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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2023

 

or

 

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________________ to ______________

 

Commission File Number: 001-41447

 

 

NeoVolta, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   82-5299263

(State or other jurisdiction

of incorporation)

 

(I.R.S. Employer

Identification No.)

 

13651 Danielson Street, Suite A

Poway, CA

  92064

(Address of principal

executive offices)

  (zip code)

 

Registrant’s telephone number, including area code: (800) 364-5464

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol (s) Name of each exchange on which registered
Common Stock, par value $0.001 per share NEOV The NASDAQ Stock Market LLC
Warrants, each warrant exercisable for one share of common stock NEOVW The NASDAQ Stock Market LLC

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes: ☒ No: ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐   Accelerated filer ☐
Non-accelerated filer   Smaller reporting company
   

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No

 

The number of shares outstanding of Common Stock, par value $0.001 per share, as of May 12, 2023, was 33,155,127 shares.

 

 

   

 

 

NEOVOLTA, INC.

FORM 10-Q

MARCH 31, 2023

 

INDEX

 

  Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS  
   
PART I. FINANCIAL INFORMATION  
   
Item 1. Financial Statements 4
Balance Sheets as of March 31, 2023 (Unaudited) and June 30, 2022 4
Statements of Operations for the three months ended March 31, 2023 and 2022 (Unaudited) 5
Statements of Operations for the nine months ended March 31, 2023 and 2022 (Unaudited) 6

Statements of Stockholders’ Equity for the nine months ended March 31, 2023 and 2022 (Unaudited)

7

Statements of Cash Flows for the nine months ended March 31, 2023 and 2022 (Unaudited)

8
Notes to Financial Statements (Unaudited) 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
   

PART II. OTHER INFORMATION

 
   
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 22
Item 4. Mine Safety Disclosures 22
Item 5. Other Information 22
Item 6. Exhibits 22
Signatures 23

 

 

 

 

 

 

 2 

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We make forward-looking statements under the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Report. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Report.

 

You should read the matters described in, and incorporated by reference in, “Risk Factors” and the other cautionary statements made in this Report, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements.

 

All forward-looking statements speak only at the date of the filing of this Quarterly Report. You should not rely upon forward-looking statements as predictions of future events. The reader should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we provide no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended June 30, 2022, as filed with the SEC on September 27, 2022. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. We do not undertake any obligation to update or revise publicly any forward-looking statements except as required by law, including the securities laws of the United States and the rules and regulations of the SEC.

 

 

 

 

 

 3 

 

 

PART I . FINANCIAL INFORMATION

 

ITEM 1.Financial Statements

 

NEOVOLTA, INC.

Balance Sheets

 

 

         
   March 31,   June 30, 
   2023   2022 
   (Unaudited)     
         
Assets          
Current assets:          
Cash and cash equivalents  $3,460,190   $330,385 
Accounts receivable, net   1,737,651    1,317,738 
Inventory   1,362,289    2,238,208 
Prepaid insurance and other current assets   205,710    239,001 
Total current assets   6,765,840    4,125,332 
           
Total assets  $6,765,840   $4,125,332 
           
Liabilities and Stockholders' Equity          
Current liabilities:          
Accounts payable  $   $205,600 
Accrued interest payable       53,436 
Other accrued liabilities   87,651    127,356 
Convertible notes payable       1,068,000 
Total current liabilities   87,651    1,454,392 
           
Convertible notes payable       53,716 
Total liabilities   87,651    1,508,108 
           
Commitments and contingencies (Note 4)        
           
Stockholders' equity:          
Common stock, $0.001 par value, 100,000,000 shares authorized, 33,155,127 and 21,977,251 shares issued and outstanding   33,155    21,978 
Additional paid-in capital   24,763,356    18,394,641 
Accumulated deficit   (18,118,322)   (15,799,395)
Total stockholders' equity   6,678,189    2,617,224 
           
Total liabilities and stockholders' equity  $6,765,840   $4,125,332 

 

 

See accompanying notes to unaudited financial statements.

 

 

 

 

 4 

 

 

NEOVOLTA, INC.

Statements of Operations

(Unaudited)

 

 

         
   Three Months Ended 
   March 31, 
   2023   2022 
         
Revenues from contracts with customers  $629,010   $932,903 
Cost of goods sold   537,261    810,563 
Gross profit   91,749    122,340 
           
Operating expenses:          
General and administrative   723,271    620,214 
Research and development   1,290     
Total operating expenses   724,561    620,214 
           
Loss from operations   (632,812)   (497,874)
           
Other income (expense):          
Interest expense       (21,829)
Total other income (expense)       (21,829)
           
Net loss  $(632,812)  $(519,703)
           
Weighted average shares outstanding - basic and diluted   33,151,685    20,287,634 
           
Net loss per share - basic and diluted  $(0.02)  $(0.03)

 

See accompanying notes to unaudited financial statements.

 

 

 

 

 

 5 

 

 

NEOVOLTA, INC.

Statements of Operations

(Unaudited)

 

 

         
   Nine Months Ended 
   March 31, 
   2023   2022 
         
Revenues from contracts with customers  $2,733,951   $3,567,634 
Cost of goods sold   2,302,380    3,033,263 
Gross profit   431,571    534,371 
           
Operating expenses:          
General and administrative   2,716,428    5,114,267 
Research and development   29,936    66,503 
Total operating expenses   2,746,364    5,180,770 
           
Loss from operations   (2,314,793)   (4,646,399)
           
Other income (expense):          
Interest expense   (4,134)   (31,365)
Total other income (expense)   (4,134)   (31,365)
           
Net loss  $(2,318,927)  $(4,677,764)
           
Weighted average shares outstanding - basic and diluted   31,650,491    20,082,627 
           
Net loss per share - basic and diluted  $(0.07)  $(0.23)

 

See accompanying notes to unaudited financial statements.

 

 

 

 

 

 

 6 

 

 

NEOVOLTA, INC.

Statements of Stockholders' Equity

Nine Months Ended March 31, 2023 and 2022

(Unaudited)

 

 

                     
           Additional       Total 
   Common Stock   Paid-in   Accumulated   Stockholders' 
   Shares   Amount   Capital   Deficit   Equity 
                     
Balance at June 30, 2022   21,977,251   $21,978   $18,394,641   $(15,799,395)  $2,617,224 
Issuance of common stock in underwritten public offering   1,121,250    1,121    3,779,284        3,780,405 
Issuance of common stock for conversion of debt and accrued interest   9,671,867    9,672    1,169,614        1,179,286 
Stock compensation expense           591,816        591,816 
Net loss               (698,586)   (698,586)
                          
Balance at September 30, 2022   32,770,368    32,771    23,935,355    (16,497,981)   7,470,145 
Stock compensation expense   75,000    75    719,220        719,295 
Net loss               (987,529)   (987,529)
                          
Balance at December 31, 2022   32,845,368    32,846    24,654,575    (17,485,510)   7,201,911 
Stock compensation expense   309,759    309    108,781        109,090 
Net loss               (632,812)   (632,812)
                          
Balance at March 31, 2023   33,155,127   $33,155   $24,763,356   $(18,118,322)  $6,678,189 

 

           Additional       Total 
   Common Stock   Paid-in   Accumulated   Stockholders' 
   Shares   Amount   Capital   Deficit   Equity 
                     
Balance at June 30, 2021   19,640,888   $19,641   $13,169,363   $(10,040,370)  $3,148,634 
Issuance of common stock for conversion of debt and accrued interest   203,630    204    1,079        1,283 
Stock compensation expense   154,165    154    130,469        130,623 
Adjustment for change in accounting principle           (87,116)   45,809    (41,307)
Net loss               (128,207)   (128,207)
                          
Balance at September 30, 2021   19,998,683    19,999    13,213,795    (10,122,768)   3,111,026 
Stock compensation expense           3,870,935        3,870,935 
Net loss               (4,029,854)   (4,029,854)
                          
Balance at December 31, 2021   19,998,683    19,999    17,084,730    (14,152,622)   2,952,107 
Issuance of common stock for conversion of debt and accrued interest   895,000    895    4,744        5,639 
Stock compensation expense   1,083,568    1,084    358,728        359,812 
Net loss               (519,703)   (519,703)
                          
Balance at March 31, 2022   21,977,251   $21,978   $17,448,202   $(14,672,325)  $2,797,855 

 

See accompanying notes to unaudited financial statements.

 

 

 7 

 

 

NEOVOLTA, INC.

Statements of Cash Flows

(Unaudited)

 

 

         
   Nine Months Ended 
   March 31, 
   2023   2022 
         
Cash flows from operating activities:          
Net loss  $(2,318,927)  $(4,677,764)
Adjustments to reconcile net loss to net cash used in operations:          
Stock compensation expense   1,420,201    4,361,370 
Bad debt expense   380,000     
Changes in current assets and liabilities          
Accounts receivable   (799,913)   (232,921)
Inventory   875,919    (15,481)
Prepaid insurance and other current assets   33,291    (119,086)
Accounts payable   (205,600)   (49,343)
Accrued expenses   (35,571)   25,533 
Net cash flows used in operating activities   (650,600)   (707,692)
           
Cash flows from financing activities:          
Underwritten public offering of common stock   3,780,405     
Proceeds from convertible notes payable       1,068,000 
Net cash flows provided by financing activities   3,780,405    1,068,000 
           
Net increase in cash and cash equivalents   3,129,805    360,308 
           
Cash and cash equivalents at beginning of period   330,385    425,681 
           
Cash and cash equivalents at end of period  $3,460,190   $785,989 
           
Supplemental disclosures of cash flow information          
Cash paid for interest  $   $ 
Cash paid for income taxes  $   $ 
           
Supplemental non-cash financing activities          
Conversion of convertible debt and accrued interest into common stock  $1,179,286   $6,922 
Adjustment of debt discount related to adoption of new accounting principle  $   $87,116 

 

See accompanying notes to unaudited financial statements.

 

 

 

 8 

 

 

NEOVOLTA, INC.

Notes to Financial Statements

(Unaudited)

 

 

(1) Business and Summary of Significant Accounting Policies

 

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, primarily 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 March 31, 2023, the results of its operations for the three and nine month periods ended March 31, 2023 and 2022, the changes in its stockholders’ equity for the nine month periods ended March 31, 2023 and 2022, and cash flows for the nine month periods ended March 31, 2023 and 2022. The balance sheet as of June 30, 2022 has been derived from the Company’s June 30, 2022 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, 2022, as filed with the SEC on September 27, 2022.

 

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 March 31, 2023, the Company maintained accounts at two different banks, of which the balance at the first bank was within the FDIC insurance limit while the balance at the second bank was in excess of the FDIC insurance limit by $3,028,474.

 

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 following table presents the components of inventory as of March 31, 2023 and June 30, 2022:

 

         
   March 31,   June 30, 
   2023   2022 
         
Raw materials  $1,299,494   $1,844,049 
Work in process   62,795    22,768 
Finished goods       371,391 
           
Total  $1,362,289   $2,238,208 

 

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. No inventory reserve was required as of March 31, 2023 and June 30, 2022.

 

 

 

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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:

 

·Identification of the contract with a customer
·Identification of the performance obligations in the contract
·Determination of the transaction price
·Allocation of the transaction price to the performance obligations in the contract
·Recognition of revenue when, or as, the Company satisfies a performance obligation

 

The Company generates revenues from contracts with customers, consisting of a relatively small number of wholesale dealers and installers, primarily in California. Three such dealers represented approximately 21%, 18% and 16% of the Company’s revenues in the nine months ended March 31, 2023, however, no other dealers accounted for more than 10% of the revenues in such period. Those same three dealers represented an aggregate of approximately 83% of the Company’s accounts receivable as of March 31, 2023 (net of allowance), however, no other dealers accounted for more than 10% of the accounts receivable as of March 31, 2023. Two dealers represented approximately 22%, and 16% of the Company’s revenues in the nine months ended March 31, 2022. Since all of the Company’s revenue is currently generated from the sales of similar products, no further disaggregation of revenue information for the nine months ended March 31, 2023 and 2022 is provided.

 

Allowance for Doubtful Accounts – The Company recognizes an allowance for doubtful accounts whenever a loss is expected to be incurred in the realization of a customer’s account. As of March 31, 2023 and June 30, 2022, our allowance for doubtful accounts was $380,000 and zero, respectively.

 

Income Taxes – The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. 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.

 

The Company accounts for uncertain tax positions in accordance with the provisions of Accounting Standards Codification (“ASC”) 740-10 which prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on its tax return. The Company evaluates and records any uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon examination and ultimate settlement with the tax authorities in the tax jurisdictions in which it operates.

 

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 March 31, 2023, the Company had total outstanding common stock equivalents of 1,229,750 shares as follows: (i) 1,121,250 shares related to warrants issued to investors in the public offering completed in August 2022; (ii) 58,500 shares related to warrants issued to the underwriters in that same offering; and (iii) 50,000 shares related to restricted stock units granted to an officer in March 2022 (see Note 3).

 

 

 

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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. As a result of the continued spread of the COVID-19 coronavirus since early 2020, economic uncertainties have arisen which could impact business operations, supply chains, energy demand, and commodity prices that are beyond our control. Overall, we have not experienced a material adverse impact to our economic performance or ability to continue our business operations as a result of COVID-19. We continue to monitor COVID-19, but do not believe it will have a material unfavorable impact to our future financial performance at this time.

 

Related Parties - The Company accounts for related party transactions in accordance with ASC 850. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that it might be prevented from fully pursuing its own separate interests is also a related party.

 

Fair Value Measurements and Financial Instruments - ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: 

 

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 

 

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. 

 

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.  The carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. The carrying value of long-term debt approximates fair value since the related rate of interest approximates current market rates.

 

At March 31, 2023 and June 30, 2022, the Company did not have any financial assets or liabilities measured and recorded at fair value on the Company’s balance sheets on a recurring basis.

 

 

 

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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 that are not yet effective will not have a material impact on the Company’s financial position or results of operations 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 equity financing to continue operations and the attainment of profitable operations. As disclosed in Note 3, we completed a public offering of our equity securities in August 2022 that raised total net proceeds of approximately $3,780,000. We anticipate that we will have sufficient cash resources in order to operate our business for at least the next 12 months from the date these financial statements are issued.

 

(2)        Notes Payable

 

In conjunction with the closing of our underwritten public offering in August 2022 (see Note 3), all holders of the Company’s two outstanding series of convertible notes payable, which were originally issued to various accredited investors in May 2018 and October 2021, agreed to convert their debt into a total of 9,671,867 shares of our common stock at the respective conversion rates. Each of these two series of our converted notes payable is further described below.

 

In May 2018, we entered into convertible note payable agreements with a group of accredited investors for aggregate proceeds of $104,688. Each unsecured note originally bore interest at a rate of 12% per annum, which was later reduced by mutual agreement to 3.99% per annum in May 2019. Subsequently, the holders of certain of these notes elected to convert or exchange certain portions of their convertible notes payable into shares of our common stock, based upon the stated conversion rate of $0.0063 per share. As of the closing of our underwritten public offering in August 2022, the holders of the remaining balance of such unconverted notes in the total amount of $59,251, including accrued interest, agreed to convert their debt into a total of 9,404,867 shares of our common stock at the stated conversion rate of $0.0063 per share.

 

In October 2021, we entered into convertible note payable agreements with a group of accredited investors for aggregate proceeds of $1,068,000. Each unsecured note bore interest at a rate of 6% per annum. As of the closing of our underwritten public offering in August 2022, pursuant to the terms of such convertible notes, the notes were automatically converted into a total of 267,000 shares of our common stock at the stated conversion rate of $4.00 of principal per share.

 

(3)        Equity

 

Common Stock – 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.

 

 

 

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In conjunction with the public offering, all holders of the Company’s 2018 convertible notes in the total amount of $59,251, including accrued interest, converted their debt into a total of 9,404,867 shares of common stock at the stated conversion rate, and all holders of the Company’s 2021 convertible notes in the total amount of $1,068,000 converted their debt into a total of 267,000 shares of common stock at the stated conversion rate (see Note 2).

 

In the nine months ended March 31, 2022, the holders of the 2018 convertible notes payable having total principal and accrued interest balances in the aggregate amount of $6,922 elected to convert their notes. Based upon the stated conversion price of $0.0063 per share, these holders converted their notes payable into a total of 1,098,630 shares of common stock (see Note 2).

 

Warrants – The Warrants for a total of 1,179,750 shares of common stock issued to investors and the underwriters are exercisable at any time after their original issuance and at any time up to the date that is five years after their original issuance, or 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 nine months ended March 31, 2023:

 

                    
   Number   Wtd. Avg.   Wtd. Avg.   Aggregate 
   of   Exercise   Remaining   Intrinsic 
   Shares   Price   Term (Yrs.)   Value 
Outstanding at July 1, 2022      $           
Warrants issued to Public Investors   1,121,250    4.00        
Warrants issued to Underwriters   58,500    4.40         
Outstanding at March 31, 2023   1,179,750   $4.02    4.3   $ 
                     
Exercisable at March 31, 2023   1,179,750   $4.02    4.3   $ 

 

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 – In February 2022, we entered into a new employment agreement with our Chief Executive Officer (“CEO”), effective April 1, 2022. The initial term of the employment agreement was one year and is automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. The agreement provides for an initial annual salary of $165,000. Pursuant to the agreement, we issued our CEO a restricted stock unit (“RSU”) award for up to 150,000 shares of our common stock upon achieving the following milestones (which achievements shall be determined by the Board): (i) Milestone 1 - Successfully complete an uplisting of our common stock in 2022 and continue his employment with our company until January 1, 2023: 50,000 shares; and (ii) Milestone 2 - Produce 2,000 ESSs in 2022 and continue his employment with our company until January 1, 2023: 100,000 shares. As of January 1, 2023, Milestone 1 was achieved, however, Milestone 2 was not achieved. The underlying 50,000 shares of common stock earned under Milestone 1 were issued to the CEO as of that date.

 

 

 

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In February 2022, we entered into a new employment agreement with our Chief Financial Officer (“CFO”), effective March 1, 2022. The initial term of the employment agreement is one year and is automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. The agreement provides for an initial annual salary of $125,000. Pursuant to the agreement, we issued our CFO an RSU award for up to 300,000 shares of our common stock upon achieving the following milestones (which achievements shall be determined by the Board): (i) Milestone 1 - Successfully complete an uplisting of our common stock in 2022 and continue his employment with our company until January 1, 2023: 250,000 shares; and (ii) Milestone 2 - successfully complete and file the Company’s Form 10-K for the year ended June 30, 2023 no later than September 29, 2023 and continue his employment with our company until January 1, 2024: 50,000 shares. Milestone 1 was achieved as of January 1, 2023, and the underlying 250,000 shares of common stock earned under Milestone 1 were issued to the CFO as of that date.

 

Based upon the Company’s assessment of the probability of the CEO and CFO ultimately achieving each milestone specified under the RSU awards indicated above, the Company has calculated the grant date value of such awards and is amortizing it as stock compensation expense over the underlying performance periods. The Company has recognized stock compensation expense applicable to such RSU awards in the nine months ended March 31, 2023 in the amount of $1,200,723.

 

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 to be paid quarterly 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 March 31, 2023, we booked an initial accrual of $146,250 of compensation expense (of which $131,625 will be settled through the issuance of shares) for our three independent directors under this plan. At the same time, we also granted 26,000 shares, with a grant date value of $97,500, to various advisors pursuant to annual contracts for their services.

 

In the nine months ended March 31, 2023, we recognized total non-cash stock compensation expense of $1,420,201 as follows: (i) $1,200,723 for the amortized value of the RSUs granted to our two executive officers, as previously described; (ii) $131,625 for the amortized value of the portion of the new compensation plan for our independent directors that is attributable to stock; (iii) $60,625 for the amortized value of the shares granted to various advisors under their annual service contracts; and (iv) $27,228 for the fair value of incentive shares earned by two wholesale dealers as of December 31, 2022 (see Note 4). There was a total of 384,759 shares of common stock that were issued to various grantees, including our two executive officers, in the nine months ended March 31, 2023, of which 75,000 shares were previously expensed in the year ended June 30, 2022.

 

In the nine months ended March 31, 2022, we recognized total non-cash stock compensation expense of $4,361,370 as follows: (i) $3,505,000 for the fair value of 500,000 incentive shares earned as of December 31, 2021 by a company controlled by the Company’s CEO under a previous compensation plan (which were not issued until early 2022); (ii) $193,314 for the initial amortized value of the RSUs granted to our two executive officers, as previously described; (iii) $175,250 for the fair value of 25,000 bonus shares earned as of December 31, 2021 by an outside attorney (which were not issued until early 2022); (iv) $236,619 for the amortized value of 50,000 shares granted to an attorney and a consultant pursuant to one year service agreements in mid 2021; (v) $191,125 for the amortized value of 50,000 shares attributable to a new independent director in early 2021; and (vi) $60,062 for the fair value of 8,568 incentive shares earned by a wholesale dealer as of December 31, 2021 (see Note 4). There was a total of 1,237,733 shares of common stock that were issued to various grantees, primarily advisors, attorneys and consultants, in the nine months ended March 31, 2022.

 

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. 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 March 31, 2023, the Company has made awards totaling 450,000 shares for the RSUs granted to two executives, as noted above, under the Plan.

 

 

 

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(4)       Commitments and Contingencies

 

Effective January 1, 2021, the Company secured new corporate and manufacturing office space under a sublease agreement with its contract manufacturer. Under the terms of the sublease agreement, the Company is required to make rental payments of $10,350 per month during the initial one-year term of the agreement. The sublease agreement is renewable upon mutual agreement of both parties for up to four additional years at a modest increase in the monthly rent, however, the Company is under no obligation to renew it. Management has determined that the exercise of the renewal option is not reasonably certain and, as such, the Company has accounted for it as a short-term lease under ASC 842, Leases. Effective January 1, 2023, the Company elected to renew the agreement for another one year period (see Note 5).

 

As indicated in Note 1, the Company sells its proprietary ESS units through wholesale dealers, primarily in California. In that regard, the Company has entered into agreements with several wholesale dealers operating in California and other states under which the Company has incentivized the dealers to achieve quarterly sales above targeted levels by agreeing to grant them shares of the Company’s common stock for exceeding such quarterly sales targets, subject to defined maximums.

 

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.

 

(5)        Subsequent Events

 

In April 2023, we amended the agreement with our contract manufacturer (see Note 4) to provide for the purchase by us of all of the contract manufacturer’s existing inventory used to assemble our ESS units and to also provide for the eventual assumption by us of full responsibility for the manufacturing of our ESS units. Pursuant to the amended agreement, we completed the purchase of our contract manufacturer’s assembly inventory by making a cash payment of $1.3 million to this company and have now recorded such purchased inventory on our balance sheet. We presently expect to assume full responsibility for the manufacturing process surrounding our ESS units from the contract manufacturer by June 1, 2023. All of our manufacturing certifications are listed under NeoVolta. This amended agreement has no effect on the present sublease agreement with our contract manufacturer.

 

 

 

 

 

 

 

 

 

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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Introduction

 

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II. Other Information - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contained in our Annual Report on Form 10-K for the year ended June 30, 2022, filed with the Securities and Exchange Commission on September 27, 2022 (the “Annual Report”).

 

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited financial statements included above under “Part I - Financial Information” - “Item 1. Financial Statements”.

 

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “NEOV”, refer specifically to NeoVolta, Inc.

 

In addition, unless the context otherwise requires and for the purposes of this Report only:

 

·“Exchange Act” refers to the Securities Exchange Act of 1934, as amended; 

 

·“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and

 

·“Securities Act” refers to the Securities Act of 1933, as amended. 

 

Overview

 

We are a designer, manufacturer, and seller of high-end Energy Storage Systems (or ESS), primarily our NeoVolta NV14 and NV 24, which can store and use energy via batteries and an inverter at residential or commercial sites. We were founded to identify new ways to leverage emerging technologies with the dynamic changes that are taking place in the energy delivery space. We primarily market and sell our products directly to our certified solar installers and solar equipment distributors. We are also pursuing agreements with residential developers, commercial developers, and other commercial opportunities. Because we are purely dedicated to energy solar systems, virtually all of our current resources and efforts go into further developing our flagship NV14 and NV 24 products, while focusing on specific industry needs for our next generation of products. We believe we are unique in the marketplace due to our low cost, our innovative battery chemistry, our product versatility and our commitment to installer service. Because of these factors, we believe NeoVolta is uniquely equipped to establish itself as a major player in the energy storage market.

 

In May 2019, we completed a public offering of 3,500,000 shares of our common stock at an offering price of $1.00 per share for gross proceeds of $3.5 million pursuant to Regulation A of the Securities Act. We used the proceeds of the offering to ramp up production, marketing, and sales of our NV14 product line. In that regard, we have used the proceeds from the offering to fund the marketing, production and distribution of our products, which commenced in July 2019 through a group of wholesale customers in California, as well as to provide additional working capital for other corporate purposes. We have expanded to include one wholesale distribution customer in Nevada. As of the current date, we have had successful installations of our products in the additional States of Arizona, Nevada, Georgia, Utah, Florida, Puerto Rico, Oklahoma, Texas, Colorado, Wyoming, Tennessee, and Missouri.

 

As further discussed below under “Underwritten Public Offering,” we completed an underwritten public offering of our equity securities in the form of Units in August 2022. We sold a total of 1,121,250 Units in the offering at an offering price to the public of $4.00 per Unit. The gross proceeds of the offering were $4,485,000 and the net proceeds, after deduction of underwriting discounts and other offering costs, were approximately $3,780,000. We are using the proceeds of this public offering to increase our current production capacity, expand our product portfolio, enlarge our product marketing and sales efforts, and for other general corporate purposes.

 

 

 

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Underwritten Public Offering

 

In early August 2022, we completed an underwritten public offering of our equity securities in the form of Units with each Unit consisting of one share of common stock and one warrant (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 under the symbols “NEOV” and “NEOVW,” respectively. Each Warrant became exercisable on the date of issuance and will expire five years from the date of issuance.

 

Between the initial closing of the offering and the underwriters’ exercise of the overallotment option, we sold a total of 1,121,250 Units in the offering at an offering price to the public of $4.00 per Unit. The gross proceeds of the offering, including the underwriters’ exercise of the overallotment option, were $4,485,000 and the net proceeds, after deduction of underwriting discounts and other offering costs, were approximately $3,780,000. We are using the proceeds of this public offering to increase our current production capacity, expand our product portfolio, enlarge our product marketing and sales efforts, and for other general corporate purposes.

 

In conjunction with the public offering, all holders of the Company’s 2018 convertible notes in the total amount of $59,251, including accrued interest, converted their debt into a total of 9,404,867 shares of common stock at the stated conversion rate, and all holders of the Company’s 2021 convertible notes in the total amount of $1,068,000 converted their debt into a total of 267,000 shares of common stock at the stated conversion rate. As a result of the simultaneous conversion of both sets of convertible notes, the Company has fully eliminated its convertible debt.

 

Results of Operations

 

The following discussion reflects the Company’s revenues and expenses for the three and nine month periods ended March 31, 2023 and 2022, as reported in our financial statements included in Item 1.

 

Three months ended March 31, 2023 versus three months ended March 31, 2022

 

Revenues - Revenues from contracts with customers for the three months ended March 31, 2023 were $629,010 compared to $932,903 for the three months ended March 31, 2022. Such decrease was primarily due to the pendency of the April 2023 effective date of new utility regulations in the State of California that we believe caused an economic disincentive for residential utility customers to acquire our energy storage systems prior to the effective date of those regulations (see “Item 1A. Risk Factors” for a discussion of the new utility regulations).

 

Cost of Goods Sold - Cost of goods sold for the three months ended March 31, 2023 were $537,261 compared to $810,563 for the three months ended March 31, 2022. The cost of goods sold in both periods reflected the cost of procuring and assembling the component parts of the energy storage systems that were sold in each fiscal year and resulted in gross profits on such sales of approximately 15% and 13%, respectively.

 

General and Administrative Expense - General and administrative expenses for the three months ended March 31, 2023 were $723,271 compared to $620,214 for the three months ended March 31, 2022. Such increase was due to the recognition of an allowance for bad debts of $380,000, partially offset by a decrease in stock compensation expense related the Company’s equity incentive programs.

 

Research and Development Expense - Research and development expenses for the three months ended March 31, 2023 were $1,290 compared to zero for the three months ended March 31, 2022. Such fluctuation was due to a modest increase in the level of the Company’s recent product development efforts.

 

 

 

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Interest Expense - Interest expense for the three months ended March 31, 2023 was zero compared to $21,829 for the three months ended March 31, 2022. This decrease resulted from the conversion of our 2018 and 2021 convertible notes in conjunction with the closing of our public equity offering in August 2022.

 

Net Loss - Net loss for the three months ended March 31, 2023 was $632,812 compared to $519,703 for the three months ended March 31, 2022, representing the aggregate of the various revenue and expense categories indicated above. The Company has not recognized any income tax benefit for these net losses due to the uncertainty of its ultimate realization.

 

Nine months ended March 31, 2023 versus nine months ended March 31, 2022

 

Revenues - Revenues from contracts with customers for the nine months ended March 31, 2023 were $2,733,951 compared to $3,567,634 for the nine months ended March 31, 2022. Such decrease was primarily due to the pendency of the April 2023 effective date of new utility regulations in the State of California that we believe caused an economic disincentive for residential utility customers to acquire our energy storage systems prior to the effective date of those regulations (see “Item 1A. Risk Factors” for a discussion of the new utility regulations).

 

Cost of Goods Sold - Cost of goods sold for the nine months ended March 31, 2023 were $2,302,380 compared to $3,033,263 for the nine months ended March 31, 2022. The cost of goods sold in both periods reflected the cost of procuring and assembling the component parts of the energy storage systems that were sold in each fiscal year and resulted in gross profits on such sales of approximately 16% and 15%, respectively.

 

General and Administrative Expense - General and administrative expenses for the nine months ended March 31, 2023 were $2,716,428 compared to $5,114,267 for the nine months ended March 31, 2022. Such decrease was primarily due to the reduction in the expense recorded for the fair value of incentive shares of common stock earned by the Company’s executive officers under their new employment contracts, effective in March 2022.

 

Research and Development Expense - Research and development expenses for the nine months ended March 31, 2023 were $29,936 compared to $66,503 for the nine months ended March 31, 2022. Such fluctuation was due to a decrease in the level of the Company’s recent product development efforts.

 

Interest Expense - Interest expense for the nine months ended March 31, 2023 was $4,134 compared to $31,365 for the nine months ended March 31, 2022. This decrease resulted from the conversion of our 2018 and 2021 convertible notes in conjunction with the closing of our public equity offering in August 2022.

 

Net Loss - Net loss for the nine months ended March 31, 2023 was $2,318,927 compared to $4,677,764 for the nine months ended March 31, 2022, representing the aggregate of the various revenue and expense categories indicated above. The Company has not recognized any income tax benefit for these net losses due to the uncertainty of its ultimate realization.

 

Liquidity and Capital Resources

 

Operating activities. Net cash used in operating activities in the nine months ended March 31, 2023 was $650,600 compared to $707,692 in the nine months ended March 31, 2022, reflecting a modest decrease in net working capital requirements in the current fiscal year period.

 

Financing activities. Net cash provided by financing activities in the nine months ended March 31, 2023 was $3,780,405, compared to $1,068,000 in the nine months ended March 31, 2022. As further discussed below, our net cash provided by financing activities in the nine months ended March 31, 2023 was entirely attributable to the successful completion of an underwritten public offering of our equity securities in early August 2022. Our net cash provided by financing activities in the nine months ended March 31, 2022 resulted from the issuance of our convertible notes payable to a group of accredited investors in October 2021 in the amount of $1,068,000. Such notes were ultimately converted into common stock in conjunction with the closing of our public offering in August 2022.

 

 

 

 18 

 

 

We completed an underwritten public offering of our equity securities in the form of Units in early August 2022. Each Unit consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $4.00 per share. We sold a total of 1,121,250 Units in the offering at an offering price to the public of $4.00 per Unit. The gross proceeds of the offering, including the underwriters’ exercise of the overallotment option, were $4,485,000 and the net proceeds, after deduction of underwriting discounts and other offering costs, were approximately $3,780,000.

 

In conjunction with the public offering, all holders of our 2018 convertible notes in the total amount of $59,251, including accrued interest, converted their debt into a total of 9,404,867 shares of common stock at the stated conversion rate, and all holders of our 2021 convertible notes in the total amount of $1,068,000 converted their debt into a total of 267,000 shares of common stock at the stated conversion rate. As a result of the simultaneous conversion of both sets of convertible notes, the Company has fully eliminated its convertible debt.

 

As of March 31, 2023, we had a cash balance of $3.5 million and net working capital of approximately $6.7 million. Currently, we are not generating a break-even level of net operating cash flow from our net sales. However, we anticipate that demand for our products will ultimately increase over time and that we will have sufficient cash to operate for at least the next 12 months.

 

Recent Assembly Inventory Purchase

 

In April 2023, we closed the bulk purchase of raw materials inventory from our contract manufacturer by making a cash payment to that company in the amount of $1.3 million. This transaction was completed pursuant to an amendment of our Master Supply Agreement with our contract manufacturer. In addition to the purchase of the raw materials inventory from our contract manufacturer, this amendment provides for the eventual assumption by us of full responsibility from our contract manufacturer for the manufacturing of our proprietary Energy Storage Systems (“ESS”) units. We presently expect to assume such responsibility for the manufacturing process surrounding our ESS units from our contract manufacturer by June 1, 2023. In conjunction with assuming this responsibility, we will hire the four employees of our contract manufacturer who currently perform contract manufacturing services for us. This amended agreement has no effect on our present Sublease Agreement with our contract manufacturer, pertaining to our existing manufacturing location in Poway, CA.

 

Other Developments

 

As a result of the continued spread of the COVID-19 coronavirus since early 2020, economic uncertainties have arisen which could impact business operations, supply chains, energy demand, and commodity prices that are beyond our control. In calendar year 2022, we have experienced some negative impact of the COVID-19 pandemic on the sales of our assembled energy storage systems, primarily through a group of wholesale dealers and installers located in California. We continue to monitor COVID-19, but do not believe it will have a material unfavorable impact to our future financial performance at this time.

 

Off-Balance Sheet Arrangements

 

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of our financial condition and results of operations are based on financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We believe that certain accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. See “Note 1. Business and Summary of Significant Accounting Policies” of the Notes to Financial Statements set forth above and under “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended June 30, 2022, as filed with the SEC on September 27, 2022, for a further description of our critical accounting policies and estimates.

 

 

 

 19 

 

 

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Information for this Item is not required as the Registrant is a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.

 

ITEM 4.CONTROLS AND PROCEDURES

 

Evaluation of disclosure controls and procedures

 

We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer, who is our principal executive officer, and Chief Financial Officer, who is our principal financial and accounting officer, to allow timely decisions regarding required disclosures.

 

As of March 31, 2023, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as a result of the material weakness relating to the lack of segregation of duties, our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were not effective. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. We will be required to hire additional personnel in order to remediate our material weakness.

 

Changes in internal controls over financial reporting

 

There was no change in our internal controls over financial reporting that occurred during the quarter ended March 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

 

 

 

 

 20 

 

 

PART II. OTHER INFORMATION

 

 

ITEM 1.LEGAL PROCEEDINGS

 

Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not currently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us, or contemplated to be brought against us.

 

ITEM 1A.RISK FACTORS

 

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2022, as filed with the SEC on September 27, 2022 (the “Form 10-K”), under the heading “Risk Factors”, except as set forth below, which are incorporated by reference herein and investors should review the risks provided in the Form 10-K prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended June 30, 2022, under “Risk Factors”, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.

 

The following are new risk factors which supplements the risk factors included in our Form 10-K:

 

Recent utility regulations enacted in the State of California in December 2022 have had a negative impact on the sales of our energy storage systems in that state.

 

On December 15, 2022, the California Public Utilities Commission (“CPUC”) unanimously passed a new statewide utility regulation known as Net Energy Metering 3.0 (“NEM 3.0”). This new regulation became effective 120 days after enactment, on April 14, 2023, and significantly alters the net billing rates for residential solar production in the State of California and ultimately impacts the monthly energy bill savings for homeowners. While this new regulation was pending, we believe that it caused a negative impact on the sales of our energy storage systems in the State of California during the recent periods ended March 31, 2023. Now that NEM 3.0 has become effective, however, we believe that it will provide an economic incentive for residential utility customers to acquire energy storage systems, such as those sold by NeoVolta, in the State of California.

 

An increase in mortgage interest rates may result in a decrease in demand by homeowners for our residential energy storage systems.

 

Sales volume in our homeowner channel is partially dependent on the construction of new homes and the sale of existing homes in our residential markets. Many customers of our installation partners rely on mortgage loans from banks and other lenders in order to finance a substantial portion of the purchase price for their home, including any related improvements. Increased mortgage interest rates may lead to lower demand for new homes and a reduced number of homes available for solar origination through our homeowner channel. Additionally, increased interest rates may result in fewer secondary home sales, a reduction in the number of customers refinancing their mortgages and uncertainty about the economy.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

There have been no sales of unregistered securities during the three months ended March 31, 2023.

 

 

 

 21 

 

 

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.OTHER INFORMATION

 

None.

 

ITEM 6.EXHIBITS

 

Exhibit No.   Exhibit Description
31.1*   Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes- Oxley Act of 2002
31.2*   Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1*   Certification of Principal Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*   Certification of Principal Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS *   Inline XBRL Instance Document
101.SCH *   Inline XBRL Taxonomy Extension Schema Document
101.CAL *   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF *   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE *   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

______________________

* Filed herewith.

 

 

 22 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

NEOVOLTA, INC.

 

May 12, 2023 /s/ Brent S. Willson                                
 

Brent S. Willson

Chief Executive Officer

(Principal Executive Officer)

 

 

May 12, 2023 /s/ Steve Bond                                       
 

Steve Bond

Chief Financial Officer

(Principal Financial/Accounting Officer)

 

 

 

 

 

 

 

 23 

EX-31.1 2 neovolta_ex3101.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION

 

I, Brent S. Willson, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of NeoVolta, Inc. (the “registrant”);

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)[Paragraph intentionally omitted in accordance with SEC Release Nos. 34-47986 and 34-54942];

 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 12, 2023

 

 

/s/ Brent S. Willson

Brent S. Willson

Chief Executive Officer

(Principal Executive Officer)

 

EX-31.2 3 neovolta_ex3102.htm CERTIFICATION

Exhibit 31.2

 

CERTIFICATION

 

I, Steve Bond, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of NeoVolta, Inc. (the “registrant”);

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)[Paragraph intentionally omitted in accordance with SEC Release Nos. 34-47986 and 34-54942];

 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 12, 2023

 

 

/s/ Steve Bond

Steve Bond

Chief Financial Officer

(Principal Financial/Accounting Officer)

 

EX-32.1 4 neovolta_ex3201.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of NeoVolta, Inc. (the “registrant”) on Form 10-Q for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brent S. Willson, Chief Executive Officer of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of this Sarbanes Oxley Act of 2002, that, to my knowledge:

 

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant at the dates and for the periods indicated.

 

 

/s/Brent S. Willson                                         

Brent S. Willson

Chief Executive Officer

(Principal Executive Officer)

May 12, 2023

 

 

EX-32.2 5 neovolta_ex3202.htm CERTIFICATION

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of NeoVolta, Inc. (the “registrant”) on Form 10-Q for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Bond, Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of this Sarbanes Oxley Act of 2002, that, to my knowledge:

 

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant at the dates and for the periods indicated.

 

 

/s/Steve Bond                                                          

Steve Bond

Chief Financial Officer

(Principal Financial/Accounting Officer)

May 12, 2023

 

 

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9 Months Ended
Mar. 31, 2023
May 12, 2023
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Mar. 31, 2023  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --06-30  
Entity File Number 001-41447  
Entity Registrant Name NeoVolta, Inc.  
Entity Central Index Key 0001748137  
Entity Tax Identification Number 82-5299263  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 13651 Danielson Street  
Entity Address, Address Line Two Suite A  
Entity Address, City or Town Poway  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 92064  
City Area Code (800)  
Local Phone Number 364-5464  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Elected Not To Use the Extended Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   33,155,127
Common Stock, par value $0.001 per share    
Title of 12(b) Security Common Stock, par value $0.001 per share  
Trading Symbol NEOV  
Security Exchange Name NASDAQ  
Warrants, each warrant exercisable for one share of common stock    
Title of 12(b) Security Warrants, each warrant exercisable for one share of common stock  
Trading Symbol NEOVW  
Security Exchange Name NASDAQ  
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Balance Sheets (Unaudited) - USD ($)
Mar. 31, 2023
Jun. 30, 2022
Current assets:    
Cash and cash equivalents $ 3,460,190 $ 330,385
Accounts receivable, net 1,737,651 1,317,738
Inventory 1,362,289 2,238,208
Prepaid insurance and other current assets 205,710 239,001
Total current assets 6,765,840 4,125,332
Total assets 6,765,840 4,125,332
Current liabilities:    
Accounts payable 0 205,600
Accrued interest payable 0 53,436
Other accrued liabilities 87,651 127,356
Convertible notes payable 0 1,068,000
Total current liabilities 87,651 1,454,392
Convertible notes payable 0 53,716
Total liabilities 87,651 1,508,108
Commitments and contingencies (Note 4)
Stockholders' equity:    
Common stock, $0.001 par value, 100,000,000 shares authorized, 33,155,127 and 21,977,251 shares issued and outstanding 33,155 21,978
Additional paid-in capital 24,763,356 18,394,641
Accumulated deficit (18,118,322) (15,799,395)
Total stockholders' equity 6,678,189 2,617,224
Total liabilities and stockholders' equity $ 6,765,840 $ 4,125,332
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Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Mar. 31, 2023
Jun. 30, 2022
Statement of Financial Position [Abstract]    
Common Stock, Par or Stated Value Per Share $ 0.001 $ 0.001
Common Stock, Shares Authorized 100,000,000 100,000,000
Common Stock, Shares, Issued 33,155,127 21,977,251
Common Stock, Shares, Outstanding 33,155,127 21,977,251
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Statements of Operations (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Mar. 31, 2023
Mar. 31, 2022
Income Statement [Abstract]        
Revenues from contracts with customers $ 629,010 $ 932,903 $ 2,733,951 $ 3,567,634
Cost of goods sold 537,261 810,563 2,302,380 3,033,263
Gross profit 91,749 122,340 431,571 534,371
Operating expenses:        
General and administrative 723,271 620,214 2,716,428 5,114,267
Research and development 1,290 0 29,936 66,503
Total operating expenses 724,561 620,214 2,746,364 5,180,770
Loss from operations (632,812) (497,874) (2,314,793) (4,646,399)
Other income (expense):        
Interest expense 0 (21,829) (4,134) (31,365)
Total other income (expense) 0 (21,829) (4,134) (31,365)
Net loss $ (632,812) $ (519,703) $ (2,318,927) $ (4,677,764)
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Statements of Operations (Unaudited) (Parenthetical) - $ / shares
3 Months Ended 9 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Mar. 31, 2023
Mar. 31, 2022
Income Statement [Abstract]        
Weighted Average Number of Shares Outstanding, Basic 33,151,685 20,287,634 31,650,491 20,082,627
Weighted Average Number of Shares Outstanding, Diluted 33,151,685 20,287,634 31,650,491 20,082,627
Earnings Per Share, Basic $ (0.02) $ (0.03) $ (0.07) $ (0.23)
Earnings Per Share, Diluted $ (0.02) $ (0.03) $ (0.07) $ (0.23)
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Statements of Stockholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Beginning balance, value at Jun. 30, 2021 $ 19,641 $ 13,169,363 $ (10,040,370) $ 3,148,634
Beginning balance, shares at Jun. 30, 2021 19,640,888      
Issuance of common stock for conversion of debt and accrued interest $ 204 1,079 1,283
Issuance of common stock for conversion of debt and accrued interest, shares 203,630      
Stock compensation expense $ 154 130,469 130,623
Adjustment for change in accounting principle (87,116) 45,809 (41,307)
Net loss (128,207) (128,207)
Ending balance, value at Sep. 30, 2021 $ 19,999 13,213,795 (10,122,768) 3,111,026
Ending balance, shares at Sep. 30, 2021 19,998,683      
Beginning balance, value at Jun. 30, 2021 $ 19,641 13,169,363 (10,040,370) 3,148,634
Beginning balance, shares at Jun. 30, 2021 19,640,888      
Net loss       (4,677,764)
Ending balance, value at Mar. 31, 2022 $ 21,978 17,448,202 (14,672,325) 2,797,855
Ending balance, shares at Mar. 31, 2022 21,977,251      
Beginning balance, value at Sep. 30, 2021 $ 19,999 13,213,795 (10,122,768) 3,111,026
Beginning balance, shares at Sep. 30, 2021 19,998,683      
Stock compensation expense 3,870,935 3,870,935
Net loss (4,029,854) (4,029,854)
Ending balance, value at Dec. 31, 2021 $ 19,999 17,084,730 (14,152,622) 2,952,107
Ending balance, shares at Dec. 31, 2021 19,998,683      
Issuance of common stock for conversion of debt and accrued interest $ 895 4,744 5,639
Issuance of common stock for conversion of debt and accrued interest, shares 895,000      
Stock compensation expense $ 1,084 358,728 359,812
Stock compensation expense, shares 1,083,568      
Net loss (519,703) (519,703)
Ending balance, value at Mar. 31, 2022 $ 21,978 17,448,202 (14,672,325) 2,797,855
Ending balance, shares at Mar. 31, 2022 21,977,251      
Beginning balance, value at Jun. 30, 2022 $ 21,978 18,394,641 (15,799,395) 2,617,224
Beginning balance, shares at Jun. 30, 2022 21,977,251      
Issuance of common stock in underwritten public offering $ 1,121 3,779,284 3,780,405
Issuance of common stock in underwritten public offering, shares 1,121,250      
Issuance of common stock for conversion of debt and accrued interest $ 9,672 1,169,614 1,179,286
Issuance of common stock for conversion of debt and accrued interest, shares 9,671,867      
Stock compensation expense 591,816 591,816
Stock compensation expense, shares 154,165      
Net loss (698,586) (698,586)
Ending balance, value at Sep. 30, 2022 $ 32,771 23,935,355 (16,497,981) 7,470,145
Ending balance, shares at Sep. 30, 2022 32,770,368      
Beginning balance, value at Jun. 30, 2022 $ 21,978 18,394,641 (15,799,395) 2,617,224
Beginning balance, shares at Jun. 30, 2022 21,977,251      
Net loss       (2,318,927)
Ending balance, value at Mar. 31, 2023 $ 33,155 24,763,356 (18,118,322) 6,678,189
Ending balance, shares at Mar. 31, 2023 33,155,127      
Beginning balance, value at Sep. 30, 2022 $ 32,771 23,935,355 (16,497,981) 7,470,145
Beginning balance, shares at Sep. 30, 2022 32,770,368      
Stock compensation expense $ 75 719,220 719,295
Stock compensation expense, shares 75,000      
Net loss (987,529) (987,529)
Ending balance, value at Dec. 31, 2022 $ 32,846 24,654,575 (17,485,510) 7,201,911
Ending balance, shares at Dec. 31, 2022 32,845,368      
Stock compensation expense $ 309 108,781 109,090
Stock compensation expense, shares 309,759      
Net loss (632,812) (632,812)
Ending balance, value at Mar. 31, 2023 $ 33,155 $ 24,763,356 $ (18,118,322) $ 6,678,189
Ending balance, shares at Mar. 31, 2023 33,155,127      
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.23.1
Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Cash flows from operating activities:    
Net loss $ (2,318,927) $ (4,677,764)
Adjustments to reconcile net loss to net cash used in operations:    
Stock compensation expense 1,420,201 4,361,370
Bad debt expense 380,000 0
Changes in current assets and liabilities    
Accounts receivable (799,913) (232,921)
Inventory 875,919 (15,481)
Prepaid insurance and other current assets 33,291 (119,086)
Accounts payable (205,600) (49,343)
Accrued expenses (35,571) 25,533
Net cash flows used in operating activities (650,600) (707,692)
Cash flows from financing activities:    
Underwritten public offering of common stock 3,780,405 0
Proceeds from convertible notes payable 0 1,068,000
Net cash flows provided by financing activities 3,780,405 1,068,000
Net increase in cash and cash equivalents 3,129,805 360,308
Cash and cash equivalents at beginning of period 330,385 425,681
Cash and cash equivalents at end of period 3,460,190 785,989
Supplemental disclosures of cash flow information    
Cash paid for interest 0 0
Cash paid for income taxes 0 0
Supplemental non-cash financing activities    
Conversion of convertible debt and accrued interest into common stock 1,179,286 6,922
Adjustment of debt discount related to adoption of new accounting principle $ 0 $ 87,116
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.23.1
Business and Summary of Significant Accounting Policies
9 Months Ended
Mar. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business and Summary of Significant Accounting Policies

(1) Business and Summary of Significant Accounting Policies

 

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, primarily 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 March 31, 2023, the results of its operations for the three and nine month periods ended March 31, 2023 and 2022, the changes in its stockholders’ equity for the nine month periods ended March 31, 2023 and 2022, and cash flows for the nine month periods ended March 31, 2023 and 2022. The balance sheet as of June 30, 2022 has been derived from the Company’s June 30, 2022 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, 2022, as filed with the SEC on September 27, 2022.

 

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 March 31, 2023, the Company maintained accounts at two different banks, of which the balance at the first bank was within the FDIC insurance limit while the balance at the second bank was in excess of the FDIC insurance limit by $3,028,474.

 

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 following table presents the components of inventory as of March 31, 2023 and June 30, 2022:

 

         
   March 31,   June 30, 
   2023   2022 
         
Raw materials  $1,299,494   $1,844,049 
Work in process   62,795    22,768 
Finished goods       371,391 
           
Total  $1,362,289   $2,238,208 

 

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. No inventory reserve was required as of March 31, 2023 and June 30, 2022.

 

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:

 

·Identification of the contract with a customer
·Identification of the performance obligations in the contract
·Determination of the transaction price
·Allocation of the transaction price to the performance obligations in the contract
·Recognition of revenue when, or as, the Company satisfies a performance obligation

 

The Company generates revenues from contracts with customers, consisting of a relatively small number of wholesale dealers and installers, primarily in California. Three such dealers represented approximately 21%, 18% and 16% of the Company’s revenues in the nine months ended March 31, 2023, however, no other dealers accounted for more than 10% of the revenues in such period. Those same three dealers represented an aggregate of approximately 83% of the Company’s accounts receivable as of March 31, 2023 (net of allowance), however, no other dealers accounted for more than 10% of the accounts receivable as of March 31, 2023. Two dealers represented approximately 22%, and 16% of the Company’s revenues in the nine months ended March 31, 2022. Since all of the Company’s revenue is currently generated from the sales of similar products, no further disaggregation of revenue information for the nine months ended March 31, 2023 and 2022 is provided.

 

Allowance for Doubtful Accounts – The Company recognizes an allowance for doubtful accounts whenever a loss is expected to be incurred in the realization of a customer’s account. As of March 31, 2023 and June 30, 2022, our allowance for doubtful accounts was $380,000 and zero, respectively.

 

Income Taxes – The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. 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.

 

The Company accounts for uncertain tax positions in accordance with the provisions of Accounting Standards Codification (“ASC”) 740-10 which prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on its tax return. The Company evaluates and records any uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon examination and ultimate settlement with the tax authorities in the tax jurisdictions in which it operates.

 

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 March 31, 2023, the Company had total outstanding common stock equivalents of 1,229,750 shares as follows: (i) 1,121,250 shares related to warrants issued to investors in the public offering completed in August 2022; (ii) 58,500 shares related to warrants issued to the underwriters in that same offering; and (iii) 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. As a result of the continued spread of the COVID-19 coronavirus since early 2020, economic uncertainties have arisen which could impact business operations, supply chains, energy demand, and commodity prices that are beyond our control. Overall, we have not experienced a material adverse impact to our economic performance or ability to continue our business operations as a result of COVID-19. We continue to monitor COVID-19, but do not believe it will have a material unfavorable impact to our future financial performance at this time.

 

Related Parties - The Company accounts for related party transactions in accordance with ASC 850. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that it might be prevented from fully pursuing its own separate interests is also a related party.

 

Fair Value Measurements and Financial Instruments - ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: 

 

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 

 

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. 

 

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.  The carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. The carrying value of long-term debt approximates fair value since the related rate of interest approximates current market rates.

 

At March 31, 2023 and June 30, 2022, the Company did not have any financial assets or liabilities measured and recorded at fair value on the Company’s balance sheets on a recurring basis.

 

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 that are not yet effective will not have a material impact on the Company’s financial position or results of operations 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 equity financing to continue operations and the attainment of profitable operations. As disclosed in Note 3, we completed a public offering of our equity securities in August 2022 that raised total net proceeds of approximately $3,780,000. We anticipate that we will have sufficient cash resources in order to operate our business for at least the next 12 months from the date these financial statements are issued.

 

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.23.1
Notes Payable
9 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Notes Payable

(2)        Notes Payable

 

In conjunction with the closing of our underwritten public offering in August 2022 (see Note 3), all holders of the Company’s two outstanding series of convertible notes payable, which were originally issued to various accredited investors in May 2018 and October 2021, agreed to convert their debt into a total of 9,671,867 shares of our common stock at the respective conversion rates. Each of these two series of our converted notes payable is further described below.

 

In May 2018, we entered into convertible note payable agreements with a group of accredited investors for aggregate proceeds of $104,688. Each unsecured note originally bore interest at a rate of 12% per annum, which was later reduced by mutual agreement to 3.99% per annum in May 2019. Subsequently, the holders of certain of these notes elected to convert or exchange certain portions of their convertible notes payable into shares of our common stock, based upon the stated conversion rate of $0.0063 per share. As of the closing of our underwritten public offering in August 2022, the holders of the remaining balance of such unconverted notes in the total amount of $59,251, including accrued interest, agreed to convert their debt into a total of 9,404,867 shares of our common stock at the stated conversion rate of $0.0063 per share.

 

In October 2021, we entered into convertible note payable agreements with a group of accredited investors for aggregate proceeds of $1,068,000. Each unsecured note bore interest at a rate of 6% per annum. As of the closing of our underwritten public offering in August 2022, pursuant to the terms of such convertible notes, the notes were automatically converted into a total of 267,000 shares of our common stock at the stated conversion rate of $4.00 of principal per share.

 

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.23.1
Equity
9 Months Ended
Mar. 31, 2023
Equity [Abstract]  
Equity

(3)        Equity

 

Common Stock – 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.

 

In conjunction with the public offering, all holders of the Company’s 2018 convertible notes in the total amount of $59,251, including accrued interest, converted their debt into a total of 9,404,867 shares of common stock at the stated conversion rate, and all holders of the Company’s 2021 convertible notes in the total amount of $1,068,000 converted their debt into a total of 267,000 shares of common stock at the stated conversion rate (see Note 2).

 

In the nine months ended March 31, 2022, the holders of the 2018 convertible notes payable having total principal and accrued interest balances in the aggregate amount of $6,922 elected to convert their notes. Based upon the stated conversion price of $0.0063 per share, these holders converted their notes payable into a total of 1,098,630 shares of common stock (see Note 2).

 

Warrants – The Warrants for a total of 1,179,750 shares of common stock issued to investors and the underwriters are exercisable at any time after their original issuance and at any time up to the date that is five years after their original issuance, or 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 nine months ended March 31, 2023:

 

                    
   Number   Wtd. Avg.   Wtd. Avg.   Aggregate 
   of   Exercise   Remaining   Intrinsic 
   Shares   Price   Term (Yrs.)   Value 
Outstanding at July 1, 2022      $           
Warrants issued to Public Investors   1,121,250    4.00        
Warrants issued to Underwriters   58,500    4.40         
Outstanding at March 31, 2023   1,179,750   $4.02    4.3   $ 
                     
Exercisable at March 31, 2023   1,179,750   $4.02    4.3   $ 

 

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 – In February 2022, we entered into a new employment agreement with our Chief Executive Officer (“CEO”), effective April 1, 2022. The initial term of the employment agreement was one year and is automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. The agreement provides for an initial annual salary of $165,000. Pursuant to the agreement, we issued our CEO a restricted stock unit (“RSU”) award for up to 150,000 shares of our common stock upon achieving the following milestones (which achievements shall be determined by the Board): (i) Milestone 1 - Successfully complete an uplisting of our common stock in 2022 and continue his employment with our company until January 1, 2023: 50,000 shares; and (ii) Milestone 2 - Produce 2,000 ESSs in 2022 and continue his employment with our company until January 1, 2023: 100,000 shares. As of January 1, 2023, Milestone 1 was achieved, however, Milestone 2 was not achieved. The underlying 50,000 shares of common stock earned under Milestone 1 were issued to the CEO as of that date.

 

In February 2022, we entered into a new employment agreement with our Chief Financial Officer (“CFO”), effective March 1, 2022. The initial term of the employment agreement is one year and is automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. The agreement provides for an initial annual salary of $125,000. Pursuant to the agreement, we issued our CFO an RSU award for up to 300,000 shares of our common stock upon achieving the following milestones (which achievements shall be determined by the Board): (i) Milestone 1 - Successfully complete an uplisting of our common stock in 2022 and continue his employment with our company until January 1, 2023: 250,000 shares; and (ii) Milestone 2 - successfully complete and file the Company’s Form 10-K for the year ended June 30, 2023 no later than September 29, 2023 and continue his employment with our company until January 1, 2024: 50,000 shares. Milestone 1 was achieved as of January 1, 2023, and the underlying 250,000 shares of common stock earned under Milestone 1 were issued to the CFO as of that date.

 

Based upon the Company’s assessment of the probability of the CEO and CFO ultimately achieving each milestone specified under the RSU awards indicated above, the Company has calculated the grant date value of such awards and is amortizing it as stock compensation expense over the underlying performance periods. The Company has recognized stock compensation expense applicable to such RSU awards in the nine months ended March 31, 2023 in the amount of $1,200,723.

 

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 to be paid quarterly 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 March 31, 2023, we booked an initial accrual of $146,250 of compensation expense (of which $131,625 will be settled through the issuance of shares) for our three independent directors under this plan. At the same time, we also granted 26,000 shares, with a grant date value of $97,500, to various advisors pursuant to annual contracts for their services.

 

In the nine months ended March 31, 2023, we recognized total non-cash stock compensation expense of $1,420,201 as follows: (i) $1,200,723 for the amortized value of the RSUs granted to our two executive officers, as previously described; (ii) $131,625 for the amortized value of the portion of the new compensation plan for our independent directors that is attributable to stock; (iii) $60,625 for the amortized value of the shares granted to various advisors under their annual service contracts; and (iv) $27,228 for the fair value of incentive shares earned by two wholesale dealers as of December 31, 2022 (see Note 4). There was a total of 384,759 shares of common stock that were issued to various grantees, including our two executive officers, in the nine months ended March 31, 2023, of which 75,000 shares were previously expensed in the year ended June 30, 2022.

 

In the nine months ended March 31, 2022, we recognized total non-cash stock compensation expense of $4,361,370 as follows: (i) $3,505,000 for the fair value of 500,000 incentive shares earned as of December 31, 2021 by a company controlled by the Company’s CEO under a previous compensation plan (which were not issued until early 2022); (ii) $193,314 for the initial amortized value of the RSUs granted to our two executive officers, as previously described; (iii) $175,250 for the fair value of 25,000 bonus shares earned as of December 31, 2021 by an outside attorney (which were not issued until early 2022); (iv) $236,619 for the amortized value of 50,000 shares granted to an attorney and a consultant pursuant to one year service agreements in mid 2021; (v) $191,125 for the amortized value of 50,000 shares attributable to a new independent director in early 2021; and (vi) $60,062 for the fair value of 8,568 incentive shares earned by a wholesale dealer as of December 31, 2021 (see Note 4). There was a total of 1,237,733 shares of common stock that were issued to various grantees, primarily advisors, attorneys and consultants, in the nine months ended March 31, 2022.

 

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. 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 March 31, 2023, the Company has made awards totaling 450,000 shares for the RSUs granted to two executives, as noted above, under the Plan.

 

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.23.1
Commitments and Contingencies
9 Months Ended
Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

(4)       Commitments and Contingencies

 

Effective January 1, 2021, the Company secured new corporate and manufacturing office space under a sublease agreement with its contract manufacturer. Under the terms of the sublease agreement, the Company is required to make rental payments of $10,350 per month during the initial one-year term of the agreement. The sublease agreement is renewable upon mutual agreement of both parties for up to four additional years at a modest increase in the monthly rent, however, the Company is under no obligation to renew it. Management has determined that the exercise of the renewal option is not reasonably certain and, as such, the Company has accounted for it as a short-term lease under ASC 842, Leases. Effective January 1, 2023, the Company elected to renew the agreement for another one year period (see Note 5).

 

As indicated in Note 1, the Company sells its proprietary ESS units through wholesale dealers, primarily in California. In that regard, the Company has entered into agreements with several wholesale dealers operating in California and other states under which the Company has incentivized the dealers to achieve quarterly sales above targeted levels by agreeing to grant them shares of the Company’s common stock for exceeding such quarterly sales targets, subject to defined maximums.

 

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.

 

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.23.1
Subsequent Events
9 Months Ended
Mar. 31, 2023
Subsequent Events [Abstract]  
Subsequent Events

(5)        Subsequent Events

 

In April 2023, we amended the agreement with our contract manufacturer (see Note 4) to provide for the purchase by us of all of the contract manufacturer’s existing inventory used to assemble our ESS units and to also provide for the eventual assumption by us of full responsibility for the manufacturing of our ESS units. Pursuant to the amended agreement, we completed the purchase of our contract manufacturer’s assembly inventory by making a cash payment of $1.3 million to this company and have now recorded such purchased inventory on our balance sheet. We presently expect to assume full responsibility for the manufacturing process surrounding our ESS units from the contract manufacturer by June 1, 2023. All of our manufacturing certifications are listed under NeoVolta. This amended agreement has no effect on the present sublease agreement with our contract manufacturer.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.23.1
Business and Summary of Significant Accounting Policies (Policies)
9 Months Ended
Mar. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business

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, primarily 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

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 March 31, 2023, the results of its operations for the three and nine month periods ended March 31, 2023 and 2022, the changes in its stockholders’ equity for the nine month periods ended March 31, 2023 and 2022, and cash flows for the nine month periods ended March 31, 2023 and 2022. The balance sheet as of June 30, 2022 has been derived from the Company’s June 30, 2022 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, 2022, as filed with the SEC on September 27, 2022.

 

Cash and Cash Equivalents

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 March 31, 2023, the Company maintained accounts at two different banks, of which the balance at the first bank was within the FDIC insurance limit while the balance at the second bank was in excess of the FDIC insurance limit by $3,028,474.

 

Inventory

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 following table presents the components of inventory as of March 31, 2023 and June 30, 2022:

 

         
   March 31,   June 30, 
   2023   2022 
         
Raw materials  $1,299,494   $1,844,049 
Work in process   62,795    22,768 
Finished goods       371,391 
           
Total  $1,362,289   $2,238,208 

 

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. No inventory reserve was required as of March 31, 2023 and June 30, 2022.

 

Revenue Recognition

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:

 

·Identification of the contract with a customer
·Identification of the performance obligations in the contract
·Determination of the transaction price
·Allocation of the transaction price to the performance obligations in the contract
·Recognition of revenue when, or as, the Company satisfies a performance obligation

 

The Company generates revenues from contracts with customers, consisting of a relatively small number of wholesale dealers and installers, primarily in California. Three such dealers represented approximately 21%, 18% and 16% of the Company’s revenues in the nine months ended March 31, 2023, however, no other dealers accounted for more than 10% of the revenues in such period. Those same three dealers represented an aggregate of approximately 83% of the Company’s accounts receivable as of March 31, 2023 (net of allowance), however, no other dealers accounted for more than 10% of the accounts receivable as of March 31, 2023. Two dealers represented approximately 22%, and 16% of the Company’s revenues in the nine months ended March 31, 2022. Since all of the Company’s revenue is currently generated from the sales of similar products, no further disaggregation of revenue information for the nine months ended March 31, 2023 and 2022 is provided.

 

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts – The Company recognizes an allowance for doubtful accounts whenever a loss is expected to be incurred in the realization of a customer’s account. As of March 31, 2023 and June 30, 2022, our allowance for doubtful accounts was $380,000 and zero, respectively.

 

Income Taxes

Income Taxes – The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. 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.

 

The Company accounts for uncertain tax positions in accordance with the provisions of Accounting Standards Codification (“ASC”) 740-10 which prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on its tax return. The Company evaluates and records any uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon examination and ultimate settlement with the tax authorities in the tax jurisdictions in which it operates.

 

Stock Compensation Expense

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

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 March 31, 2023, the Company had total outstanding common stock equivalents of 1,229,750 shares as follows: (i) 1,121,250 shares related to warrants issued to investors in the public offering completed in August 2022; (ii) 58,500 shares related to warrants issued to the underwriters in that same offering; and (iii) 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 – Research and development costs are expensed as incurred.

 

Use of Estimates

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. As a result of the continued spread of the COVID-19 coronavirus since early 2020, economic uncertainties have arisen which could impact business operations, supply chains, energy demand, and commodity prices that are beyond our control. Overall, we have not experienced a material adverse impact to our economic performance or ability to continue our business operations as a result of COVID-19. We continue to monitor COVID-19, but do not believe it will have a material unfavorable impact to our future financial performance at this time.

 

Related Parties

Related Parties - The Company accounts for related party transactions in accordance with ASC 850. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that it might be prevented from fully pursuing its own separate interests is also a related party.

 

Fair Value Measurements and Financial Instruments

Fair Value Measurements and Financial Instruments - ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: 

 

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 

 

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. 

 

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.  The carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. The carrying value of long-term debt approximates fair value since the related rate of interest approximates current market rates.

 

At March 31, 2023 and June 30, 2022, the Company did not have any financial assets or liabilities measured and recorded at fair value on the Company’s balance sheets on a recurring basis.

 

Recent Accounting Pronouncements

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 that are not yet effective will not have a material impact on the Company’s financial position or results of operations 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

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 equity financing to continue operations and the attainment of profitable operations. As disclosed in Note 3, we completed a public offering of our equity securities in August 2022 that raised total net proceeds of approximately $3,780,000. We anticipate that we will have sufficient cash resources in order to operate our business for at least the next 12 months from the date these financial statements are issued.

 

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   March 31,   June 30, 
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Mar. 31, 2022
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Mar. 31, 2023
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Warrant exercisable, aggregate intrinsic value | $ $ 0
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10-Q true 2023-03-31 false 001-41447 NeoVolta, Inc. NV 82-5299263 13651 Danielson Street Suite A Poway CA 92064 (800) 364-5464 Common Stock, par value $0.001 per share NEOV NASDAQ Warrants, each warrant exercisable for one share of common stock NEOVW NASDAQ Yes Yes Non-accelerated Filer true true false false 33155127 3460190 330385 1737651 1317738 1362289 2238208 205710 239001 6765840 4125332 6765840 4125332 0 205600 0 53436 87651 127356 0 1068000 87651 1454392 0 53716 87651 1508108 0.001 0.001 100000000 100000000 33155127 33155127 21977251 21977251 33155 21978 24763356 18394641 -18118322 -15799395 6678189 2617224 6765840 4125332 629010 932903 537261 810563 91749 122340 723271 620214 1290 0 724561 620214 -632812 -497874 -0 21829 0 -21829 -632812 -519703 33151685 33151685 20287634 20287634 -0.02 -0.02 -0.03 -0.03 2733951 3567634 2302380 3033263 431571 534371 2716428 5114267 29936 66503 2746364 5180770 -2314793 -4646399 4134 31365 -4134 -31365 -2318927 -4677764 31650491 31650491 20082627 20082627 -0.07 -0.07 -0.23 -0.23 21977251 21978 18394641 -15799395 2617224 1121250 1121 3779284 3780405 9671867 9672 1169614 1179286 591816 591816 -698586 -698586 32770368 32771 23935355 -16497981 7470145 75000 75 719220 719295 -987529 -987529 32845368 32846 24654575 -17485510 7201911 309759 309 108781 109090 -632812 -632812 33155127 33155 24763356 -18118322 6678189 19640888 19641 13169363 -10040370 3148634 203630 204 1079 1283 154165 154 130469 130623 -87116 45809 -41307 -128207 -128207 19998683 19999 13213795 -10122768 3111026 3870935 3870935 -4029854 -4029854 19998683 19999 17084730 -14152622 2952107 895000 895 4744 5639 1083568 1084 358728 359812 -519703 -519703 21977251 21978 17448202 -14672325 2797855 -2318927 -4677764 1420201 4361370 380000 0 799913 232921 -875919 15481 -33291 119086 -205600 -49343 -35571 25533 -650600 -707692 3780405 0 0 1068000 3780405 1068000 3129805 360308 330385 425681 3460190 785989 0 0 0 0 1179286 6922 0 87116 <p id="xdx_808_eus-gaap--OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureAndSignificantAccountingPoliciesTextBlock_zd99JljxVVoa" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>(<span style="font-size: 10pt">1) <span id="xdx_820_zdEtt3uPmpne">Business and Summary of Significant Accounting Policies</span></span></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p id="xdx_84F_ecustom--DescriptionOfBusinessPolicyTextBlock_zuk7KKJfNrYe" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_86A_zdzIT8OE57ec">Description of Business</span></i> – 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, primarily 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).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_84C_ecustom--InterimFinancialInformationPolicyTextBlock_ztuqipJeRwP8" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_860_zk9ZkK4oygM8">Interim Financial Information</span> </i>– 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 March 31, 2023, the results of its operations for the three and nine month periods ended March 31, 2023 and 2022, the changes in its stockholders’ equity for the nine month periods ended March 31, 2023 and 2022, and cash flows for the nine month periods ended March 31, 2023 and 2022. The balance sheet as of June 30, 2022 has been derived from the Company’s June 30, 2022 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, 2022, as filed with the SEC on September 27, 2022.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_847_eus-gaap--CashAndCashEquivalentsPolicyTextBlock_zPC0JZwyW5fi" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_868_zQc4aHL6iWw">Cash and Cash Equivalents</span></i> – 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 March 31, 2023, the Company maintained accounts at two different banks, of which the balance at the first bank was within the FDIC insurance limit while the balance at the second bank was in excess of the FDIC insurance limit by $<span id="xdx_904_eus-gaap--CashFDICInsuredAmount_iI_pp0p0_c20230331_z4g4D3pmPhh8" title="FDIC uninsured amount">3,028,474</span>.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_84F_eus-gaap--InventoryPolicyTextBlock_zt9371pUtIO6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_860_zSAqsE1h6cC1">Inventory</span></i> – 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 following table presents the components of inventory as of March 31, 2023 and June 30, 2022:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <table cellpadding="0" cellspacing="0" id="xdx_892_eus-gaap--ScheduleOfInventoryCurrentTableTextBlock_zam4lHlbmpwg" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%" summary="xdx: Disclosure - Business and Summary of Significant Accounting Policies (Details Inventory)"> <tr style="vertical-align: bottom"> <td style="text-align: left"> <span id="xdx_8BF_znx6MJwkxx2" style="display: none">Schedule of inventory</span></td><td> </td> <td colspan="2" id="xdx_497_20230331" style="text-align: center"> </td><td> </td><td> </td> <td colspan="2" id="xdx_490_20220630" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">March 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td><td> </td> <td colspan="2" style="text-align: justify"> </td><td> </td><td> </td> <td colspan="2" style="text-align: justify"> </td><td> </td></tr> <tr id="xdx_406_eus-gaap--InventoryRawMaterials_iI_pp0p0_maINznZ7_zPAgsL7Jqgw9" style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="width: 66%; text-align: left">Raw materials</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">1,299,494</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">1,844,049</td><td style="width: 1%; text-align: left"> </td></tr> <tr id="xdx_402_eus-gaap--InventoryWorkInProcess_iI_pp0p0_maINznZ7_zNtBY6c01WEd" style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Work in process</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">62,795</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">22,768</td><td style="text-align: left"> </td></tr> <tr id="xdx_408_eus-gaap--InventoryFinishedGoods_iI_pp0p0_d0_maINznZ7_zZVGwvEwZ0di" style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="text-align: left; padding-bottom: 1pt">Finished goods</td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">–</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">371,391</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr id="xdx_40E_eus-gaap--InventoryNet_iTI_pp0p0_mtINznZ7_z4NXxIpDKkA6" style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="padding-left: 10pt; text-align: left; padding-bottom: 2.5pt">Total</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,362,289</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,238,208</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table> <p id="xdx_8A9_zp8RwRBC8qE7" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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. <span id="xdx_903_eus-gaap--InventoryValuationReserves_iI_pp0p0_do_c20230331_zN4I0elvXfD7" title="Inventory Valuation Reserves"><span id="xdx_907_eus-gaap--InventoryValuationReserves_iI_pp0p0_do_c20220630_zZjh5gXmxMmf" title="Inventory Valuation Reserves">No</span></span> inventory reserve was required as of March 31, 2023 and June 30, 2022.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_84A_eus-gaap--RevenueRecognitionPolicyTextBlock_zam5OesD3eH6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_860_zPd00p932Ag">Revenue Recognition</span></i> – 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:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Identification of the contract with a customer</td></tr> <tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Identification of the performance obligations in the contract</td></tr> <tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Determination of the transaction price</td></tr> <tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Allocation of the transaction price to the performance obligations in the contract</td></tr> <tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Recognition of revenue when, or as, the Company satisfies a performance obligation</td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company generates revenues from contracts with customers, consisting of a relatively small number of wholesale dealers and installers, primarily in California. Three such dealers represented approximately <span id="xdx_908_eus-gaap--ConcentrationRiskPercentage1_dp_c20220701__20230331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--OneDealerMember_zs3TR1wkhbF5" title="Concentration Risk, Percentage">21</span>%, <span id="xdx_903_eus-gaap--ConcentrationRiskPercentage1_dp_c20220701__20230331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--TwoDealersMember_zKCtvu0uyRN5" title="Concentration Risk, Percentage">18</span>% and <span id="xdx_902_eus-gaap--ConcentrationRiskPercentage1_dp_c20220701__20230331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--ThridDealerMember_zzHlYSSBYrwc" title="Concentration Risk, Percentage">16</span>% of the Company’s revenues in the nine months ended March 31, 2023, however, no other dealers accounted for more than 10% of the revenues in such period. Those same three dealers represented an aggregate of approximately <span id="xdx_905_eus-gaap--ConcentrationRiskPercentage1_dp_c20220701__20230331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsReceivableMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--ThreeDealersMember_zobANdIbTbof" title="Concentration Risk, Percentage">83</span>% of the Company’s accounts receivable as of March 31, 2023 (net of allowance), however, no other dealers accounted for more than 10% of the accounts receivable as of March 31, 2023. Two dealers represented approximately <span id="xdx_903_eus-gaap--ConcentrationRiskPercentage1_dp_c20210701__20220331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--OneDealerMember_zwPipTKl6FFj" title="Concentration Risk, Percentage">22</span>%, and <span id="xdx_905_eus-gaap--ConcentrationRiskPercentage1_dp_c20210701__20220331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--TwoDealersMember_za0RduG9sEq2" title="Concentration Risk, Percentage">16</span>% of the Company’s revenues in the nine months ended March 31, 2022. Since all of the Company’s revenue is currently generated from the sales of similar products, no further disaggregation of revenue information for the nine months ended March 31, 2023 and 2022 is provided.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p id="xdx_847_eus-gaap--RevenueFromContractWithCustomerPolicyTextBlock_z7ZUCtW8zQEd" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_862_z7rpz6Ya5dId">Allowance for Doubtful Accounts</span></i> – The Company recognizes an allowance for doubtful accounts whenever a loss is expected to be incurred in the realization of a customer’s account. As of March 31, 2023 and June 30, 2022, our allowance for doubtful accounts was $<span id="xdx_90E_eus-gaap--AllowanceForDoubtfulAccountsReceivable_c20230331_pp0p0" title="Allowance for doubtful accounts">380,000</span> and zero, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_84C_eus-gaap--IncomeTaxPolicyTextBlock_zcS0rgJF6uCh" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_863_zPdPAwUxyr4l">Income Taxes</span></i> – The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company accounts for uncertain tax positions in accordance with the provisions of Accounting Standards Codification (“ASC”) 740-10 which prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on its tax return. The Company evaluates and records any uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon examination and ultimate settlement with the tax authorities in the tax jurisdictions in which it operates.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_84E_eus-gaap--CompensationRelatedCostsPolicyTextBlock_z5EDwVAsdMok" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_862_zoZ06gBPrXe6">Stock Compensation Expense</span></i> – 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i> </i></p> <p id="xdx_848_eus-gaap--EarningsPerSharePolicyTextBlock_zHJmvEbaSRmd" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_866_z9LpL4YCtPjl">Loss Per Common Share</span></i> – 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 March 31, 2023, the Company had total outstanding common stock equivalents of <span id="xdx_90D_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220701__20230331__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__us-gaap--CommonStockMember_pdd" title="Antidilutive shares">1,229,750</span> shares as follows: (i) <span id="xdx_905_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220701__20230331__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--WarrantsMember_pdd" title="Antidilutive shares">1,121,250</span> shares related to warrants issued to investors in the public offering completed in August 2022; (ii) <span id="xdx_907_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220701__20230331__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--WarrantsUnderwritersMember_pdd" title="Antidilutive shares">58,500</span> shares related to warrants issued to the underwriters in that same offering; and (iii) <span id="xdx_906_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220701__20230331__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__us-gaap--RestrictedStockMember_pdd" title="Antidilutive shares">50,000</span> shares related to restricted stock units granted to an officer in March 2022 (see Note 3).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_840_eus-gaap--ResearchAndDevelopmentExpensePolicy_zbHCQ0xCS0Ia" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_869_zkWUaMsOWgvd">Research and Development Costs</span></i> – Research and development costs are expensed as incurred.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_84D_eus-gaap--UseOfEstimates_zunGl6R8gaA8" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_86D_zkNPR4ZpoEQc">Use of Estimates</span></i> – 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. As a result of the continued spread of the COVID-19 coronavirus since early 2020, economic uncertainties have arisen which could impact business operations, supply chains, energy demand, and commodity prices that are beyond our control. Overall, we have not experienced a material adverse impact to our economic performance or ability to continue our business operations as a result of COVID-19. We continue to monitor COVID-19, but do not believe it will have a material unfavorable impact to our future financial performance at this time.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_840_ecustom--RelatedPartiesPolicyTextBlock_zKS1O23o3zHg" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_86C_zSQgYYzF61eh">Related Parties</span></i> - The Company accounts for related party transactions in accordance with ASC 850. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that it might be prevented from fully pursuing its own separate interests is also a related party.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_845_eus-gaap--FairValueOfFinancialInstrumentsPolicy_zipVdePhPDLg" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white"><i><span id="xdx_867_zSxL2Gd7kf17">Fair Value Measurements and Financial Instruments</span></i> - ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). <span style="background-color: white">The three levels of the fair value hierarchy are described below: </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="background-color: white">Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="background-color: white">Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="background-color: white">Level 3 - Inputs that are both significant to the fair value measurement and unobservable.  The carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. The carrying value of long-term debt approximates fair value since the related rate of interest approximates current market rates.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At March 31, 2023 and June 30, 2022, the Company did <span id="xdx_90D_eus-gaap--LiabilitiesFairValueDisclosure_iI_pp0p0_do_c20230331_z2ZEuns0jzb5" title="Liabilities, Fair Value Disclosure"><span id="xdx_90D_eus-gaap--AssetsFairValueDisclosure_iI_pp0p0_do_c20230331_zYQsrMTaaAMj" title="Assets, Fair Value Disclosure">no</span></span>t have any financial assets or liabilities measured and recorded at fair value on the Company’s balance sheets on a recurring basis.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_848_eus-gaap--NewAccountingPronouncementsPolicyPolicyTextBlock_zJJRuQY4LjW6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_86E_zM9y4NQ19IQ2">Recent Accounting Pronouncements</span></i> – 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 that are not yet effective will not have a material impact on the Company’s financial position or results of operations 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_840_eus-gaap--SubstantialDoubtAboutGoingConcernTextBlock_zRRGaPkUms2e" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_865_z4hTt4Qbfbq5">Liquidity</span></i> – 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 equity financing to continue operations and the attainment of profitable operations. As disclosed in Note 3, we completed a public offering of our equity securities in August 2022 that raised total net proceeds of approximately $3,780,000. We anticipate that we will have sufficient cash resources in order to operate our business for at least the next 12 months from the date these financial statements are issued.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p id="xdx_84F_ecustom--DescriptionOfBusinessPolicyTextBlock_zuk7KKJfNrYe" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_86A_zdzIT8OE57ec">Description of Business</span></i> – 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, primarily 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).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_84C_ecustom--InterimFinancialInformationPolicyTextBlock_ztuqipJeRwP8" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_860_zk9ZkK4oygM8">Interim Financial Information</span> </i>– 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 March 31, 2023, the results of its operations for the three and nine month periods ended March 31, 2023 and 2022, the changes in its stockholders’ equity for the nine month periods ended March 31, 2023 and 2022, and cash flows for the nine month periods ended March 31, 2023 and 2022. The balance sheet as of June 30, 2022 has been derived from the Company’s June 30, 2022 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, 2022, as filed with the SEC on September 27, 2022.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_847_eus-gaap--CashAndCashEquivalentsPolicyTextBlock_zPC0JZwyW5fi" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_868_zQc4aHL6iWw">Cash and Cash Equivalents</span></i> – 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 March 31, 2023, the Company maintained accounts at two different banks, of which the balance at the first bank was within the FDIC insurance limit while the balance at the second bank was in excess of the FDIC insurance limit by $<span id="xdx_904_eus-gaap--CashFDICInsuredAmount_iI_pp0p0_c20230331_z4g4D3pmPhh8" title="FDIC uninsured amount">3,028,474</span>.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> 3028474 <p id="xdx_84F_eus-gaap--InventoryPolicyTextBlock_zt9371pUtIO6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_860_zSAqsE1h6cC1">Inventory</span></i> – 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 following table presents the components of inventory as of March 31, 2023 and June 30, 2022:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <table cellpadding="0" cellspacing="0" id="xdx_892_eus-gaap--ScheduleOfInventoryCurrentTableTextBlock_zam4lHlbmpwg" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%" summary="xdx: Disclosure - Business and Summary of Significant Accounting Policies (Details Inventory)"> <tr style="vertical-align: bottom"> <td style="text-align: left"> <span id="xdx_8BF_znx6MJwkxx2" style="display: none">Schedule of inventory</span></td><td> </td> <td colspan="2" id="xdx_497_20230331" style="text-align: center"> </td><td> </td><td> </td> <td colspan="2" id="xdx_490_20220630" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">March 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td><td> </td> <td colspan="2" style="text-align: justify"> </td><td> </td><td> </td> <td colspan="2" style="text-align: justify"> </td><td> </td></tr> <tr id="xdx_406_eus-gaap--InventoryRawMaterials_iI_pp0p0_maINznZ7_zPAgsL7Jqgw9" style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="width: 66%; text-align: left">Raw materials</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">1,299,494</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">1,844,049</td><td style="width: 1%; text-align: left"> </td></tr> <tr id="xdx_402_eus-gaap--InventoryWorkInProcess_iI_pp0p0_maINznZ7_zNtBY6c01WEd" style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Work in process</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">62,795</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">22,768</td><td style="text-align: left"> </td></tr> <tr id="xdx_408_eus-gaap--InventoryFinishedGoods_iI_pp0p0_d0_maINznZ7_zZVGwvEwZ0di" style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="text-align: left; padding-bottom: 1pt">Finished goods</td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">–</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">371,391</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr id="xdx_40E_eus-gaap--InventoryNet_iTI_pp0p0_mtINznZ7_z4NXxIpDKkA6" style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="padding-left: 10pt; text-align: left; padding-bottom: 2.5pt">Total</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,362,289</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,238,208</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table> <p id="xdx_8A9_zp8RwRBC8qE7" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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. <span id="xdx_903_eus-gaap--InventoryValuationReserves_iI_pp0p0_do_c20230331_zN4I0elvXfD7" title="Inventory Valuation Reserves"><span id="xdx_907_eus-gaap--InventoryValuationReserves_iI_pp0p0_do_c20220630_zZjh5gXmxMmf" title="Inventory Valuation Reserves">No</span></span> inventory reserve was required as of March 31, 2023 and June 30, 2022.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <table cellpadding="0" cellspacing="0" id="xdx_892_eus-gaap--ScheduleOfInventoryCurrentTableTextBlock_zam4lHlbmpwg" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%" summary="xdx: Disclosure - Business and Summary of Significant Accounting Policies (Details Inventory)"> <tr style="vertical-align: bottom"> <td style="text-align: left"> <span id="xdx_8BF_znx6MJwkxx2" style="display: none">Schedule of inventory</span></td><td> </td> <td colspan="2" id="xdx_497_20230331" style="text-align: center"> </td><td> </td><td> </td> <td colspan="2" id="xdx_490_20220630" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">March 31,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td><td> </td> <td colspan="2" style="text-align: justify"> </td><td> </td><td> </td> <td colspan="2" style="text-align: justify"> </td><td> </td></tr> <tr id="xdx_406_eus-gaap--InventoryRawMaterials_iI_pp0p0_maINznZ7_zPAgsL7Jqgw9" style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="width: 66%; text-align: left">Raw materials</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">1,299,494</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">1,844,049</td><td style="width: 1%; text-align: left"> </td></tr> <tr id="xdx_402_eus-gaap--InventoryWorkInProcess_iI_pp0p0_maINznZ7_zNtBY6c01WEd" style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Work in process</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">62,795</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">22,768</td><td style="text-align: left"> </td></tr> <tr id="xdx_408_eus-gaap--InventoryFinishedGoods_iI_pp0p0_d0_maINznZ7_zZVGwvEwZ0di" style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="text-align: left; padding-bottom: 1pt">Finished goods</td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">–</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">371,391</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr id="xdx_40E_eus-gaap--InventoryNet_iTI_pp0p0_mtINznZ7_z4NXxIpDKkA6" style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="padding-left: 10pt; text-align: left; padding-bottom: 2.5pt">Total</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,362,289</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,238,208</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table> 1299494 1844049 62795 22768 0 371391 1362289 2238208 0 0 <p id="xdx_84A_eus-gaap--RevenueRecognitionPolicyTextBlock_zam5OesD3eH6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_860_zPd00p932Ag">Revenue Recognition</span></i> – 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:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Identification of the contract with a customer</td></tr> <tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Identification of the performance obligations in the contract</td></tr> <tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Determination of the transaction price</td></tr> <tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Allocation of the transaction price to the performance obligations in the contract</td></tr> <tr style="vertical-align: top"> <td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-family: Symbol">·</span></td><td style="text-align: justify">Recognition of revenue when, or as, the Company satisfies a performance obligation</td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company generates revenues from contracts with customers, consisting of a relatively small number of wholesale dealers and installers, primarily in California. Three such dealers represented approximately <span id="xdx_908_eus-gaap--ConcentrationRiskPercentage1_dp_c20220701__20230331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--OneDealerMember_zs3TR1wkhbF5" title="Concentration Risk, Percentage">21</span>%, <span id="xdx_903_eus-gaap--ConcentrationRiskPercentage1_dp_c20220701__20230331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--TwoDealersMember_zKCtvu0uyRN5" title="Concentration Risk, Percentage">18</span>% and <span id="xdx_902_eus-gaap--ConcentrationRiskPercentage1_dp_c20220701__20230331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--ThridDealerMember_zzHlYSSBYrwc" title="Concentration Risk, Percentage">16</span>% of the Company’s revenues in the nine months ended March 31, 2023, however, no other dealers accounted for more than 10% of the revenues in such period. Those same three dealers represented an aggregate of approximately <span id="xdx_905_eus-gaap--ConcentrationRiskPercentage1_dp_c20220701__20230331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsReceivableMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--ThreeDealersMember_zobANdIbTbof" title="Concentration Risk, Percentage">83</span>% of the Company’s accounts receivable as of March 31, 2023 (net of allowance), however, no other dealers accounted for more than 10% of the accounts receivable as of March 31, 2023. Two dealers represented approximately <span id="xdx_903_eus-gaap--ConcentrationRiskPercentage1_dp_c20210701__20220331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--OneDealerMember_zwPipTKl6FFj" title="Concentration Risk, Percentage">22</span>%, and <span id="xdx_905_eus-gaap--ConcentrationRiskPercentage1_dp_c20210701__20220331__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember__srt--MajorCustomersAxis__custom--TwoDealersMember_za0RduG9sEq2" title="Concentration Risk, Percentage">16</span>% of the Company’s revenues in the nine months ended March 31, 2022. Since all of the Company’s revenue is currently generated from the sales of similar products, no further disaggregation of revenue information for the nine months ended March 31, 2023 and 2022 is provided.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> 0.21 0.18 0.16 0.83 0.22 0.16 <p id="xdx_847_eus-gaap--RevenueFromContractWithCustomerPolicyTextBlock_z7ZUCtW8zQEd" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_862_z7rpz6Ya5dId">Allowance for Doubtful Accounts</span></i> – The Company recognizes an allowance for doubtful accounts whenever a loss is expected to be incurred in the realization of a customer’s account. As of March 31, 2023 and June 30, 2022, our allowance for doubtful accounts was $<span id="xdx_90E_eus-gaap--AllowanceForDoubtfulAccountsReceivable_c20230331_pp0p0" title="Allowance for doubtful accounts">380,000</span> and zero, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> 380000 <p id="xdx_84C_eus-gaap--IncomeTaxPolicyTextBlock_zcS0rgJF6uCh" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_863_zPdPAwUxyr4l">Income Taxes</span></i> – The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company accounts for uncertain tax positions in accordance with the provisions of Accounting Standards Codification (“ASC”) 740-10 which prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on its tax return. The Company evaluates and records any uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon examination and ultimate settlement with the tax authorities in the tax jurisdictions in which it operates.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_84E_eus-gaap--CompensationRelatedCostsPolicyTextBlock_z5EDwVAsdMok" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_862_zoZ06gBPrXe6">Stock Compensation Expense</span></i> – 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i> </i></p> <p id="xdx_848_eus-gaap--EarningsPerSharePolicyTextBlock_zHJmvEbaSRmd" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_866_z9LpL4YCtPjl">Loss Per Common Share</span></i> – 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 March 31, 2023, the Company had total outstanding common stock equivalents of <span id="xdx_90D_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220701__20230331__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__us-gaap--CommonStockMember_pdd" title="Antidilutive shares">1,229,750</span> shares as follows: (i) <span id="xdx_905_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220701__20230331__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--WarrantsMember_pdd" title="Antidilutive shares">1,121,250</span> shares related to warrants issued to investors in the public offering completed in August 2022; (ii) <span id="xdx_907_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220701__20230331__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--WarrantsUnderwritersMember_pdd" title="Antidilutive shares">58,500</span> shares related to warrants issued to the underwriters in that same offering; and (iii) <span id="xdx_906_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20220701__20230331__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__us-gaap--RestrictedStockMember_pdd" title="Antidilutive shares">50,000</span> shares related to restricted stock units granted to an officer in March 2022 (see Note 3).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> 1229750 1121250 58500 50000 <p id="xdx_840_eus-gaap--ResearchAndDevelopmentExpensePolicy_zbHCQ0xCS0Ia" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_869_zkWUaMsOWgvd">Research and Development Costs</span></i> – Research and development costs are expensed as incurred.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_84D_eus-gaap--UseOfEstimates_zunGl6R8gaA8" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_86D_zkNPR4ZpoEQc">Use of Estimates</span></i> – 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. As a result of the continued spread of the COVID-19 coronavirus since early 2020, economic uncertainties have arisen which could impact business operations, supply chains, energy demand, and commodity prices that are beyond our control. Overall, we have not experienced a material adverse impact to our economic performance or ability to continue our business operations as a result of COVID-19. We continue to monitor COVID-19, but do not believe it will have a material unfavorable impact to our future financial performance at this time.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_840_ecustom--RelatedPartiesPolicyTextBlock_zKS1O23o3zHg" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_86C_zSQgYYzF61eh">Related Parties</span></i> - The Company accounts for related party transactions in accordance with ASC 850. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that it might be prevented from fully pursuing its own separate interests is also a related party.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_845_eus-gaap--FairValueOfFinancialInstrumentsPolicy_zipVdePhPDLg" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white"><i><span id="xdx_867_zSxL2Gd7kf17">Fair Value Measurements and Financial Instruments</span></i> - ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). <span style="background-color: white">The three levels of the fair value hierarchy are described below: </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="background-color: white">Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="background-color: white">Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="background-color: white">Level 3 - Inputs that are both significant to the fair value measurement and unobservable.  The carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. The carrying value of long-term debt approximates fair value since the related rate of interest approximates current market rates.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At March 31, 2023 and June 30, 2022, the Company did <span id="xdx_90D_eus-gaap--LiabilitiesFairValueDisclosure_iI_pp0p0_do_c20230331_z2ZEuns0jzb5" title="Liabilities, Fair Value Disclosure"><span id="xdx_90D_eus-gaap--AssetsFairValueDisclosure_iI_pp0p0_do_c20230331_zYQsrMTaaAMj" title="Assets, Fair Value Disclosure">no</span></span>t have any financial assets or liabilities measured and recorded at fair value on the Company’s balance sheets on a recurring basis.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> 0 0 <p id="xdx_848_eus-gaap--NewAccountingPronouncementsPolicyPolicyTextBlock_zJJRuQY4LjW6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_86E_zM9y4NQ19IQ2">Recent Accounting Pronouncements</span></i> – 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 that are not yet effective will not have a material impact on the Company’s financial position or results of operations 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_840_eus-gaap--SubstantialDoubtAboutGoingConcernTextBlock_zRRGaPkUms2e" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i><span id="xdx_865_z4hTt4Qbfbq5">Liquidity</span></i> – 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 equity financing to continue operations and the attainment of profitable operations. As disclosed in Note 3, we completed a public offering of our equity securities in August 2022 that raised total net proceeds of approximately $3,780,000. We anticipate that we will have sufficient cash resources in order to operate our business for at least the next 12 months from the date these financial statements are issued.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p id="xdx_801_eus-gaap--DebtDisclosureTextBlock_zX5MIVOel5r4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>(2)        <span id="xdx_82D_znTmiZLKn0X5">Notes Payable</span> </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In conjunction with the closing of our underwritten public offering in August 2022 (see Note 3), all holders of the Company’s two outstanding series of convertible notes payable, which were originally issued to various accredited investors in May 2018 and October 2021, agreed to convert their debt into a total of <span id="xdx_907_eus-gaap--ConversionOfStockSharesConverted1_c20220801__20220831__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_pdd" title="Number of shares converted">9,671,867</span> shares of our common stock at the respective conversion rates. Each of these two series of our converted notes payable is further described below.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May 2018, we entered into convertible note payable agreements with a group of accredited investors for aggregate proceeds of $104,688. Each unsecured note originally bore interest at a rate of 12% per annum, which was later reduced by mutual agreement to 3.99% per annum in May 2019. Subsequently, the holders of certain of these notes elected to convert or exchange certain portions of their convertible notes payable into shares of our common stock, based upon the stated conversion rate of $0.0063 per share. As of the closing of our underwritten public offering in August 2022, the holders of the remaining balance of such unconverted notes in the total amount of $<span id="xdx_90B_eus-gaap--ConversionOfStockAmountConverted1_c20220801__20220831_pp0p0" title="Conversion of Stock, Amount Converted">59,251</span>, including accrued interest, agreed to convert their debt into a total of <span id="xdx_906_eus-gaap--DebtConversionConvertedInstrumentSharesIssued1_c20220801__20220831_pdd" title="Shares converted">9,404,867</span> shares of our common stock at the stated conversion rate of $<span id="xdx_906_eus-gaap--DebtInstrumentConvertibleConversionPrice1_c20220831_pdd" title="Conversion price">0.0063</span> per share.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In October 2021, we entered into convertible note payable agreements with a group of accredited investors for aggregate proceeds of $<span id="xdx_90E_eus-gaap--ProceedsFromConvertibleDebt_c20211001__20211031__us-gaap--LongtermDebtTypeAxis__us-gaap--ConvertibleDebtMember_pp0p0" title="Proceeds from Convertible Debt">1,068,000</span>. Each unsecured note bore interest at a rate of <span id="xdx_90A_eus-gaap--DebtInstrumentInterestRateStatedPercentage_iI_dp_c20211031__us-gaap--LongtermDebtTypeAxis__us-gaap--ConvertibleDebtMember_zJ4yGf6uDwuh" title="Debt Instrument, Interest Rate, Stated Percentage">6</span>% per annum. As of the closing of our underwritten public offering in August 2022, pursuant to the terms of such convertible notes, the notes were automatically converted into a total of <span id="xdx_902_eus-gaap--DebtConversionConvertedInstrumentSharesIssued1_c20211001__20211031__us-gaap--LongtermDebtTypeAxis__us-gaap--ConvertibleDebtMember_pdd" title="Shares converted">267,000</span> shares of our common stock at the stated conversion rate of $<span id="xdx_90D_eus-gaap--DebtInstrumentConvertibleConversionPrice1_c20211031__us-gaap--LongtermDebtTypeAxis__us-gaap--ConvertibleDebtMember_pdd" title="Conversion price">4.00</span> of principal per share.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> 9671867 59251 9404867 0.0063 1068000 0.06 267000 4.00 <p id="xdx_808_eus-gaap--StockholdersEquityNoteDisclosureTextBlock_zjg8YxI2T5J8" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>(3)        <span id="xdx_827_zyiXjCwdPy5e">Equity</span> </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Common Stock</i> – 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 $<span id="xdx_903_eus-gaap--ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1_c20220831_pdd" title="Exercise price">4.00</span> 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the underwritten public offering, a total of <span id="xdx_90E_eus-gaap--SaleOfStockNumberOfSharesIssuedInTransaction_c20220701__20230331__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_pdd" title="Sale of Stock, Number of Shares Issued in Transaction">1,121,250</span> Units, including exercise of the underwriter’s overallotment option, were sold at an offering price to the public of $<span id="xdx_909_eus-gaap--SaleOfStockPricePerShare_c20230331__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_pdd" title="Sale of Stock, Price Per Share">4.00</span> per Unit. The gross proceeds of the offering were $<span id="xdx_90F_eus-gaap--ProceedsFromIssuanceInitialPublicOffering_c20220701__20230331__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_pp0p0" title="Proceeds from Issuance Initial Public Offering">4,485,000</span> and the net proceeds, after deduction of underwriting discounts and other offering costs were approximately $<span id="xdx_906_eus-gaap--ProceedsFromIssuanceOrSaleOfEquity_c20220701__20230331__us-gaap--SecuritiesFinancingTransactionAxis__custom--PublicOfferingMember_pp0p0" title="Proceeds from Issuance or Sale of Equity">3,780,000</span>. The Company also granted the underwriter non-tradeable warrants to purchase a total of <span id="xdx_903_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfSharesAvailableForGrant_c20230331__us-gaap--StatementEquityComponentsAxis__us-gaap--WarrantMember_pdd" title="Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant">58,500</span> shares of common stock at an exercise price of $<span id="xdx_906_eus-gaap--ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1_c20230331__us-gaap--StatementEquityComponentsAxis__us-gaap--WarrantMember_pdd" title="Exercise price">4.40</span> per share for a period of five years.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In conjunction with the public offering, all holders of the Company’s 2018 convertible notes in the total amount of $<span id="xdx_90D_eus-gaap--ConversionOfStockAmountConverted1_c20220701__20230331__us-gaap--LongtermDebtTypeAxis__us-gaap--ConvertibleDebtMember_pp0p0" title="Amounts converted">59,251</span>, including accrued interest, converted their debt into a total of <span id="xdx_907_eus-gaap--DebtConversionConvertedInstrumentSharesIssued1_c20220701__20230331__us-gaap--LongtermDebtTypeAxis__us-gaap--ConvertibleDebtMember_pdd" title="Shares converted">9,404,867</span> shares of common stock at the stated conversion rate, and all holders of the Company’s 2021 convertible notes in the total amount of $<span id="xdx_902_eus-gaap--ProceedsFromConvertibleDebt_c20220701__20230331__us-gaap--LongtermDebtTypeAxis__custom--ConvertibleDebt1Member_pp0p0" title="Proceeds from Convertible Debt">1,068,000</span> converted their debt into a total of <span id="xdx_907_eus-gaap--DebtConversionConvertedInstrumentSharesIssued1_c20220701__20230331__us-gaap--LongtermDebtTypeAxis__custom--ConvertibleDebt1Member_pdd" title="Shares converted">267,000</span> shares of common stock at the stated conversion rate (see Note 2).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the nine months ended March 31, 2022, the holders of the 2018 convertible notes payable having total principal and accrued interest balances in the aggregate amount of $<span id="xdx_903_eus-gaap--DebtConversionConvertedInstrumentAmount1_c20210701__20220331_pp0p0" title="Debt Conversion, Converted Instrument, Amount">6,922</span> elected to convert their notes. Based upon the stated conversion price of $0.0063 per share, these holders converted their notes payable into a total of <span id="xdx_90F_eus-gaap--DebtConversionConvertedInstrumentSharesIssued1_c20210701__20220331_pdd" title="Shares converted">1,098,630</span> shares of common stock (see Note 2).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Warrants</i> – The Warrants for a total of <span id="xdx_90E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExercisableNumber_c20230331__us-gaap--StatementEquityComponentsAxis__us-gaap--WarrantMember_pdd" title="Number of shares exercisable">1,179,750</span> shares of common stock issued to investors and the underwriters are exercisable at any time after their original issuance and at any time up to the date that is five years after their original issuance, or 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table presents activity with respect to the Company’s warrants for the nine months ended March 31, 2023:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <table cellpadding="0" cellspacing="0" id="xdx_88F_eus-gaap--ScheduleOfStockholdersEquityNoteWarrantsOrRightsTextBlock_zWb0QV7nNGs2" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%" summary="xdx: Disclosure - Equity (Details - Warrant activity)"> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left"><span id="xdx_8B9_zOL26nysVgfd" style="display: none">Schedule of warrants activity</span></td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Number</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Aggregate</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">of</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Exercise</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Remaining</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Intrinsic</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1pt"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Shares</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Price</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Term (Yrs.)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Value</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td>Outstanding at July 1, 2022</td><td> </td> <td style="text-align: left"> </td><td id="xdx_981_eus-gaap--ClassOfWarrantOrRightOutstanding_iS_d0_c20220701__20230331_zVXNft8hhKJg" style="text-align: right" title="Class of Warrant or Right, Outstanding">–</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td id="xdx_988_eus-gaap--ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1_iS_d0_c20220701__20230331_zvcDlSOIf07k" style="text-align: right" title="Class of Warrant or Right, Exercise Price of Warrants or Rights">–</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 32%; text-align: left">Warrants issued to Public Investors</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td id="xdx_985_ecustom--WarrantsIssuedToPublicInvestors_c20220701__20230331_zKHxhnR2yK01" style="width: 13%; text-align: right" title="Warrants issued to public investors">1,121,250</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td id="xdx_988_ecustom--WarrantIssuedToPublicInvestorsWeightedAverageExcercisePrice_c20220701__20230331_zdyV4W0ij3Mi" style="width: 13%; text-align: right" title="Warrant issued to public investors, weighted average excercise price">4.00</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 13%; text-align: right">–</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 13%; text-align: right">–</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="text-align: left; padding-bottom: 1pt">Warrants issued to Underwriters</td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td id="xdx_984_ecustom--WarrantsIssuedToUnderwriters_c20220701__20230331_zXykRyhw35uc" style="border-bottom: Black 1pt solid; text-align: right" title="Warrants issued to underwriters">58,500</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td id="xdx_987_ecustom--WarrantIssuedToUnderwritersWeightedAverageExcercisePrice_c20220701__20230331_zXLAjRGMtJkk" style="border-bottom: Black 1pt solid; text-align: right" title="Warrant issued to underwriters, weighted average excercise price">4.40</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td> <td style="text-align: left"> </td><td style="text-align: right">–</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td> <td style="text-align: left"> </td><td style="text-align: right">–</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Outstanding at March 31, 2023</td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td id="xdx_984_eus-gaap--ClassOfWarrantOrRightOutstanding_iE_c20220701__20230331_z301vhi9Jt85" style="border-bottom: Black 2.5pt double; text-align: right" title="Class of Warrant or Right, Outstanding">1,179,750</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_980_eus-gaap--ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1_iE_c20220701__20230331_zRFCPXZmA0Qi" style="border-bottom: Black 2.5pt double; text-align: right" title="Class of Warrant or Right, Exercise Price of Warrants or Rights">4.02</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"><span id="xdx_904_eus-gaap--WarrantsAndRightsOutstandingTerm_iI_dtY_c20230331_zukdYEgaGHHj" title="Warrants and Rights Outstanding, Term">4.3</span></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_98F_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardEquityInstrumentsOtherThanOptionsAggregateIntrinsicValueOutstanding_iI_pp0p0_d0_c20230331_zt2PETFiHOKg" style="border-bottom: Black 2.5pt double; text-align: right" title="Aggregate intrinsic value, outstanding">–</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable at March 31, 2023</td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td id="xdx_982_ecustom--WarrantsExercisableShares_c20230331_pdd" style="border-bottom: Black 2.5pt double; text-align: right" title="Warrant exercisable, shares">1,179,750</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_98F_ecustom--WarrantsExercisableWeightedAverageExercisePrice_c20230331_pdd" style="border-bottom: Black 2.5pt double; text-align: right" title="Warrants exercisable, weighted average exercise price">4.02</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"><span id="xdx_90B_ecustom--WarrantsAndRightsOutstandingTermExercisable_dtY_c20220701__20230331_zm47StEByasb" title="Warrants term, exercisable">4.3</span></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_986_ecustom--SharebasedCompensationArrangementBySharebasedPaymentAwardEquityInstrumentsOtherThanOptionsAggregateIntrinsicValueExercisable_iI_pp0p0_d0_c20230331_z6eQUNaa9mki" style="border-bottom: Black 2.5pt double; text-align: right" title="Warrant exercisable, aggregate intrinsic value">–</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table> <p style="margin-top: 0; margin-bottom: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These warrants were issued in conjunction with an underwritten public equity offering, therefore, there was no employee or non-employee compensation expense recognized.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Stock Compensation Expense</i> – In February 2022, we entered into a new employment agreement with our Chief Executive Officer (“CEO”), effective April 1, 2022. The initial term of the employment agreement was one year and is automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. The agreement provides for an initial annual salary of $165,000. Pursuant to the agreement, we issued our CEO a restricted stock unit (“RSU”) award for up to 150,000 shares of our common stock upon achieving the following milestones (which achievements shall be determined by the Board): (i) Milestone 1 - Successfully complete an uplisting of our common stock in 2022 and continue his employment with our company until January 1, 2023: 50,000 shares; and (ii) Milestone 2 - Produce 2,000 ESSs in 2022 and continue his employment with our company until January 1, 2023: 100,000 shares. As of January 1, 2023, Milestone 1 was achieved, however, Milestone 2 was not achieved. The underlying 50,000 shares of common stock earned under Milestone 1 were issued to the CEO as of that date.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In February 2022, we entered into a new employment agreement with our Chief Financial Officer (“CFO”), effective March 1, 2022. The initial term of the employment agreement is one year and is automatically renewable for additional one-year terms unless either party chooses not to renew the agreement. The agreement provides for an initial annual salary of $125,000. Pursuant to the agreement, we issued our CFO an RSU award for up to 300,000 shares of our common stock upon achieving the following milestones (which achievements shall be determined by the Board): (i) Milestone 1 - Successfully complete an uplisting of our common stock in 2022 and continue his employment with our company until January 1, 2023: 250,000 shares; and (ii) Milestone 2 - successfully complete and file the Company’s Form 10-K for the year ended June 30, 2023 no later than September 29, 2023 and continue his employment with our company until January 1, 2024: 50,000 shares. Milestone 1 was achieved as of January 1, 2023, and the underlying 250,000 shares of common stock earned under Milestone 1 were issued to the CFO as of that date.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based upon the Company’s assessment of the probability of the CEO and CFO ultimately achieving each milestone specified under the RSU awards indicated above, the Company has calculated the grant date value of such awards and is amortizing it as stock compensation expense over the underlying performance periods. The Company has recognized stock compensation expense applicable to such RSU awards in the nine months ended March 31, 2023 in the amount of $1,200,723.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 to be paid quarterly 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 March 31, 2023, we booked an initial accrual of $<span id="xdx_90B_eus-gaap--DeferredCompensationLiabilityCurrentAndNoncurrent_c20230331__srt--CounterpartyNameAxis__custom--ThreeIndependentDirectorsMember_pp0p0" title="Accrued compensation expenses">146,250</span> of compensation expense (of which $131,625 will be settled through the issuance of shares) for our three independent directors under this plan. At the same time, we also granted <span id="xdx_90E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsGrantsInPeriod_c20221101__20230331__srt--CounterpartyNameAxis__custom--ThreeIndependentDirectorsMember_pdd" title="Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period">26,000</span> shares, with a grant date value of $<span id="xdx_90C_eus-gaap--StockGrantedDuringPeriodValueSharebasedCompensationGross_c20221101__20230331__srt--CounterpartyNameAxis__custom--ThreeIndependentDirectorsMember_pp0p0" title="Shares Granted, Value, Share-Based Payment Arrangement, before Forfeiture">97,500</span>, to various advisors pursuant to annual contracts for their services.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the nine months ended March 31, 2023, we recognized total non-cash stock compensation expense of $<span id="xdx_90A_eus-gaap--ShareBasedCompensation_c20220701__20230331_pp0p0">1,420,201 </span>as follows: (i) $<span id="xdx_909_eus-gaap--ShareBasedCompensation_c20220701__20230331__us-gaap--TransactionTypeAxis__custom--AmortizedValueOfRSUsGrantedMember_pp0p0">1,200,723 </span>for the amortized value of the RSUs granted to our two executive officers, as previously described; (ii) $<span id="xdx_907_eus-gaap--ShareBasedCompensation_c20220701__20230331__us-gaap--TransactionTypeAxis__custom--AmortizedValueOfNewCompensationPlanMember_pp0p0">131,625 </span>for the amortized value of the portion of the new compensation plan for our independent directors that is attributable to stock; (iii) $<span id="xdx_900_eus-gaap--ShareBasedCompensation_c20220701__20230331__us-gaap--TransactionTypeAxis__custom--AmortizedValueOfSharesGrantedToVariousAdvisorsMember_pp0p0">60,625 </span>for the amortized value of the shares granted to various advisors under their annual service contracts; and (iv) $<span id="xdx_90E_eus-gaap--ShareBasedCompensation_pp0p0_c20220701__20230331__us-gaap--TransactionTypeAxis__custom--FairValueOfIncentiveSharesMember_zcJflqTXYBXe">27,228 </span>for the fair value of incentive shares earned by two wholesale dealers as of December 31, 2022 (see Note 4). There was a total of <span id="xdx_90E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsGrantsInPeriod_c20220701__20230331__srt--CounterpartyNameAxis__custom--VariousGranteesMember_zRT6VgLR4cVi">384,759 </span>shares of common stock that were issued to various grantees, including our two executive officers, in the nine months ended March 31, 2023, of which <span id="xdx_900_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsGrantsInPeriod_c20220701__20230331__srt--CounterpartyNameAxis__custom--ExecutiveOfficersMember_zK0QKqBy9lS3">75,000 </span>shares were previously expensed in the year ended June 30, 2022.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the nine months ended March 31, 2022, we recognized total non-cash stock compensation expense of $<span id="xdx_908_eus-gaap--ShareBasedCompensation_c20210701__20220331_pp0p0" title="Share-Based Payment Arrangement, Noncash Expense">4,361,370</span> as follows: (i) $<span id="xdx_905_eus-gaap--ShareBasedCompensation_c20210701__20220331__us-gaap--TransactionTypeAxis__custom--FairValueOfIncentiveSharesMember_pp0p0" title="Share-Based Payment Arrangement, Noncash Expense">3,505,000</span> for the fair value of 500,000 incentive shares earned as of December 31, 2021 by a company controlled by the Company’s CEO under a previous compensation plan (which were not issued until early 2022); (ii) $<span id="xdx_901_eus-gaap--ShareBasedCompensation_pp0p0_c20210701__20220331__us-gaap--TransactionTypeAxis__custom--AmortizedValueOfRSUsGrantedMember_zGJdlwu8VOxl" title="Share-Based Payment Arrangement, Noncash Expense">193,314</span> for the initial amortized value of the RSUs granted to our two executive officers, as previously described; (iii) $<span id="xdx_90A_eus-gaap--ShareBasedCompensation_c20210701__20220331__us-gaap--TransactionTypeAxis__custom--FairValueOfBonusSharesEarnedMember_pp0p0" title="Share-Based Payment Arrangement, Noncash Expense">175,250</span> for the fair value of 25,000 bonus shares earned as of December 31, 2021 by an outside attorney (which were not issued until early 2022); (iv) $<span id="xdx_900_eus-gaap--ShareBasedCompensation_c20210701__20220331__us-gaap--TransactionTypeAxis__custom--AmortizedValueOfSharesGrantedToAttorneyMember_pp0p0" title="Share-Based Payment Arrangement, Noncash Expense">236,619</span> for the amortized value of 50,000 shares granted to an attorney and a consultant pursuant to one year service agreements in mid 2021; (v) $<span id="xdx_90C_eus-gaap--ShareBasedCompensation_c20210701__20220331__us-gaap--TransactionTypeAxis__custom--AmortizedValueOfSharesToNewIndependentDirectorMember_pp0p0" title="Share-Based Payment Arrangement, Noncash Expense">191,125</span> for the amortized value of 50,000 shares attributable to a new independent director in early 2021; and (vi) $<span id="xdx_909_eus-gaap--ShareBasedCompensation_pp0p0_c20210701__20211231__us-gaap--TransactionTypeAxis__custom--FairValueOfIncentiveSharesWholesaleDealerMember_ztQwU5fou5R" title="Share-Based Payment Arrangement, Noncash Expense">60,062</span> for the fair value of 8,568 incentive shares earned by a wholesale dealer as of December 31, 2021 (see Note 4). There was a total of 1,237,733 shares of common stock that were issued to various grantees, primarily advisors, attorneys and consultants, in the nine months ended March 31, 2022.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Other Matters</i> – 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 <span id="xdx_901_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfSharesAuthorized_c20190228__us-gaap--PlanNameAxis__custom--StockOptionPlan2019Member_pdd" title="Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized">2,500,000</span> shares of common stock. 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 March 31, 2023, the Company has made awards totaling <span id="xdx_900_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsGrantsInPeriod_c20220701__20230331__us-gaap--AwardTypeAxis__us-gaap--RestrictedStockUnitsRSUMember__srt--CounterpartyNameAxis__custom--TwoExecutivesMember_ztVe33TN1im8" title="Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period">450,000</span> shares for the RSUs granted to two executives, as noted above, under the Plan.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> 4.00 1121250 4.00 4485000 3780000 58500 4.40 59251 9404867 1068000 267000 6922 1098630 1179750 <table cellpadding="0" cellspacing="0" id="xdx_88F_eus-gaap--ScheduleOfStockholdersEquityNoteWarrantsOrRightsTextBlock_zWb0QV7nNGs2" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%" summary="xdx: Disclosure - Equity (Details - Warrant activity)"> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left"><span id="xdx_8B9_zOL26nysVgfd" style="display: none">Schedule of warrants activity</span></td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Number</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Wtd. Avg.</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Aggregate</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">of</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Exercise</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Remaining</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Intrinsic</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1pt"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Shares</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Price</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Term (Yrs.)</td><td style="padding-bottom: 1pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Value</td><td style="padding-bottom: 1pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td>Outstanding at July 1, 2022</td><td> </td> <td style="text-align: left"> </td><td id="xdx_981_eus-gaap--ClassOfWarrantOrRightOutstanding_iS_d0_c20220701__20230331_zVXNft8hhKJg" style="text-align: right" title="Class of Warrant or Right, Outstanding">–</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td id="xdx_988_eus-gaap--ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1_iS_d0_c20220701__20230331_zvcDlSOIf07k" style="text-align: right" title="Class of Warrant or Right, Exercise Price of Warrants or Rights">–</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 32%; text-align: left">Warrants issued to Public Investors</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td id="xdx_985_ecustom--WarrantsIssuedToPublicInvestors_c20220701__20230331_zKHxhnR2yK01" style="width: 13%; text-align: right" title="Warrants issued to public investors">1,121,250</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td id="xdx_988_ecustom--WarrantIssuedToPublicInvestorsWeightedAverageExcercisePrice_c20220701__20230331_zdyV4W0ij3Mi" style="width: 13%; text-align: right" title="Warrant issued to public investors, weighted average excercise price">4.00</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 13%; text-align: right">–</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 13%; text-align: right">–</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td style="text-align: left; padding-bottom: 1pt">Warrants issued to Underwriters</td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td id="xdx_984_ecustom--WarrantsIssuedToUnderwriters_c20220701__20230331_zXykRyhw35uc" style="border-bottom: Black 1pt solid; text-align: right" title="Warrants issued to underwriters">58,500</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td> <td style="border-bottom: Black 1pt solid; text-align: left"> </td><td id="xdx_987_ecustom--WarrantIssuedToUnderwritersWeightedAverageExcercisePrice_c20220701__20230331_zXLAjRGMtJkk" style="border-bottom: Black 1pt solid; text-align: right" title="Warrant issued to underwriters, weighted average excercise price">4.40</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td> <td style="text-align: left"> </td><td style="text-align: right">–</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td> <td style="text-align: left"> </td><td style="text-align: right">–</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Outstanding at March 31, 2023</td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td id="xdx_984_eus-gaap--ClassOfWarrantOrRightOutstanding_iE_c20220701__20230331_z301vhi9Jt85" style="border-bottom: Black 2.5pt double; text-align: right" title="Class of Warrant or Right, Outstanding">1,179,750</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_980_eus-gaap--ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1_iE_c20220701__20230331_zRFCPXZmA0Qi" style="border-bottom: Black 2.5pt double; text-align: right" title="Class of Warrant or Right, Exercise Price of Warrants or Rights">4.02</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"><span id="xdx_904_eus-gaap--WarrantsAndRightsOutstandingTerm_iI_dtY_c20230331_zukdYEgaGHHj" title="Warrants and Rights Outstanding, Term">4.3</span></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_98F_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardEquityInstrumentsOtherThanOptionsAggregateIntrinsicValueOutstanding_iI_pp0p0_d0_c20230331_zt2PETFiHOKg" style="border-bottom: Black 2.5pt double; text-align: right" title="Aggregate intrinsic value, outstanding">–</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(238,238,238)"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable at March 31, 2023</td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td id="xdx_982_ecustom--WarrantsExercisableShares_c20230331_pdd" style="border-bottom: Black 2.5pt double; text-align: right" title="Warrant exercisable, shares">1,179,750</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_98F_ecustom--WarrantsExercisableWeightedAverageExercisePrice_c20230331_pdd" style="border-bottom: Black 2.5pt double; text-align: right" title="Warrants exercisable, weighted average exercise price">4.02</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"><span id="xdx_90B_ecustom--WarrantsAndRightsOutstandingTermExercisable_dtY_c20220701__20230331_zm47StEByasb" title="Warrants term, exercisable">4.3</span></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td id="xdx_986_ecustom--SharebasedCompensationArrangementBySharebasedPaymentAwardEquityInstrumentsOtherThanOptionsAggregateIntrinsicValueExercisable_iI_pp0p0_d0_c20230331_z6eQUNaa9mki" style="border-bottom: Black 2.5pt double; text-align: right" title="Warrant exercisable, aggregate intrinsic value">–</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table> 0 0 1121250 4.00 58500 4.40 1179750 4.02 P4Y3M18D 0 1179750 4.02 P4Y3M18D 0 146250 26000 97500 1420201 1200723 131625 60625 27228 384759 75000 4361370 3505000 193314 175250 236619 191125 60062 2500000 450000 <p id="xdx_803_eus-gaap--CommitmentsAndContingenciesDisclosureTextBlock_zW1zs1prLOK3" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>(4)       <span id="xdx_826_zQIINVBNXwp5">Commitments and Contingencies</span> </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective January 1, 2021, the Company secured new corporate and manufacturing office space under a sublease agreement with its contract manufacturer. Under the terms of the sublease agreement, the Company is required to make rental payments of $10,350 per month during the initial one-year term of the agreement. The sublease agreement is renewable upon mutual agreement of both parties for up to four additional years at a modest increase in the monthly rent, however, the Company is under no obligation to renew it. Management has determined that the exercise of the renewal option is not reasonably certain and, as such, the Company has accounted for it as a short-term lease under ASC 842, <i>Leases</i>. Effective January 1, 2023, the Company elected to renew the agreement for another one year period (see Note 5).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As indicated in Note 1, the Company sells its proprietary ESS units through wholesale dealers, primarily in California. In that regard, the Company has entered into agreements with several wholesale dealers operating in California and other states under which the Company has incentivized the dealers to achieve quarterly sales above targeted levels by agreeing to grant them shares of the Company’s common stock for exceeding such quarterly sales targets, subject to defined maximums.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p id="xdx_80F_eus-gaap--SubsequentEventsTextBlock_zBk85Mp1sRhd" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>(5)        <span id="xdx_826_zZiCEpI2LMYe">Subsequent Events</span> </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In April 2023, we amended the agreement with our contract manufacturer (see Note 4) to provide for the purchase by us of all of the contract manufacturer’s existing inventory used to assemble our ESS units and to also provide for the eventual assumption by us of full responsibility for the manufacturing of our ESS units. Pursuant to the amended agreement, we completed the purchase of our contract manufacturer’s assembly inventory by making a cash payment of $1.3 million to this company and have now recorded such purchased inventory on our balance sheet. We presently expect to assume full responsibility for the manufacturing process surrounding our ESS units from the contract manufacturer by June 1, 2023. All of our manufacturing certifications are listed under NeoVolta. This amended agreement has no effect on the present sublease agreement with our contract manufacturer.</p> EXCEL 33 Financial_Report.xlsx IDEA: XBRL DOCUMENT begin 644 Financial_Report.xlsx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