.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company’s significant accounting policies which have been consistently applied in the preparation of the accompanying consolidated financial statements follows.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2026, filed with the SEC on August 20, 2026. In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements include all adjustments necessary in order to make the financial statements not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. Certain notes to the financial statements that would substantially duplicate the disclosures contained in the audited consolidated financial statements for the most recent fiscal year as reported in the Company’s Annual Report on Form 10-K have been omitted. The accompanying unaudited condensed consolidated balance sheet at June 30, 2026 has been derived from the audited balance sheet at June 30, 2026 contained in such Form 10-K.

Use of Estimates

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a smaller reporting company, which require the Company 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 condensed 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 September 30, 2026 through the filing date of this quarterly report on Form 10-Q.

Principles of Consolidation

The consolidated financial statements include Flux Power Holdings, Inc. and its wholly-owned subsidiary Flux Power, Inc. after elimination of all intercompany accounts and transactions.

Reclassifications

Adjustments were made to our previously reported Financial Statements during interim periods for the fiscal year ending June 30, 2026, including with respect to classifications for the prior period ending September 30, 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.

Recently Issued Accounting Pronouncements

Management has considered all recent accounting pronouncements not yet adopted in the Company’s 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. The Company is evaluating the disclosure requirements related to the new standard.

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.

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. The Company is evaluating the disclosure requirements related to the new standard.

In September 2025, the FASB issued Accounting Standards Update (“ASU”) 2025-06,Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 modernizes the accounting for internal-use software costs by eliminating the existing software-development project-stage framework. Under the amended guidance, an entity begins capitalizing eligible software development costs when management has authorized and committed to funding the project and it is probable that the project will be completed and the software will be used to perform its intended function. In evaluating whether completion is probable, an entity must consider whether significant uncertainty exists regarding the software’s development. The amendments also clarify that the disclosure requirements in ASC Topic 360 apply to capitalized internal-use software costs, regardless of their presentation in the financial statements. The amendments are effective for the Company for its fiscal year beginning July 1, 2028, including interim periods within that fiscal year. Early adoption is permitted. The Company is evaluating the impact of adopting the amendments on its consolidated financial statements and related disclosures.

NOTE 3 –INVENTORIES

Inventories consist of the following:

NOTE 4 –OTHER CURRENT ASSETS

Other current assets consist of the following:

NOTE 5 –FIXED AND INTANGIBLE ASSETS, NET

Fixed assets, net, consist of the following:

Depreciation expense on property, plant and equipment was approximately $66,000 and $87,000 for the three months ended September 30, 2026 and 2025, respectively, and is included in sales, general and administrative expenses in the accompanying condensed consolidated statements of operations. Depreciation expense is computed on a straight-line basis with useful lives between three and five years. Leasehold improvements are amortized over the expected term of the lease.

Intangible Assets, net, consist of the following:

Software, consisting primarily of internally developed software for resale, is amortized over three years. Software amortization expense is approximately $115,000 and $125,000 for the three months ended September 30, 2026 and 2025, respectively.

NOTE 6 –ACCRUED EXPENSES

Accrued expenses consist of the following:

NOTE 7 –LINE OF CREDIT

Gibraltar Business Capital Credit Facility

On July 28, 2023, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Gibraltar Business Capital (“GBC”) (the “GBC Credit Facility”). The Loan and Security Agreement provides the Company with a senior secured revolving loan facility for up to $16.0 million (the “Revolving Loan Commitment”). Subject to conditions and terms set forth in the Loan and Security Agreement, the Company may request an increase in the Revolving Loan Commitment from time to time upon not less than 30 days’ notice to GBC which increase may be made at the sole discretion of GBC, as long as: (a) the requested increase is in a minimum amount of $1,000,000, and (b) the total increases do not exceed $5,000,000 and no more than five (5) increases are made. The revolving amount available under the GBC Credit Facility is equal to the lesser of the Revolving Loan Commitment and the borrowing base amount (as defined in the Loan and Security Agreement). The GBC Credit Facility is evidenced by a revolving note, which was initially to mature on July 28, 2025, and has been extended by various amendments to July 31, 2027 (the “Maturity Date”). Outstanding principal under the GBC Credit Facility accrues interest at Secured Overnight Financing Rate (“SOFR”, as defined in the Loan and Security Agreement) plus five and one half of one percent (5.50%) per annum with such interest payment due monthly on the last day of the month. In the event of a default, the amounts due under the Loan and Security Agreement bear interest at a rate per annum equal to three percent (3.0%) above the rate that is otherwise applicable to such amounts. In addition, the Company is required to pay a monthly unused line fee equal to one-half of one percent (0.50%) per annum on the difference between the Revolving Loan Commitment and the average outstanding principal balance of the revolving loan(s) for such month. Concurrently with entering into the Loan and Security Agreement, the Company entered into an Intellectual Property Security Agreement (the “IP Security Agreement”). The loans and other obligations under the GBC Credit Facility are secured by substantially all of the Company’s tangible and intangible assets including, without limitation, intellectual property. As of September 30, 2026, the outstanding balance under the GBC Credit Facility was approximately $6.3 million, with up to $9.7 million available for future borrowings, subject to borrowing base limitations.

On March 31, 2026, the Company notified GBC that it 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.

On September 17, 2026 (the “Amendment No. 7 Effective Date”), the Company entered into Amendment No. 7 to the Loan and Security Agreement (the “Seventh Amendment”) with GBC, which amended certain terms of the Loan and Security Agreement, including, among other things, the addition of covenants requiring the Company to complete a sale of equity interests resulting in net proceeds of not less than $4.0 million within 50 days of the Amendment No. 7 Effective Date and provide to GBC certain projections, budgets and compliance reports with respect to the operation of the Company’s business, with certain material deviations from such budgets constituting an immediate event of default. In addition, the Company and GBC agreed to amend the EBITDA minimum financial covenant of the Company in the Loan and Security Agreement within 90 days of the Amendment No. 7 Effective Date. Notwithstanding the Seventh Amendment, the Company remains in default under the Loan and Security Agreement. GBC has allowed the Company to continue to have access to its revolving credit facility under the Loan and Security Agreement, but GBC has reserved its rights to discontinue such access at any time, declare its commitments to the Company terminated and all obligations of the Company under the Loan and Security Agreement immediately due and payable and/or exercise other remedies available to it, which include, among other things, its rights as a secured party under the Loan and Security Agreement, so long as the Company remains in default.

In consideration for the Seventh Amendment, the Company agreed to pay GBC a non-refundable amendment fee of $135,000 in cash, as follows: (i) $45,000 due and payable on September 17, 2026, (ii) $45,000 due and payable on October 17, 2026, and (iii) $45,000 due and payable on November 16, 2026.

NOTE 8 –COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in any legal proceedings that may arise from time to time may harm the Company’s business. To the best of its knowledge, except for the legal proceedings disclosed below, there are no other material legal proceedings pending against the Company.

Employment-Related Litigation

On April 30, 2024, a former employee (the “Employee”) filed a class action complaint against the Company and Insperity, its third-party payroll service provider, in San Diego County Superior Court for various claims which he has purported to assert on behalf of himself and all other individuals who worked for the Company or Insperity, amended to include a representative action complaint for Violation of Private Attorneys’ General Act (“PAGA”), seeking an unspecified amount of penalties and attorneys’ fees based on allegations that the Company violated certain California employment laws.

A Motion to Compel Arbitration was granted and arbitration was scheduled for March 26, 2026 wherein the parties agreed to a settlement of $164,000.

Final settlement is subject to, among other things, court approval of such agreement. If the settlement does not obtain approval, the parties agree that the settlement class will be decertified without prejudice, and that all the parties will revert to their pre-settlement positions. A settlement agreement has been reached and agreed by both parties.

Lease Obligations

Operating Leases

On April 25, 2019 the Company signed a Standard Industrial/Commercial Multi-Tenant Lease with Accutek to rent approximately 45,600 square feet of industrial space at 2685 S. Melrose Drive, Vista, California. Under the terms of the original lease, the monthly rental rate escalates at 3% each year. The Company has since signed additional amendments and extensions, most recently an extension through November 2028. The Company rents 63,200 square feet of industrial space for a monthly rent of approximately $72,000.

On December 16, 2022, the Company signed a Lease Agreement with MM Parker Court Associates, LLC to rent approximately 4,900 square feet of office space at Building 1959 Parker Court, Suite E, Atlanta, Georgia, set to expire in April 2028, with the monthly rate increasing 5% each year. Currently, the Company pays a monthly rent of approximately $6,000.

Total rent expense was approximately $271,000 and $227,000 for the three months ended September 30, 2026 and 2025, respectively.

Finance Leases

In August 2026, the Company exercised its option to purchase previously leased equipment for a payment of $20,000. As of September 30, 2026 the Company has two finance leases outstanding. Total finance lease expense was approximately $13,000 and $30,000 for the three months ended September 30, 2026 and 2025, respectively.

Lease Commitments

Future minimum lease payments as of September 30, 2026 are as follows:

Product Warranty Obligations

The Company provides product warranties for goods sold. Product warranties are negotiated separately with each customer. Generally, the Company’s product warranties have a five year term for electronics components and an eight year term for battery cells. Other product components have separate warranty periods, and all warranties are voided when the product is used outside certain defined limits.

The Company evaluates its exposure to product warranty obligations based on historical experience. As of September 30 and June 30, 2026, a warranty liability of approximately $2,712,000 and $2,811,000, respectively, is included in accrued expenses on the consolidated balance sheets.

Additionally, the Company granted a certain customer a five-year right of return for goods purchased as a percentage of the original purchase price upon return of the goods to the Company’s warehouse. Management believes that during the entire five-year period, the anticipated fair value of the purchased goods will exceed the amount committed as a refund, it therefore being disadvantageous for the customer to so exercise its right. As such, management neither presently expects, nor in the future will expect the customer to demand such a right of return and refund, and no liability was accrued on the condensed consolidated balance sheets therefor.

NOTE 9 –STOCKHOLDERS’ EQUITY (DEFICIT)

Private Placement

On July 18, 2025, the Company entered into a securities purchase agreement, which was amended and restated on September 15, 2025 (the “Amended and Restated Purchase Agreement”), with certain accredited investors (collectively, the “Purchasers”) pursuant to which, among other things, the Purchasers agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Purchasers, an aggregate of 258,144 Preferred Stock Warrants and 1,214,766 Common Stock Warrants at the aggregate purchase price of approximately $5.0 million (the “Private Placement”). The purchase price was paid in cash or, in the case of purchaser Cleveland Capital, L,P., cash and the cancellation of certain existing debt held by them.

The Securities were offered to a small select group of accredited investors, as defined in Rule 501 of Regulation D, all of whom have a substantial pre-existing relationship with the Company, including certain executives and affiliates of the Company.

The closing of the Private Placement contemplated by the Amended and Restated Purchase Agreement occurred simultaneously on September 15, 2025 upon the satisfaction of certain customary conditions. As of September 30, 2026, proceeds received, net of offering costs of approximately $652,000, were approximately $4,348,000 consisting of $3,175,000 cash and the aforementioned cancellation of $1,173,000 of outstanding debt and accrued interest. As of September 30, 2025, proceeds received, net of offering costs of approximately $600,000, were approximately $3,227,000 consisting of $2,054,000 cash and $1,173,000 of debt cancellation. Additional offering costs of $45,000 were incurred during the three months ended December 31, 2025, and $7,000 was incurred during the three months ended March 31, 2026.

The Private Placement Common Stock Warrants and Preferred Stock Warrants are classified as equity. Accordingly, proceeds, net of offering costs, are included in additional paid-in capital on the Company’s condensed consolidated balance sheets.

Public Offering

On November 3, 2025, the Company completed an underwritten public offering (the “Public Offering”) of 3,840,000 shares of its common stock at a public offering price of $2.50 per share, and the Company 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 and which was subsequently exercised in full. The Company received net proceeds of approximately $9,760,000, after offering costs of approximately $1,280,000.

Committed Equity Facility

On May 15, 2026, the Company entered into a purchase agreement (the “CEF Purchase Agreement”) and a related registration rights agreement (the “CEF Registration Rights Agreement”) with Roth Principal Investments, LLC (“Roth”). Subject to the terms and conditions of the CEF Purchase Agreement, the Company may, in its sole discretion, sell to Roth up to $40,000,000 of shares of common stock from time to time during the term of the CEF Purchase Agreement (the “Committed Equity Facility”). The Company is under no obligation to sell any shares, and Roth is required to purchase shares only as directed by management.

Pursuant to the CEF Registration Rights Agreement, the Company filed a registration statement to register the resale of up to 38,461,538 shares of common stock.

From and after June 4, 2026, and for a period of up to 36 months (the “Commitment Period”), unless earlier terminated, the Company may direct Roth to purchase shares of common stock through one or more “Market Open Purchases”, “Intraday Purchases”, “Pre-Market Purchases” or “Post-Market Purchases”, each subject to the terms, conditions, notice requirements, and limitations set forth in the CEF Purchase Agreement, including the requirement that the closing sale price of the Company’s common stock on the trading day immediately prior to the applicable purchase date is not less than the threshold price of $0.50 (the “Threshold Price”).

The per share purchase price for shares sold in a Market Open Purchase, an Intraday Purchase, a Pre-Market Purchase or a Post-Market Purchase is based on the volume weighted average price (“VWAP”) of the Company’s common stock during the applicable valuation period, less a fixed 3.0% discount in the case of a Market Open Purchase or an Intraday Purchase or less a fixed 5.25% discount in the case of a Pre-Market Purchase or a Post-Market Purchase, subject, in each case, to the applicable minimum price thresholds and other adjustments set forth in the CEF Purchase Agreement. There is no upper limit on the per share price that Roth may be required to pay.

Management controls the timing and amount of any sales under the CEF Purchase Agreement. Actual sales, if any, will depend on market conditions, the trading price of the Company’s common stock and management’s determination of capital needs. Net proceeds, if any, are expected to be used for working capital and general corporate purposes. No shares were sold pursuant to the CEF Purchase Agreement during the three months ended September 30, 2026.

As of October 30, 2026, the closing sale price of the Company’s common stock on the Nasdaq Capital Market was $0.43 per share. Given that the closing price of the Company’s common stock is currently below the Threshold Price of $0.50, the Company cannot direct Roth to purchase shares pursuant to the CEF Purchase Agreement until the closing price of the Company’s common stock exceeds the Threshold Price or the Company can amend the CEF Purchase Agreement to decrease the Threshold Price to a price below the closing price of the Company’s common stock. There can be no assurances if or when the Company’s common stock will begin trading at a price that will exceed the Threshold Price or the Company will be able to amend the CEF Purchase Agreement to decrease the Threshold Price.

Preferred Stock

Authorized and Outstanding Shares of Preferred Stock

Effective September 10, 2025,3,000,000 shares of Preferred Stock are authorized, $0.001 par value per share, of which 1,000,000 are Series A Convertible Preferred Stock. As of September 30 and June 30, 2026, there wereno shares of preferred stock outstanding.

Preferred Stock Warrants

In September 2025 and in conjunction with the Private Placement, the Company issued Preferred Stock Warrants to purchase up to 258,144 shares of the Company’s Series A Preferred Stock at an exercise price of $0.001 per share which are then convertible to 2,429,523 shares of common stock, subject to certain adjustments. The Preferred Stock Warrants do not expire. Activity during the fiscal year ended June 30, 2026 and the three months ended September 30, 2026 is reflected below:

Common Stock

Authorized and Outstanding Shares of Common Stock

Effective May 28, 2025,75,000,000 shares of Common Stock are authorized, $0.001 par value per share. As of September 30 and June 30, 2026, there were 21,636,790 and 21,580,992 shares, respectively, of the Company’s common stock outstanding.

Common Stock Warrants

In connection with the Company’s Registered Direct Offering (“RDO”) in September 2021, the Company issued five-year warrants to the RDO investors to purchase up to 1,071,430 shares of the Company’s common stock at an exercise price of $7.00 per share with an estimated fair value of approximately $3,874,000. These warrants expired September 27, 2026.

In May 2022 and in conjunction with entry into a credit facility with Cleveland, HPO and other lenders, the Company issued five-year warrants to the lenders to purchase up to 128,000 shares of the Company’s common stock at an exercise price of $2.53 per share with a fair value of approximately $173,000.

In June 2022 and in conjunction with the entry into the Second Amendment to the Loan and Security Agreement with SVB, the Company issued twelve-year warrants to SVB and its designee, SVB Financial Group, to purchase up to 40,806 shares of the Company’s common stock at an exercise price of $2.23 per share with a fair value of approximately $80,000.

In November 2023 and in conjunction with the entry into the 2023 Subordinated LOC, the Company issued five-year warrants to Cleveland Capital, L.P. to purchase up to 41,196 shares of the Company’s common stock at an exercise price of $3.24 per share with a fair value of approximately $92,000.

In September 2025 and in conjunction with the Private Placement, the Company issued Common Stock Warrants to purchase up to 1,214,766 shares of the Company’s common stock at an exercise price of $1.715 per share and exercisable for five years from date of issuance with a fair value of $2,144,000.

Activity in the Company’s Common Stock Warrants during the year ended June 30, 2026 and the three months ended September 30, 2026 are reflected below:

Equity Award Plans

The Company awards stock options, restricted stock units and performance stock units.

On February 17, 2015, the Company’s stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan expired on November 26, 2024, at which time no future stock or stock option awards could be granted under the plan.

April 29, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan authorizes the issuance of awards for up to 2,000,000 shares of common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates. As of September 30, 2026,266,901 shares of the Company’s common stock were available for future grants under the 2021 Plan.

On May 28, 2025, the Company’s stockholders approved the 2025 Equity Incentive Plan (the “2025 Plan”). The 2025 Plan authorizes the issuance of awards for up to 1,000,000 shares of common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates. As of September 30, 2026,1,000,000 shares of the Company’s common stock were available for future grants under the 2025 Plan.

Stock Options

On July 8, 2026, a total of 222,222 common stock options were granted under the 2021 Plan to two of the Company’s Board of Directors as director compensation for the fiscal year ending June 30, 2027. The options vest on March 26, 2027 at a grant date fair value of $31,000.

Activity in stock options during the year ended June 30, 2026 and three months ended September 30, 2026, and related balances outstanding, are reflected below:

Restricted Stock Units and Performance Stock Units

The Company’s Equity Award Plans allows for grants of Restricted Stock Units (“RSUs”), which include performance-based stock units (“PSUs”). The awards are subject to the terms and conditions provided in (i) the Restricted Stock Unit Award Agreement for time-based awards, and (ii) the Performance Restricted Stock Unit Award Agreement for PSUs. Subject to vesting requirements set forth in the applicable RSU or PSU award agreement, one share of common stock is issuable for one vested RSU or PSU, as applicable. The fair value of time-based RSUs and PSUs without a market condition is the closing stock price of the Company’s common stock on the date of grant. The fair value of PSUs with market conditions is determined using the Monte Carlo valuation method. Compensation recorded for RSUs and PSUs was $146,000 for the three months ended September 30, 2026. Management determined as of September 30, 2026 that achieving the performance conditions required for vesting of performance-based PSUs is not probable.

On May 28, 2025, a total of 200,000 time-based RSUs were granted under the 2021 Plan to the Company’s Board of Directors as director compensation for the fiscal year ended June 30, 2026. The RSUs vested on May 28, 2026 at a grant date fair value of $320,000.

On August 1, 2025, a total of 121,951 time-based RSUs were granted by the Company’s Board of Directors under the 2021 Plan to the Company’s Chief Executive Officer (“CEO”).40,650 of these RSUs vested on July 1, 2026. Also on August 1, 2025, a total of 182,927 PSUs were granted by the Company’s Board of Directors under the 2021 Plan to the Company’s CEO, of which 122,561 PSUs contained only performance conditions for which the Company has determined that achievement is not probable, and 60,366 PSUs contained a stock appreciation condition. These 2025 grants had a grant date fair value of $494,000.

On July 8, 2026, a total of 148,148 time-based RSUs were granted under the 2021 Plan to two of the Company’s Board of Directors as director compensation for the fiscal year ended June 30, 2027. The RSUs vest on March 26, 2027 and had a grant date fair value of $160,000.

Activity in RSUs and PSUs during the year ended June 30, 2026 and the three months ended September 30, 2026 and related balances outstanding are reflected below:

Employee Stock Purchase Plan

On March 6, 2023, the Company’s Board of Directors approved the 2023 Employee Stock Purchase Plan (the “2023 ESPP”), and on April 20, 2023, the 2023 ESPP was approved by the Company’s stockholders. The 2023 ESPP enables eligible employees of the Company and certain of its subsidiaries (a “Participating Subsidiary”) to use payroll deductions to purchase shares of the Company’s common stock and acquire an ownership interest in the Company. The maximum aggregate number of shares of the Company’s common stock that have been reserved as authorized for the grant of options under the 2023 ESPP is 350,000 shares, subject to adjustment as provided for in the 2023 ESPP. Each eligible employee may authorize payroll deductions of 1% to 15% of the eligible employee’s compensation on each pay day to be used to purchase up to 1,500 shares of common stock for the employee’s account occurring during an offering period. The 2023 ESPP has a term of ten (10) years commencing on April 20, 2023, the date of approval by the Company’s stockholders, unless otherwise earlier terminated.

Under the provisions of the 2023 ESPP, participants purchase common stock at 85% of the closing price of the Company’s common stock at the start or end of each six-month offering period, whichever is lower. Compensation expense recorded for the ESPP was $4,000 for the three months ended September 30, 2026. Common stock purchases under the 2023 ESPP are reflected below:

NOTE 10 –STOCK BASED COMPENSATION EXPENSE

Stock-based compensation (“SBC”) expense represents the estimated fair value of stock options, RSUs, PSUs and ESPP shares at the beginning of each offering period, amortized under the straight-line method over the requisite service period and reduced for estimated forfeitures. For PSUs with only performance conditions, recognition of SBC expense is delayed until the performance-based vesting conditions are deemed probable of being achieved, at which time the unrecognized SBC to date is recognized. For PSUs with market conditions, SBC expense is recognized beginning on the date of grant over the requisite service period regardless of whether the market condition is ultimately satisfied.

At September 30, 2026, none of the PSUs with performance only conditions were deemed to be probable of achievement and no related stock-based compensation has been recognized to date therefrom. The following table summarizes SBC expense for the three months ended September 30, 2026 and 2025:

At September 30, 2026 and 2025, the unamortized stock-based compensation expense relating to outstanding stock options, RSUs and PSUs (excluding PSUs with performance conditions deemed “not probable”) was approximately $886,000 and $1,105,000, respectively, which are expected to be expensed over the weighted-average remaining term of 1.3 years and 1.4 years, respectively.

NOTE 11 –NET LOSS PER COMMON SHARE

The Company calculates basic net loss per common share by dividing net loss by the weighted average number of common shares outstanding during the periods. Potential diluted net loss per common share includes the impact from all dilutive potential common shares relating to outstanding convertible securities.

For the three months ended September 30, 2026 and 2025, basic and diluted weighted-average common shares outstanding were 21,621,807 and 16,835,698, respectively. The Company incurred a net loss for the three months ended September 30, 2026 and 2025 and, therefore, basic and diluted loss per share for the periods were the same because all potentially dilutive common share equivalents would have been anti-dilutive. At September 30, 2026 and 2025, potentially dilutive securities excluded from the calculation of diluted weighted-average common shares outstanding were as follows:

NOTE 12 –CONCENTRATIONS

Credit Risk

The Company is subject to potential concentrations in credit risk that consist principally of its cash deposits in banking institutions and its unsecured trade accounts receivable.

The Company maintains cash balances in non-interest-bearing bank deposit accounts at a California commercial bank. The Company’s cash balance at this institution is secured by the Federal Deposit Insurance Corporation up to $250,000. As of September 30, 2026 and June 30, 2026, cash deposited was approximately $409,000 and $305,000, respectively. The Company has not experienced any losses in its cash accounts, and therefore management believes that the Company is not exposed to any significant credit risk with respect to its cash deposits.

As of September 30, 2026, the Company had two major customers that each represented more than 10% of its accounts receivable on an individual basis, and together represented approximately $3,071,000 or 68% of its total accounts receivable. Of that total,99.9% is outstanding for less than 60 days from invoice date. The Company has not experienced, nor does it expect to experience, any significant losses in such accounts. Management therefore believes that the Company is not exposed to any significant credit risk with respect to its trade accounts receivable.

Customer Concentrations

During the three months ended September 30, 2026, the Company had three major customers that each represented more than 10% of its revenues on an individual basis, and together represented approximately $5,385,000 or 80% of its total revenues. During the three months ended September 30, 2025, the Company had two major customers that each represented more than 10% of revenues on an individual basis and together represented approximately $10,142,000 or 77% of total revenues.

Suppliers/Vendor Concentrations

The Company obtains components and supplies included in its products from a group of suppliers. The Company does not manufacture the battery cells used in energy storage solutions. Battery cells, which are an integral part of energy storage solutions, are sourced from a single manufacturer located in China. 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., imports from the battery cell supplier in China were temporarily paused. 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 the Company’s ability to cost-effectively source from the supplier in China.

During the three months ended September 30, 2026 the Company had one supplier who accounted for more than 10% of its total purchases, which represented approximately $1,843,000 or 27% of its total purchases. During the three months ended September 30, 2025, the Company had one supplier that accounted for more than 10% of total purchases on an individual basis and represented approximately $1,686,000 or 15% of total purchases.

NOTE 13 –SEGMENT INFORMATION

The Company hasone business activity and derives its revenue from the design, development, manufacturing and sale of a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of industrial commercial sectors which include material handling, airport ground support equipment (“GSE”), and stationary energy storage. Accordingly, the Company operates as a single operating and reporting segment. The Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer. The CODM reviews financial information including operating results and assets on a consolidated basis.

When evaluating the Company’s financial performance and making strategic decisions, the CODM uses net loss and Adjusted EBITDA to assess performance and allocate financial, capital and personnel resources. Net loss and Adjusted EBITDA are used in the annual operating plan and forecasting process as well as ongoing decisions driven by the monthly or quarterly reviews of the plan versus actual results.

The table below is a summary of the segment profit or loss, including significant segment expenses, for the periods presented:

Assets provided to the CODM are consistent with those reported on the consolidated balance sheets. All long-lived assets are held in the United States, and revenues and net losses are solely generated from operations in the United States.

NOTE 14 –SUBSEQUENT EVENTS

Management evaluated events subsequent to September 30, 2026 through the filing date of these condensed consolidated financial statements and concluded there are no material subsequent events to disclose.