NOTE 10 – STOCKHOLDERS’ EQUITY (DEFICIT)

Private Placement

On July 18, 2025, the Company entered into a securities purchase agreement, which was amended and restated on September 15, 2025 (the “Amended and Restated Purchase Agreement”) with certain accredited investors (collectively, the “Purchasers”) pursuant to which, among other things, the Purchasers agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Purchasers, an aggregate of 258,144 Preferred Stock Warrants and 1,214,766 Common Stock Warrants at the aggregate purchase price of approximately $5.0 million (the “Private Placement”). The purchase price was paid in cash or, in the case of purchaser Cleveland, cash and the cancellation of certain existing debt of the Company held by Cleveland. See Note 8 – Subordinated Debt for additional information.

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

The closing of the Private Placement contemplated by the Amended and Restated Purchase Agreement occurred simultaneously on September 15, 2025 upon the satisfaction of certain customary conditions. Proceeds received, net of offering costs of approximately $652,000, were approximately $4,348,000 consisting of $3,175,000 cash and the aforementioned cancellation of $1,173,000 of outstanding debt and accrued interest. The Private Placement Common Stock Warrants and Preferred Stock Warrants are classified as equity. Accordingly, proceeds, net of offering costs, are included in additional paid-in capital on the Company’s consolidated balance sheets.

Public Offering

On November 3, 2025, the Company completed an underwritten public offering (the “Public Offering”) of 3,840,000 shares of its common stock at a public offering price of $2.50 per share, and the Company granted the underwriter a 30-day option to purchase up to an additional 576,000 shares of common stock at the public offering price, less underwriting discounts and commissions, to cover over-allotments and which was subsequently exercised in full. The Company received net proceeds of approximately $9,760,000, after offering costs of approximately $1,280,000.

Committed Equity Facility

On May 15, 2026, the Company entered into a common stock purchase agreement (the “CEF Purchase Agreement”) and related registration rights agreement (the “CEF Registration Rights Agreement”) with Roth Principal Investments, LLC (“Roth Principal Investments”), providing a discretionary committed equity facility of up to $40.0 million (the “Committed Equity Facility”). Beginning June 4, 2026, the Company may, at its option over 36 months, sell shares of common stock to Roth Principal Investments at a price based on the volume weighted average price of the Company’s common stock as reported on the Nasdaq during a specific valuation period, less a fixed 3.0% discount in the case of a “Market Open Purchase” or an “Intraday Purchase” or less a fixed 5.25% discount in the case of a “Pre-Market Purchase” or a “Post-Market Purchase”, subject to ownership and other limitations set forth in the CEF Purchase Agreement, including the requirement that the closing sale price of the Company’s common stock on the trading day immediately prior to the applicable purchase date is not less than a threshold price of $0.50. Pursuant to the CEF Registration Rights Agreement, the Company filed a registration statement on Form S-1 to register the resale by Roth Principal Investments of up to 38,461,538 shares of common stock that the Company may direct Roth Principal Investments to purchase pursuant to the CEF Purchase Agreement.

As consideration for Roth Principal Investments’ commitment, the Company paid a $25,000 structuring fee and agreed to pay a cash commitment fee of up to $800,000, payable over time by Roth Principal Investments withholding cash amounts equal to 10% of the total aggregate purchase price payable by Roth Principal Investments to the Company in connection with each purchase of shares of the Company’s common stock effected under the CEF Purchase Agreement. The Company also agreed to reimburse Roth Principal Investments’ legal fees in the amounts specified in the CEF Purchase Agreement. As of June 30, 2026, the Company issued and sold 19,609 shares of common stock at an average price of $0.98 per share under the Committed Equity Facility. The Company received net proceeds of approximately $17,000, after offering costs of approximately $2,000. Additionally, the Company expended an additional $389,000 in costs associated with the CEF, recorded as a current asset on the balance sheet.

Preferred Stock

Authorized Shares of Preferred Stock

On August 29, 2025, the Company’s stockholders approved the amendment and restatement of the Articles of Incorporation to, among other things, (i) increase the aggregate number of authorized shares of preferred stock from 500,000 to 3,000,000, $0.001 par value per share, and (ii) grant the Board authority to fix the rights and preferences of the preferred stock by resolution from time to time, and (iii) designate 1,000,000 shares of Preferred Stock as “Series A Convertible Preferred Stock”, $0.001 par value per share, with rights, preferences, privileges and restrictions all as set forth in the Second Amended and Restated Certificate of Incorporation. The Second Amended and Restated Certificate of Incorporation was filed with the State of Nevada on September 10, 2025.

As of June 30, 2026 and 2025, there were no shares of preferred stock outstanding.

Preferred Stock Warrants

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

 SCHEDULE OF STOCK WARRANT ACTIVITY

Common Stock

Authorized Shares of Common Stock

On May 28, 2025, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment of its Articles of Incorporation to increase the number of shares of common stock to 75,000,000 from the 30,000,000 shares previously authorized. As of June 30, 2026 and 2025, there are 21,580,992 and 16,835,698 shares, respectively, of the Company’s common stock outstanding, par value $0.001.

Common Stock Warrants

In connection with the Company’s Registered Direct Offering (“RDO”) in September 2021, the Company issued 5 five-year warrants to the RDO investors to purchase up to 1,071,430 shares of the Company’s common stock at an exercise price of $7.00 per share with an estimated fair value of approximately $3,874,000. The warrants were exercisable immediately and are limited to beneficial ownership of 4.99% at any point in time in accordance with the warrant agreement.

In May 2022 and in conjunction with entry into a credit facility with Cleveland, HPO and other lenders, the Company issued 5 five-year warrants to the lenders to purchase up to 128,000 shares of the Company’s common stock at an exercise price of $2.53 per share with a fair value of approximately $173,000.

In June 2022 and in conjunction with the entry into the Second Amendment to the Loan and Security Agreement with SVB, the Company issued 12 twelve-year warrants to SVB and its designee, SVB Financial Group, to purchase up to 40,806 shares of the Company’s common stock at an exercise price of $2.23 per share with a fair value of approximately $80,000.

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

In September 2025 and in conjunction with the Private Placement, the Company issued Common Stock Warrants to purchase up to 1,214,766 shares of the Company’s common stock at an exercise price of $1.715 per share and exercisable for 5 five years from date of issuance with a fair value of $2,144,000.

All of the above issued common stock warrants are outstanding and exercisable as of June 30, 2026. Activity in the Company’s Common Stock Warrants during the year ended June 30, 2026 and 2025 are reflected below:

 SCHEDULE OF STOCK WARRANT ACTIVITY

The Company uses the Black-Scholes valuation model to calculate the fair value of common stock. The fair value of warrants was measured at the issuance date using the assumptions in the table below:

 SCHEDULE OF FAIR VALUE ASSUMPTIONS OF WARRANTS

Equity Award Plans

On February 17, 2015, the Company’s stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan offers certain employees, directors, and consultants the opportunity to acquire the Company’s common stock subject to vesting requirements and serves to encourage such persons to remain employed by the Company and to attract new employees. The 2014 Plan expired on November 26, 2024, at which time no future stock or stock option awards could be granted.

On April 29, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan authorizes the issuance of awards for up to 2,000,000 shares of common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates. As of June 30, 2026, 180,130 shares of the Company’s common stock were available for future grants under the 2021 Plan.

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

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

Stock Options

Activity in stock options during the year ended June 30, 2026 and 2025 and related balances outstanding are reflected below:

 SCHEDULE OF STOCK OPTIONS ACTIVITY

Compensation recorded for stock options was $558,000 and $605,000 for the fiscal year ended June 30, 2026 and 2025, respectively.

The Company uses the Black-Scholes valuation model to calculate the fair value of stock options. Weighted average annualized percentages and expected term inputs used in Black-Scholes valuations during the periods are listed below. No stock options were issued during the twelve months ended June 30, 2025.

 SCHEDULE OF FAIR VALUE ASSUMPTIONS OF STOCK OPTIONS

Restricted Stock Units and Performance Stock Units

The Company’s Equity Award Plans allows for grants of Restricted Stock Units (“RSUs”), which include performance-based stock units (“PSUs”). The awards are subject to the terms and conditions provided in (i) the Restricted Stock Unit Award Agreement for time-based awards, and (ii) the Performance Restricted Stock Unit Award Agreement for PSUs. Subject to vesting requirements set forth in the applicable RSU or PSU award agreement, one share of common stock is issuable for one vested RSU or PSU, as applicable. The fair value of time-based RSUs and PSUs without a market condition is the closing stock price of the Company’s common stock on the date of grant. The fair value of PSUs with market conditions is determined using the Monte Carlo valuation method. Compensation recorded for RSUs and PSUs was $385,000 and $322,000 for the fiscal year ended June 30, 2026 and 2025, respectively. Management determined as of June 30, 2026 that achieving the performance conditions required for vesting of performance-based PSUs is not probable.

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

On August 1, 2025, a total of 121,951 time-based RSUs were granted by the Company’s Board of Directors under the 2021 Plan to the Company’s Chief Executive Officer (“CEO”). Also on August 1, 2025, a total of 182,927 PSUs were granted by the Company’s Board of Directors under the 2021 Plan to the Company’s CEO, of which 122,561 PSUs contained only performance conditions and 60,366 PSUs contained a stock appreciation condition. The grants had a grant date fair value of $494,000.

Activity in RSUs and PSUs during the year ended June 30, 2026 and 2025 and related balances outstanding are reflected below:

 SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Employee Stock Purchase Plan

On March 6, 2023, the Company’s Board of Directors approved the 2023 Employee Stock Purchase Plan (the “2023 ESPP”), and on April 20, 2023, the 2023 ESPP was approved by the Company’s stockholders. The 2023 ESPP enables eligible employees of the Company and certain of its subsidiaries (a “Participating Subsidiary”) to use payroll deductions to purchase shares of the Company’s common stock and acquire an ownership interest in the Company. The maximum aggregate number of shares of the Company’s common stock that have been reserved as authorized for the grant of options under the 2023 ESPP is 350,000 shares, subject to adjustment as provided for in the 2023 ESPP. Participation in the 2023 ESPP is voluntary and is limited to eligible employees (as such term is defined in the 2023 ESPP) of the Company or a Participating Subsidiary who (i) has been employed by the Company or a Participating Subsidiary for at least 90 days and (ii) is customarily employed for at least twenty (20) hours per week and more than five (5) months in any calendar year. Each eligible employee may authorize payroll deductions of 1% to 15% of the eligible employee’s compensation on each pay day to be used to purchase up to 1,500 shares of common stock for the employee’s account occurring during an offering period. The 2023 ESPP has a term of ten (10) years commencing on April 20, 2023, the date of approval by the Company’s stockholders, unless otherwise earlier terminated.

Under the provisions of the 2023 ESPP, participants purchase common stock at 85% of the closing price of the Company’s common stock at the start or end of each six-month offering period, whichever is lower. Compensation expense recorded for the ESPP was $32,000 and $52,000 for the fiscal year ended June 30, 2026 and 2025, respectively. Common stock purchases under the 2023 ESPP are reflected below:

 SCHEDULE OF EMPLOYEE STOCK PURCHASE PLAN