NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

Private Placement

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

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

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

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

Public Offering

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

Committed Equity Facility

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

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

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

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

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

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

Preferred Stock

Authorized and Outstanding Shares of Preferred Stock

Effective September 10, 2025, 3,000,000 shares of Preferred Stock are authorized, $0.001 par value per share, of which 1,000,000 are Series A Convertible Preferred Stock. As of September 30 and June 30, 2026, there 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 fiscal year ended June 30, 2026 and the three months ended September 30, 2026 is reflected below:

 SCHEDULE OF STOCK WARRANT ACTIVITY

Common Stock

Authorized and Outstanding Shares of Common Stock

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

Common Stock Warrants

In connection with the Company’s Registered Direct Offering (“RDO”) in September 2021, the Company issued 5five-year warrants to the RDO investors to purchase up to 1,071,430 shares of the Company’s common stock at an exercise price of $7.00 per share with an estimated fair value of approximately $3,874,000. These warrants expired September 27, 2026.

In May 2022 and in conjunction with entry into a credit facility with Cleveland, HPO and other lenders, the Company issued 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 5five-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.

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

 SCHEDULE OF STOCK WARRANT ACTIVITY

Equity Award Plans

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

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

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

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

Stock Options

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

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

 SCHEDULE OF STOCK OPTIONS ACTIVITY

Restricted Stock Units and Performance Stock Units

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

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

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

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

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

 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. Each eligible employee may authorize payroll deductions of 1% to 15% of the eligible employee’s compensation on each pay day to be used to purchase up to 1,500 shares of common stock for the employee’s account occurring during an offering period. The 2023 ESPP has a term of ten (10) years commencing on April 20, 2023, the date of approval by the Company’s stockholders, unless otherwise earlier terminated.

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

 SCHEDULE OF EMPLOYEE STOCK PURCHASE PLAN