NeoVolta Inc.

Notes to Financial Statements

Description of Business – NeoVolta Inc. (“we”, “our” or the "Company") is a Nevada corporation, which was formed on March 5, 2018. The Company is a designer, seller and manufacturer of Energy Storage Systems (ESS) which can store and use energy via batteries and an inverter at residential and commercial sites. The Company sells its proprietary ESS units through wholesale customers, initially in California, and in an expanding number of other states. In August 2022, the Company completed an underwritten public offering of its equity securities resulting in its common stock and warrants becoming listed on a national exchange (see Note 3).

*Interim Financial Information *– The Company has prepared the accompanying financial statements, without audit, in accordance with accounting principles generally accepted in the Unites States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, these financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the Company’s financial position as of September 30, 2025, the results of its operations for the three month periods ended September 30, 2025 and 2024, the changes in its stockholders’ equity for the three month periods ended September 30, 2025 and 2024, and cash flows for the three month periods ended September 30, 2025 and 2024. The balance sheet as of June 30, 2025 has been derived from the Company’s June 30, 2025 financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, 2025, as filed with the SEC on September 29, 2025.

Cash and Cash Equivalents – The Company considers all highly liquid accounts with original maturities of three months or less at the date of acquisition to be cash equivalents. Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000, per bank. At September 30, 2025, the Company maintained all of its accounts at one bank and the combined balances of all accounts at this bank was in excess of the FDIC insurance limit by $639,819.

Inventory – Inventory consists of batteries and inverters purchased from Asian suppliers and delivered to a location near the Company’s offices, for assembly into ESS units. Inventory is stated at the lower of cost or net realizable value, cost being determined using the first-in, first out (FIFO) method. The Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value of inventory to the lower of cost or net realizable value based on its assessment of market conditions, inventory turnover and current stock levels. Inventory write-downs are charged to cost of goods sold. The following table presents the components of inventory as of September 30, 2025 and June 30, 2025:

Revenue Recognition – The Company recognizes revenue in accordance with Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). Revenues are recognized when control of the promised goods is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. Revenue is recognized based on the following five step model:

The Company generates revenues from contracts with customers, consisting of a relatively small number of wholesale dealers and installers, in California and several other states. Four such dealers represented approximately 35%,18%,11% and 11% of the Company’s revenues in the three months ended September 30, 2025, however, no other dealers accounted for more than 10% of the revenues in such period. Three dealers represented approximately 22%,15% and 15% of the Company’s accounts receivable as of September 30, 2025. Three dealers represented approximately 37%,26% and 13% of the Company’s revenues in the three months ended September 30, 2024. Since all of the Company’s revenue is currently generated from the sales of similar products, no further disaggregation of revenue information for the three months ended September 30, 2025 and 2024 is provided.

Allowance for Expected Credit Losses – The Company recognizes an allowance for expected credit losses based on the assessed risk of loss for a customer's account, reflecting the net amount expected to be collected. As of September 30, 2025 and June 30, 2025, our allowance for expected credit losses was $450,000 and $314,200, respectively.

Stock Compensation Expense – Employee and non-employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period.

Loss Per Common Share – Basic loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. As of September 30, 2025, the Company had total outstanding common stock equivalents of 2,948,150 shares as follows: (i)1,670,000 shares related to restricted stock units granted to three officers since April 2024; (ii)1,081,150 shares related to warrants issued to investors in the public offering completed in August 2022; (iii)147,000 shares for Non-Qualified Stock Options granted to employees in August 2025; and (iv)50,000 shares related to restricted stock units granted to an officer in March 2022 (see Note 3).

Research and Development Costs – Research and development costs are expensed as incurred.

Use of Estimates – Management has made a number of estimates and assumptions in preparing these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

Recent Accounting Pronouncements – From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, (“FASB”), or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards, including ASU 2023-07,*Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,*and prospective standards that are not yet effective, including ASU 2024-03,Income Statement – Reporting Comprehensive Income – Expense disaggregation disclosures (Topic 220-40): Disaggregation of Income Statement Expenses, are not expected to have a significant impact on the Company’s financial statement disclosures upon adoption. The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

Liquidity – These financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern has been dependent upon the ability of the Company to obtain necessary debt and equity financing to continue operations and the attainment of profitable operations.

As disclosed in Note 2, we entered into an agreement with a financing entity in September 2024 whereby we have obtained a line of credit for borrowings of up to $5,000,000, in order to meet any near-term borrowing needs. As a result, we believe that we will have sufficient financial resources available to us in order to operate our business for at least the next 12 months from the date these financial statements are issued.

On September 3, 2024, we entered into an agreement with a newly formed financing entity whereby we obtained a line of credit for borrowings of up to $5,000,000. Under this agreement, we are obligated to make periodic payments to the lender of accrued interest, at the rate of 16% per annum, on any outstanding borrowings that we make, with the principal and any unpaid accrued interest being due at maturity on September 3, 2028. In order to secure such borrowings, we have granted a security interest in all of our assets to the lender. As a condition of receiving this line of credit from the lender, we have agreed not to issue any securities pursuant to the Company’s Form S-3 (file number 333-280400), without the lender’s consent, so long as any borrowing remains outstanding. As of September 30, 2025, we had made net borrowings under this credit agreement in the amount of $633,538, leaving an available balance of $4,366,462. Accrued interest as of September 30, 2025 was $48,646.

In the month of November 2024, we initiated short-term borrowings from a commercial accounts receivable lender under a loan agreement allowing for borrowings, secured by certain property interests, of up to a principal amount of $4,000,000. In the three months ended September 30, 2025, we made borrowings from this lender to finance customer shipments and related costs in the total amount of $4,199,549. The lender charges a placement fee of 1% on each borrowing and assesses interest at the rate of 2.5% per month on the outstanding borrowings. Borrowings are to be repaid upon the earlier of: (i) 120 days from the borrowing date; or (ii) receipt of payment from the customer. In the event of default, interest is assessed at the default rate of 1% per 7 days. In the three months ended September 30, 2025, we repaid $2,660,497 of such borrowings, including accrued interest and fees, leaving an outstanding balance as of that date, including accrued interest and fees, of $4,142,275 (see Note 5).

Common Stock – In September 2025, the Company commenced plans for a private equity offering of shares of its common stock to accredited investors. As of September 30, 2025, the Company had received a cash deposit from a potential investor in the amount of $800,000. Pending the subsequent closing of the offering, of which there is no assurance, the Company has accounted for it as an advance received for stock subscription under current liabilities on its balance sheet as of September 30, 2025.

In August 2022, the Company completed an underwritten public offering of its equity securities in the form of Units with each Unit consisting of one share of common stock and one warrant (each, a “Warrant” and collectively, the “Warrants”) to purchase one share of common stock at an exercise price of $4.00 per share. The shares of common stock and the Warrants comprising the Units were immediately separated at closing of the offering and each is now independently listed on the NASDAQ Capital Market. Each Warrant became exercisable on the date of issuance and will expire five years from the date of issuance.

In the underwritten public offering, a total of 1,121,250 Units, including exercise of the underwriter’s overallotment option, were sold at an offering price to the public of $4.00 per Unit. The gross proceeds of the offering were $4,485,000 and the net proceeds, after deduction of underwriting discounts and other offering costs were approximately $3,780,000. The Company also granted the underwriter non-tradeable warrants to purchase a total of 58,500 shares of common stock at an exercise price of $4.40 per share for a period of five years.

Warrants – As of September 30, 2025, there were outstanding Warrants for a total of 1,081,150 shares of common stock issued to investors which are exercisable at any time up to August 1, 2027. The Warrants may be exercised upon payment of the exercise price in cash on or prior to the expiration date. Under the terms of the Warrant Agreement, we must use our best efforts to maintain the effectiveness of the registration statement and current prospectus relating to common stock issuable upon exercise of the Warrants until the expiration of the Warrants. If we fail to maintain the effectiveness of the registration statement and current prospectus relating to the common stock issuable upon exercise of the Warrants, the holders of the Warrants shall have the right to exercise the Warrants solely via a cashless exercise feature provided for in the Warrants, until such time as there is an effective registration statement and current prospectus.

The following table presents activity with respect to the Company’s warrants for the three months ended September 30, 2025:

These warrants were issued in conjunction with an underwritten public equity offering, therefore, there was no employee or non-employee compensation expense recognized.

Stock Compensation Expense – On August 22, 2025, we issued Non-Qualified Stock Options to a group of our non-executive employees to purchase a total of 147,000 shares of our common stock at the current stock price of $3.60 per share, pursuant to the provisions of our 2019 Stock Option Plan. These options are exercisable for a period of 5 years from the date of issuance and will become vested on a ratable basis over a period of 3 years from the date of issuance. Using the Black-Scholes valuation model, and assuming expected volatility of 78.6% and current interest rate of 4.3%, we have calculated that the total fair value of these options as of the date of issuance was approximately $349,500, and we are amortizing this total amount to stock compensation expense on a straight-line basis over the 3-year vesting period of the options.

The following table presents activity with respect to our Non-Qualified Stock Options for the three months ended September 30, 2025:

In April 2024, we entered into an employment agreement with a new Chief Executive Officer (“CEO”), providing for an initial term extending through June 30, 2027, which will be automatically renewed for additional one-year terms unless either party chooses not to renew it. Pursuant to the agreement, our new CEO received an initial equity grant equal to 1,280,000 restricted stock units (“RSU’s”), with a grant date value of $2,854,000, which will vest over a four-year period, subject to his continued employment with the Company, and will be entitled to earn additional RSU’s on each anniversary in the form of three annual performance-based equity grants, beginning in the year ending June 30, 2025, with a target value of up to $660,000 each. However, our Compensation Committee has not set any definitive targets, therefore, no additional grants have been made as of September 30, 2025.

In February 2025, we entered into an amended and restated employment agreement with our Chief Financial Officer (“CFO”). The initial term of the employment agreement ends on December 31, 2027 and will be automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. Pursuant to the agreement, we issued our CFO an award of 240,000 RSUs vesting in four annual installments. In February 2022, we entered into an earlier amended and restated employment agreement with our CFO, pursuant to which we issued him an RSU award for up to 300,000 shares of our common stock upon achieving two defined milestones. The first milestone was achieved as of January 1, 2023, and the underlying 250,000 shares of common stock were issued to our CFO as of that date. The second milestone was achieved as of January 1, 2024, and the underlying 50,000 shares of common stock are expected to be issued to our CFO at a later date.

In January 2025, we entered into an employment agreement with our former Chief Operating Officer and current Chief Business Officer (“CBO”). The initial term of the employment agreement ends on December 31, 2027 and will be automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. Pursuant to the agreement, we issued our CBO an award of 150,000 RSUs vesting in three annual installments. As a result, we presently have a total of 1,670,000 RSUs that have been issued to our three officers. For all of these awards, we have calculated the grant date value of such awards and are amortizing it as stock compensation expense over the underlying vesting periods. We have recognized stock compensation expense applicable to such RSU awards in the three months ended September 30, 2025 and 2024 in the amounts of $293,025 and $221,524, respectively (see Note 5).

In February 2025, we entered into a referral agreement with a marketing company to market our products to qualified solar and energy storage system installers. The term of the referral agreement ends on December 31, 2026. Pursuant to the agreement, the only compensation that the marketing company will be entitled to receive will be through the issuance of shares of our common stock in exchange for reaching specified target levels of product sales, up to a maximum total of 2,000,000 shares for reaching a total of 2,500 units sold and paid for. In accordance with ASC 718, we are accounting for this agreement based on our periodic assessments of the probability of reaching such target levels.

In conjunction with our public offering in August 2022, we appointed two new independent directors and adopted a new compensation plan for all independent directors based on an annual compensation amount of $65,000 with not less than 70% of such amount paid in shares of our common stock, calculated based on the share price at the end of such prior fiscal quarter, and up to 30% paid in cash, with such final amounts to be determined by each director. As of September 30, 2025 and 2024, we booked an accrual of $48,750 of compensation expense (of which $43,875 will be settled through the issuance of shares) for our three independent directors under this plan.

In the three months ended September 30, 2025, we recognized total non-cash stock compensation expense of $466,765 as follows: (i) $293,025 for the amortized value of the RSUs granted to our three executive officers; (ii) $43,875 for the amortized value of the portion of the new compensation plan for our independent directors that is attributable to stock; (iii) $117,418 for the value of the shares issuable to a distribution company pursuant to a April 2025 distribution agreement; and (iv) $12,447 for the amortized value of the Non-Qualified Stock Options issued to non-executive employees in August 2025. There was a total of 88,965 shares of our common stock that were issued to various grantees for services in the three months ended September 30, 2025, all of which were previously expensed in the year ended June 30, 2025.

In the three months ended September 30, 2024, we recognized total non-cash stock compensation expense of $265,399 as follows: (i) $221,524 for the amortized value of the RSUs granted to our chief executive officer, as previously described, plus a non-executive recipient of another RSU award granted in June 2024; and (ii) $43,875 for the amortized value of the portion of the new compensation plan for our independent directors that is attributable to stock. There were a total of 9,776 shares of our common stock that were issued to two grantees in the three months ended September 30, 2024, which were previously expensed in the year ended June 30, 2024.

Other Matters – In February 2019, the Company’s Board of Directors approved the establishment of a new 2019 Stock Plan (“Plan”) with an authorization for the issuance of up to 2,500,000 shares of common stock. In December 2024, the Plan was amended to increase the number of shares of common stock authorized for issuance by 5,000,000 shares. The Plan is designed to provide for future discretionary grants of stock options, stock awards and stock unit awards to key employees, consultants, advisors, and non-employee directors. As of September 30, 2025, we have made total awards of 2,669,219 shares under the Plan as follows: (i) RSUs for 2,120,000 shares granted to our executive officers, as noted above; (ii)197,335 shares for the initial services of our three independent directors in the years ended June 30, 2025, 2024 and 2023, pursuant to the compensation plan adopted in August 2022 for independent directors; (iii)204,884 shares granted to various consultants for their services and to wholesale dealers under an incentive sales program; and (iv) Non-Qualified Stock Options to purchase 147,000 shares granted to employees in August 2025.

Effective February 1, 2025, the Company relocated its corporate and manufacturing office space to a nearby facility in Poway, California, under a 13 month sublease agreement with the sublandlord, at a base rental of $18,638 per month. We are accounting for the lease agreement as an operating lease under ASU 2016-02,Leases (Topic 842). Accordingly, the Company has capitalized the present value of the future lease obligations and is amortizing the related right-of-use asset on a straight-line basis each month over the term of the lease.

We are dependent on our two main component vendors for our suppliers of batteries, inverters and other raw materials and the inability of these single-source suppliers to deliver necessary components of our products according to our schedule and at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components, could have a material adverse effect on our financial condition and operating results. Beginning in April 2025, the Trump Administration implemented a significant increase in tariff rates on all goods imported from China, although it was temporarily suspended for 90 days in April 2025 and the suspension has been extended to November 2025, subject to judicial review. Prior to the tariff escalation in April 2025, we had anticipated the likelihood of facing such a tariff increase and began stockpiling our inventory of these two components.

From time to time in the ordinary course of our business, the Company may be involved in legal proceedings, the outcomes of which may not be determinable. The Company is not involved in any legal proceedings at this time. The results of litigation are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources. We are not able to estimate an aggregate amount or range of reasonably possible losses for those legal matters for which losses are not probable and estimable.

Asset Purchase Agreement -

On October 15, 2025, we closedan Asset Purchase Agreement (the “Agreement”) with Neubau Energy Inc. (“Neubau”), a privately-owned company based in California, and its shareholders, whereby the Company acquired substantially all of Neubau’s assets consisting mostly of intellectual property and other intangible assets along with a relatively small amount of tangible inventory and fixed assets. Neubau has developed a proprietary battery storage module but has not had any commercial sales of the product. With this acquisition, the Company is able to produce and sell Neubau’s proprietary module, which is a complement to the Company’s products.

The total consideration paid at closing was approximately $1.5 million consisting of cash in the amount of $500,000 and 200,000 shares of the Company’s common stock. The Company will also pay Neubau a royalty of $10.00 per unit of Neubau’s proprietary module sold bythe Company for a period of three years following the closing. Additionally, Neubau has the right to receive up to 4,000,000 additional shares of the Company’s common stock if certain sales milestones related to Neubau’s proprietary product are met within specified time periods through December 31, 2028. The Company is planning to account for this transaction as an acquisition of assets and plans to assign the total purchase price paid at closing to the fair value of the assets acquired.

In conjunction with closing the asset purchase, we entered into employment agreements with the two principals of Neubau covering a three year period ending September 30, 2028. One of the principals was appointed as the Company’s Chief Operating Officer replacing our former Chief Operating Officer engaged in January 2025 in that capacity (see Note 3), and our former Chief Operating Officer has now been re-designated as our Chief Product Officer. The other principal was appointed as our Chief Technology Officer. Pursuant to their employment agreements, we granted each of the two new officers an award of 450,000 RSUs (900,000 RSUs in total), vesting in three annual installments.

Other Reportable Events

Effective October 1, 2025, we entered into an extension of our sublease agreement with the sublandlord on our corporate and manufacturing office space from an expiration date of February 28, 2026 to March 31, 2031. Future undiscounted lease payments under the extended lease agreement are approximately $1.2 million, exclusive of operating expenses and obligations under the existing lease agreement. We will capitalize the present value of the future lease obligations under the extended sublease agreement and amortize the related right-of-use asset on a straight-line basis over the term of the extended lease (see Note 4).

On October 15, 2025, we entered into an Exchange Agreement with our commercial lender who has provided short-term financing to us for customer shipments and related costs under a loan agreement beginning in November 2024. Pursuant to a negotiated exchange ratio in the Exchange Agreement, we issued 200,000 shares of our common stock to the lender in exchange for reducing the outstanding principal loan balance that we owed to the lender in the amount of $500,000 (see Note 2).

On October 16, 2025, we issued a total of 47,757 shares of our common stock to the three independent members of our Board of Directors as consideration for their services rendered in the year ended June 30, 2025. We recognized the underlying expense for such services in the year ended June 30, 2025.