Filed 2026-03-31 · Period ending 2025-12-31 · 49,201 words · SEC EDGAR
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# TurnOnGreen, Inc. (TOGI) — 10-K
**Filed:** 2026-03-31
**Period ending:** 2025-12-31
**Accession:** 0001214659-26-004113
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1349706/000121465926004113/)
**Origin leaf:** 9f3d2683a5c943b9c39b1d87a8666b59dbd5e3c7a1dae02ad9db31bb0a0f2be7
**Words:** 49,201
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**
UNITED STATES SECURITIES AND EXCHANGE COMMISSION**
**Washington, D.C. 20549**
**FORM 10-K**
**x****ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
**For the Fiscal Year Ended December 31, 2025**
or
******TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
For the transition
period from _____________ to ________________
Commission file number 000-52140
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**TURNONGREEN, INC.**
(Exact name of registrant as specified in its charter)
****
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Nevada |
90-1104713 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
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2030 Ringwood Ave., San Jose, CA |
95035 |
(510) 657-2635 | |
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(Address of principal executive offices) |
(Zip Code) |
(Registrants telephone number, including area code) | |
**Securities registered pursuant to Section12(b) of the Act:**None
**Securities registered pursuant to Section12(g) of the Act:**
Common Stock, $0.001 par value
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule405 of the Securities Act.YesNo
x
Indicate by check mark if the registrant is not
required to file reports pursuant to Section13 or Section15(d)of the Exchange Act.YesNo
x
Indicate by check mark whether the registrant
(1)has filed all reports required to be filed by Section13 or 15(d)of the Securities Exchange Act of 1934 during the
preceding year (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 90days. YesxNo
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). YesxNo
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 Rule12b-2 of the Exchange Act.
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Largeacceleratedfiler |
Acceleratedfiler | |
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Non-accelerated filerx |
Smallerreportingcompany x | |
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Emerging growth company |
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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
has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants
executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate by check mark whether the registrant
is a shell company (as defined in Rule12b-2 of the Exchange Act).YesNox
As of June 30, 2025, the aggregate market value
of the registrants common stock held by non-affiliates of the registrant was approximately $ 987,805 based on the closing sale
price, as quoted on the Pink Open Market, of $0.0080 per share.Such a determination should not be deemed an admission that the registrants
directors, officers, or 10% beneficial owners are, in fact, affiliates of the registrant.
There were 183,983,122
shares of common stock outstanding as of March 30, 2026.
**Documents incorporated by reference:**None
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**TURNONGREEN, INC.**
**FORM 10-K**
**FOR THE FISCAL YEAR ENDED DECEMBER 31, 2025**
**INDEX**
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PART I |
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Item 1. |
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Business |
1 | |
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Item 1A. |
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Risk Factors |
12 | |
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Item 1B. |
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Unresolved Staff Comments |
28 | |
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Item 1C. |
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Cybersecurity |
29 | |
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Item 2. |
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Properties |
29 | |
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Item 3. |
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Legal Proceedings |
29 | |
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Item 4. |
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Mine Safety Disclosures |
30 | |
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PART II |
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Item 5. |
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Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
31 | |
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Item 6. |
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Reserved |
31 | |
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Item 7. |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
31 | |
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Item 7A. |
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Quantitative and Qualitative Disclosures About Market Risk |
35 | |
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Item 8. |
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Financial Statements and Supplementary Data |
F-1 F-24 | |
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Item 9. |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
36 | |
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Item 9A. |
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Controls and Procedures |
36 | |
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Item 9B. |
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Other Information |
37 | |
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Item 9C. |
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Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
37 | |
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PART III |
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Item 10. |
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Directors, Executive Officers and Corporate Governance |
38 | |
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Item 11. |
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Executive Compensation |
39 | |
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Item 12. |
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Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
40 | |
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Item 13. |
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Certain Relationships and Related Transactions, and Director Independence |
41 | |
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Item 14. |
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Principal Accountant Fees and Services |
42 | |
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PART IV |
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Item 15. |
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Exhibits and Financial Statement Schedules. |
43 | |
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Item 16. |
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Form 10-K Summary |
44 | |
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Signatures |
45 | |
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**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**
This Annual Report on Form 10-K (the Annual
Report) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of
the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements relate to future events or our future
financial performance. We have attempted to identify forward-looking statements by terminology including anticipates, believes,
expects, can, continue, could, estimates, expects,
intends, may, plans, potential, approximate, might,
budget, forecast, shall, project, predict, should
or will or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties
and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future
results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe
that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance, achievements, or our ability to successfully remediate the material weakness in our internal control over financial reporting
disclosed in this Annual Report on Form 10-K in an appropriate and timely matter or at all, and the other factors described under Item
1A. Risk Factors and elsewhere in this Annual Report on Form 10-K. Our expectations are as of the date this Annual Report is filed,
and we do not intend to update any of the forward-looking statements after the date this Annual Report is filed to confirm these statements
to actual results, unless required by law.
**RISK FACTOR SUMMARY**
Below is a summary of
the principal factors that make an investment in our common stock speculative. This summary does not address all of the risks that we
face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under
the heading Risk Factors and should be carefully considered, together with other information in this Annual Report and our
other filings with the Securities and Exchange Commission (the Commission or the SEC), before making investment
decisions regarding our common stock.
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We have a history of annual net losses which may continue and which may negatively impact our ability to achieve our business objectives. | |
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Our business model will continue to evolve as we focus on our EV charging operating segment, which will increase the complexity of our business. | |
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Our growth strategy through acquisitions and partnerships involves a significant degree of risk, and some of the companies that we have identified as acquisition targets or strategic partners may not have a developed business or are experiencing inefficiencies and losses. | |
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If we fail to anticipate and adequately respond to rapid technological changes in our industry, our business would be materially and adversely affected. | |
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Our future results will depend on our ability to maintain and expand our existing sales channels and to put our marketing, business development and sales functions in place. | |
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We depend upon a few major customers for most of our revenues, and the loss of any of these customers, or the substantial reduction in the quantity of products that any of them purchase from us, would significantly reduce our revenues. | |
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We are heavily dependent on our senior management, and a loss of a member of our senior management team could adversely affect our existing operations and future development. | |
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Our technology is generally unpatented and others may seek to copy it. | |
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We rely on charging station manufacturers and other partners, and a loss of any such partner or interruption in the partners production could have a material adverse effect on our business. | |
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We are dependent upon our and our contract manufacturers ability to timely procure electronic components. | |
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Our future results will depend on our ability to establish, maintain and expand our manufacturers representative original equipment manufacturer (OEM) relationships and our other relationships. | |
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We depend on international operations for a substantial portion of our
manufacturing components and products. These activities are subject to the uncertainties associated with international business operations,
including tariffs, trade barriers and other restrictions. | |
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We face intense industry competition, price erosion and product obsolescence, which could reduce our revenues and prevent us from generating net income, and many of our competitors are larger and have greater financial and other resources than we do. | |
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As long as Hyperscale maintains a significant interest in our company, your ability to influence matters requiring shareholder approval will be limited, and our historical financial information as a subsidiary of Hyperscale may not be representative of our results as an independent public company. | |
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The price of our common stock may have little or no relationship to the historical bid prices of our common stock on the Pink Open Market (Current Information). There is currently only a limited trading market for our common stock. | |
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Supply chain disruptions, component shortages, manufacturing interruptions or delays, or the failure to accurately forecast customer demand, could adversely affect our ability to meet customer's demand, lead to higher costs, and adversely affect our business and results of operations. For example, supply chain challenges related to the and global semiconductor chip shortages have impacted companies worldwide and may have adverse effects on our suppliers and customers and, as a result, our business. | |
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**PART I**
**ITEM 1. BUSINESS**
**Overview**
TurnOnGreen, Inc., a
Nevada corporation (TOGI), through its wholly owned subsidiaries Digital Power Corporation (Digital Power)
and TOG Technologies Inc. (TOGT, and together with Digital Power, the TurnOnGreen), is an emerging provider
of premium power electronic and electric vehicle (EV) charging solutions. TurnOnGreen designs, develops, manufactures, and
sells highly engineered, feature-rich, high-grade power conversion systems and power solutions for mission-critical, life-sustaining,
and lifesaving applications across a variety of sectors, particularly those operating in demanding and harsh environments. TurnOnGreen
serves a broad range of markets, including defense and aerospace, medical and healthcare, industrial applications, telecommunications,
e-Mobility, and OEM solutions. TurnOnGreens products are highly adaptive, featuring customized firmware meticulously configured
to meet the specific requirements and challenges of its customers applications. Approximately 17% of TurnOnGreens revenue
is generated leveraging its core power technologies to deliver comprehensive EV charging infrastructure and subscription-based charging
network management services for residential, fleet, hospitality, workplace, healthcare, municipal, and educational environments including
universities and schools.
Digital Power offers
a broad range of rugged power solutions for the defense and aerospace market. These solutions feature the ability to withstand harsh environments.
For more than 50 years, Digital Power has provided rugged products and custom power solutions designed end-to-end for military and aerospace
applications. Digital Power offers a wide variety of units designed to comply with the most demanding United States and international
military standards (MIL-STDs).
In addition, Digital
Power provides a comprehensive range of integrated power system solutions that are designed to meet the diverse and precise needs of its
customers with the highest levels of efficiency, flexibility and scalability. Digital Power designs develop and manufacture custom power
systems to meet performance and/or form-factor requirements that cannot be met with standard power products. These power system solutions
are designed to function reliably in harsh environments associated with defense and aerospace applications, while also being utilized
for applications ranging from industrial and telecommunications equipment to medical instrumentation. TurnOnGreen believes that Digital
Powers power products are highly adaptive and feature digital power management and software configurations that allow them to achieve
higher power efficiency to meet the requirements of both its customers and its original equipment manufacturers (OEMs).
In addition to Digital Powers custom power system solutions, it also provides a wide range of industry-standard power products.
These products include their alternating current (AC) into a stable direct current (DC) voltage open-frame
product series, which TurnOnGreen believes to be among the industrys leading power switchers in terms of power efficiency. The
open-frame products are deployed in highly compact form factors and modular power series that support configurable multiple DC outputs.
Additionally, Digital Power offers high-power and high-voltage laser power supplies tailored to meet the unique requirements of medical,
dental, and industrial pulsed energy systems. Digital Powers expertise also encompasses high-performance and high-power data-center
power supplies, semiconductor fabrication equipment power source supplies, desktop power supplies, and a comprehensive range of value-added
customized AC/DC and DC/DC ruggedized power supply and system solutions.
Digital Powers
power products serve a wide range of applications across several critical industries. In the defense and aerospace industry, typical applications
include mobile and ground communications systems, naval power conversion, automated test and simulation equipment for weapon systems,
combat and airborne power supplies, radar array power sources, tactical gyro position and navigation systems, and active protection systems
for tactical vehicles. In the industrial and telecommunications industry, typical applications include packaging equipment, laboratory
and diagnostic equipment, industrial laser drivers, data center computing infrastructure, and turbomachinery control solutions. In the
medical and healthcare industry, typical applications include portable oxygen concentrators, patient monitoring systems, pulsed laser
drivers for dental and surgical treatments, DNA sequencers, medical beds, and ultrasound systems.
TOGT provides EV drivers and site hosts with convenient,
reliable, and high-speed charging solutions. TOGT designs, manufactures, resells, owns, operates, and supplies Level 2 AC and DC fast
charging (DCFC) equipment for residential, commercial, and fleet applications. Its Level 2 charging systems are deployed
at single-family homes, multi-family residences, hospitality and healthcare facilities, retail properties, municipalities, schools, workplaces,
and fleet depots. TOGTs DCFC systems are designed for high-traffic urban, suburban, corridor, destination, and fleet locations
where rapid charging and high utilization are essential. TOGT also offers a charger-as-a-service (CaaS) model in which customers receive
charging hardware bundled with access to the TOGI network.
The Company also amended and restated its bylaws
on January 11, 2024, to reflect thechange in its name. The principal executive offices of the Company are located at 2030 Ringwood
Ave., San Jose, California 95131, its telephone number is (510) 657-2635 and its corporate website is www.turnongreen.com.
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**Our Products and Markets**
****
*Power System Products
and Technology*
Power System Solutions.
At Digital Power, we provide a comprehensive range of advanced, integrated power system solutions engineered to meet the diverse and precise
requirements of our customers with the highest levels of efficiency, flexibility, and scalability. The core focus of our business is the
design, development, and manufacture of custom power systems for mission-critical defense and aerospace applications. These systems are
built to operate with exceptional reliability in harsh, high-stress environments, including extreme temperatures, electromagnetic exposure,
altitude variation, and rigorous shock and vibration conditions. Our defense-grade products are utilized in a wide variety of platforms
and subsystems, including communications, surveillance, guidance, targeting, and unmanned systems.
Beyond defense and aerospace,
our power solutions are deployed in demanding industrial, telecommunications, and medical instrumentation applications. Our products incorporate
adaptive digital power management and configurable software control, enabling high power density, improved efficiency, and precise output
performance to satisfy both end-user needs and OEM specifications.
In addition to custom-engineered
defense and industrial systems, Digital Power offers a broad range of industry-standard power products. These include our AC/DC Open Frame
series, which we believe to be among the industrys leading high-efficiency power switchers, available in highly compact formats
and modular architectures that support configurable multiple DC outputs. We also supply high-power and high-voltage laser power solutions
tailored for medical, dental, and industrial pulsed-energy applications, as well as high-performance power products used in data-center
infrastructure, semiconductor fabrication equipment, and desktop computing. Our portfolio further includes ruggedized AC/DC and DC/DC
conversion systems and value-added engineered solutions for customers requiring highly specialized performance characteristics.
Power Technology for
High-Grade Power Products. We offer our feature rich based power rectifiers that support flexible configuration and high-grade design
implementation. This includes innovative designs and implementation of digital power management improving power efficiently and customization
of the product. It includes digital signal processor controls for the power factor corrector (PFC) and DC to DC conversing.
The advanced power technology used in our products includes synchronous rectifiers, two-phase PFC, power management integrated circuits
and features such as hot plug capacity and intelligent current sharing. While some of our customers have special requirements that include
a full custom design, other customers may require only certain electrical changes to standard power supply products, such as modified
output voltages, unique status and control signals and mechanical repackaging tailored to fit the specific application. We offer a wide
range of standard and modified standard products that can be easily integrated with any platform across our diversified market segments.
For example, our board
mount converters are ideal for a range of consumer electronics, medical applications and industrial control applications. These AC/DC
and DC/DC power supplies range from 10 to 9,000 watts, with operating temperatures from -40 to +85 degrees Celsius and include universal
AC input and/or wide range of DC inputs that are widely used by our defense and aerospace customers and for uninterruptible power supplies
applications.
Value-Added Services.
We also offer a range of AC/DC and DC/DC products that provide value to our customers due to the configuration we provide to fit each
customers specific needs, which often require multiple voltage outputs. These custom products illustrate the benefits and flexibility
of our modular approach to offer higher performance, higher power densities, lower costs and faster delivery than many competitive offerings.
Our configurable products typically are used in a wide range of distributed power architecture implementations in defense and aerospace
electronic systems, industrial and telecommunication applications, as well as medical and healthcare instrumentation and equipment. Such
configurable products include our capacitor charger supplies, which support out powers from 50 watts to 9,000 watts, with configurable
voltages from 500 volts to 3,000 volts.
*Power System Markets*
****
We sell our power systems
as integrated solutions to our diverse customers for a wide range of applications in the global markets and sectors we serve, including
medical and healthcare, defense and aerospace, and industrial and telecommunications. We also sell our products as stand-alone products
to our commercial customers and, most recently, we have started to roll out our EV charger products to consumers. Our current commercial
customer base consists of approximately 98 companies, which are served through our direct sales groups and our strategic partner channels.
During the years ended December 31, 2025, and 2024, approximately 94.05% and 98.5% of our revenues, respectively, were generated from
customers located in North America.
Medical and Healthcare.
Our power solutions are ideal for healthcare and medical applications that require a high level of reliability and performance due to
their quality, output power and high-power density. Our power supplies meet the rigorous medical safety requirements and major industrial
safety standards related to such products to major industrial safety standards, including the EN60601-1 safety standard and the 4th Edition
EMC compliance requirements, and help medical device and system manufacturers speed compliance testing of their own products. Our qualification
testing facilities are also approved by various safety agencies to test and qualify power products to be used in medical devices. We have
obtained the medical quality management systems ISO 13485 certification to support rigorous design requirements and high-quality manufacturing
of our medical power systems. Our medical power products help OEMs minimize the risk of encountering unexpected development problems outside
of their own areas of expertise. The typical applications for our power products in the medical and healthcare industry include portable
oxygen concentrators, patient monitoring systems, pulsed lasers drivers for dental and surgical treatment, DNA sequencers, medical beds
and ultrasounds. Revenues from the medical and healthcare industry accounted for approximately 3% and 11% of all revenues received from
our power supply products for the years ended December 31, 2025, and 2024, respectively.
****
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Defense and Aerospace.
We offer a broad range of rugged power solutions for the defense and aerospace market. These solutions feature the ability to withstand
harsh environments. For more than 50 years, we have been providing rugged customer off-the-shelf (COTS) products and custom
power solutions designed end-to-end for military and aerospace applications. We offer a wide variety of units designed to comply with
the most demanding United States and international MIL-STDs. We believe that our military products meet all relevant military standards
in accordance with the Defense Standardization Program Policies and Procedures. This includes specifications related to space, weight,
output power, electromagnetic compatibility, power density and multiple output requirements, all of which we meet due to decades of experience
held by our engineering teams. Certain of our products that are specifically designed, modified, configured or adapted for military systems
are subject to the United States International Traffic in Arms Regulations (ITAR), which are administered by the U.S. Department
of State. We obtain the required export licenses for any exports subject to ITAR. Our defense manufacturing facilities are compliant with
the international Quality Management System standard for the AS&D AS9100.
The typical applications
for our power products in the defense and aerospace industry include mobile and ground communications, naval power conversion, automated
test and simulation equipment for weapon systems, combat and airborne power supplies, radar arrays power source, tactical gyro position
and navigation systems and active protection of tactical vehicles. Revenues from the defense and aerospace industry accounted for approximately
61% and 48% of all revenues received from our power supply products for the years ended December 31, 2025, and 2024, respectively.
Industrial and Telecommunications.
We build products for custom and standard applications used in industrial and telecommunication markets and set the standard in flexibility,
efficiency and reliability. Our compact, high-density and flexible power supplies and power converters allow optimal performance, boost
functionality and decrease costs. Due to the breadth of our experience, our products have proven to easily meet stringent design requirements.
Our industrial power solutions are designed to stand up to the extreme temperatures, input surges, vibration and shock found through uses
such as industrial automation, material handling, industrial lasers, robotics, agriculture, oil, and gas, mining and outdoor applications.
Our technology is designed for superior thermal management, reliability, electromagnetic interference (EMI) and electromagnetic
compatibility (EMC) specifications and power density, with rugged performance that is typically unavailable in standard
power supplies. The typical applications for our power products in the industrial and telecommunications industry include packaging equipment,
laboratory and diagnostic equipment, industrial laser drivers, datacenter computing and turbomachinery control solutions. R**e**venues
from the industrial and telecommunications industry accounted for approximately 36% and 41% of all revenues received from our power supply
products for the years ended December 31, 2025, and 2024, respectively.
*EV Charging Products*
****
At TOG Technologies we
provide EV drivers and site hosts with convenient, reliable, and high-speed charging solutions. TOGT designs, manufactures, resells, owns,
operates, and supplies Level 2 AC and DCFC equipment for residential, commercial, and fleet applications. Our Level 2 charging systems
are deployed at single-family homes, multi-family residences, hospitality and healthcare facilities, retail properties, municipalities,
schools, workplaces, and fleet depots. Our DCFC systems are designed for high-traffic urban, suburban, corridor, destination, and fleet
locations, where rapid charging and high utilization are essential.
Leveraging more than
50 years of experience in high-performance power conversion, TOGT develops charging hardware and software solutions that address the expected
global expansion of EV infrastructure, and the increasing energy demands of battery-electric vehicles. Our innovative DCFC platforms can
deliver an approximately full charge to a 250-mile range EV battery in roughly 35 minutes, depending on vehicle specifications.
We offer a comprehensive
portfolio of networked EV charging products, including Level 2 AC chargers supporting the SAE J1772 standard, and DCFC systems compatible
with the North American Combined Charging System Type 1 (CCS1), the SAE J3400 North America Charging Standard (NACS),
and the CHArge de MOve (CHAdeMO) standard used in certain Japanese-manufactured EVs. Our chargers are supported by a cloud-based
charging station management system (CSMS) that operates, monitors, and manages charging infrastructure, enabling remote
diagnostics, charging data collection, access control, and payment processing.
We expect demand for
EV charging infrastructure to grow as the demand for EV charging infrastructure increases from fleet operators and municipalities in addition
to utilities enhance grid capabilities. TOGT intends to generate revenue primarily through sales of networked charging hardware and recurring
subscription fees for TOG Network Services, which include charger connectivity, software features, authentication, energy billing, and
site-host management tools. Access to the TOG Network is available through each networked commercial charging port, and optional extended-warranty
coverage is billed annually. Based on current projections, we anticipate that recurring subscription-based revenue from TOG Network Services
and extended warranties will reach parity with one-time commercial charger hardware sales (including EV700, EVP700, EV1100, and EVP1900
models) after approximately five years. TOGT also offers a charger-as-a-service (CaaS) model in which customers receive
hardware bundled with TOG Network access.
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With a shared mission
to do our part to fight climate change, our team strives to bring to established and emerging markets innovative solutions that provide
value for the company and our shareholders. We provide green energy services to homeowners, business partners, and EV drivers, leveraging
our highly efficient, flexible, and software-managed technologies to meet their needs for reliable and customized energy saving services.
We benefit from newer technologies and by learning from the experience of our competition to offer smarter and better products and services
to our markets. During the years ended December 31, 2025, and 2024, approximately 17% and 8%, respectively of our revenues, were generated
from the Companys EV charging products, all of which were sold to customers located in North America.
*Power electronics and EV charging products
and services renderings:*
**
*
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**Our Growth Strategies**
We sell our power systems
and EV charging solutions through custom, value-added and standard hardware sales, engineering services, recurring network subscriptions,
extended warranty offerings, and related services. Our strategy is to continue expanding our core advanced power electronics business
while supporting long-term growth through selective expansion of our EV charging products and network services. We intend to optimize
our operating model by combining high-performance technology, differentiated engineering, and competitive pricing with customer-focused
business models that support recurring revenue streams.
Key elements of our growth
strategy include:
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| Expand Power Electronics Capabilities in Core Markets. Our primary growth focus is to continue
advancing our custom and integrated power electronic solutions across defense, aerospace, medical, industrial, telecommunications, and
other mission-critical markets. We plan to invest in new product architectures, higher-density power conversion, software-managed controls,
ruggedized electronics, and advanced form-factor designs to meet the evolving requirements of these customers. Our goal is to deepen our
role as a trusted supplier of high-reliability power systems for harsh and demanding operating environments, including programs requiring
long service life, precision performance, and military-grade durability. | |
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| Increase Market Penetration with Existing and New Customers. We intend to grow revenue within
our established customer base by expanding power system deployment across additional platforms, applications, and programs. We also expect
new opportunities through emerging defense, medical, and industrial projects that require customized solutions, higher efficiency, and
improved power density. Our direct sales teams and strategic partner channels will continue to pursue long-term supply relationships with
OEMs, defense contractors, and system integrators. | |
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| Strengthen Recurring Revenue Opportunities. As we expand our installed base of custom and
integrated power systems, we plan to increase recurring revenues through replacement units, system upgrades, firmware updates, value-added
engineering support, and long-term service agreements. We believe our technology roadmap and long-standing customer relationships create
opportunities for multi-year supply and support arrangements. | |
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| Develop and Expand Strategic Partnerships. We intend to continue providing reliable, feature-rich
power electronic solutions to our existing customers while developing and offering new advanced power products to address evolving market
needs. In parallel, we will continue forming strategic partnerships that support deployment of our EV charging infrastructure and expand
our market reach. Our agreements span a broad range of sectors, including construction and infrastructure service providers, large commercial
fleet operators, hospitality networks, national accounts integrators, regional transportation organizations, municipalities, engineering
and consulting firms, solar energy installers, universities, public school districts, car rental operators, and automotive dealerships.
These partnerships support site development, product installation, and broader adoption of our charging hardware and network services. | |
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| Continue to Expand Our EV Charging Products and Network Services. While our core focus remains
power electronics, we intend to continue scaling our EV charging hardware and software offerings to meet growing e-Mobility demand. We
plan to expand our portfolio of Level 2 chargers and DCFC systems, supported by our cloud-based management platform, TOG Network Services.
This includes charger connectivity, authentication, billing, diagnostics, energy management, and fleet solutions. We may also deploy a
charger-as-a-service (CaaS) model that bundles hardware with subscription-based network access. | |
|
| Cooperative and Turnkey Site-Host Programs. For select EV charging locations, we may partner
directly with commercial property owners under a cooperative revenue-sharing model. In these cases, we fund, install, and operate the
charging systems while retaining a majority of the revenue generated from charging sessions for a contracted period. We seek to offset
capital costs through rebates, grant programs, sale of carbon credits, and energy revenue where applicable. | |
|
| Strategic Acquisitions and Investments. We may pursue acquisitions or investments that expand
our technical capabilities, customer base, geographic reach, or product offerings. Potential targets may include power electronics businesses,
technology assets, infrastructure partners, or software platforms that align with our core competencies and growth objectives. | |
**Sales and Markets**
We sell and market our
products through a variety of sales channels. Our direct sales groups are dedicated to developing commercial and fleet sales in well-defined
customer segments in specific geographic regions. Our channel partners, which include independent manufacturer representatives and distributors,
focus on e-commerce and business-to-business sales. Our sales and marketing efforts target specific verticals and territories that we
believe will have the highest demand for EV charging solutions including EV charging hardware, engineering planning, and charging management
solutions over the forthcoming five-to-ten-year period. Our segment-based sales strategy focuses on regional priorities where demand is
highest, strategic partnerships in commercial real estate development and business development projects that provide ongoing revenue to
EV owners.
We have an internal marketing
team that has built a digital and social media marketing program to increase brand awareness, product promotion and product sales. We
have a variety of digital assets that can be easily shared across multiple platforms to help us scale sales quickly. We plan to market
directly to consumers through our software applications, e-commerce platforms and digital advertising campaigns. We will also work across
channels to help our distribution partners market our products and services by utilizing their ecommerce and social platforms.
Revenues of approximately
$6.0 million and $4.5 million or 83% and 92%, of total revenues were attributable to power electronics products under various OEM agreements
for the years ended December 31, 2025, and 2024, respectively. Three customers accounted for more than 10% of our total revenues for the
year ended 2025 and one customer accounted for more than 10% for the year ended 2024.
| | 6 | | |
| | |
**Manufacturing and
Supplies**
Consistent with our strategy
of focusing on custom designed, high-grade, flexible and configurable products to support our diverse applications in the markets we serve,
we aim to maintain a high degree of flexibility in our manufacturing through the use of strategically focused contract manufacturer partners.
These partnerships give us access to new markets and benefit our production processes, which are designed for high-mix and fast-line-charge
and take advantage of technologies such as electronically controlled operating instructions, automated pick and place, automatic optical
inspection and automatic testing. To achieve our high-quality and low-cost manufacturing goals with labor-intensive products, we have
entered into strategic manufacturing agreements with certain contract manufacturers in the United States and Asia.
We strive to bring low
cost and fast delivery production to our customers in a way that limits the impact on the natural environment. Our Asia manufacturing
capabilities have provided the opportunity to not only sell but also manufacture high quality, energy efficient power systems for our
global customers, with recognized standards, that we control and audit. We demonstrate through our manufacturing partners our attitude
to the environment by holding our partners accountable for certain environmental-friendly standards for their manufacturing facilities.
We are also continually improving our internal processes and monitoring the processes of our contract manufacturers to ensure the highest
quality and consistent manufacturing of our power product solutions so that our customers can use our products right out of the box. Customer
specific testing services are offered with custom designed test standards to simulate operation within our customer applications.
We believe that we are
in compliance with international safety standards, which is critical for every application. By obtaining the ISO 9001 quality management
system, we seek to offer total quality at every stage, from in-house design to manufacturing facilities around the world. Our contract
manufacturing partners are also in compliance with such international safety standards and maintain the same ISO 9001 quality management
system, as well as the ISO 14001 environmental management system, the ISO 13485 medical management system and the AS&D AS9100 quality
management system. Such standards are the cornerstones of our integrated management system to drive continuous improvement of our product
quality.
**Product Design
and Development**
****
Our product design and
development efforts are primarily directed toward developing new products in conjunction with our strategy of continuing to introduce
advanced product solutions for the markets we serve and to expand our business into emerging markets based on our disruptive power technology.
Our engineering groups
are strategically located around the world to facilitate communication with, and access to, our worldwide customer base and manufacturing
facilities. This collaborative approach facilitates partnerships with customers for technical development efforts and enables us to develop
technological products that support complex and evolving markets such as eMobility, cloud computing, military and aerospace. On occasion,
we execute non-disclosure agreements with customers to help develop proprietary, next generation products designed for rapid deployment.
We also sponsor memberships in technical organizations that allow our engineers to participate in developing standards for emerging technologies.
We believe that this participation is critical in establishing credibility and a reputable level of expertise in the marketplace, as well
as to position us among industry leaders in new product development.
Our internal product
design and development programs have also been augmented by third party development programs with engineering partners to achieve the
best technological and product design results for specific customer product applications. In June 2021, we entered into a partnership
agreement with ChargeLab, Inc. to design, build and publish cross-platform mobile experiences for residential and commercial end-users
of our EV chargers. Under this agreement, ChargeLab will support us in the pre-production stage of our EV charging products by performing
testing sessions to ensure and validate solid firmware compliance with the Open Charge Point Protocol.
When required, we modify
standard products to meet specific customer requirements. Such modifications include, but are not limited to, redesigning commercial products
to meet MIL-STD requirements for military applications based on COTS products and to meet other customized product requirements. We continually
seek to improve our product power density, adaptability and efficiency, while attempting to anticipate changing market demands for increased
functionality, such as PFC controlled digital signal processors, customized firmware and improved Electromagnetic Interference filtering(EMI)
. We also continue to attempt to differentiate all of our products from commodity-type products by enhancing, modifying and customizing
our existing product portfolio through our engineering integrating laboratory located in California.
The development of our
new custom and emerging product solutions is driven by our ability to provide our customers with advanced technologies that meet their
product needs within a short turnaround time at a competitive price point. We believe that we are successfully executing our strategic
account focus, as evidenced by the award of second and third generation product development contracts from some of our customers. In addition,
our standard contract for custom power solutions includes a multi-year high-volume production forecast that could allow us to secure long-term
production guarantees while providing an environment that promotes the development of our IP portfolio.
| | 7 | | |
| | |
Product design and development
expenditures were approximately $0.4 million for the years ended December 31, 2025, and 2024.
**Key Design Consideration
for Safety Compliance**
TOGs EVSE product
line (product) complies with several safety requirements and regulations to ensure electric safety and prevent hazardous accidents, in
which safety requirements for the EV supply equipment and the EV battery. To facilitate the safety requirements in our EVSE product line,
key requirements of electrical safety are presented. These crucial design rules implemented in our products including functional requirements,
constructional requirements, personal protection against electric shock, insulation coordination, electromagnetic compatibility and charging
control were implemented to fulfil the electrical safety completely.
To meet national and
international safety standards requirements, we use step design methodology including product design review, product testing, approval,
certificate, and listing. To obtain the safety certification for our EVSE product, we designed the product to be compliant with the safety
requirements and standards for North America.
Electric shock fire,
and personal injury hazards are key safety considerations for all EV charging systems and are addressed by applicable industry standards.
TOG designs its EVSE products in accordance with these standards to mitigate such risks. To assure the safety of our charging equipment,
we comply with applicable regulatory and industry standards and have implemented crucial design requirements across our EVSE products.
These requirements address, among other things, the construction of exterior and interior components, protection against electric shock,
insulation coordination, electromagnetic compatibility, charging control systems.
To ensure the safety
of our charging equipment, we comply with applicable regulatory and industry standards and have implemented critical design requirements
across our EVSE products. These requirements address, among other things, the construction of exterior and interior components, protection
against electric shock, insulation coordination, electromagnetic compatibility, and charging control systems.
**Competitive Strengths
and Competition**
****
We offer highly engineered,
feature-rich, high-grade power conversion and power system solutions on a global scale. We believe that we differentiate ourselves from
our competition and have been able to grow our business as a result of the following key competitive strengths:
|
|
|
Custom-Made Products. We have designed our base model power system platform so that it can be quickly and economically adapted to the specific power needs of any hosting platform or OEM, which minimizes the time between customer consultation and delivery of the products. | |
|
|
|
Specialized Technical Expertise. We benefit from more than 50 years of expertise in power technologies and energy management. This has given us a wealth of experience in designing and manufacturing AC/DC power conversion solutions and positions us to benefit from the ongoing transformation towards eMobility with smarter and greener EV charging infrastructure solutions. | |
*
|
|
|
Diverse Product and Customer Base and Revenue Streams. We have a diverse power supply product and customer base. With our growing EV charging solution segment, we will receive additional revenue streams through a range of different sources such as energy sales, hardware sales, network management services, advertising sales and energy services. We will also offer customers a variety of business model options, particularly with respect to our EV charging solution installation and maintenance services. | |
|
|
|
Minimal Non-Recurring Engineering Expenses. Our ability to efficiently adapt our base-model power system platforms to develop customized products for specific customer requirements generally results in limited non-recurring engineering (NRE) costs. We typically charge customers a modest NRE fee to partially offset development costs; however, our business model is primarily focused on generating revenue from the ongoing manufacture and sale of the products we develop, rather than from NRE activities. | |
**
|
|
|
Emphasis on Product Design Development Efforts. We have strategically deployed engineering groups around the world to facilitate communication with and access to our global customer base and manufacturing facilities. This enables us to develop cutting-edge products to support highly complex and evolving markets such as eMobility, cloud computing, military and aerospace. | |
****
We compete in two operating
segments, power solutions and EV charging solutions.
**Power Electronic Segment.**Our
competition in the power solutions industry includes many companies located throughout the world. Many of our competitors, including Bel
Fuse, Artesyn Embedded Technologies, TDK-Lambda, Delta Electronics, Murata and Mean-Well Power Supplies, have greater fiscal and marketing
resources and a more expansive geographic presence than we do. We also face competition from current and prospective customers who may
decide to internally design, and manufacture power supplies needed for their products.Further, certain larger OEMs tend to contract
only with larger power supply manufacturers. We believe that our power system solutions and advanced technology are superior to our competitors
power supplies based in part on our use of the latest power technology processing and controls, which make our power supplies highly customized
and efficient. In addition, we believe the power-to-volume ratio makes our power solutions more compact compared to what is offered by
our competitors and is suitable for custom infrastructures to meet our customers requirements.
| | 8 | | |
| | |
Notably, the flexibility
of our power system products provides us with another advantage by employing an adjustable power range and a selectable number of output
product design platforms. We believe that we are in a competitive position with our targeted customers that need a high-quality, compact
product that can be readily modified to meet specific requirements.We have also designed the base model power system platform so
that it can be quickly and economically modified and adapted to the specific power needs of any hosting platform or OEM. This emphasis
on flexibility has allowed us to provide samples of modified power systems to OEM customers only a few days after initial consultation.
This is an important capability given the emphasis placed by OEMs on time to market. It also results in very low NRE expenses,
which allow us generally not to charge our OEM customers for NRE expenses related to tailoring a power system to a customers specific
requirements. We believe that this approach gives us an additional advantage over our competitors, many of which charge their customers
for NRE expenses.
**Electrical Vehicle
Supply Equipment and Network Segment.**Our EVSE business segment competes directly with several companies in the North American
market. We expect to face competition across multiple verticals in the future as demand for EVSE increases. The EV charging market has
grown significantly over the past five years and can be divided into the three following macro segments:
**
|
|
|
Public open network Level 2 and DCFC charging; | |
|
|
|
Commercial fleet closed network charging; and | |
|
|
|
Residential single and multi-family home charging. | |
Growth in the North American
market has primarily been driven by a subset of companies including Tesla, ChargePoint, Blink Charging, EVGO, Electrify America, and Sema
Connect. These companies primarily focus on the growth of public open network charging solutions but are increasingly diversifying into
commercial and residential closed network sales. The EVSE competitive market is fragmented and not necessarily aligned with the EV needs
of tomorrow. As EVSE charging standards are established and the market is consolidated, we expect that the competitive landscape will
favor our approach to market segmentation, strategic partnerships and product development. EV driver charging behavior indicates that
residential and commercial closed network charging are the areas with the most potential for growth, as an estimated of 85% of EV drivers
charge at home or at work.
The competitive landscape
for closed network residential EVSE sales can be found in the ecommerce segment, where there are several product and class competitors
that vary in size and market reach. This segment is primarily driven by purchasing decisions that are dictated by price, consumer reviews
and product features. Competitors will likely consolidate in the future to establish larger open charging networks, cooperative relationships
with OEMs, and other EVSE product-based companies. As new alliances emerge in the market, EVSE manufactures that have greater market share,
access to more dynamic and user-friendly software and hardware will put us at a competitive disadvantage. If we are slow to adapt to changing
market conditions and EV innovations our growth will be limited or curtailed, which would negatively affect our ability to scale business
and operations.
**Intellectual Property
and Proprietary Technology**
****
We rely on a combination
of trade secrets, industry expertise, confidential procedures and contractual provisions to protect our intellectual property. Given the
continuous updates and revisions that we are making to our products, we believe that the cost of obtaining patents would outweigh the
benefits of doing so. However, we may seek to obtain patents in the future as we continue to develop unique core technologies.
We do not patent technology
developed by us and we cannot be sure that others will not independently develop the same or similar technology or otherwise obtain access
to our technology. To protect our rights in these areas, we require all employees, consultants and others who work for or with us to enter
into confidentiality agreements. We cannot be sure, however, that these agreements will provide meaningful protection for our trade secrets,
know-how or other information in the event of any unauthorized use, misappropriation or disclosure.
We have a registered
our trademarks with the United States Patent and Trademark Office for our brand name TURNONGREEN and for our brand names
DP Digital Power DP Digital Power Flexible Power Solutions among some other trademarks names which we also
registered with the World Intellectual Property Organization (WIPO) Madrid System.
Currently we are not
planning to apply for a protected patent for some of the products we have developed for EV charging supply equipment. However, we will
maintain the IP of the proprietary products and solutions we developed for the power electronic and eMobility market and some other adjacent
markets. We periodically monitor for infringements on our intellectual property and have never encountered such an infringement. We do
not believe that our lack of patents is material to our ongoing business.
| | 9 | | |
| | |
****
**Compliance with Material Government
(Including Environmental) Regulations**
Our businesses are heavily
regulated in many of the markets in which it operates. TurnOnGreen develop and supplies power electronics products primarily used for
power conversion. As a result, TurnOnGreen must comply with numerous standards governing electronic safety designed to protect the health
of humans and animals. TurnOnGreen serves diverse markets including automotive, defense and aerospace, medical and healthcare, industrial
and telecommunications, each of which is subject to its own set safety regulations and standards.
*Environmental Matters*.We
are subject to various federal, state, local, and non-U.S. laws and regulations relating to environmental protection, including those
governing the discharge, treatment, storage, disposal, and remediation of hazardous substances and wastes. TurnOnGreen continually assesses
its compliance status and environmental management practices to ensure its operations comply with applicable environmental laws and regulations.
Investigation, remediation, and operation and maintenance costs associated with environmental compliance and site management are a normal
and recurring part of our operations.
*Government Contracts*.The
U.S. Government, and other governments, may terminate any of our government contracts at their convenience, or for default based on a
failure to meet specified performance requirements. If any of our U.S. Government or foreign government contracts were terminated for
convenience, we would generally be entitled to receive payment for work completed and allowable termination or cancellation costs. If
a government contract were terminated for breach or default, the U.S. Government or foreign government would generally pay only for work
that has been accepted and may require us to pay the difference between the original contract price and the cost to re-procure the contract
items, net of the work accepted from the original contract. The U.S. Government or foreign government may also hold us liable for damages
resulting from the default.
*Medical Device Power
Supplies*.****Our medical power supplies must incorporate one or more means of protection (MOP) to prevent electrical
shock. A MOP may include safety insulation, protective earth, defined creepage distance, air gaps (clearance), or other protective impedances.
These protections may be used in various combinations such that if one protection fails, another remains in place. Our medical power supplies
must comply with standards that distinguish between operators and patients, resulting in classifications known as means of operator
protection and means of patient protection. Patient protection requirements are more stringent because patients may
be physically connected to equipment through an applied part and may be unconscious when a fault occurs.
*Non-U.S. Sales*.Our
non-U.S. sales are subject to both U.S. and non-U.S. governmental regulations and procurement policies, including regulations relating
to import and export controls, tariffs, foreign investment, exchange controls, anti-corruption laws, and the repatriation of earnings.
Non-U.S. sales are also subject to currency, political, and economic risks.
*Other Compliance Matters.*In
addition, we are subject to the local, state, national, and international laws and regulations of the jurisdictions in which we operate
that affect companies generally, including those governing commerce, intellectual property, trade, health and safety, contracts, privacy
and communications, consumer protection, web services, taxation, corporate governance, and securities laws. These laws and regulations
may change over time. Unfavorable changes in existing or new laws and regulations could increase our cost of doing business and impede
our growth.
**Human Capital Resources**
We are committed to attracting
and retaining the brightest and best talent, so investing in human capital is critical to our success. The employee traits we value include
industriousness, intellectual curiosity, growth mindset and deeply caring about the quality of work. The human capital measures and objectives
that we focus on in managing our business include employee safety, talent acquisition and retention, employee engagement, development
and training, diversity and inclusion, and compensation and pay equity. None of our employees is represented by a collective bargaining
unit or is a party to a collective bargaining agreement. We believe that our relationship with our employees is good.
The following description
provides an overall view of our Company.
*Employee Profile*
**
As of December 31, 2025,
we have approximately eighteen full-time employees and one part-time employee, of whom two were in engineering, five in production, six
in customer support, sales and marketing and six in general and administrative. Our employees are not covered byany
collective bargaining agreements. We consider relations with our employees to be good.
As of December 31, 2025,
approximately 22% of our current workforce is female, 78% male, and our average tenure is 9.7 years, an increase of 5% from an average
tenure of 9.2 years as of December 31, 2024.
We believe we materially
comply with all applicable state, local and international laws governing nondiscrimination in employment in every location in which we
operate. All applicants and employees are treated with the same high level of respect regardless of their gender, ethnicity, religion,
national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability or protected veteran status.
| | 10 | | |
| | |
*Pay Equity*
**
Our employee compensation
strategy supports three primary objectives: attract and retain the best team members; reflect and reinforce our most important values;
and align team member interests with stockholder interests in building enduring value. We believe people should be paid for what they
do and how they do it, regardless of their gender, race or other personal characteristics. To deliver on that commitment, we benchmark
and set pay ranges based on market data and consider factors such as an employees role and experience, the location of their job,
and their performance. We also regularly review our compensation practices, both in terms of our overall workforce and individual employees,
to ensure our pay is fair and equitable.
****
*Total Rewards*
**
As part of our compensation
philosophy, we believe that we must offer and maintain market competitive total rewards programs for our employees in order to attract
and retain superior talent. In addition to healthy base wages, additional programs include annual bonus opportunities, healthcare and
insurance benefits, paid time off, family leave, family care resources and flexible work schedules. We have established a Company matched
401(k) plan.
**
*Health and Safety*
**
The success of our business
is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our employees.
We provide our employees and their families with access to a variety of flexible and convenient health and welfare programs, including
benefits that support their physical and mental health by providing tools and resources to help them improve or maintain their health
status; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.
****
**Backlog**
As of December 31, 2025,
and December 31, 2024, our backlog was approximately $6.5 million and $6.1 million, respectively. Due to the nature of our manufacturing
process and customer base, we purchase and ship products to our customers without experiencing a significant backlog and recognize revenue
at a point in time when control of goods are transferred.
| | 11 | | |
| | |
**ITEM 1A. RISK FACTORS**
An investment in our common stock involves significant
risks. You should carefully consider the following risks and all other information set forth in this Annual Report before deciding to
invest in our common stock. If any of the events or developments described below occurs, our business, financial condition and results
of operations may suffer. In that case, the value of our common stock may decline, and you could lose all or part of your investment.
You should consider each of the following risk
factors and any other information set forth in this Annual Report and the other reports filed by the Company with the SEC, including the
Companys financial statements and related notes, in evaluating the Companys business and prospects. The risks and uncertainties
described below are not the only ones that impact on the Companys operations and business. Additional risks and uncertainties not
presently known to the Company, or that the Company currently considers immaterial, may also impair its business or operations. If any
of the following risks actually occurs, the Companys business and financial condition, results or prospects could be harmed. Please
also read carefully the section entitled Special Note Regarding Forward-Looking Statements at the beginning of this Annual
Report.
**Risks Related to the Company and Its Financial Condition**
**We have a history of annual net losses which
may continue, and which may negatively impact our ability to achieve our business objectives.**
As of December 31, 2025, we had cash of $0.1 million
and negative working capital of $8.2 million. We have incurred recurring losses, anticipated continuing losses, and reported losses available
to common shareholders for the years ended December 31, 2025, and December 31, 2024, of $2.1 million and $4.0 million, respectively. In
the past, we have financed our operations principally through investment by Hyperscale, our parent company; however, there can be no assurance
that Hyperscale will continue to support us. There can be no assurance that, even if our revenues increase, future operations will result
in net income. Our failure to increase our revenues or improve our gross margins will harm our business. We may not be able to sustain
or increase profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate, our gross
margins fail to improve or our operating expenses exceed our expectations, our operating results will suffer. The prices we charge for
our products may decrease, which would reduce our revenues and gross margins and harm our business. If we are unable to sell our products
at acceptable prices relative to our costs, or if we fail to develop and introduce, on a timely basis, new products from which we can
derive additional revenues, our financial results will suffer. These factors raise substantial doubt regarding the Companys ability
to continue as a going concern for the 12 months following the issuance of the financial statements included within this Annual Report.
**Our business model will continue to evolve
as we focus on our EV charging operating segment, which will increase the complexity of our business.**
Our business model has evolved in the past and
will continue to do so as we focus on our EV charging operating segment. In prior years we have added additional types of services and
product offerings and in some cases, we have modified or discontinued those services and product offerings. We intend to continue to try
to offer additional types of products or services, including with respect to our EV charging products and services, and we do not know
whether any of them will be successful. From time to time, we have also modified aspects of our business model relating to our product
mix. We do not know whether these or any other modifications will be successful. The additions and modifications to our business have
increased the complexity of our business and placed significant strain on our management, personnel, operations, systems, technical performance,
financial resources, and internal financial control and reporting functions. Future additions to or modifications of our business are
likely to have similar effects. Further, any new business or website we launch that is not favorably received by the market could damage
our reputation or our brand. The occurrence of any of the foregoing could have a material adverse effect on our business.
**We will need, but may be unable to obtain,
funding on satisfactory terms, or at all; any financing we do obtain would dilute our shareholders and investors and could also impose
burdensome financial restrictions on our business.**
While we have historically relied upon cash from
financing activities, we hope to generate sufficient revenues from operations to fund all of the cash requirements we need to support
our business. However, it is extremely unlikely that we will be able to generate any significant cash from our operating activities in
the foreseeable future. Future financings may not be available on a timely basis, in sufficient amounts or on terms acceptable to us,
if at all. Any debt financing or other financing of securities senior to our common stock will likely include financial and other covenants
that will restrict our flexibility. Any failure to comply with these covenants may cause an event of default and acceleration of the obligation
to pay the debt or dividend payments if the funds we raise arise from the sale of preferred equity, which would have a material adverse
effect on our business, prospects, financial condition and results of operations and we could lose our existing sources of funding and
impair our ability to secure new sources of funding. You should not assume that Hyperscale will support us financially in the future.
There can be no assurance that we will be able to generate any further investor interest in our securities or other types of funding,
in which case you would likely lose the entirety of the value of your shares.
| | 12 | | |
| | |
****
**Our acquisition growth
strategy is subject to a significant degree of risk.**
Our growth strategy through
acquisitions involves a significant degree of risk. Some of the companies that we have identified as acquisition targets may not have
a developed business or are experiencing inefficiencies and incur losses. Therefore, we may lose our investment assuming we are able to
make one, in the event that these companies businesses do not develop as planned or that they are unable to achieve the anticipated
cost efficiencies or reduction of losses.
****
**If we make any acquisitions, they may disrupt
or have a negative impact on our business.**
****
Whenever we make acquisitions, we could have difficulty
integrating the acquired companies personnel and operations with our own. In addition, the key personnel of the acquired business
may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether we are
successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase
our expenses. In addition to the risks described above, acquisitions are accompanied by several inherent risks, including, without limitation,
the following:
|
| The possibility that senior management and/or management of future acquired companies terminate their
employment prior to or shortly following our completion of integration; | |
|
| difficulty of integrating acquired products, services or operations; | |
|
| integration of new employees and management into our culture while maintaining focus on operating efficiently
and providing consistent, high-quality goods and services; | |
|
| potential disruption of the ongoing businesses and distraction of our management and the management of
acquired companies; | |
|
| unanticipated issues with transferring customer relationships; | |
|
| complexity associated with managing our combined company; | |
|
| difficulty of incorporating acquired rights or products into our existing business; | |
|
| difficulties in disposing of the excess or idle facilities of an acquired company or business and expenses
in maintaining such facilities; | |
|
| difficulties in maintaining uniform standards, controls, procedures and policies; | |
|
| potential impairment of relationships with employees and customers as a result of any integration of new
management personnel; | |
|
| potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing
of the products to new and existing customers; | |
|
| effect of any government regulations which relate to the business acquired; and | |
|
| potential unknown liabilities associated with acquired businesses or product lines, or the need to spend
significant amounts to retool, reposition or modify the marketing and sales of acquired products or the defense of any litigation, whether
or not successful, resulting from actions of the acquired company prior to our acquisition. | |
****
Our business could be severely impaired if and
to the extent that we are unsuccessful in addressing any of these risks or other problems encountered in connection with any acquisition,
many of which cannot be presently identified. If we fail to satisfactorily address them, these risks and problems could disrupt our ongoing
business, distract our management and employees, increase our expenses and adversely affect our results of operations.
**Our business and operations are growing, and
if we fail to effectively manage our growth, our business and operating results could be harmed**.
We have experienced, and may continue to experience,
growth in our operations. This has placed, and may continue to place, significant demands on our management, operational and financial
infrastructure. If we do not manage our growth effectively, the quality of our products and services could suffer, which could negatively
affect our operating results. To effectively manage our growth, we must continue to improve our operational, financial and management
controls and reporting systems and procedures. These systems improvements may require significant capital expenditures and management
resources. Failure to implement these improvements could hurt our ability to manage our growth and our financial position.
**There can be no assurance of successful expansion
of operations.**
Our increase in the scope and scale of our operations,
including the hiring of additional personnel, has resulted in substantially higher operating expenses, and we expect our operating expenses
to continue to increase. Expansion of our operations may place significant demands on our management, financial resources, and internal
systems. Our ability to manage anticipated future growth will depend on the expansion of its accounting and internal management systems
and the implementation and improvement of systems, procedures, and controls. We cannot assure you that significant problems will not arise
in these areas. Failure to expand and improve these systems, procedures, and controls efficiently and at a pace consistent with our business
growth could have a material adverse effect on our business, financial condition, and results of operations. Additionally, we cannot assure
you that our efforts to expand marketing, sales, manufacturing, and customer support will generate additional sales or profitability in
future periods.
| | 13 | | |
| | |
**We may be unable to successfully expand our
production capacity, which could result in material delays, quality issues, increased costs and loss of business opportunities, which
may negatively impact our product margins and profitability**.
Part of our future growth strategy is to increase
our production capacity to meet increasing demand for our goods. Assuming we obtain sufficient funding to increase our production capacity,
any projects to increase such capacity may not be constructed on the anticipated timetable or within budget. We may also experience quality
control issues as we implement any production upgrades. Any material delay in completing these projects, or any substantial cost increases
or quality issues in connection with these projects could materially delay our ability to bring our products to market and adversely affect
our business, reduce our revenue, income and available cash, all of which could harm our financial condition.
****
**If we fail to anticipate and adequately respond
to rapid technological changes in our industry, including evolving industry-wide standards, in a timely and cost-effective manner, our
business, financial condition and results of operations would be materially and adversely affected.**
The markets in which we operate are characterized
by technological changes. Such changes, including evolving industry standards, changes in customer requirements and new product introductions
and enhancements, could render our products obsolete. Accordingly, we are required to constantly monitor and anticipate technological
changes in our industry and develop new product offerings and technologies or adapt or modify our existing offerings and technologies
to keep pace with technological advances in our industry and remain competitive.
Our ability to implement our business strategy
and continue to grow our revenues will depend on a number of factors, including our continuing ability to:
|
| identify emerging technological trends in our current and target markets. | |
|
| identify additional uses for our existing technology to address customer needs in our current and future
markets; | |
|
| enhance our offerings by adding innovative features that differentiate our offerings from those of our
competitors; and | |
|
| design, develop, manufacture, assemble, test, market and support new products and enhancements in a timely
and cost-effective manner. | |
We believe that, to remain competitive in the
future, we will need to continue to invest significant financial resources in developing new offerings and technologies or to adapt or
modify our existing offerings and technologies, including through internal product design and development, strategic acquisitions and
joint ventures or other arrangements. However, these efforts may be more costly than we anticipate and there can be no assurance that
they will be successful.
To the extent our customers adopt such new technology
in place of our products, the sales of our products may be adversely affected. Such competition may also increase pricing pressure for
our products and adversely affect the revenues from such products.
**Our future success depends upon our ability
to develop, and market differentiated, leading-edge power conversion products for larger customers as well as off-grid power generation
and distribution technologies, potentially contributing to lengthy product development and sales cycles that may result in significant
expenditures before revenues are generated.**
The power system industry and the industries in
which many of our customers operate are characterized by intense competition, rapid technological change, quickened product obsolescence,
and price erosion for mature products, each of which could have an adverse effect on our results of operations. The development of new,
innovative products is often a complex, time-consuming and costly process involving significant investment in research and development,
with no assurance of return on investment. Although we have introduced many products over recent years, there can be no assurance we will
be able to continue to develop and introduce new and improved products and power system concepts in a timely or efficient manner. Similarly,
there can be no assurance that recently introduced or to be developed products will achieve customer acceptance.
Our future success depends substantially upon
customer acceptance of our innovative products and services. As we have been in the early stages of market penetration for our EVSE infrastructure
and eMobility service, we have experienced lengthy periods during which we have focused our product development efforts on the specific
requirements of a limited number of large customers, followed by further periods of delay before meaningful purchase orders are received.
As a result, we may incur significant product development expenses, as well as significant sales and marketing expenses, before we generate
the related revenues for these products.
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| | |
We cannot offer any assurance that the markets
we currently serve will grow in the future, our power products, including EVSE infrastructure and services, will meet respective market
requirements, or we can maintain adequate gross margins or operating profits in these markets.
**Our future results will depend on our ability
to maintain and expand our existing sales channels and to build out our marketing, business development and sales functions.**
To grow our business, we must add new customers
for our products in addition to retaining and increasing sales to our current customers. Currently, we have a limited sales force focused
on establishing relationships with customers that we expect to expand over time. We have historically relied on key executives to drive
growth through return business with existing customers. Building out marketing, business development and sales functions in all operating
subsidiaries is critical to drive significant growth in line with our strategic plans. We plan to contract for marketing services to improve
our websites, manage public relations and optimize our social media presence. Failure to recruit and retain the business development and
sales personnel to execute on outreach and capture of new business, or the failure of those new hires or marketing services to perform
as expected, will limit our ability to achieve our growth targets.
**The sale of our products is dependent upon
our ability to satisfy the proprietary requirements of our customers.**
We depend upon a relatively narrow range of products
for the majority of our revenue. Our success in marketing our products is dependent upon their continued acceptance by our customers.
In some cases, our customers require that our products meet their own proprietary requirements. If we are unable to satisfy such requirements,
or forecast and adapt to changes in such requirements, our business could be materially harmed.
**We depend upon a few major customers for a
majority of our revenues, and the loss of any of these customers, or the substantial reduction in the quantity of products that they purchase
from us, would significantly reduce our revenues.**
A relatively small number of commercial customers
and OEM partners account for a substantial portion of our revenue. Our operating results and projections are therefore dependent on our
performance under commercial agreements with customers in the defense and aerospace, medical and healthcare, industrial, and telecommunications
sectors. We expect that a majority of our revenue, excluding our eMobility market, will continue to be derived from a concentrated group
of customers and OEM partners. In addition, we do not expect a significant portion of our near-term revenue to be generated from our eMobility
market. As a result, our business remains subject to risks associated with customer concentration, including the loss of, or reduction
in demand from, any of these key customers or partners, as well as risks related to the industries and markets in which they operate.
Furthermore, our growth strategy depends, in part, on our ability to diversify and expand our customer and OEM partner base. If we are
unable to attract a broader range of customers and partners, our business, results of operations, and financial condition could be adversely
affected.
If our major OEM customers reduce or cancel their
orders or scale back their operations, our revenues could be significantly reduced. In addition, shifts in the capital spending priorities
of certain of these customers toward new network elements have resulted, and may continue to result, in reduced demand for our products,
which could have a material adverse effect on our business and results of operations. If the financial condition of one or more of our
major customers deteriorates, or if they experience difficulty obtaining financing or investment capital, our revenues could decline substantially.
Because we are dependent on the electronic equipment industry, our business is also subject to the impact of general economic conditions
affecting that industry.
Substantially all of our customers operate in
the electronic equipment industry, which is characterized by rapid technological change, product obsolescence, and significant fluctuations
in demand. This industry is also highly competitive and subject to volatility. OEMs serving this industry face ongoing pressure to improve
product performance while reducing costs. These pressures are often passed on to suppliers, including us, resulting in demands for enhanced
product performance and lower pricing. Such demands may adversely affect our ability to compete effectively in certain markets and may
negatively impact our gross margins.
**We anticipate growing international sales for a portion of our revenues,
for which there can be no assurance.**
Sales to customers outside of North America accounted
for 6%, and 2% of revenues for the years ended December 31, 2025, and 2024, respectively, and we expect that international sales will
represent an increasing portion of our total revenues. International sales are subject to the risks of international business operations
as described above, as well as generally longer payment cycles, greater difficulty collecting accounts receivable and currency restrictions.
| | 15 | | |
| | |
****
**Our backlog is subject to reduction and cancellation
and unavailability of raw materials used in our products, which could negatively impact our revenues and results of operations.**
Backlog represents products or services that our
customers have committed by contract to purchase from us. Many of the orders that comprise our backlog may be canceled by our customers,
and we cannot be certain that the amount of our backlog does not exceed the level of orders that will ultimately be delivered. Moreover,
cancellations of purchase orders or reductions of product quantities in existing contracts could substantially and materially reduce backlog
and, consequently, future revenues. Our failure to replace orders for canceled backlog or replace decreased backlog could negatively impact
our revenues and results of operations. Further, disruption in the supply chain of electronic components and material parts used as raw
materials in our products may affect our ability to manufacture products which could substantially reduce backlog.
**Although we depend on sales of our legacy products
for a meaningful portion of our revenues, these products are mature, and their sales will decline.**
A relatively large portion of our sales have historically
been attributable to our legacy products. We expect that these products may continue to account for a meaningful percentage of our revenues
for the foreseeable future. However, these sales are declining. Although we are unable to predict future prices for our legacy products,
we expect that prices for these products will continue to be subject to significant downward pressure in certain markets for the reasons
described above. Accordingly, our ability to maintain or increase revenues will be dependent on our ability to expand our customer base,
increase unit sales volumes of these products and successfully, develop, introduce, and sell new products such as custom design and value-added
products. We cannot assure you that we will be able to expand our customer base, increase unit sales volumes of existing products or develop,
introduce and/or sell new products.
**We are heavily dependent on our senior management,
and a loss of a member of our senior management team could cause our stock price to suffer**.
If we lose the services of Amos Kohn, our Chief
Executive Officer and Chief Financial Officer, Marcus Charuvastra, our President and/or certain key employees, we may not be able to find
appropriate replacements on a timely basis, and our business could be adversely affected. Our existing operations and continued future
development depend to a significant extent upon the performance and active participation of these individuals and certain key employees.
We may enter into employment agreements new employment agreement with Mr. Kohn, Mr. Charuvastra and additional key employees in the future,
we cannot guarantee that we will be successful in retaining the services of these individuals. If we were to lose any of these individuals,
we may not be able to find appropriate replacements on a timely basis and our financial condition and results of operations could be materially
adversely affected.
Furthermore, competition for employees can be
intense, particularly in Silicon Valley where TurnOnGreen is headquartered, and the ability to attract, hire and retain them depends on
TurnOnGreens ability to provide competitive compensation. In addition, job market dynamics have been impacted by the great
resignation, with a significant number of people leaving the workforce, and future challenges related to TurnOnGreens return-to-office
plans, hybrid work model or workplace practices could lead to attrition and difficulty attracting high-quality employees. TurnOnGreen
may not be able to attract, assimilate, develop, or retain qualified personnel in the future, and failure to do so could adversely affect
its business, including the execution of its global business strategy.
**If we are unable to identify, attract, train
and retain qualified personnel, especially our design and technical personnel, our business and results of operations would be materially
and adversely affected, and we may not be able to effectively execute our business strategy.**
Our performance and future success largely depend
on our continuing ability to identify, attract, train, retain and motivate qualified personnel, including our management, sales and marketing,
finance and in particular our engineering, design and technical personnel. For example, we currently have a limited number of qualified
personnel for the assembling and testing processes. We do not know whether we will be able to retain all these personnel as we continue
to pursue our business strategy. Our engineering, design and technical personnel represent a significant asset. The competition for qualified
personnel in our industry is intense and constrains our ability to attract qualified personnel. The loss of the services of one or more
of our key employees, especially of our key engineering, design and technical personnel, or our inability to attract, retain and motivate
qualified personnel, could have a material adverse effect on our business, financial condition and operating results.
**Our technology is generally unpatented, and
others may seek to copy it.**
We operate in an industry in which the ability
to compete depends on the development or acquisition of proprietary technologies that must be protected to preserve the exclusive use
of such technologies. We devote substantial resources to establish and protect our proprietary rights. This protection, however, may not
prevent competitors from independently developing products similar or superior to our products. We may be unable to protect our IP that
competitors could restrict or replicate, of which may have a material adverse effect on our competitive position. In addition, the intellectual
property laws of foreign countries may not protect our rights to the same extent as those of the United States.
| | 16 | | |
| | |
We generally do not patent technology developed
by us and we cannot be sure that others will not independently develop the same or similar technology or otherwise obtain access to our
technology. To protect our rights in these areas, we require all employees, consultants and others who work for or with us to enter into
confidentiality agreements. We cannot be sure, however, that these agreements will provide meaningful protection for our trade secrets,
know-how or other information in the event of any unauthorized use, misappropriation or disclosure.
**Failure of our information technology infrastructure
to operate effectively could adversely affect our business.**
We depend heavily on information technology infrastructure
to achieve our business objectives. If a problem occurs that impairs this infrastructure, the resulting disruption could impede our ability
to record or process orders, manufacture and ship in a timely manner, or otherwise carry on business in the normal course. Any such event
could cause us to lose customers or revenue and could require us to incur significant expenses to remediate.
**Our insurance coverage and indemnity may be
insufficient to cover potential liabilities we may face due to the risks inherent in the products and services we provide.**
We are exposed to liabilities that are unique
to the products and services we provide. A significant portion of our business relates to designing, developing and manufacturing components,
integrated assemblies and subsystems for advanced defense, medical, transportation, industrial, technology and communications systems
and products. New technologies associated with these systems and products may be untested or unproven. Components of certain defense systems
and products we develop are inherently dangerous. Failures of satellites, missile systems, air traffic control systems, homeland security
applications and aircraft have the potential to cause loss of life and extensive property damage. In most circumstances, we may receive
indemnification from the government end users of our defense offerings in the United States, the United Kingdom and Israel. In addition,
failures of products and systems that we manufacture or distribute for medical devices, transportation controls or industrial systems
also have the potential to result in loss of life, personal injury and/or extensive property damage.
While we maintain insurance for certain risks,
the amount of our insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial
costs from an accident or incident. It also is not possible for us to obtain insurance to protect against all operational risks and liabilities.
Substantial claims resulting from an incident in excess of government indemnity and our insurance coverage would harm our financial condition,
results of operations and cash flows. Moreover, any accident or incident for which we are liable, even if fully insured, could negatively
affect our standing with our customers and the public, thereby making it more difficult for us to compete effectively, and could significantly
impact the cost and availability of adequate insurance in the future.
**Risks Related to Our EV Charging Business and the EV Charging
Industry**
**We are dependent upon our and our contract
manufacturers ability to timely procure electronic components.**
Because of the global economy, many raw material
vendors have reduced capacities, closed production lines and, in some cases, even discontinued their operations. As a result, there is
a global shortage of certain electronic or mineral components, which may extend our production lead-time and our production costs. Some
materials are no longer available to support some of our products, thereby requiring us to search for cross materials or, even worse,
redesign some of our products to support currently available materials. Such redesign efforts may require certain regulatory and safety
agency re-submittals, which may cause further production delays. While we have initiated actions that we believe will limit our exposure
to such problems, the dynamic business conditions in many of our markets may challenge the solutions that have been put in place, and
issues may recur in the future.
In addition, most of our products are manufactured,
assembled and tested by third party subcontractors and contract manufacturers located in Asia, and particularly China. While we have had
relationships with many of these third parties in the past, we cannot predict how or whether these relationships will continue in the
future. In addition, changes in management, financial viability, manufacturing demand or capacity, or other factors, at these third parties
could hurt our ability to manufacture our products.
**We may not be able to procure necessary key
components or raw materials, or we may purchase excess raw material inventory or unusable inventory, which increases the risk of reserve
charges to reduce the value of any inventory deemed excess or obsolete, thereby reducing our profitability.**
The power systems industry, and the electronics
industry as a whole, can be subject to pronounced, lengthy business cycles and otherwise subject to sudden and sharp changes in demand.
Our success is, in part, dependent on our ability to forecast and procure inventories of components and materials to match production
schedules and customer delivery requirements. Many of our products require raw materials supplied by a limited number of vendors and,
in some instances, a single vendor. During certain periods, key components or materials required to build our products may become unavailable
in the timeframe required for us to meet our customers needs. Our inability to secure sufficient raw materials to manufacture products
for our customers has reduced, in the past, our revenue and profitability and could do so again.
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We may choose, and have chosen, to mitigate our
inventory risks by increasing the levels of inventory for certain products, components and materials. Such increased inventory levels
may increase the potential risk for excess or obsolete inventories, should our forecasts fail to materialize or if there are negative
factors impacting our customers end markets, leading to order cancellation. If we identify excess inventory or determine certain
inventory is obsolete (i.e., unusable), we likely will record additional inventory reserves (i.e., expenses representing the write-off
of the excess or obsolete inventory), which could have an adverse effect on our gross margins and on our operating results.
**We depend on international operators for a
substantial portion of our components and products.**
We purchase a substantial portion of our components
from foreign manufacturers and have a substantial portion of our commercial products assembled, packaged and tested by subcontractors
located outside the United States. These activities are subject to the uncertainties associated with international business operations,
including trade barriers and other restrictions, changes in trade policies, governmental regulations, currency exchange fluctuations,
reduced protection for intellectual property, war and other military activities, terrorism, changes in social, political, or economic
conditions, and other disruptions or delays in production or shipments, any of which could have a materially adverse effect on our business,
financial condition, and/or operating results.
Although no assurance can be given that future
disruptions will not occur, to date, we have not experienced any disruptions due to our reliance on foreign manufacturers. In the future,
if any one of our foreign manufacturers experiences an extensive disruption in the production of the products that we need, we will have
to pursue alternative plans of production, such as finding an alternative manufacturer to produce those products affected by such disruption.
Alternative manufacturers that produce the products that we need do exist. Nonetheless, having to locate an alternative supplier may cause
a material disruption in our ability to produce and supply products to our customers. If we have to pursue alternative plans of production,
it could have a materially adverse effect on our business, financial condition, and operating results.
****
**We may face significant risks and operational
disruptions in transitioning to a new contract manufacturer, which could adversely affect our business, results of operations, and customer
relationships.**
****
Shifting production to a new contract manufacturer
(CM) involves numerous challenges and introduces substantial risks that could materially impact our operations. The transition
may result in technical and engineering setbacks, including the loss of specialized expertise and difficulties in re-qualifying manufacturing
processes and replicating established workflows at the new facility. We may also face quality and reliability issues as the new CM ramps
up production, potentially resulting in increased product defects or variability in quality standards. The change could disrupt our supply
chain due to uncertainty in sourcing raw materials and components, extended lead times, or diminished supplier reliability.
Additionally, the transition may require significant
capital expenditures related to new equipment, tooling, and inventory adjustments, as well as increased operational costs during the ramp-up
period. We may experience delays in production output and reduced capacity during this time, which could impair our ability to meet customer
demand. There is also a heightened risk of intellectual property leakage or confidentiality breaches associated with onboarding a new
CM, along with potential compliance and regulatory hurdles that could delay necessary certifications.
Such disruptions may negatively impact customer
satisfaction and damage our brand reputation, especially if product delivery timelines or quality expectations are not met.
Collectively, these risks could impair our ability
to deliver products reliably, fulfill contractual obligations, and maintain our competitive position in the market.
**Changes in U.S. and international trade policies,
particularly with respect to China, and key trading countries, may adversely impact our business and operating results.**
We rely a on foreign third-party manufacturers
and component suppliers located in China, Taiwan, Israel, and other countries. The U.S. government has taken actions that may result in
changes to U.S. and international trade policies. In April 2025, the U.S. government announced tariffs on imports from China that may
reach a combined total rate of up to at least 145%, including the 20% tariff implemented in February 2025. Tariffs of 10% were also imposed
on imports from Taiwan and Israel. If maintained or expanded to additional countries, tariffs and potential trade disputes with China
or other countries could increase our costs of revenue and operating expenses. The extent and duration of tariffs, and their impact on
economic conditions and our business, remain uncertain.
Disruption of our manufacturing facilities or
other operations or those of our suppliers, or in the operations of our customers, due to climate change, earthquake, flood, other natural
catastrophic events, public health crises or terrorism could result in cancellation of orders, delays in deliveries or other business
activities, or loss of customers and could seriously harm our business.
****
****
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****
We have operations, suppliers and customers located
in the U.S., China and Israel. Operations at our manufacturing facilities and our assembly subcontractors and those of our suppliers,
as well as our other operations and those of our customers, are subject to disruption for a variety of reasons, including work stoppages,
acts of war such as the United States and Israeli military actions taken against Iran and its reverberations, Russias invasion
of Ukraine, terrorism, public health crises, fire, earthquake, volcanic eruptions, drought, storms, sea-level rise, extreme temperatures,
energy shortages, spikes in energy demand or power blackouts, disruptions in the availability of water necessary for our operations (including,
but not limited to, in areas of relatively high water stress), flooding or other natural disasters; and certain of these events may become
more frequent or intense as ma result of climate change. Such disruption could in the future cause inefficiencies in our workforce and
delays in, among other things, shipments of products to our customers, our ability to perform services requested by our customers, the
ability of our suppliers to supply us components for our products in a timely manner, or the timely installation and acceptance of our
products at customer sites. Such disruptions could also induce illiquidity for our customers and suppliers, further straining our supply
chain and causing continued uncertainty in customers abilities to pay for the products they purchase and their demand for our products
and services. In case of any disruptions in our supply chain, we may need to commit to increased purchases and provide longer lead times
to secure critical components, which could increase inventory obsolescence risk.
**Changes in government incentives, emissions
and fuel economy standards, and other regulatory policies may negatively impact the EV market and demand for our products and services.**
The market for EVs is influenced by a range of regulatory and policy
factors, including government rebates, tax credits, infrastructure incentives, emissions standards, fuel economy standards, and other
measures intended to encourage the adoption of EVs and related charging infrastructure. Changes to, reductions in, or the elimination
of such incentives, standards, mandates, or other supportive policies at the federal, state, or international level could reduce consumer
demand for EVs and EV charging infrastructure. In addition, improvements in the fuel efficiency, cost, or performance of internal combustion
engine vehicles or other alternative fuel technologies could reduce the relative attractiveness of EVs. The regulatory environment remains
subject to change, including as a result of legislative, administrative, or political developments. If demand for EVs or EV charging infrastructure
declines or grows more slowly than expected as a result of these factors, our business, results of operations, financial condition, and
prospects could be materially adversely affected.
**The EV market is influenced by government incentives,
regulatory policies, and political priorities, and changes to such programs or policies could adversely affect demand for our products
and services.**
****
The market for electric vehicles (EVs)
and EV charging infrastructure has historically benefited from government incentives, including tax credits, rebates, grants, and other
financial support programs at the federal, state, and local levels, as well as from regulatory policies and mandates intended to encourage
electrification. These incentives and policies have reduced the effective cost of EVs and charging infrastructure and have contributed
to the growth of the EV market.
However, these programs and policies are subject
to change, reduction, or elimination as a result of legislative, regulatory, or administrative actions, including changes in political
priorities across administrations. For example, government authorities may reduce or eliminate tax credits, grants, or other incentives
supporting EV adoption or charging infrastructure deployment, delay or weaken emissions or electrification mandates, or prioritize alternative
technologies or energy policies. Any such changes could reduce consumer and commercial demand for EVs and related infrastructure.
In addition, certain of our revenues may be derived
from regulatory credit programs or other government-supported mechanisms. Changes to, or the elimination of, such programs could adversely
affect our ability to generate such revenue.
Because the EV market remains dependent, in part,
on continued regulatory support and favorable policy environments, any reduction in incentives, changes in regulatory frameworks, or shifts
in government priorities could slow the growth of the EV market. If demand for EVs or EV charging infrastructure declines or grows more
slowly than expected, our business, results of operations, financial condition, and prospects could be materially adversely affected.
**The growth of the EV charging market depends
on the development of adequate charging infrastructure, which is subject to significant uncertainty and requires substantial investment.**
The size, composition, and geographic distribution
of the EV charging network will depend on a number of evolving factors, including the rate of EV adoption, consumer charging preferences,
the availability of residential and workplace charging, and differences across urban, suburban, and rural markets. As a result, the development
of charging infrastructure may not occur at the pace or scale required to support widespread EV adoption.
In addition, the buildout of charging infrastructure
requires significant capital investment, including investment in publicly accessible fast charging, Level 2 charging, and private residential
charging. The level and timing of such investment remain uncertain and may vary based on economic conditions, technology developments,
and policy support.
Furthermore, the expansion of EV infrastructure
depends on the availability of sufficient electric grid capacity, energy generation, and distribution systems. If federal, state, or local
governments, utilities, or private sector participants do not make adequate investments in these areas, the growth of EV adoption and
charging infrastructure could be constrained.
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If the development of EV charging infrastructure,
grid capacity, or related investments does not meet market needs, demand for our products and services could be adversely affected, which
could have a materially and adversely impact on our business, results of operations, and financial condition.
****
**Our revenue growth ultimately depends on consumers
willingness to adopt electric vehicles in a market that is still in its early stages.**
Our growth is highly dependent upon the adoption
by consumers of EVs, and we are subject to the risk of reduced demand for EVs. If the market for EVs does not gain broader market acceptance
or develops slower than we expect, our business, prospects, financial condition and operating results will be harmed. The market for alternative
fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors,
evolving government regulation and industry standards, frequent new vehicle announcements, long development cycles for EV original equipment
manufacturers, and changing consumer demands and behaviors.
**We are in a highly competitive EV charging
services industry and there can be no assurance that we will be able to compete with many of our competitors, which are larger and have
greater financial resources.**
We face strong competition from other EV charging
providers, some of whom may be able to duplicate aspects of our business model. Many competitors have substantially greater financial,
marketing, and development resources than us. In addition, barriers to entry in certain segments of the EV charging services market are
relatively low. As a result, competitors may independently develop services that are substantially equivalent or superior to their services.
Therefore, an investment in our company is very risky and speculative due to the competitive environment.
Our competitors may also provide customers with
greater capabilities or benefits in areas such as technical qualifications, past contract performance, geographic presence, and pricing.
Furthermore, competitors with greater resources may develop competing technologies, secure broader contracts, or recruit our employees
by offering more attractive compensation packages.
**Our business is subject
to risks associated with construction, cost overruns and delays, and other contingencies that may arise in the course of completing installations,
and such risks may increase in the future as we expand the scope of such services with other parties.**
We do not typically install
charging stations at customer sites. These installations are often performed by our partners or electrical contractors with an existing
relationship with the customer and/or knowledge of the site. The installation of charging stations at a particular site is generally subject
to oversight and regulation in accordance with state and local laws and ordinances relating to building codes, safety, environmental protection
and related matters, and frequently requires various local and other governmental approvals and permits that may vary by jurisdiction.
In addition, building codes, accessibility requirements or regulations may hinder EV charger installation because they end up costing
the developer or installer more in order to meet the code requirements. Meaningful delays or cost overruns may impact our recognition
of revenue in certain cases and/or impact customer relationships, either of which could impact our business and profitability.
Further, we may install
charging stations at customer sites or manage contractors, primarily as part of offering customers a turnkey solution. Working with contractors
may require us to obtain licenses or require us or our customers to comply with additional rules, working conditions and other union requirements,
which can add costs and complexity to an installation project. In addition, if these contractors are unable to provide timely, thorough
and quality installation-related services, customers could fall behind their construction schedules
leading to liability or cause customers to become dissatisfied with the solutions we offer, and our overall reputation would be harmed.
**If we fail to offer
high-quality support to charging station owners and drivers, our business and reputation will suffer.**
Once a customer has installed
our charging stations and subscribed to our services, station owners and drivers will rely on us to provide support services to resolve
any issues that might arise in the future. Rapid and high-quality customer support is important so station owners can provide charging
services and drivers can receive reliable charging for their EVs. The importance of high-quality customer support will increase as we
seek to expand our business and pursue new customers and geographies. If we do not quickly resolve issues and provide effective support,
our ability to retain customers or sell additional products and services to existing customers could suffer and our brand and reputation
could be harmed.
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**We rely on charging
station manufacturing and other partners, and a loss of any such partner or interruption in the partners production could have
a material adverse effect on our business.**
If we experience a significant increase in demand
for our charging stations and services, or if we need to replace an existing supplier, it may not be possible to supplement or replace
them on acceptable terms, which may undermine our ability to deliver products to customers in a timely manner. For example, it may take
a significant amount of time to identify a manufacturer that has the capability and resources to build charging stations in sufficient
volume. Identifying suitable suppliers and manufacturers could be an extensive process that requires us to become satisfied with their
quality control, technical capabilities, responsiveness and service, financial stability, regulatory compliance, and labor and other ethical
practices. Accordingly, a loss of any significant suppliers or manufacturers, or an interruption in their production, could have an adverse
effect on our business, financial condition and operating results.
Moreover, the bi-directionalEV charging
station market as a whole is relatively new and charging station manufacturers are even more limited and requirements are evolving. Though
we work with multiple vendors, it is likely that at the time a new product is launched, and new requirements are rolled out, we may rely
on a single vendor. Certifications might also be delayed, as tests are not always available at the time of commercial launch. Certain
of these requirements might at times apply to technology inside the vehicles, in which case such risks could also be pushed on the vehicle
OEMs. To the extent we rely on a single supplier, the risks to us would be intensified.
**Our future results are dependent on our ability
to establish, maintain and expand our manufacturers representative OEM relationships and our other relationships.**
We market and sell our products through domestic
and international OEM relationships and other distribution channels, such as manufacturers representatives and distributors. Our
future results are dependent on our ability to establish, maintain and expand our relationships with OEMs as well as with manufacturers
representatives and distributors to sell our products. If, however, the third parties with whom we have entered into such OEM and other
arrangements should fail to meet their contractual obligations, cease doing, or reduce the amount of their, business with us or otherwise
fail to meet their own performance objectives, customer demand for our products could be adversely affected, which would have an adverse
effect on our revenues.
****
**Risks Related to Our Relationship with Hyperscale**
**As long as Hyperscale controls us, your ability
to influence matters requiring shareholder approval will be limited.**
As of December 31, 2025, Hyperscale beneficially
owned approximately 27 million shares of our common stock and approximately 33.5 million through its ownership of shares of our Series
A Preferred Stock (the Preferred Stock). The Preferred Stock is subject to a 19.9% beneficial ownership limitation, representing
approximately 17% of the combined voting power of our outstanding common stock. For so long as Hyperscale beneficially owns shares of
our common stock representing a significant percentage of the votes entitled to be cast by the holders of outstanding common stock, Hyperscale
may be able to elect all of the members of our board of directors. For so long as any of the shares of Preferred Stock remains issued
and outstanding, Hyperscale has the ability to appoint a number of directors equal to its percentage of beneficial ownership of our common
stock.
It should be noted that Hyperscale does not require
beneficial ownership amounting to an outright majority to control or very strongly influence any of matter placed before our shareholders,
in part because many shareholders would not attend, whether in person or not, any of our shareholder meetings(s). If Hyperscale does not
provide any requisite consent allowing us to conduct such activities when requested, we will not be able to conduct such activities and,
as a result, our business and our operating results may be harmed.Hyperscales voting control may discourage transactions
involving a change of control of us, including transactions in which you as a holder of our common stock might otherwise receive a premium
for your shares over the then-current market price. Hyperscale is not prohibited from selling a controlling interest in us to a third
party and may do so without your or our approval and without providing for a purchase of your shares of common stock. Accordingly, your
shares of common stock may be worth less than they would be if Hyperscale did not maintain significant voting control over us.
Hyperscales interests and objectives as
a shareholder may not align with, or may even directly conflict with, our or your interests and objectives as a shareholder. For example,
Hyperscale may be more or less interested in us entering into a transaction or conducting an activity due to the impact such transaction
or activity may have on Hyperscale as a company, independent of us. In such instances, Hyperscale may exercise its significant control
over us in a way that is beneficial to Hyperscale, and you will not be able to affect the outcome so long as Hyperscale continues to hold
a controlling interest of our company, despite not beneficially owning a majority of the outstanding shares entitled to vote.
In the event Hyperscale is acquired or otherwise
undergoes a change of control, any acquirer or successor will be entitled to exercise the voting control and contractual rights of Hyperscale
and may do so in a manner that could vary significantly from what Hyperscale would have done or not done.
| | 21 | | |
| | |
**Our historical financial information as a subsidiary
of Hyperscale may not be representative of our results as an independent public company.**
The historical financial information we have included
in this Annual Report does not necessarily reflect what our financial position, results of operations or cash flows would have been had
we been an independent entity during the historical periods presented. The historical costs and expenses reflected in our consolidated
financial statements include an allocation for certain corporate functions historically provided by Hyperscale, including tax, accounting,
treasury, legal, human resources, compliance, insurance, sales and marketing services. The historical financial information is not necessarily
indicative of what our results of operations, financial position, cash flows or costs and expenses will be in the future. We have not
made pro forma adjustments to reflect many significant changes that will occur in our cost structure, funding and operations as a result
of our transition to becoming a public company, including changes in our employee base, potential increased costs associated with reduced
economies of scale and increased costs associated with being a publicly traded, stand-alone company. For additional information, see Managements
Discussion and Analysis of Financial Condition and Results of Operations and our historical consolidated financial statements and
notes thereto.
**Risks Relating to Ownership of Our Common Stock**
**An active, liquid trading market for our common
stock does not currently exist and may not develop after within the foreseeable future, if at all, and as a result, you may not be able
to sell your common stock at a favorable price, or at all.**
****
An extremely limited trading market exists for
our common stock on the Pink Open Market (Current Information). No assurance can be given as to the following:
|
| that we will be successful in causing our common stock to become listed on the OTCQB Market or, in the
future, any national securities exchange such as The Nasdaq Capital Market or NYSE American; | |
|
| the likelihood that a more active trading market for shares of our common stock will develop or be sustained; | |
|
| the liquidity of any such market; | |
|
| the ability of our shareholders to sell their shares of common stock; or | |
|
| the price that our shareholders may obtain for their shares of common stock. | |
If an active market does not develop for our common
stock or is not maintained, the market price of our common stock may decline and you may not be able to sell your shares. The market price
of our common stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action,
tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our common stock.
**The price of our common stock may have little
or no relationship to the historical bid prices of our common stock on the Pink Open Market (Current Information).**
****
There has been no public market for our capital
stock other than on the Pink Open Market (Current Information). Given the limited history of sales and the lack of publicly available
information about our business, financing and financial results available, among other factors, this information may have little or no
relation to broader market demand for our common stock and thus the price of our common stock. As a result, you should not rely on these
historical sales prices as they may differ materially from subsequent prices of our common stock.
**Future sales, or the perception of future sales,
of a substantial amount of our shares of common stock could depress the trading price of our common stock.**
****
If we or our shareholders sell substantial amounts
of our shares of common stock in the public market or if the market perceives that these sales could occur, the market price of shares
of our common stock could decline. These sales may make it more difficult for us to sell equity or equity-linked securities in the future
at a time and price that we deem appropriate, or to use equity as consideration for future acquisitions.
As of the date of this Annual Report, we have
2,000,000,000 shares of common stock and 50,000,000 shares of blank check preferred stock authorized. As of March
30, 2026, we had 183,983,122 shares of common stock outstanding. Of these shares, 169,808,311 shares of common stock are currently
held by unaffiliated shareholders. However, these figures do not take into account issuances of common stock that we may make upon conversion
of Hyperscales preferred stock, nor does it account for any other shares that may be issued.
**The rights of the holders of common stock may
be impaired by the potential issuance of preferred stock.**
Our articles of incorporation give our board of
directors the right to create new series of preferred stock. As a result, the board of directors may, without shareholder approval, issue
preferred stock with voting, dividend, conversion, liquidation, or other rights which could adversely affect the voting power and equity
interest of the holders of common stock. Preferred stock, which could be issued with the right to more than one vote per share, could
be utilized as a method of discouraging, delaying, or preventing a change of control. The possible impact on takeover attempts could adversely
affect the price of our common stock. Although we have no present intention to issue any shares of preferred stock, we may issue such
shares in the future.
| | 22 | | |
| | |
**The regulation of penny stocks by the SEC and FINRA may have an
effect on the tradability of our securities.**
****
Our shares of common stock are currently quoted
on the Pink Open Market (Current Information). Our common stock is subject to a Securities and Exchange Commission rule that imposes special
sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase accredited investors means, in general terms, institutions with assets in excess of
$5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 for the past two
years (or that, when combined with a spouses income, exceeds $300,000).
For transactions covered by the rule, the broker-dealer
must make a special suitability determination for the purchaser and receive the purchasers written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and also may affect the ability
of sellers to sell their securities in any market that might therefore develop.
In addition, the Securities and Exchange Commission
has adopted a number of rules to regulate penny stocks. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5,
15g-6, 15g-7, and 15g-9 under the Exchange Act. Because our securities constitute penny stocks within the meaning of the
rules, the rules would apply to us and to our securities. The rules may further affect the ability of owners of our common stock to sell
our securities in any market that might develop for them.
Shareholders should be aware that, according to
the Securities and Exchange Commission, the market for penny stocks has suffered in recentyears from patterns of fraud and abuse.
Such patterns include (i)control of the market for the security by one or a few broker-dealers that are often related to the promoter
or issuer; (ii)manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
(iii)boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (iv)excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v)the wholesale
dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent investor losses.
Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a
position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines
of practical limitations to prevent the described patterns from being established with respect to our securities.
The shares of our common stock may be thinly
traded on the Pink Open Market, meaning that the number of persons interested in purchasing our shares of common stock at or near ask
prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the
fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the
investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to
be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of
our shares of common stock until such time as we became more seasoned and viable. As a consequence, there may be periods of several days
or more when trading activity in our shares of common stock is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous sales without an adverse effect on the price of our common
stock.
**General Risk Factors**
**If we fail to establish and maintain an effective
system of internal control over financial reporting, we may not be able to report our financial results accurately or prevent fraud. Any
inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price
of our common stock.**
Effective internal control over financial reporting
is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent
fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business
and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect
our financial condition, results of operations and access to capital. We have carried out an evaluation under the supervision and with
the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of
the design and operation of our disclosure controls and procedures as of the end of the most recent period covered by this report. Based
on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures
were not effective at the reasonable assurance level due to the material weaknesses described below.
A material weakness is a deficiency, or a combination
of deficiencies, within the meaning of Public Company Accounting Oversight Board (PCAOB) Audit Standard No. 5, in internal
control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis.
Based on the results of managements testing,
management concluded that the previously identified material weakness related to inventory, revenue recognition, accounts receivable,
complex financial instruments and fair value estimates were remediated as of December 31, 2025.
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| | |
Management has identified the following material
weakness which caused management to conclude that as of December 31, 2025, our internal control over financial reporting (ICFR)
was not effective at the reasonable assurance level:
We do not have sufficient resources in our accounting
function, which restricts our ability to gather, analyze and properly review information related to financial reporting, including fair
value estimates, in a timely manner. Due to our size and nature, segregation of all conflicting duties may not always be possible and
may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording
of transactions should be performed by separate individuals. The companys primary user access controls to ensure appropriate authorization
and segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate
personnel were not designed and/or implemented effectively.
Management evaluated the impact of our failure to have segregation
of duties and concluded that the control deficiency represented a material weakness.
While management evaluates the effectiveness
of our internal controls on a regular basis, these controls may not always be effective. There are inherent limitations on the effectiveness
of internal controls, including collusion, management override, and failure in human judgment. In addition, control procedures are designed
to reduce rather than eliminate business risks. In the event our Chief Executive Officer or Chief Financial Officer, our certifying officers
under the Sarbanes-Oxley Act of 2002 (the SOX), or our independent registered public accounting firm determines our internal
controls over financial reporting are not effective as defined under Section 404 of SOX, we may be unable to produce reliable financial
reports or prevent fraud, which could materially harm our business. In addition, we may be subject to sanctions or investigation by government
authorities or self-regulatory organizations, such as the SEC or the Financial Industry Regulatory Authority (FINRA). Any
such actions could affect investor perceptions of our company and result in an adverse reaction in the financial markets due to a loss
of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline or limit
our access to capital.
**We rely on third-party vendors and subcontractors
for supply of components, assemblies, and services and, therefore, cannot control the availability or quality of such components, assemblies,
and services. Any interruptions in goods provided by these third parties may impair our ability to support our customers.**
We depend on third-party vendors and subcontractors
to supply components, assemblies and services used to manufacture our products, some of which are supplied by a single vendor. We have
experienced shortages of certain semiconductor and electronic components and delays in service delivery, have incurred additional and
unexpected costs to address the shortages and delays, and have experienced our own delays in production and shipping.
If suppliers or subcontractors cannot provide
their products or services on time or to our specifications, we may not be able to meet the demand for our products, and our delivery
times may be negatively affected. In addition, we cannot directly control the quality of the products and services provided by third parties.
In order to expand revenue, we likely will need to identify and qualify new suppliers and subcontractors to supplant or replace existing
suppliers and subcontractors, which may be a time-consuming and expensive process. In addition, any qualification of new suppliers may
require customers of our products utilizing products and services from new suppliers and service providers to undergo a re-qualification
process. Such circumstances likely would lead to disruptions in our production, increased manufacturing costs, delays in shipping to our
customers, and/or increases in prices paid to third parties for products and services.
We rely on a third-party partner to provide certain
manufacturing steps associated with some of our proprietary processes to support our power products and solutions. This process, developed
with the third-party partners, involves complex printed circuit board assembly, advanced environmental conditioning and accelerated testing
performed on equipment developed by us or the third-party partners. An important, differentiating benefit of this proprietary process
is that it does not generate problematic effluent, resulting in an environmentally safe approach to our products with minimal waste. We
have entered into agreements with a third-party partner for production and transfer of technologies and process know-how, including the
purchase of the enabling equipment developed by the third-party partner.
To date, we have successfully relied upon this
third-party partner to perform these manufacturing steps, although we have experienced delivery delays associated with the third-party
partners volume constraints. This experience caused us to accelerate our schedule for establishing our own high-volume capabilities
in-house, modifying, in 2020, our construction plans to accommodate a dedicated, on-premises metal surface finishing facility. We expect
to rely on our third-party partner for production requirements through the installation and qualification for production of our products.
We also expect to rely on our third-party partner in the future for surge capacity requirements.
In the event one of our third-party vendors experiences
a cybersecurity incident, we have taken steps to mitigate potential damages to our operations by diversifying our sources of supply to
such an extent that we have the ability to move production of a product impacted by such cybersecurity incident to an alternative third-party
vendor. Due to our diverse sources of supply, we do not believe that cybersecurity incidents at the third-party vendor level of our supply
chain will have a material impact on our business. However, if our third-party partner experiences a cybersecurity incident, our operations
related to manufacturing associated with some of our proprietary processes supporting our power products and solutions could be disrupted,
or otherwise negatively affected. If we are unable to procure alternatives in a timely and efficient manner and on acceptable terms, or
at all, third-party supply unavailability could result in customer dissatisfaction, regulatory scrutiny and damage to our reputation and
brand, and other consequences that could adversely affect our business.
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| | |
**We are dependent on information technology
in our operations, and the failure of such technology may adversely affect our business. Potential security breaches of our information
technology systems, including cyber-attacks, could lead to liability or could damage our reputation and financial results.**
Although no assurance can be given that future
disruptions will not occur, to date we have not experienced problems with the operations of our current technology systems or the technology
systems of third parties on which we rely. In the future, we may experience such problems, as well as with the development and deployment
of new information technology systems, which could adversely affect, or even temporarily disrupt, all or a portion of our operations until
resolved. Inabilities and delays in implementing new systems can also affect our ability to realize projected or expected cost savings.
Any systems failures could impede our ability to timely collect and report financial results in accordance with applicable laws.
Information technology system and/or network disruptions
could harm the companys operations. Failure to effectively prevent, detect and recover from security breaches, including cyber-attacks,
could result in the misuse of company assets, unauthorized use or publication of our trade secrets and confidential business information,
disruption to the company, diversion of management resources, regulatory inquiries, legal claims or proceedings, reputational damage,
loss of sales, reduction in value of our investment in research and development, among other costs to the company. Although we have not
experienced any attempts to gain unauthorized access to our information technology systems on which we maintain proprietary and confidential
information, in the future, we may experience such attempts. The risk of a security breach or disruption, particularly through cyber-attacks,
or cyber intrusion, including by computer hackers, and cyber terrorists, has generally increased as cyber-attacks have become more prevalent
and harder to detect and fight against. Additionally, outside parties may attempt to access our confidential information through other
means, for example by fraudulently inducing our employees to disclose confidential information. We actively seek to prevent and detect
any unauthorized access. These threats are also continually evolving and, as a result, might become increasingly difficult to detect.
**We face intense industry competition, price
erosion and product obsolescence, which, in turn, could reduce our profitability.**
We operate in an industry that is generally characterized
by intense competition. We believe that the principal bases of competition in our markets are breadth of product line, quality of products,
stability, reliability and reputation of the provider, along with cost. Quantity discounts, price erosion, and rapid product obsolescence
due to technological improvements are therefore common in our industry as competitors strive to retain or expand their market share. Product
obsolescence can lead to increases in unsaleable inventory that may need to be written off and, therefore, could reduce our profitability.
Similarly, price erosion can reduce our profitability by decreasing our revenues and our gross margins. In fact, we have seen price erosion
over the last several years on most of the products we sell, and we expect additional price erosion in the future.
**If we are unable to satisfy our customers
specific product quality, certification or network requirements, our business could be disrupted, and our financial condition could be
harmed.**
Our customers demand that our products meet stringent
quality, performance and reliability standards. We have, from time to time, experienced problems in satisfying such standards. Defects
or failures have occurred in the past, and may in the future occur, relating to our product quality, performance and reliability. From
time to time, our customers also require us to implement specific changes to our products to allow these products to operate within their
specific network configurations. If we are unable to remedy these failures or defects or if we cannot affect such required product modifications,
we could experience lost revenues, increased costs, including inventory write-offs, warranty expense and costs associated with customer
support, delays in, or cancellations or rescheduling of, orders or shipments and product returns or discounts, any of which would harm
our business.
**Because we do not intend to pay dividends on our common stock, you
must rely on stock appreciation for any return on your investment.**
****
We presently intend to retain any future earnings
and do not expect to pay any dividends in the foreseeable future. As a result, you must rely on stock appreciation and a liquid trading
market for any return on your investment. If an active and liquid trading market does not develop, you may be unable to sell your shares
of common stock at the time you would like to sell.
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| | |
**Anti-takeover provisions in our charter documents
could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.**
Our corporate documents and Nevada law contain
provisions that may enable our board of directors to resist a change in control of our company even if a change in control were to be
considered favorable by you and other shareholders. These provisions authorize the issuance of blank check preferred stock
that could be issued by our board of directors to help defend against a takeover attempt. Further, Nevada law prohibits large shareholders,
in particular those owning 10% or more of our outstanding voting stock, from merging or consolidating with us except under certain circumstances.
These provisions and other provisions under Nevada law could discourage, delay or prevent a transaction involving a change in control
of our company. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect
directors of your choosing and cause us to take other corporate actions you desire.
**If securities analysts do not publish
research or reports about our business or if they publish negative evaluations of our stock, the price of our common stock could decline.**
The trading market for our common stock will rely
in part on the research and reports that industry or financial analysts publish about us or our business. We do not currently have and
may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price
of our common stock could decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade
their evaluations of our stock, the price of our common stock could decline. If one or more of these analysts cease to cover our stock,
we could lose visibility in the market for our common stock, which in turn could cause our stock price to decline.
**Our charter provides for limitations of director
liability and indemnification of directors, officers and employees.**
Our articles of incorporation limit the liability
of directors to the maximum extent permitted by Nevada law. Nevada law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:
|
| breach of their duty of loyalty to us or our shareholders; | |
|
| act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
| |
|
| unlawful payments of dividends or unlawful stock repurchases, or redemptions as provided in the Nevada
Revised Statutes; or | |
|
| transaction from which the directors derived an improper personal benefit. | |
These limitations of liability do not apply to
liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive
relief or rescission.
Our bylaws provide that we will indemnify our
directors, officers and employees to the fullest extent permitted by law. Our bylaws also provide that we are obligated to advance expenses
incurred by a director or officer in advance of the final disposition of any action or proceeding. We believe that these provisions are
necessary to attract and retain qualified persons as directors and officers.
The limitation of liability in our articles of
incorporation and bylaws may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They
may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide
a benefit to us and our shareholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of
settlement and damage awards against directors and officers pursuant to these indemnification provisions.
**Our operating results may vary from quarter
to quarter.**
Our operating results have in the past been subject
to quarter-to-quarter fluctuations, and we expect that these fluctuations will continue, and may increase in magnitude, in future periods.
Demand for our products is driven by many factors, including the availability of funding for our products in our customers capital
budgets. There is a trend for some of our customers to place large orders near the end of a quarter or fiscal year, in part to spend remaining
available capital budget funds. Seasonal fluctuations in customer demand for our products driven by budgetary and other concerns can create
corresponding fluctuations in period-to-period revenues, and we therefore cannot assure you that our results in one period are necessarily
indicative of our revenues in any future period. In addition, the number and timing of large individual sales and the ability to obtain
acceptances of those sales, where applicable, have been difficult for us to predict, and large individual sales have, in some cases, occurred
in quarters subsequent to those we anticipated, or have not occurred at all. The loss or deferral of one or more significant sales in
a quarter could harm our operating results for such quarter. It is possible that, in some quarters, our operating results will be below
the expectations of public market analysts or investors. In such events, or in the event adverse conditions prevail, the market price
of our common stock may decline significantly.
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| | |
**Many of our competitors are larger and have
greater financial and other resources than we do.**
We compete with companies that may offer similar
or competing products and that have significantly greater financial, technical, marketing, and distribution resources than we do. These
competitors may be able to develop and introduce new products more quickly, expand into new markets more effectively, and devote greater
resources to sales and marketing efforts. In addition, larger competitors may seek to maintain or expand market share through aggressive
pricing strategies, including discounted pricing, which we may be unable to match. Existing or new competitors may also develop products
or technologies with superior performance, features, or cost advantages.
If we are unable to compete effectively, including by developing and
commercializing innovative, cost-effective products on a timely basis, our competitive position, revenues, and results of operations could
be materially adversely affected.
**Changes in the U.S. tax and other laws and regulations may adversely
affect our business.**
The U.S. government may revise tax laws, regulations
or official interpretations in ways that could have a significant adverse effect on our business, including modifications that could reduce
the profits that we can effectively realize, or that could require costly changes to those operations, or the way in which they are structured.
For example, the effective tax rates for most U.S. companies reflect the fact that income earned and reinvested outside the U.S. is generally
taxed at local rates, which may be much lower than U.S. tax rates. If we expand abroad and there are changes in tax laws, regulations
or interpretations that significantly increase the tax rates on non-U.S. income, our effective tax rate could increase, and our profits
could be reduced. If such increases resulted from our status as a U.S. company, those changes could place us at a disadvantage to our
non-U.S. competitors if those competitors remain subject to lower local tax rates.
**Our sales and profitability may be affected by changes in economic,
business and industry conditions**.
If the economic climate in the United States or
abroad deteriorates, customers or potential customers could reduce or delay their technology investments. Reduced or delayed technology
and entertainment investments could decrease our sales and profitability. In this environment, our customers may experience financial
difficulty, cease operations and fail to budget or reduce budgets for the purchase of our products and professional services. This may
lead to longer sales cycles, delays in purchase decisions, payment and collection, and can also result in downward price pressures, causing
our sales and profitability to decline. In addition, general economic uncertainty and general declines in capital spending in the information
technology sector make it difficult to predict changes in the purchasing requirements of our customers and the markets we serve. There
are many other factors which could affect our business, including:
|
| the introduction and market acceptance of new technologies, products and services; | |
|
| new competitors and new forms of competition; | |
|
| the size and timing of customer orders (for retail distributed physical product); | |
|
| the size and timing of capital expenditures by our customers; | |
|
| adverse changes in the credit quality of our customers and suppliers; | |
|
| changes in the pricing policies of, or the introduction of, new products and services by us or our competitors; | |
|
| changes in the terms of our contracts with our customers or suppliers; | |
|
| the availability of products from our suppliers; and | |
|
| variations in product costs and the mix of products sold. | |
These trends and factors could adversely affect our business, profitability
and financial condition and diminish our ability to achieve our strategic objectives.
**Our limited ability to protect our proprietary
information and technology may adversely affect our ability to compete, and our products could infringe upon the intellectual property
rights of others, resulting in claims against us, the results of which could be costly.**
Many of our products consist entirely or partly
of proprietary technology owned by us. Although we seek to protect our technology through a combination of copyrights, trade secret laws
and contractual obligations, these protections may not be sufficient to prevent the wrongful appropriation of our intellectual property,
nor will they prevent our competitors from independently developing technologies that are substantially equivalent or superior to our
proprietary technology. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as the
laws of the United States. In order to defend our proprietary rights in the technology utilized in our products from third party infringement,
we may be required to institute legal proceedings, which would be costly and would divert our resources from the development of our business.
If we are unable to successfully assert and defend our proprietary rights in the technology utilized in our products, our future results
could be adversely affected.
Although we attempt to avoid infringing known
proprietary rights of third parties in our product development efforts, we may become subject to legal proceedings and claims for alleged
infringement from time to time in the ordinary course of business. Any claims relating to the infringement of third-party proprietary
rights, even if not meritorious, could result in costly litigation, divert managements attention and resources, require us to reengineer
or cease sales of our products or require us to enter into royalty or license agreements which are not advantageous to us. In addition,
parties making claims may be able to obtain an injunction, which could prevent us from selling our products in the United States or abroad.
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**If we ship products that contain defects, the
market acceptance of our products and our reputation will be harmed and our customers could seek to recover their damages from us.**
Our products are complex, and despite extensive
testing, may contain defects or undetected errors or failures that may become apparent only after our products have been shipped to our
customers and installed in their network or after product features or new versions are released. Any such defect, error or failure could
result in failure of market acceptance of our products or damage to our reputation or relations with our customers, resulting in substantial
costs for us and our customers, as well as the cancellation of orders, warranty costs and product returns. In addition, any defects, errors,
misuse of our products or other potential problems within or out of our control that may arise from the use of our products could result
in financial or other damages to our customers. Our customers could seek to have us pay for these losses. Although we maintain product
liability insurance, it may not be adequate.
**The elimination of monetary liability against
our directors, officers and employees under law and the existence of indemnification rights for or obligations to our directors, officers
and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees.**
Our articles of incorporation contain a provision
permitting us to eliminate the personal liability of our directors to us and our shareholders for damages for the breach of a fiduciary
duty as a director or officer to the extent provided by Nevada law. We may also have contractual indemnification obligations under any
future employment agreements with our officers. The foregoing indemnification obligations could result in us incurring substantial expenditures
to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and
the resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties
and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such
actions, if successful, might otherwise benefit us and our shareholders.
**Failure to build our finance infrastructure
and improve our accounting systems and controls could impair our ability to comply with the financial reporting and internal controls
requirements for publicly traded companies.**
As a public company, we will operate in an increasingly
demanding regulatory environment, which requires us to comply with SOX, the rules and regulations of the SEC, expanded disclosure requirements,
accelerated reporting requirements and more complex accounting rules. Company responsibilities required by SOX include establishing corporate
oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are
necessary for us to produce reliable financial reports and are important to help prevent financial fraud. Commencing with our fiscal year
ending 2024, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management
to report on the effectiveness of our internal controls over financial reporting in our Form 10-K filing for that year, as required by
Section 404 of SOX. We have never been required to test our internal controls within a specified period and, as a result, we may experience
difficulty in meeting these reporting requirements in a timely manner.
We anticipate that the process of building our
accounting and financial functions and infrastructure will require significant additional professional fees, internal costs and management
efforts. We expect that we will need to implement a new internal system to combine and streamline the management of our financial, accounting,
human resources and other functions. However, such a system would likely require us to complete many processes and procedures for the
effective use of the system or to run our business using the system, which may result in substantial costs. Any disruptions or difficulties
in implementing or using such a system could adversely affect our controls and harm our business. Moreover, such disruption or difficulties
could result in unanticipated costs and diversion of management attention. In addition, we may discover weaknesses in our system of internal
financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal
control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error
or fraud will not occur or that all control issues and instances of fraud will be detected.
If we are not able to comply with the requirements
of Section 404 of SOX in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to
produce timely and accurate financial statements. If we cannot provide reliable financial reports or prevent fraud, our business and results
of operations could be harmed, investors could lose confidence in our reported financial information, and we could be subject to sanctions
or investigations by the SEC or other regulatory authorities.****
**ITEM 1B. UNRESOLVED STAFF COMMENTS.**
Not applicable.
| | 28 | | |
| | |
****
**ITEM 1C. CYBERSECURITY.**
**Information Security Program**
Our information security organization safeguards
the confidentiality, integrity, and availability of our systems, services, and data. We employ internal and external security and technology
professionals and continue to invest in resources to address evolving cybersecurity threats. Oversight of our cybersecurity program is
provided by designated management personnel and, where appropriate, reported to our board of directors or relevant committees.
**Cybersecurity Risk Management and Strategy**
We maintain a cybersecurity risk management program
designed to identify, assess, and manage risks to our critical systems, data, and operations. Our program incorporates elements of recognized
industry frameworks, including guidance from the National Institute of Standards and Technology (NIST), which we use as
a reference in evaluating and enhancing our cybersecurity practices.
Our cybersecurity risk management processes include:
|
| Risk Identification: Ongoing identification of potential cybersecurity threats across our systems,
operations, personnel, and third-party service providers, informed by threat intelligence and industry trends. | |
|
| Risk Assessment: Periodic evaluation of our exposure to identified risks and the effectiveness
of existing controls. | |
|
| Risk Mitigation and Response: Implementation of security measures and remediation plans to address
identified risks, including tracking and resolution of vulnerabilities. | |
We also consider cybersecurity risks associated
with third-party vendors and service providers as part of our overall risk management framework.
To date, cybersecurity risks have not materially
affected our business strategy, results of operations, or financial condition. However, due to the evolving nature of cybersecurity threats,
we may in the future experience incidents that could materially adversely affect our business, results of operations, or financial condition.
**Cybersecurity Governance**
Management is responsible for the Companys
cybersecurity risk management program including the identification, assessment, mitigation, and remediation of cybersecurity risks. Oversight
of the Companys cybersecurity program is led by the CEO, who is responsible for cybersecurity strategy, policies, standards, architecture,
and processes.
The Companys board of directors has oversight
responsibility for cybersecurity risk and receives periodic reports from the CEO regarding cybersecurity risks, threat trends, and initiatives
to strengthen the Companys information security systems. The board of directors is also informed of material cybersecurity incidents
in accordance with the Companys incident response procedures and receives updates, as appropriate, on incidents that may have a
lesser impact.
The Company maintains a cybersecurity incident response plan designed
to facilitate timely identification, escalation, and management of cybersecurity incidents. In addition, the Company provides regular
cybersecurity and data protection training to its employees, covering topics such as phishing, social engineering, password security,
protection of confidential information, and secure use of company systems. These programs are intended to promote awareness of cybersecurity
risks and reinforce the importance of timely reporting of potential incidents
**ITEM 2. PROPERTIES**
Our principal business and corporate address is
2030 Ringwood Ave, San Jose, CA.
**ITEM 3. LEGAL PROCEEDINGS**
The Company is currently
involved in litigation arising from matters in the ordinary course of business. We are regularly subject to claims, suits, regulatory
and government investigations, and other proceedings involving labor and employment, commercial disputes, and other matters. Such claims,
suits, regulatory and government investigations, and other proceedings could result in fines, civil penalties, or other adverse consequences.
| | 29 | | |
| | |
Certain of these outstanding
matters include speculative or indeterminate monetary amounts. We record an undiscounted liability for contingent losses, including future
legal costs, settlements and judgments, when we consider it is probable that a liability has been incurred and the amount of the loss
can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose
the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously
accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgment is
required to determine both likelihood of there being a loss and the estimated amount of loss related to such matters.
With respect to our outstanding
matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually
or in aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.
However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.
**ITEM 4. MINE SAFETY DISCLOSURES**
Not applicable.
| | 30 | | |
| | |
**PART II**
**ITEM 5. MARKET FOR REGISTRANTS COMMON
EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**
**Market Information**
Our common stock is quoted on the Pink Open Market
(Current Information), operated by OTC Markets Group Inc., under the symbol TOG. The last reported sale price for our common stock, as
quoted on the Pink Open Market, was $0.0280 on March 30, 2026. Quotes of stock trading prices on any over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
We have never declared or paid dividends on our
common stock and do not anticipate paying dividends on our common stock at any time in the foreseeable future. The terms of our series
A preferred stock will prohibit us from paying dividends on all classes of stock junior to such stock (including our common stock) while
shares of our series A preferred stock remain outstanding.
**Holders**
As of March 30, 2026, there were 190 shareholders
of record of our common stock based upon the records of the shareholders provided by our transfer agent. Our transfer agent is Computershare,
Inc. A number of holders of our common stock are street name or beneficial holders
whose shares of record are held by banks, brokers, and other financial institutions.
**Dividends**
We have never paid or declared any dividends on
our Common Stock and do not anticipate paying cash dividends in the foreseeable future. The terms of our series A preferred stock will
prohibit us from paying dividends on all classes of stock junior to such stock (including our common stock) while shares of our series
A preferred stock remain outstanding.
**Securities Authorized for Issuance Under
Equity Compensation Plans**
On June 27, 2023,the
Companyheld a special meeting of shareholders, and the shareholders voted and approved the TurnOnGreen,
Inc. 2023 Stock Incentive Plan which reserved 100,000,000 shares for issuance. As of the date of this Annual Report, no shares had been
issued under the plan.
**Unregistered Sales of Equity Securities**
We have previously disclosed all sales of securities
without registration under the Securities Act of 1933, as amended.
**Issuer Purchases of Equity Securities**
None
**ITEM 6. RESERVED**
**ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
*You should read the following discussion and
analysis of our financial condition and results of our operations together with our financial statements and the notes thereto appearing
elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations,
whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated
in or implied by these forward-looking statements due to several factors, including those discussed in the sections entitled Risk
Factors and Special Note Regarding Forward-Looking Statements, and elsewhere in this Annual Report on Form 10-K.*
**
**Plan of Operations**
We are an emerging power electronics company that
design and manufacture premium power solutions and EV charging infrastructure. Through our wholly owned subsidiaries Digital Power Corporation
(DPC) and TOG Technologies Inc. (TOGT), we design, develop, manufacture and sell highly engineered, feature-rich,
high-grade-power conversion and power system solutions to diverse industries and markets including e-Mobility, medical, military, telecommunications,
and industrial as well as design and provide a line of advanced EV charging solutions. Through DPC, we provide solutions which leverage
a combination of low leakage power emissions, very high-power density with power efficiency, flexible design leveraging customized firmware
and short time to market. Our designed and manufactured, highly engineered, precision power conversion and control solutions serve mission-critical
applications and processes. Through TOGT, we market and sell a line of scalable EV residential, commercial and ultra-fast charging products
and comprehensive charging management software and network services. The business represents a natural outgrowth from our proprietary
core power technologies to optimizing the design and performance of EV charging solutions.
| | 31 | | |
| | |
Our strategy is to be the supplier of choice across
numerous markets that require high-quality power system solutions where custom design, superior product, high quality, time to market
and competitive prices are critical to business success. We believe that we provide advanced custom product design services to deliver
high-grade products that reach a high level of efficiency and density and can meet rigorous environmental requirements. Our customers
benefit from a direct relationship with us that supports all their needs for designing and manufacturing power solutions and products.
By implementing our proprietary core technology, including process implementation in integrated circuits, we can provide cost reductions
to our customers by replacing their existing power sources with our custom design cost-effective products.
**Factors Affecting Our Performance**
****
We believe that the growth of our business and
our future success depend on various opportunities, challenges, trends and other factors, including the following:
Our
business model is evolving and we will need to invest a substantial amount of operating capital on an ongoing basis to support our EV
charging solutions business. We expect to use the largest portion of any capital we may be able to raise to purchase EV components and
inventory in connection with future sales and installations. To the extent that the capital expenditure requirements of our EV charging
solutions business are greater than anticipated, any funds we have will be unavailable for our other operations. It is likely that we
will need substantial additional funds for our working capital and capital expenditure requirements as we grow our EV charging solutions
business.
Our
ability to provide our products and systems on a timely basis relies heavily on obtaining essential electronic components used not only
in our products but also in our customers' products. As an electronics technology original design manufacturer (ODM) and
original equipment design manufacturer (OEM), we continue to face significant challenges in producing some of our products
due to shortages and delays in electronic components and raw materials. Various factor, heightened demand for electronics, and disruptions
in the supply chain, have led to a widespread scarcity of these crucial materials. Some of our customers face similar challenges, affecting
their demand for our products promptly.
We
are still experiencing long lead times and shortages of critical components used in our products. While the global chip shortage has eased,
certain high-demand components (such as power semiconductors and automotive semiconductor chips), continue to face supply bottlenecks
due to limited fab capacity and ongoing geopolitical factors.
Tensions
between major economies (e.g., U.S.-China, Taiwan-China) have led to export controls, further restricting the availability of essential
electronic components. These prolonged lead times and supply constraints have negatively impacted our operations throughout 2024, disrupting
our supply chain for semiconductors, electronic components, and raw materials from key vendors.
Global
manufacturing operations continue to be affected by geopolitical tensions, supply chain constraints, and cost volatility. While certain
supply chain disruptions, including semiconductor shortages, have moderated, availability of critical electronic components, including
power semiconductors and specialized chips, remains constrained in certain markets, and lead times and pricing continue to fluctuate.
In addition, global demand for materials used in electrification and advanced technologies, including lithium, copper, and rare earth
elements, remains elevated. This demand, combined with geopolitical developments, trade restrictions, and resource concentration in certain
regions, has contributed to ongoing price volatility and supply uncertainty. These factors have resulted in increased costs and procurement
challenges across our supply chain, and such conditions may persist or worsen. Increases in material costs, component pricing, transportation
expenses, and supplier pricing pressures could adversely affect our margins and ability to meet customer demand in a timely and cost-effective
manner.
To
date, our operations were financed principally through investments by Hyperscale and took advantage of Hyperscales size and purchasing
power in procuring goods, technology, and services, including insurance, employee benefit support and audit, and other professional services.
However, we may not have access to Hyperscales financial and other resources in the future.
| | 32 | | |
| | |
**Results of Operations**
**for the Years Ended December 31, 2025, and 2024**
|
| |
2025 | | |
2024 | | |
Change ($) | | |
Change (%) | | |
|
Revenue | |
$ | 7,228,000 | | |
$ | 4,912,000 | | |
$ | 2,316,000 | | |
| 47 | % | |
|
Cost of revenue | |
| 3,909,000 | | |
| 2,790,000 | | |
| 1,119,000 | | |
| 40 | % | |
|
Gross profit | |
| 3,319,000 | | |
| 2,122,000 | | |
| 1,197,000 | | |
| 56 | % | |
|
Operating expenses: | |
| | | |
| | | |
| | | |
| | | |
|
General and administrative | |
| 3,598,000 | | |
| 3,610,000 | | |
| (12,000 | ) | |
| 0 | % | |
|
Selling and marketing | |
| 1,055,000 | | |
| 1,293,000 | | |
| (238,000 | ) | |
| (18 | )% | |
|
Write off EV Assets | |
| - | | |
| 763,000 | | |
| (763,000 | ) | |
| (100 | )% | |
|
Total operating expenses | |
| 4,653,000 | | |
| 5,666,000 | | |
| (1,013,000 | ) | |
| (18 | )% | |
|
Operating loss | |
| (1,334,000 | ) | |
| (3,544,000 | ) | |
| 2,210,000 | | |
| 62 | % | |
|
Other expense: | |
| | | |
| | | |
| | | |
| | | |
|
Interest expense, related party | |
| 583,000 | | |
| 368,000 | | |
| 215,000 | | |
| (58 | )% | |
|
Interest expense | |
| 158,000 | | |
| 56,000 | | |
| 102,000 | | |
| (182 | )% | |
|
Change in fair value of embedded derivative liabilities | |
| 36,000 | | |
| - | | |
| 36,000 | | |
| (100 | )% | |
|
Total other expense | |
| 777,000 | | |
| 424,000 | | |
| 353,000 | | |
| (50 | )% | |
|
Loss before income taxes | |
| (2,111,000 | ) | |
| (3,968,000 | ) | |
| 1,857,000 | | |
| 47 | % | |
|
Income tax provision | |
| 2,000 | | |
| 5,000 | | |
| (3,000 | ) | |
| | | |
|
Net loss | |
| (2,113,000 | ) | |
| (3,973,000 | ) | |
| | | |
| | | |
*Revenue and Gross Profit*
For the
year ended December 31, 2025, we had increased revenues of $2,316,000 and increased gross profits of $1,197,000 compared to the year ended
December 31, 2024, primarily due to a new defense customer that contributed $1,107,000 new sales and, increased sales of $729,000 from
one of our existing defense industry customers and $729,000 increased sales from two of our commercial and telecom customers, somewhat
offset by decreased sales of $229,000 from one of medical customers during the year ended December 31, 2025. The increase in gross profit
during the year ended December 31, 2025, was negatively impacted by increased costs for components sourced from China and related tariffs.
*Net Loss and Operating Expenses*
****
During the
year ended December 31, 2025, our net loss before income tax provision decreased $1,857,000 from the year ended December 31, 2024. During
the year ended December 31, 2025, our gross profit increased $1,197,000 as described above, our selling and marketing expenses decreased
$238,000 and overhead allocation decreased $213,000 and the write off EV related assets in the prior year of $763,000. Somewhat offsetting
these increases, we recognized increased interest expense of $317,000 and increased salaries and benefits expenses of $156,000.
**Liquidity and Capital Resources**
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring net losses and has not
generated sufficient cash flows from operations. We expect to continue incurring operating and net losses until we achieve significant
product deliveries. Historically, the Company has been funded primarily by its parent and that is expected to continue. Recently, the
Company has also begun to receive funding from external investors. Despite these sources of capital, there is substantial doubt about
the Companys ability to continue as a going concern. The Company intends to finance its future development activities and working
capital needs primarily through the sale of equity securities, supplemented by additional financing sources, including term notes, until
such time as operating cash flows are sufficient to support its working capital requirements. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classifications of
liabilities that may be necessary if the Company is unable to continue as a going concern. As of February 28, 2026, the Company had cash
and cash equivalents of approximately $0.4 million and negative working capital of approximately $8.6 million.
| | 33 | | |
| | |
**Securities Purchase Agreement**
On October 29, 2025, the Company entered into
a Securities Purchase Agreement with SJC Lending LLC, pursuant to which the Company agreed to sell to SJC convertible promissory notes
in the aggregate principal amount of up to $ 1,650,000 for a total purchase price of up to $ 1.5 million.
The Agreement provides that the Loan shall be
conducted through seven (7) separate tranche closings, provided, that SJC has the ability, exercisable in its sole discretion, to accelerate
its purchases of Convertible Notes prior to the dates of the tranche closings provided for in the Agreement.
Pursuant to the Agreement, the initial tranche
closing, which occurred on October 29,2025, consisted of the issuance of a Convertible Note to SJC in the principal face amount of $440,000
for a purchase price of $400,000. The Convertible Note accrues interest at 12% per annum and will mature October 29, 2026. The Convertible
Note is convertible into shares of the Companys common stock at any time at a conversion price equal to the greater of (i) $0.035
per share, which shall not be adjusted for stock dividends, stock splits, stock combinations and other similar transactions and (ii) 20%
discount to the Companys lowest VWAP (as defined in the Convertible Note) of the common stock during the ten trading days immediately
prior to the date of conversion into shares of common stock.
**Critical Accounting Estimates**
Our consolidated financial statements have been
prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet
date, as well as the reported revenues and expenses recognized during the reporting period. Management bases its estimates on historical
experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about
the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material
to our financial statements.
**Supply Chain Constraints, Cost Increases, and Geopolitical Effects
on Our Operations**
****
Although the broader
semiconductor supply environment has improved, we continue to experience cost increases, pricing volatility, and, in certain cases, extended
lead times for components and materials used in our products. In particular, the costs of key inputs, including copper, transformers,
capacitors, and other passive components, have increased, driven in part by strong demand associated with artificial intelligence infrastructure,
geopolitical developments, and rising labor costs. These conditions have resulted in, and may continue to result in, supplier price increases,
including recent notifications of adjustments for certain products. In addition, supply-demand imbalances and capacity constraints affecting
specific components and materials may continue to create variability in availability and lead times. Further, geopolitical tensions and
trade policies, including export controls, tariffs, and other regulatory actions particularly involving the United States, China, and
Taiwan, and some other countries may disrupt our supply chain, limit our ability to source components from certain suppliers, increase
our costs, and require us to modify our sourcing strategies. Any inability to obtain components and materials on commercially reasonable
terms, or at all, as well as increases in input costs or disruptions in our supply chain, could adversely affect our production schedules,
margins, and ability to meet customer demand, which could have a material adverse effect on our business, results of operations, and financial
condition.
**Impact of Global Trade Policies on Our Operations**
We rely upon vendors outside the U.S. for a significant
amount of our products and related components. And we face resulting uncertainty and risks related to tariffs and other trade policies
which will likely increase the costs of securing products from our vendors. Tariffs and other non-tariff trade practices and policies
may adversely affect our business in other ways beyond increased costs for our products. Uncertainty about trade policy, tariff rates,
and other changes in practices affecting international trade might have an adverse effect on our business and results of operation and
we may face challenges in implementing the optimal responses to changing trade conditions. Apart from the impact of macroeconomic factors
on our business operations and on general economic conditions, below are certain factors that affect our results of operations.
**Impact on Our Supply
Chain**
Global supply chain disruptions, including component
shortages, manufacturing interruptions, increased material and product costs, extended lead times, customer order delays, and customer
order cancellations, have had and could continue to have a material adverse effect on our business, financial condition, and results of
operations. We depend on the timely supply of materials, services, and related products to meet the demands of our customers, which depends
in part on the timely delivery of materials and services from our suppliers and contract manufacturers. Global supply chain conditions
in fiscal 2025 continued to be affected by geopolitical tensions, trade restrictions, export controls, inflationary pressures, and logistics
disruptions. Although the global semiconductor shortage has improved compared to prior periods, shortages and extended lead times persist
for certain components, including power semiconductors, specialized integrated circuits, and other critical electronic components. Increased
demand driven by electrification, artificial intelligence infrastructure, and telecommunications expansion has further constrained supply.
These conditions have made it more difficult for us to obtain sufficient quantities of materials on commercially reasonable terms, or
at all.
| | 34 | | |
| | |
We have experienced, and may continue to experience,
increased costs for raw materials, including lithium, copper, and rare earth elements, as well as increased freight and logistics costs.
Although cost inflation has moderated compared to prior years, costs remain elevated relative to historical levels and continue to fluctuate.
Our ability to pass these increased costs on to our customers may be limited, which could adversely affect our gross margins.
Disruptions in manufacturing, delivery delays,
port congestion, transportation constraints, and intermittent supplier shutdowns have resulted in additional costs, reduced availability
of components, and increased variability in supply. Trade restrictions and export controls affecting semiconductors and raw materials
have further contributed to supply constraints. These factors have led to fluctuations in our production levels and sales and have adversely
affected our operations.
Our customers are experiencing similar supply
chain challenges, which may result in delays in their production schedules, extended delivery timelines, or cancellations of orders they
have placed with us. In addition, changes in customer demand, including a shift toward more customized solutions, have increased operational
complexity and may adversely affect our ability to efficiently plan production and manage inventory.
Ongoing supply chain challenges, component shortages,
and increased logistics costs have adversely affected our gross margins in fiscal 2025 and prior periods, and we expect that our gross
margins may continue to be adversely affected by increased material costs and freight and logistics expenses for the foreseeable future.
Further, any sustained slowdown in demand for electronic systems used in our customers products, including in industrial, telecommunications,
and electric vehicle markets, could adversely affect our business, financial condition, and results of operations.
These adverse impacts on our supply chain could
limit our ability to manufacture and deliver our products in a timely and cost-effective manner and could materially adversely affect
our business, financial condition, and results of operations.
We have implemented measures
intended to mitigate these risks, including supplier diversification, alternative sourcing, product redesign, inventory management initiatives,
manufacturing partner optimization, and pricing adjustments. However, these measures may not be effective, and there can be no assurance
that they will be sufficient to offset the impact of current or future supply chain disruptions and revenue fluctuations affecting us
and our customers.
**Recently Issued Accounting Pronouncements**
The Company has implemented
all the new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial
statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have
been issued that might have a material impact on its financial position or results of operations.
**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK**
The Company is a smaller reporting company as
defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 305(e) of Regulation S-K, the Company is not required to provide
the information required by this Item.
| | 35 | | |
| | |
**ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA**
|
|
Page
No. | |
|
Report of Independent Registered Public Accounting Firm CBIZ CPAs P.C. (PCAOB ID Number 199) |
F-2 | |
|
Report of Independent Registered Public Accounting Firm - Marcum LLP (PCAOB ID Number 688) |
F-4 | |
|
Consolidated Balance Sheets as of December 31, 2025, and 2024 |
F-6 | |
|
Consolidated Statements of Operations for the Years Ended December 31, 2025, and 2024 |
F-7 | |
|
Consolidated Statement of Changes in Shareholders Deficit for the Years Ended December 31, 2025, and 2024 |
F-8 | |
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, and 2024 |
F-9 | |
|
Notes to the Consolidated Financial Statements |
F-10 | |
| | F-1 | | |
| | |
**Report of Independent Registered Public Accounting
Firm**
****
To the Stockholders and Board of Directors of
TurnOnGreen, Inc. and Subsidiaries
**Opinion on the Financial Statements**
****
We have audited the accompanying consolidated
balance sheet of TurnOnGreen, Inc. (the Company) as of December 31, 2025, the related consolidated statements of operations,
changes in shareholders deficit and cash flows for the year ended December 31, 2025, and the related notes (collectively referred
to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2025, and the results of its operations and its cash flow for the year ended December
31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We also have audited the adjustments to the 2024
consolidated financial statements to retrospectively apply the change in accounting for income taxes as a result of the adoption of Accounting
Standards Update No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, as described in Note 2 and 14. In our opinion,
such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the
2024 consolidated financial statements of the Company other than with respect to these adjustments and, accordingly, we do not express
an opinion or any other form of assurance on the 2024 consolidated financial statements taken as a whole.
**Explanatory Paragraph Going Concern**
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As more fully described in Note 3, the Company has a significant
working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its
operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
**Basis for Opinion**
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
| | F-2 | | |
| | |
**Critical Audit Matters**
Critical audit matters are matters arising from
the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ CBIZ CPAs P.C.
CBIZ CPAs P.C.
We have served as the Companys
auditor since 2021. (such date takes into account the acquisition of the attest business of Marcum llp
by CBIZ CPAs P.C. effective November 1, 2024).
New York, NY
March 31, 2026
| | F-3 | | |
| | |
**Report of Independent Registered Public Accounting
Firm**
To the Shareholders and Board of Directors of
TurnOnGreen, Inc. and Subsidiaries
**Opinion on the Financial Statements**
****
We have audited, before the effects of the retrospective
adjustments for the impact of the adoption of ASU 2023-09, *Income Taxes (Topic 740): Improvements to Income Tax Disclosures* (ASU
2023-09) as discussed in Note 2 and 14 to the consolidated financial statements, the accompanying consolidated balance sheet of
TurnOnGreen, Inc. (the Company) as of December 31, 2024, the related consolidated statements of operations, changes in shareholders
deficit and cash flows for the year in the period ended December 31, 2024, and the related notes (collectively referred to as the financial
statements). In our opinion, the financial statements, before the effects of the ASU 2023-09, present fairly, in all material respects,
the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flow for the year in the
period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review, or apply
any procedures to ASU 2023-09 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments
are appropriate and have been properly applied. Those retrospective adjustments were audited by CBIZ CPAs P.C.
**Explanatory Paragraph Going Concern**
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As more fully described in Note 3, the Company has a significant
working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its
operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
**Basis for Opinion**
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
| | F-4 | | |
| | |
**Critical Audit Matters**
Critical audit matters are matters arising from
the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Marcum llp
Marcum llp
We have served as the Companys auditor since 2021.
****
New York, NY
April 23, 2025
| | F-5 | | |
| | |
**TURNONGREEN, INC. AND SUBSIDIARIES**
**CONSOLIDATED BALANCE SHEETS**
|
| |
| | | |
| | | |
|
| |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
ASSETS | |
| | |
| | |
|
CURRENT ASSETS | |
| | | |
| | | |
|
Cash and cash equivalents | |
$ | 65,000 | | |
$ | 27,000 | | |
|
Accounts receivable | |
| 1,434,000 | | |
| 730,000 | | |
|
Inventories | |
| 984,000 | | |
| 890,000 | | |
|
Prepaid expenses | |
| 90,000 | | |
| 107,000 | | |
|
TOTAL CURRENT ASSETS | |
| 2,573,000 | | |
| 1,754,000 | | |
|
| |
| | | |
| | | |
|
Property and equipment, net | |
| 159,000 | | |
| 154,000 | | |
|
Right-of-use assets | |
| 45,000 | | |
| 567,000 | | |
|
Other noncurrent assets | |
| 450,000 | | |
| 270,000 | | |
|
TOTAL ASSETS | |
$ | 3,227,000 | | |
$ | 2,745,000 | | |
|
| |
| | | |
| | | |
|
LIABILITIES AND SHAREHOLDERS DEFICIT | |
| | | |
| | | |
|
CURRENT LIABILITIES | |
| | | |
| | | |
|
Accounts payable, accrued expenses and other current liabilities | |
$ | 1,312,000 | | |
$ | 1,376,000 | | |
|
Convertible notes payable | |
| 557,000 | | |
| - | | |
|
Lawsuit liability | |
| 1,157,000 | | |
| 1,122,000 | | |
|
Operating lease liability, current | |
| 51,000 | | |
| 581,000 | | |
|
Related party notes and advances payable | |
| 7,854,000 | | |
| 5,185,000 | | |
|
TOTAL CURRENT LIABILITIES | |
| 10,931,000 | | |
| 8,264,000 | | |
|
| |
| | | |
| | | |
|
LONG TERM LIABILITIES | |
| | | |
| | | |
|
Operating lease liability, non-current | |
| - | | |
| 50,000 | | |
|
Other long term liabilities | |
| 138,000 | | |
| 163,000 | | |
|
TOTAL LIABILITIES | |
| 11,069,000 | | |
| 8,477,000 | | |
|
| |
| | | |
| | | |
|
COMMITMENTS AND CONTINGENCIES (NOTE 16) | |
| | | |
| | | |
|
CONVERTIBLE REDEEMABLE PREFERRED STOCK | |
| | | |
| | | |
|
Preferred stock series A subject to possible redemption, 50,000,000 shares authorized: 25,000 issued and outstanding at stated redemption value of $1,000 per share as of December 31, 2025 and December 31, 2024 | |
| 25,000,000 | | |
| 25,000,000 | | |
|
| |
| | | |
| | | |
|
SHAREHOLDERS DEFICIT: | |
| | | |
| | | |
|
Common Stock, par value $0.001 a share; 2,000,000,000 shares authorized as of December 31, 2025 and December 31, 2024: 183,983,122 shares issued and outstanding on December 31, 2025, and 183,949,923 as of December 31, 2024, respectively | |
| 184,000 | | |
| 184,000 | | |
|
Additional paid-in capital | |
| 16,174,000 | | |
| 16,171,000 | | |
|
Accumulated deficit | |
| (49,200,000 | ) | |
| (47,087,000 | ) | |
|
TOTAL SHAREHOLDERS DEFICIT | |
| (32,842,000 | ) | |
| (30,732,000 | ) | |
|
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS DEFICIT | |
$ | 3,227,000 | | |
$ | 2,745,000 | | |
The accompanying notes are an integral part of
these consolidated financial statements.
| | F-6 | | |
| | |
**TURNONGREEN, INC. AND SUBSIDIARIES**
**CONSOLIDATED STATEMENTS OF OPERATIONS**
|
| |
| | | |
| | | |
|
| |
For the Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Revenue | |
$ | 7,228,000 | | |
$ | 4,912,000 | | |
|
Cost of revenue | |
| 3,909,000 | | |
| 2,790,000 | | |
|
Gross profit | |
| 3,319,000 | | |
| 2,122,000 | | |
|
| |
| | | |
| | | |
|
Operating expenses: | |
| | | |
| | | |
|
General and administration | |
| 3,598,000 | | |
| 3,610,000 | | |
|
Selling and marketing | |
| 1,055,000 | | |
| 1,293,000 | | |
|
Write off EV assets | |
| - | | |
| 763,000 | | |
|
Total operating expenses | |
| 4,653,000 | | |
| 5,666,000 | | |
|
Operating loss | |
| (1,334,000 | ) | |
| (3,544,000 | ) | |
|
Other expense: | |
| | | |
| | | |
|
Interest expense, related party | |
| 583,000 | | |
| 368,000 | | |
|
Interest expense | |
| 158,000 | | |
| 56,000 | | |
|
Change in fair value of embedded derivative liabilities | |
| 36,000 | | |
| - | | |
|
Total other expense | |
| 777,000 | | |
| 424,000 | | |
|
Loss before income taxes | |
| (2,111,000 | ) | |
| (3,968,000 | ) | |
|
Income tax provision | |
| 2,000 | | |
| 5,000 | | |
|
Net loss | |
$ | (2,113,000 | ) | |
$ | (3,973,000 | ) | |
|
| |
| | | |
| | | |
|
Net loss per common share basic and diluted: | |
$ | (0.01 | ) | |
$ | (0.02 | ) | |
|
| |
| | | |
| | | |
|
Weighted average common shares, basic and diluted | |
| 183,982,485 | | |
| 183,944,607 | | |
The accompanying notes are an integral part of
these consolidated financial statements.
| | F-7 | | |
| | |
**TURNONGREEN, INC. AND SUBSIDIARIES**
**CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS
DEFICIT**
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
Common Stock | | |
Additional | | |
| | |
Total | | |
|
| |
Shares | | |
Amount | | |
Paid in Capital | | |
Accumulated Deficit | | |
Shareholders Deficit | | |
|
Balance, January 1, 2025 | |
| 183,949,923 | | |
$ | 184,000 | | |
$ | 16,171,000 | | |
$ | (47,087,000 | ) | |
$ | (30,732,000 | ) | |
|
Common stock issued upon exercise of warrants | |
| 33,199 | | |
| - | | |
| 3,000 | | |
| - | | |
| 3,000 | | |
|
Net loss | |
| - | | |
| - | | |
| - | | |
| (2,113,000 | ) | |
| (2,113,000 | ) | |
|
Balance, December 31, 2025 | |
| 183,983,122 | | |
$ | 184,000 | | |
$ | 16,174,000 | | |
$ | (49,200,000 | ) | |
$ | (32,842,000 | ) | |
****
****
****
|
| |
Common Stock | | |
Additional | | |
| | |
Total | | |
|
| |
Shares | | |
Amount | | |
Paid in Capital | | |
Accumulated Deficit | | |
Shareholders Deficit | | |
|
Balance, January 1, 2024 | |
| 183,941,422 | | |
$ | 184,000 | | |
$ | 13,504,000 | | |
$ | (43,114,000 | ) | |
$ | (29,426,000 | ) | |
|
Common stock issued upon exercise of warrants | |
| 8,501 | | |
| - | | |
| - | | |
| - | | |
| - | | |
|
Preferred dividends - forgiveness | |
| - | | |
| - | | |
| 2,667,000 | | |
| | | |
| 2,667,000 | | |
|
Net loss | |
| - | | |
| - | | |
| - | | |
| (3,973,000 | ) | |
| (3,973,000 | ) | |
|
Balance, December 31, 2024 | |
| 183,949,923 | | |
$ | 184,000 | | |
$ | 16,171,000 | | |
$ | (47,087,000 | ) | |
$ | (30,732,000 | ) | |
The accompanying notes are an integral part of
these consolidated financial statements.
| | F-8 | | |
| | |
**TURNONGREEN, INC. AND SUBSIDIARIES**
**CONSOLIDATED STATEMENT OF CASH FLOWS **
|
| |
| | | |
| | | |
|
| |
For the Year Ended December 31, | | |
|
Cash flows from operating activities: | |
2025 | | |
2024 | | |
|
Net loss | |
$ | (2,113,000 | ) | |
$ | (3,973,000 | ) | |
|
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | | |
|
Depreciation and amortization | |
| 56,000 | | |
| 94,000 | | |
|
Amortization of right-of-use assets | |
| 522,000 | | |
| 566,000 | | |
|
Amortization of debt discount | |
| 7,000 | | |
| - | | |
|
Write off EV assets | |
| - | | |
| 763,000 | | |
|
Inventory adjustment | |
| - | | |
| 270,000 | | |
|
Change in fair value of embedded derivative liabilities | |
| 150,000 | | |
| | | |
|
Changes in operating assets and liabilities | |
| | | |
| | | |
|
Accounts receivable | |
| (704,000 | ) | |
| 236,000 | | |
|
Prepaid expenses and other assets | |
| (144,000 | ) | |
| (88,000 | ) | |
|
Inventory | |
| (94,000 | ) | |
| 179,000 | | |
|
Accounts payable | |
| (298,000 | ) | |
| (85,000 | ) | |
|
Accrued expenses and other current liabilities | |
| 269,000 | | |
| (66,000 | ) | |
|
Operating lease and other liabilities | |
| (605,000 | ) | |
| (561,000 | ) | |
|
Net cash used in operating activities | |
| (2,954,000 | ) | |
| (2,665,000 | ) | |
|
| |
| | | |
| | | |
|
Cash flows from investing activities: | |
| | | |
| | | |
|
Purchase of property and equipment | |
| (80,000 | ) | |
| (42,000 | ) | |
|
Cash used in investing activities | |
| (80,000 | ) | |
| (42,000 | ) | |
|
| |
| | | |
| | | |
|
Cash flows from financing activities: | |
| | | |
| | | |
|
Proceeds from related party advances, net of payments | |
| 2,669,000 | | |
| 2,713,000 | | |
|
Proceeds from warrant exercises | |
| 3,000 | | |
| - | | |
|
Proceeds from convertible note payable | |
| 400,000 | | |
| - | | |
|
Net cash provided by financing activities | |
| 3,072,000 | | |
| 2,713,000 | | |
|
| |
| | | |
| | | |
|
Net decrease in cash and cash equivalents | |
| 38,000 | | |
| 6,000 | | |
|
Cash at beginning of period | |
| 27,000 | | |
| 21,000 | | |
|
Cash at end of period | |
$ | 65,000 | | |
$ | 27,000 | | |
|
Supplemental disclosures of cash flow information | |
| | | |
| | | |
|
Cash paid for interest | |
$ | 13,000 | | |
$ | - | | |
|
Cash paid for state income taxes | |
$ | 2,000 | | |
$ | 5,000 | | |
|
Non-cash investing and financing activities | |
| | | |
| | | |
|
Forgiveness of accrued dividends | |
$ | - | | |
$ | 2,667,000 | | |
The accompanying notes are an integral part of
these consolidated financial statements.
| | F-9 | | |
| | |
**TURNONGREEN, INC. AND SUBSIDIARIES**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**DECEMBER 31, 2025**
**1. DESCRIPTION OF BUSINESS**
**Overview**
****
TurnOnGreen, Inc., a Nevada corporation (TOG),
through its wholly owned subsidiaries Digital Power Corporation (Digital Power) and TOG Technologies Inc. (TOGT,
and together with Digital Power, the Company), is an emerging provider of premium power electronic and electric vehicle
(EV) charging solutions. The Company designs, develops, manufactures, and sells highly engineered, feature-rich, high-grade
power conversion systems and power solutions for mission-critical, life-sustaining, and lifesaving applications across a variety of sectors,
particularly those operating in demanding and harsh environments. We serve a broad range of markets, including defense and aerospace,
medical and healthcare, industrial applications, telecommunications, e-Mobility, and OEM solutions. Our products are highly adaptive,
featuring customized firmware meticulously configured to meet the specific requirements and challenges of our customers applications.
In addition, we provide comprehensive EV charging infrastructure and subscription-based charging network management services for residential,
fleet, hospitality, workplace, healthcare, municipal, and educational environments including universities and schools.
**2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES**
****
**Basis of Presentation**
**
The accompanying consolidated financial statements
are presented in accordance with generally accepted accounting principles in the United States of America (GAAP) and pursuant
to the rules and regulations of the Securities and Exchange Commission (the SEC). References to GAAP issued by the Financial
Accounting Standards Board (FASB) in these notes to the consolidated financial statements are to the FASB Accounting Standards
Codification (ASC). The consolidated financial statements include the accounts of the Company and its subsidiaries, and
all intercompany transactions have been eliminated in consolidation. All significant intercompany accounts have been eliminated in consolidation.
**Accounting Estimates**
The preparation of financial statements, in conformity
with GAAP, requires management to make estimates, judgments and assumptions. The Companys management believes that the estimates,
judgments, and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments
and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates
of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ
from those estimates. Key estimates include net realizable inventory value and useful lives of asset.
**Revenue Recognition**
The Company recognizes revenue under ASC 606,*Revenue
from Contracts with Customers*. The core principle of the revenue standard is that a company should recognize revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled
in exchange for those goods or services. The following five steps are applied to achieve that core principle:
|
| Step 1: Identify the contract with the customer, | |
|
| Step 2: Identify the performance obligations in the contract, | |
|
| Step 3: Determine the transaction price, | |
|
| Step 4: Allocate the transaction price to the performance obligations in the contract, and | |
|
| Step 5: Recognize revenue when the company satisfies a performance obligation. | |
*The Company recognizes revenue primarily from
four different types of contracts:*
**
|
| Product sales and installation - The Company generates revenues from the sale of its products through
a direct and indirect sales force and primarily receives fixed consideration for sales of products. Some contracts contain a combination
of product sales with a service such as installation of the products, which is expected to be performed in the near term. Such services
are distinct and accounted for as separate performance obligations. For sales, the Companys performance obligations to deliver
products are satisfied at the point in time when products are shipped to the customer, which is when the customer obtains control over
the goods. The installation service on these types of contracts is usually completed within six to twelve weeks. | |
| | F-10 | | |
| | |
|
| The Company recognizes installation service revenue over time using the cost-to-cost measure of progress,
which measures an installation obligations progress toward completion based on the ratio of actual contract costs incurred to date
to the Companys estimated costs at completion. Significant judgment may be required by management in the cost estimation process
for these contracts, which is based on the knowledge and experience of the Companys project managers, subcontractors and financial
professionals. Total estimated costs to complete projects include direct labor, material, permits and subcontractor costs. | |
The Company also provides standard assurance
warranties on product functionality, which are not separately priced or considered material.
Some of the Companys contracts
with distributors include stock rotation rights after six months for slow-moving inventory, which represents variable consideration. The
Company uses an expected value method to estimate variable consideration and constrains revenue for estimated stock rotations until it
is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. To date, returns have been insignificant.
**
Because the Companys product sales agreements
have an expected duration of one year or less, the Company has elected to adopt the practical expedient in ASC 606-10-50-14(a) of not
disclosing information about its remaining performance obligations.
**Sales Tax Collected from Customers**
As a part of the Companys normal course
of business, sales taxes are collected from customers in accordance with local regulations. Sales taxes collected are remitted, in a timely
manner, to the appropriate governmental tax authority on behalf of the customer. The Companys policy is to present revenue and
costs net of sales taxes.
**Deferred Revenue**
Deferred revenue consists of billings on contracts
where performance has commenced, and payments have been received in advance of revenue recognition. Deferred revenue is recognized in
revenue as the related revenue recognition criteria are met.
****
**Cash and Cash Equivalents**
The Companys cash is maintained in checking
accounts with reputable financial institutions. These balances may, at times, exceed the U.S. Federal Deposit Insurance Corporation insurance
limits. As of December 31, 2025, the Company had cash of $65,000. The Company has not experienced any losses on deposits of cash and cash
equivalents.
**Accounts Receivable and Allowance for Credit Losses**
The Companys receivables are recorded when
invoiced and represent claims against third parties that will be settled in cash. The Company records accounts receivable at the invoiced
amount less an allowance for any potentially uncollectible accounts under the current expected credit loss impairment model and discloses
the net amount of the financial instrument expected to be collected. The Company estimates the allowance for credit losses based on an
ongoing review of existing economic conditions, the financial conditions of the customers, historical trends in credit losses, and the
amount and age of past due accounts. Past-due receivable balances are written off when the Companys internal collection efforts
have been unsuccessful in collecting the amount due.
**Leases**
****
The Company accounts for its leases under ASC
842,*Leases*. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing
leases. Operating leases are recognized as Right-of-use (ROU) assets, Operating lease liability, current, and Operating
lease liability, non-current on the consolidated balance sheets. Lease assets and liabilities are recognized based on the present value
of the future minimum lease payments over the lease term at commencement date. As most of the leases do not provide an implicit rate,
the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value
of future payments. In certain of the lease agreements, the Company receives rent holidays and other incentives. The Company recognizes
lease costs on a straight-line basis over the lease term without regard to deferred payment terms, such as rent holidays, that defer the
commencement date of required payments. The Companys lease terms may include options to extend or terminate the lease when it is
reasonably certain that the Company will exercise that option. Leasehold improvements are capitalized at cost and amortized over the lesser
of their expected useful life or the life of the lease, without assuming renewal features, if any, are exercised. The Company elected
the practical expedient in ASC 842 and does not separate lease and non-lease components for any of its leases.
****
****
| | F-11 | | |
| | |
****
**Inventory**
Inventories, inclusive of raw materials and finished
goods, are valued at the lower cost or net realizable value after using the first-in, first-out method. Management compares the cost of
inventory with the net realizable value and adjustments are made for writing down inventory to net realizable value, if lower.
The Company periodically assesses its inventories
valuation with respect to obsolete items by reviewing revenue forecasts and technological obsolescence and moving such items into a reserve
for obsolescence. When inventories on hand exceed the foreseeable demand or become obsolete, the value of excess inventory, which at the
time of the review was not expected to be sold, is written off.
**Property and Equipment, Net**
Property and equipment are stated at cost, net
of accumulated depreciation. Major additions and improvements are capitalized, while replacements, maintenance and repairs, which do not
improve or extend the life of the respective assets, are expensed as incurred. When property and equipment is retired or otherwise disposed
of the cost and accumulated depreciation are removed from the related accounts and any resulting gain or loss is included in the results
of operations for the respective period.
****
**Warranty**
The Company offers a warranty period for all its
manufactured products to function free from defects in material and workmanship under normal use and service for one to two years on most
products and up to five years for rugged power products for the defense and aerospace markets. For the Companys electric vehicle
supply equipment product line, the Company offers up to a three-year extended warranty beyond the manufacturing warranty period, although
not considered material to its revenue stream. The Company also provides end user technical support for up to fifteen (15) years on many
of its products that have long lifetimes. The Company estimates the costs that may be incurred under its warranty and records a liability
in the amount of such costs at the time product revenue is recognized. Factors that affect the Companys warranty liability include
the number of units sold, the sector product being used, historical rates of warranty claims, and cost per claim. The Company periodically
assesses the adequacy of its recorded warranty liability.
**Litigation**
****
The Company records an undiscounted liability
for contingent losses, including future legal costs, settlements and judgments, when it considers it is probable that a liability has
been incurred and the amount of the loss can be reasonably estimated.
**Income Taxes**
The Company determines its income taxes under
the asset and liability method in accordance with ASC No. 740,*Income Taxes*, which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.
Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets
are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date.
The Company accounts for uncertain tax positions
in accordance with ASC No. 740-10-25**.**ASC No. 740-10-25 addresses the determination of whether tax benefits claimed or expected
to be claimed on a tax return should be recorded in the financial statements. Under ASC No. 740-10-25, the Company may recognize the tax
benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position.The tax benefit to be recognized is measured as the largest amount
of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. To the extent that the final tax
outcome of these matters is different than the amount recorded, such differences impact income tax expense in the period in which such
determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income
tax expense. ASC No. 740-10-25also requires management to evaluate tax positions taken by the Company and recognize a liability
if the Company has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing
authorities. Management of the Company has evaluated tax positions taken by the Company and has concluded that as of December 31, 2025,
and December 31, 2024, there were no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability
that would require disclosure in the financial statements.
**Impairment of Long-lived Assets**
The Company analyzes its long-lived assets
for potential impairment at least annually or when changes in circumstances indicate a possibility of impairment. Impairment losses are
recorded on long-lived assets when indicators of impairment are present. When the carrying value of an asset exceeds the associated undiscounted
expected future cash flows, it is considered to be impaired and is written down to fair value.
****
****
| | F-12 | | |
| | |
****
**Segments**
The Company determined that its two primary brands
constitute its two operating segments. However, the Companys operating segments continue to be aggregated into one reportable segment
based on the similarity in economic characteristics, other qualitative factors and the objectives and principles of ASC 280, *Segment
Reporting*.
**Receivables and Concentration of
Credit Risk**
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash and trade receivables.
Trade receivables of the Company and its subsidiaries
are mainly derived from sales to customers located primarily in the U.S. The Company performs ongoing credit evaluations of its customers
and to date has not experienced any material losses.
**Preferred Shares**
The Company applies the accounting standards for
distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred shares subject
to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares
(including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon
the occurrence of uncertain events not solely within the Companys control) are classified as temporary equity.
**New Accounting Guidance Recently Adopted**
On November 27, 2023, the FASB issued ASU No.
2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 is designed to improve the reportable
segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided
to the chief operating decision maker. The new standard is effective for the Company for the fiscal year beginning after 15 December 2023,
and interim periods within fiscal years beginning after 15 December 2024. The Company adopted ASU No. 2023-07 during the fiscal year ended
December 31, 2024, and the adoption did not result in any material changes to the consolidated financial statements.
On December 14, 2023, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements
to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 requires entities to disclose specific rate reconciliations, amount
of income taxes separated by federal and individual jurisdiction, and the amount of income (loss) from continuing operations before income
tax expense (benefit) disaggregated between federal, state, and foreign. The Company retrospectively adopted ASU 2023-09 as required for
the year ending December 31, 2025. The adoption of ASU 2023-09 did not have a material impact on the Companys consolidated financial
position, results of operations, or cash flows, as the standard primarily expands disclosure requirements.
**Recent Accounting Pronouncements not yet Adopted**
The Company continually assesses any new accounting
pronouncements to determine their applicability. When it is determined that a new accounting pronouncement may affect the Companys
financial reporting, the Company undertakes an analysis to determine any required changes to its Consolidated Financial Statements.
In December 2024, the FASB issued ASU No. 2024-03,
Income Statement - Reporting Comprehensive Income- Expense Disaggregation Disclosures (ASU 2024-03). ASU 2024-03 requires disclosure of
specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods.
The objective of the disclosure requirements is to provide disaggregated information to help financial statement users (a) better understand
the Companys performance, (b) better assess the Companys prospects for future cash flows, and (c) compare the Companys
performance over time and with that of other entities. ASU 2024-03 is effective for annual reporting periods beginning after December
15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. We are currently evaluating the impact
that this guidance will have on our consolidated financial statements.
**3. GOING CONCERN**
****
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring net losses and operations
have not provided sufficient cash flows. The Company believes that it will continue to incur operating and net losses each quarter until
at least the time it begins significant deliveries of its products. The Companys inabilityto continueas a going concerncouldhave
a negativeimpacton theCompany, includingits abilityto obtain neededfinancing,and could adverselyaffectthetradingpriceof
the Companys commonstock. These factors create substantial doubt about the Companys ability to continue as a going
concern for at least one year after the date that the Companys audited consolidated Financial Statements are issued. The Company
intends to finance its future development activities and its working capital needs largely through the sale of equity securities with
some additional funding from other sources, including term notes until such time as funds provided by operations are sufficient to fund
working capital requirements.
| | F-13 | | |
| | |
The consolidated financial statements of the Company
do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications
of liabilities that might be necessary should the Company be unable to continue as a going concern.
**4. REVENUE DISAGGREGATION**
The Companys disaggregated revenues consisted
of the following:
|
Schedule of disaggregated revenues | |
| | | |
| | | |
|
| |
For the Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Primary Geographical Markets | |
| | | |
| | | |
|
North America | |
$ | 6,793,000 | | |
$ | 4,839,000 | | |
|
Other | |
| 435,000 | | |
| 73,000 | | |
|
Total Revenue | |
$ | 7,228,000 | | |
$ | 4,912,000 | | |
|
| |
| | | |
| | | |
|
Major Goods | |
| | | |
| | | |
|
Power supply units | |
$ | 6,025,000 | | |
$ | 4,501,000 | | |
|
EV chargers | |
| 1,203,000 | | |
| 411,000 | | |
|
Total Revenue | |
$ | 7,228,000 | | |
$ | 4,912,000 | | |
|
| |
| | | |
| | | |
|
Timing of Revenue Recognition | |
| | | |
| | | |
|
Goods transferred at a point in time | |
$ | 7,151,000 | | |
$ | 4,865,000 | | |
|
Revenue recognized over time | |
| 77,000 | | |
| 47,000 | | |
|
Total Revenue | |
$ | 7,228,000 | | |
$ | 4,912,000 | | |
**Customer advances**
We defer revenues when cash payments are received
in advance of our performance obligation required under the guidelines of ASC 606. The revenue is recognized upon completion of our related
performance obligations, typically within twelve months following receipt of the customer advances. Customer advances are recorded in
the accounts payable, accrued expenses and other current liabilities line of the consolidated balance sheets.
Customer advances consisted of the following:
|
Schedule of customer advances |
|
|
|
| |
|
|
|
Customer advances |
| |
|
Balance, December 31, 2024 |
|
$ |
125,000 |
| |
|
Advances received |
|
|
1,403,000 |
| |
|
Revenue recognized |
|
|
(1,018,000 |
) | |
|
Advances refunded |
|
|
(305,000 |
) | |
|
Balance, December 31, 2025 |
|
$ |
205,000 |
| |
The Companys related party sales consisted of the following:
|
Schedule of related party sales |
|
|
|
|
|
| |
|
|
|
For the Year Ended December 31, |
| |
|
|
|
2025 |
|
|
2024 |
| |
|
Related Party |
|
|
|
|
|
| |
|
Subsidiaries of Hyperscale |
|
$ |
- |
|
|
$ |
28,000 |
| |
|
|
|
|
|
|
|
|
|
| |
| | F-14 | | |
| | |
The following table provides the percentage of
total revenue attributable to a single customer from which 10% or more of total revenue is derived:
|
Schedule of concentration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
For the Year Ended |
|
|
For the Year Ended |
| |
|
|
|
December 31, 2025 |
|
|
December 31, 2024 |
| |
|
|
|
Total Revenue |
|
|
Percentage of |
|
|
Total Revenue |
|
|
Percentage of |
| |
|
|
|
by Major |
|
|
Total Company |
|
|
by Major |
|
|
Total Company |
| |
|
|
|
Customers |
|
|
Revenue |
|
|
Customer |
|
|
Revenue |
| |
|
Customer A |
|
$ |
1,709,000 |
|
|
|
24 |
% |
|
$ |
1,721,000 |
|
|
|
35 |
% | |
|
Customer B |
|
$ |
1,107,000 |
|
|
|
15 |
% |
|
$ |
- |
|
|
|
- |
% | |
|
Customer C |
|
$ |
865,000 |
|
|
|
12 |
% |
|
$ |
- |
|
|
|
- |
% | |
**5. FAIR VALUE OF FINANCIAL INSTRUMENTS**
****
The following table sets forth the Companys
financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy at December 31, 2025
(no material financial instruments were measured at fair value on a recurring basis at December 31, 2024):
|
Schedule of fair value, assets measured on recurring basis | |
| | |
| | |
| | |
| | |
|
| |
Fair Value Measurement at December 31, 2025 | | |
|
| |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
|
Embedded conversion feature liabilities | |
$ | 150,000 | | |
$ | - | | |
$ | - | | |
$ | 150,000 | | |
The embedded conversion feature liabilities are
included in the convertible notes payable line of the consolidated balance sheets.
The Company assesses the inputs used to measure
fair value using the three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market.
For investments where little or no public market exists, managements determination of fair value is based on the best available
information which may incorporate managements own assumptions and involves a significant degree of judgment, taking into consideration
various factors including earnings history, financial condition, recent sales prices of the issuers securities and liquidity risks.
The changes in Level 3 fair value hierarchy during
the year ended December 31, 2025, were as follows:
|
Schedule of fair value, liabilities measured on recurring basis | |
| | |
| | |
| | |
| | |
| | |
|
| |
Level 3 Balance at Beginning of Year | | |
Fair Value Adjustments | | |
Sales and Settlement | | |
Grants | | |
Level 3 Balance at End of Year | | |
|
Embedded conversion feature liabilities | |
$ | - | | |
$ | 36,000 | | |
$ | - | | |
$ | 114,000 | | |
$ | 150,000 | | |
**6. TRADE RECEIVABLES**
****
The following table provides the percentage of
total trade receivables attributable to a single customer that accounted for 10% or more of the Companys outstanding receivables:
|
Schedule percentage of total trade receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
For the Year Ended |
|
|
For the Year Ended |
| |
|
|
|
December 31, 2025 |
|
|
December 31, 2024 |
| |
|
|
|
Trade Receivables |
|
|
Percentage of |
|
|
Total Receivables |
|
|
Percentage of |
| |
|
|
|
by Major |
|
|
Total Trade |
|
|
by Major |
|
|
Total Trade |
| |
|
|
|
Customer |
|
|
Receivables |
|
|
Customer |
|
|
Receivables |
| |
|
Customer A |
|
$ |
501,000 |
|
|
|
35 |
% |
|
$ |
346,000 |
|
|
|
47 |
% | |
|
Customer B |
|
$ |
244,000 |
|
|
|
17 |
% |
|
|
- |
|
|
|
- |
% | |
|
Customer C |
|
$ |
- |
|
|
|
- |
% |
|
$ |
91,000 |
|
|
|
12 |
% | |
**Related party receivables**
****
As of December 31, 2025, and 2024, the Company had related party receivables
of $- and $17,000, respectively.
**7. WRITE OFF EV-RELATED ASSETS**
During the year ended December 31, 2024, the Company
performed a review of the carrying value of assets associated with its EV charging business based on current demand trends and sales activity.
As a result of this assessment, the Company recorded a write-off of approximately $763,000 related primarily to certain prepaid and fixed
assets.
| | F-15 | | |
| | |
**8. PROPERTY AND EQUIPMENT**
****
As of December 31, 2025, and 2024, property and
equipment consisted of the following:
|
Schedule of property and equipment |
|
|
|
|
|
|
|
| |
|
|
|
December 31, 2025 |
|
|
December 31, 2024 |
| |
|
Machinery and equipment |
|
$ |
648,000 |
|
|
$ |
648,000 |
| |
|
Leasehold improvements, furniture and equipment |
|
|
304,000 |
|
|
|
221,000 |
| |
|
|
|
|
952,000 |
|
|
|
869,000 |
| |
|
Less: accumulated depreciation and amortization |
|
|
(793,000 |
) |
|
|
(715,000 |
) | |
|
Property and equipment, net |
|
$ |
159,000 |
|
|
$ |
154,000 |
| |
****
Depreciation and amortization expense related
to property and equipment was $56,000 and $94,000 for the years ended December 31, 2025, and 2024, respectively.
Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets, at the following rates:
|
Schedule of estimated useful lives of the assets |
|
| |
|
|
|
Useful Lives | |
|
Asset |
|
(In Years) | |
|
Computer software and office and computer equipment |
|
3 5 | |
|
Machinery and equipment, automobiles, furniture, and fixtures |
|
3 15 | |
|
Leasehold improvements |
|
Over the term of the lease or the life of the asset, whichever is shorter | |
**9. INVENTORIES**
As of December 31, 2025, and 2024, inventories
consisted of:
|
Schedule of inventories |
|
|
|
|
|
|
|
| |
|
|
|
December 31, 2025 |
|
|
December 31, 2024 |
| |
|
Finished products |
|
$ |
296,000 |
|
|
$ |
416,000 |
| |
|
Raw materials, parts and supplies |
|
|
688,000 |
|
|
|
474,000 |
| |
|
Total inventories |
|
$ |
984,000 |
|
|
$ |
890,000 |
| |
**10. CONVERTIBLE NOTES PAYABLE**
****
Convertible notes payable were comprised of the
following:
|
Schedule of convertible notes payable | |
| |
| |
| |
| |
| | | |
| | | |
|
| |
Conversion price per share | |
Interest
rate | |
Effective
rate(1) | |
Due date | |
December 31, 2025 | | |
December 31, 2024 | | |
|
SJC convertible promissory note | |
80% of 10-day VWAP | |
12% | |
21% | |
October 29,2026 | |
$ | 440,000 | | |
$ | - | | |
|
Fair value of embedded conversion options | |
| |
| |
| |
| |
| 150,000 | | |
| - | | |
|
Less: unamortized debt discounts | |
| |
| |
| |
| |
| 33,000 | | |
| - | | |
|
Total convertible notes payable, net of financing cost, long-term | |
| |
| |
| |
| |
$ | 557,000 | | |
$ | - | | |
|
Less: current portion | |
| |
| |
| |
| |
| 557,000 | | |
| | | |
|
Convertible notes payable, net of financing cost long-term portion | |
| |
| |
| |
| |
$ | - | | |
$ | - | | |
|
(1) | Includes OID costs that are amortized to interest expense over the life of the notes. | |
**SJC Convertible Promissory Note**
****
On October 29, 2025, the Company entered into
a Securities Purchase Agreement (Agreement) with SJC Lending LLC ("SJC"), pursuant to which the Company agreed
to sell to SJC convertible promissory notes in the aggregate principal amount of up to $ 1,650,000 (the "Convertible Notes")
for a total purchase price of up to $ 1.5 million (the "Loan"). The Agreement provides that the Loan shall be conducted through
seven (7) separate tranche closings, provided, that SJC has the ability, exercisable in its sole discretion, to accelerate its purchases
of Convertible Notes prior to the dates of the tranche closings provided for in the Agreement (See Note 17).
Pursuant to the Agreement, the initial tranche
closing, which occurred on October 29,2025, consisted of the issuance of a Convertible Note to SJC in the principal face amount of $440,000
for a purchase price of $400,000. The Convertible Note accrues interest at 12% per annum and will mature October 28, 2026. The note was
issued with an original issue discount of 10%.
| | F-16 | | |
| | |
SJC entered into various collateral agreements
in support of the convertible notes including (i) an intellectual property security agreement pursuant to which the Company and its subsidiaries
granted SJC a continuing security interest in certain trademarks, copyrights, patents and mask works (ii) a security agreement pursuant
to which the Company and its subsidiaries granted SJC a security interest in substantially all of their respective assets as collateral
for repayment of the convertible notes and (iii) a pledge agreement pursuant to which the Company pledged the capital stock of the Companys
subsidiaries as additional collateral.
**Embedded Derivative**
The Company identified embedded derivative features within certain convertible
promissory notes issued on October 29, 2025, that required bifurcation and separate accounting as derivative liabilities under Accounting
Standards Codification (ASC) 815, Derivatives and Hedging Activities. Specifically, the embedded conversion options associated
with the SJC convertible promissory note was determined to meet the criteria for derivative classification.
The fair value of the embedded derivative liabilities
was estimated using a Monte Carlo simulation model. The model incorporates key assumptions including the Companys stock price,
risk-free interest rate, expected volatility, credit-risk adjusted discount rate, and the specific terms of each conversion feature (including
floor price, cap, and VWAP-based pricing). Due to the significant use of unobservable inputs, these derivative liabilities are classified
within Level 3 of the fair value hierarchy.
The following table summarizes the key inputs
used in the valuation of the embedded derivatives at inception and on December 31, 2025:
|
Schedule of summary of valuation allowance | |
| | | |
| | | |
|
Assumption | |
October 29, 2025 | | |
December 31, 2025 | | |
|
Valuation technique | |
Monte Carlo Simulation | | |
Monte Carlo Simulation | | |
|
Risk-free interest rate (cont. comp.) | |
| 4 | % | |
| 3 | % | |
|
Expected volatility | |
| 95 | % | |
| 105 | % | |
|
Credit-risk adjusted rate | |
| 22 | % | |
| 26 | % | |
|
Time to maturity (years) | |
| 1 | | |
| 0.83 | | |
|
Stock price at valuation date | |
$ | 0.05 | | |
$ | 0.07 | | |
|
Dividend yield | |
| 0.00 | % | |
| 0.00 | % | |
The Monte Carlo simulation utilized 100,000 iterations
and incorporated conversion mechanics, including the floor price and the VWAP-based conversion price as defined in the agreement. The
incremental value attributable to the conversion feature was isolated to determine its impact on the overall fair value of the embedded
option.
**11. LAWSUIT LIABILITY**
****
Gordon v. Digital Power Corporation
On or about November 21, 2019, the plaintiff-William
Gordon, filed a complaint against defendant, DPC, alleging wrongful termination and disability discrimination. The arbitration was conducted
during October 2022. Aside from the opening and responding trial briefs, the arbitrator requested additional briefing on two subjects,
undisclosed principal liability, and disclosed principal liability, both of which were submitted. In May 2023 the arbitrator entered a
final award against the Company and in favor of Mr. Gordon in the amount of $1.1 million inclusive of interest, legal fees, administrative
fees and expenses. Interest accrues at 10% per annum.
The Company has recorded a lawsuit liability of
$1.1 million for this judgement as of December 31, 2025, and 2024 in the consolidated balance sheets. Interest expense related to the
liability was $29,000 and $56,000 for the years ended December 31, 2025, and 2024, respectively.
**12. LEASES**
****
**Office and Warehouse Leases**
During the year ended December 31, 2024, the Company
was a lessee as well as a sublessor for a certain office space lease. No residual value guarantees had been provided by the sublessee.
For the year ended December 31, 2024, the Company recognized income related to the sublease of $91,000. The sublease expired November
30, 2024. Fixed sublease payments received were recognized on a straight-line basis over the sublease term and netted against operating
lease expenses.
| | F-17 | | |
| | |
The Company leases offices and warehouse space
under an operating lease requiring periodic payments. The following table provides a summary of leases by balance sheet category as ofDecember
31, 2025, and 2024:
|
Summary of leases by balance sheet category |
|
|
|
|
|
|
|
| |
|
|
|
December 31, 2025 |
|
|
December 31, 2024 |
| |
|
Operating right-of-use assets |
|
$ |
45,000 |
|
|
$ |
567,000 |
| |
|
Operating lease liability current |
|
|
51,000 |
|
|
|
581,000 |
| |
|
Operating lease liability non-current |
|
|
- |
|
|
|
50,000 |
| |
****
The components of lease expenses recorded within
operating expenses on the Companys consolidated statements of operations for the years ended December 31, 2025, and 2024, were
as follows:
|
Schedule of lease cost |
|
|
|
|
|
|
|
| |
|
|
|
December 31, |
| |
|
|
|
2025 |
|
|
2024 |
| |
|
Operating lease costs |
|
$ |
550,000 |
|
|
$ |
649,000 |
| |
|
Less: Sublease income |
|
|
- |
|
|
|
(91,000) |
| |
|
Total |
|
$ |
550,000 |
|
|
$ |
558,000 |
| |
The following tables provides a summary of other
information related to leases for theyear ended December 31, 2025:
|
Summary of other information related to leases |
|
|
|
| |
|
|
|
December 31, 2025 |
| |
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
| |
|
Operating cash flows related to operating leases |
|
$ |
609,000 |
| |
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
|
- |
| |
|
Weighted-average remaining lease term operating leases |
|
|
.1 years |
| |
|
Weighted-average discount rate operating leases |
|
|
8 |
% | |
Payments due by period of lease liabilities under
the Companys non-cancellable operating lease as of December 31, 2025, were as follows:
|
Schedule of non cancellable operating leases |
|
|
|
| |
|
2026 |
|
$ |
51,000 |
| |
|
Total lease payments |
|
|
51,000 |
| |
|
Less interest |
|
|
- |
| |
|
Present value of lease liabilities |
|
$ |
51,000 |
| |
****
**13. RELATED PARTY TRANSACTIONS**
****
The Company is an indirect subsidiary of Hyperscale
Data, Inc. (Hyperscale), and as a result Hyperscale is deemed a related party.
****
**Allocation of General Corporate Expenses**
Hyperscale provides human resources, accounting
and other services to the Company, which are included as allocations of these expenses. The allocation method calculates an appropriate
share of overhead costs by using Company revenue as a percentage of total revenue. This method is reasonable and consistently applied.
Costs incurred in connection with the allocation of these costs are reflected in selling, general and administrative of $196,000 and $401,000
for the fiscal year end December 31, 2025, and 2024, respectively and were recorded in Hyperscale advance payable.
**Related Party Notes and Advances Payable**
****
Related party notes and advances payable were
used for working capital purposes and were comprised of the following:
|
Schedule of related party notes and advances payable |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Interest
rate |
|
Due date |
|
December 31,
2025 |
|
|
December 31,
2024 |
| |
|
Hyperscale advance payable |
|
10% |
|
- |
|
$ |
7,803,000 |
|
|
$ |
5,118,000 |
| |
|
Chief Executive Officer |
|
14% and 22% |
|
Default |
|
|
51,000 |
|
|
|
46,000 |
| |
|
Non-officer advance payable |
|
- |
|
- |
|
|
- |
|
|
|
21,000 |
| |
|
Total related party notes and advances payable |
|
|
|
|
|
$ |
7,854,000 |
|
|
$ |
5,185,000 |
| |
On September 26, 2024, the Company entered into
an Amendment to the Loan and Security Agreement (the Amendment) with Hyperscale dated August 15, 2023 (the Credit
Agreement). The Credit Agreement provided for a secured, non-revolving credit facility with an aggregate principal amount of up
to $2,000,000 (the Credit Limit) through December 31, 2023 (the Credit Termination Date). All loans under
the Credit Agreement (collectively, the Advances) were payable within five business days of a request by Hyperscale, and
Hyperscale was not obligated to provide any further Advances after the Credit Termination Date.
| | F-18 | | |
| | |
Pursuant to the Amendment, the Company and Hyperscale
have agreed to, among other things, amend the Credit Agreement to increase the Credit Limit to $8,000,000, extend the Credit Termination
Date to December 31, 2026, and provide for additional loans made in excess of the initial Credit Limit to become Advances.
The Company recorded related party interest expense
of $583,000 and $368,000 for the years ended December 31, 2025, and 2024, respectively in interest expense, related party.
**14. INCOME TAXES**
The following is a geographical breakdown of loss
before the provision for income tax, for the years ended December 31, 2025, and 2024.
|
Schedule of loss before provision for income tax |
|
|
|
|
|
|
|
| |
|
|
|
2025 |
|
|
2024 |
| |
|
Pre-tax loss |
|
|
|
|
|
| |
|
U.S. Federal |
|
$ |
(2,111,000 |
) |
|
$ |
(3,968,000 |
) | |
|
Foreign |
|
|
- |
|
|
|
- |
| |
|
Total |
|
$ |
(2,111,000 |
) |
|
$ |
(3,968,000 |
) | |
The federal and state
income tax (provision) benefit is summarized as:
|
Schedule of federal and state income tax (provision) benefit |
|
|
|
|
|
|
|
| |
|
|
|
2025 |
|
|
2024 |
| |
|
Current |
|
|
|
|
|
| |
|
U.S. Federal |
|
$ |
- |
|
|
$ |
- |
| |
|
U.S. State |
|
|
2,000 |
|
|
|
5,000 |
| |
|
Foreign |
|
|
- |
|
|
|
- |
| |
|
Total current provision |
|
|
2,000 |
|
|
|
5,000 |
| |
|
Deferred |
|
|
|
|
|
|
|
| |
|
U.S. Federal |
|
|
- |
|
|
|
- |
| |
|
U.S. State |
|
|
|
|
|
|
- |
| |
|
Foreign |
|
|
- |
|
|
|
- |
| |
|
Total deferred provision (benefit) |
|
|
- |
|
|
|
- |
| |
|
Total provision (benefit) for income taxes |
|
$ |
2,000 |
|
|
$ |
5,000 |
| |
Deferred income taxes reflect the net tax effects
of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes
and (b) operating losses and tax credit carryforwards. Significant components of the Companys deferred taxes as of December 31
were as follows:
|
Schedule of deferred tax assets and liabilities |
|
|
|
|
|
|
|
| |
|
|
|
2025 |
|
|
2024 |
| |
|
Deferred tax asset: |
|
|
|
|
|
|
|
| |
|
Net operating loss |
|
$ |
7,829,000 |
|
|
$ |
7,396,000 |
| |
|
Intangible asset basis |
|
|
99,000 |
|
|
|
113,000 |
| |
|
Deferred rent liability |
|
|
14,000 |
|
|
|
177,000 |
| |
|
Inventory adjustments |
|
|
380,000 |
|
|
|
375,000 |
| |
|
R&D capitalization |
|
|
70,000 |
|
|
|
102,000 |
| |
|
Asset retirement obligation |
|
|
8,000 |
|
|
|
7,000 |
| |
|
Settlement liability |
|
|
298,000 |
|
|
|
298,000 |
| |
|
Accrued warranty |
|
|
13,000 |
|
|
|
13,000 |
| |
|
Accrued salaries |
|
|
90,000 |
|
|
|
69,000 |
| |
|
Deferred revenue |
|
|
75,000 |
|
|
|
35,000 |
| |
|
Accrued interest |
|
|
281,000 |
|
|
|
122,000 |
| |
|
Change in fair value of derivatives |
|
|
10,000 |
|
|
|
- |
| |
|
Total deferred tax asset |
|
|
9,167,000 |
|
|
|
8,707,000 |
| |
|
|
|
|
|
|
|
|
|
| |
|
Deferred tax liability: |
|
|
|
|
|
| |
|
ROU assets |
|
|
(8,000) |
|
|
|
(159,000 |
) | |
|
Fixed asset basis |
|
|
(13,000) |
|
|
|
(90,000 |
) | |
|
Total deferred income tax liabilities |
|
|
(21,000) |
|
|
|
(249,000 |
) | |
|
Net deferred income tax assets |
|
|
9,146,000 |
|
|
|
8,458,000 |
| |
|
Valuation allowance |
|
|
(9,146,000) |
|
|
|
(8,458,000 |
) | |
|
Deferred tax asset (liability), net |
|
$ |
- |
|
|
$ |
- |
| |
| | F-19 | | |
| | |
Events whichmayrestrict
utilization of a companys net operating loss and credit carryforwards include, but arenotlimited to, certain ownership
change limitations as defined in Internal Revenue Code Section*382*and similar state provisions. In the event the Company
has had a change of ownership, utilization of carryforwards could be restricted to an annual limitation. The annual limitationmayresult
in the expiration of net operating loss carryforwards before utilization. The Company hasnotundertaken a study to determine
if its net operating losses are limited. In the event the Company previously experienced an ownership change, or should experience an
ownership change in the future, the amount of net operating loss carryovers available in any taxable year could be limited andmayexpire
unutilized. The impact of any such limitations or expirations would not have a material impact on the financials since all the deferred
tax assets for the Companys attributes are fully offset by a valuation allowance.
ASC 740 requires that the tax benefit of net operating
losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization
is more likely than not. Realization of the future tax benefits is dependent on the Companys ability to generate
sufficient taxable income within the carryforward period. Because of the Companys recent history of operating losses, management
believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be
realized and, accordingly, has provided a valuation allowance.
The valuation allowance increased by $688,000,
and $929,000 during the years ended December 31, 2025, and 2024, respectively. Net operating losses and tax credit carryforwards as of
December 31, 2025, and 2024 were as follows:
|
Schedule of net operating losses and tax credit carryforwards |
|
|
|
|
|
| |
|
|
|
2025 Amount |
|
|
Expiration Years | |
|
Net operating losses, federal (Post December 31, 2017) |
|
$ |
19,189,000 |
|
|
Do Not Expire | |
|
Net operating losses, federal (Pre-January 1, 2018) |
|
|
8,058,000 |
|
|
2026 to 2037 | |
|
Net operating losses, state |
|
|
30,180,000 |
|
|
2029 to 2044 | |
|
|
|
2024 Amount |
|
|
Expiration Years | |
|
Net operating losses, federal (Post December 31, 2017) |
|
$ |
16,415,000 |
|
|
Do Not Expire | |
|
Net operating losses, federal (Pre-January 1, 2018) |
|
|
9,263,000 |
|
|
2025 to 2037 | |
|
Net operating losses, state |
|
|
28,697,000 |
|
|
2029 to 2043 | |
The effective tax rate of the Companys
provision (benefit) for income taxes as of December 31, differed from the federal statutory rate as follows:
|
Schedule of effective income tax rate reconciliation | |
| | | |
| | | |
| | | |
| | | |
|
| |
2025 | | |
2024 | | |
|
Tax computed at the federal statutory rate | |
$ | (443,000 | ) | |
| 21.00 | % | |
$ | (772,000 | ) | |
| 21.00 | % | |
|
State and local income tax (net of FBOS) | |
| 41,000 | | |
| -1.94 | % | |
| 72,000 | | |
| -1.97 | % | |
|
Change in Valuation Allowance | |
| 466,000 | | |
| -22.09 | % | |
| 553,000 | | |
| -15.04 | % | |
|
Nontaxable or nondeductible items | |
| 1,000 | | |
| -0.09 | % | |
| 3,000 | | |
| -0.05 | % | |
|
NOL Expiration | |
| - | | |
| 0.00 | % | |
| 190,000 | | |
| -5.17 | % | |
|
Prior Year True-Up | |
| (63,000 | ) | |
| 3.00 | % | |
| (41,000 | ) | |
| 1.11 | % | |
|
Total | |
$ | 2,000 | | |
| -0.11 | % | |
$ | 5,000 | | |
| -0.13 | % | |
The Companys statute of limitations remains
open for various taxable years in various U.S. federal and California jurisdictions.
On July 4, 2025, the One Big Beautiful Bill Act
(OBBBA) was enacted, restoring the immediate deductibility of domestic Section 174 research and experimental expenditures for tax years
beginning in 2025 and reinstating 100% bonus depreciation. The Company evaluated the impact of the legislation and determined it does
not have a material effect on its consolidated financial statements. The Company elected to continue amortizing Section 174 costs capitalized
in 2022 through 2024 over their remaining amortization periods rather than taking a full deduction in 2025.
| | F-20 | | |
| | |
**15. LOSS PER SHARE**
****
In accordance with ASC 260, *Earnings Per Share*,
the basic loss per common share is computed by dividing the net loss available to common shareholders by the weighted average number of
common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator
is increased to include the number of additional shares of common stock that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive.
The Company excluded the potential common stock
equivalents outstanding from the calculation of diluted weighted average net loss per share for each of the years ended December 31, 2025,
and 2024, which would be anti-dilutive due to the net loss from continuing operations in those periods.
Anti-dilutive securities, which are convertible
into or exercisable for the Companys common stock, consisted of the following as of December 31, 2025, and 2024:
|
Schedule of anti dilutive securities excluded from computation of earnings per share |
|
|
|
|
|
|
|
| |
|
|
|
December 31, |
| |
|
|
|
2025 |
|
|
2024 |
| |
|
Warrants |
|
|
140,923,000 |
|
|
|
140,956,000 |
| |
|
Convertible notes payable |
|
|
10,659,000 |
|
|
|
- |
| |
|
Convertible preferred stock |
|
|
1,250,000,000 |
|
|
|
1,250,000,000 |
| |
|
Total |
|
|
1,401,582,000 |
|
|
|
1,390,956,000 |
| |
****
**16. COMMITMENTS AND CONTINGENCIES**
**Litigation Matters**
**
The Company is involved in litigation arising
from other matters in the ordinary course of business. The Company is regularly subject to claims, suits, regulatory and government investigations,
and other proceedings involving labor and employment, commercial disputes, and other matters. Such claims, suits, regulatory and government
investigations, and other proceedings could result in fines, civil penalties, or other adverse consequences.
Certain of these outstanding matters include speculative,
substantial or indeterminate monetary amounts. The Company records an undiscounted liability for contingent losses, including future legal
costs, settlements and judgments, when we consider it is probable that a liability has been incurred, and the amount of the loss can be
reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, the
Company discloses the reasonably possible loss. The Company evaluates developments in its legal matters that could affect the amount of
liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and makes adjustments as
additional information becomes available. Significant judgment is required to determine both the likelihood of there being a loss, and
the estimated amount of a loss related to such matters.
With respect to the Companys outstanding
litigation matters, based on the Companys current knowledge, the Company believes that the amount or range of reasonably possible
loss will not, either individually or in aggregate, have a material adverse effect on the Companys business, consolidated financial
position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant
uncertainties.
**Non-cancelable Obligations**
****
In the normal course of business, the Company
enters non-cancelable obligations with certain parties to purchase services, such as technology equipment and subscription-based cloud
service arrangements. As of December 31, 2025, and 2024, the Company had outstanding non-cancelable purchase obligations with terms of
one year or longer aggregating $0 and $18,000, respectively.
**17. SHAREHOLDERS DEFICIT**
****
**Authorized Capital**
The Company is authorized to issue 2 billion (2,000,000,000)
shares of common stock, par value $0.001 per share and fifty million (50,000,000) shares of preferred stock, par value $0.001 per share,
of which twenty-five thousand shares (25,000) have been designated as Series A Convertible Redeemable Preferred Stock, par value $0.001
per share and the remaining authorized shares of preferred stock are blank check shares, which can be issued with various
rights as determined by the Board. The number of authorized shares of any class or classes of stock may be increased or decreased (but
not below the number of shares thereof then outstanding) by the affirmative vote of the holders of at least a majority of the voting power
of the issued and outstanding shares of common stock of the Corporation, voting together as a single class.
| | F-21 | | |
| | |
**Common Stock**
The holders of the Companys
Common Stock have equal ratable rights to dividends from funds legally available therefore, when, as and if declared by the Companys
board of directors (the Board). Holders of Common Stock are also entitled to share ratably in all of the Companys
assets available for distribution to holders of Common Stock upon liquidation, dissolution or winding up of the Companys affairs.
Except as otherwise required by law
or as may be provided by the resolutions of the Board authorizing the issuance of Common Stock, all rights to vote and all voting power
shall be vested in the holders of Common Stock. Each share of Common Stock shall entitle the holder thereof to one vote.
Upon any liquidation, dissolution
or winding-up of the corporation, whether voluntary or involuntary, the remaining net assets of the Company shall be distributed pro
rata to the holders of the Common Stock.
**18. REDEEMABLE SERIES A PREFERRED STOCK RELATED PARTY**
**Series A Preferred Stock**
There are 25,000 shares
of Series A Preferred Stock issued and outstanding. Each share of Series A Preferred Stock has a stated value of $1,000, for an aggregate
value of $25 million.
On August 9, 2024, the Company amended and restated
its certificate of designations of rights and preferences of the Series A Convertible Redeemable Preferred Stock (Preferred Stock).
Pursuant to the Series A Amendment, the holder of the preferred stock, which is a related party, waived all accrued and future dividends
in exchange for an increase in the liquidation preference to 125%. This modification of the Preferred Stock resulted in a non-cash decrease
in accrued dividends and a corresponding increase in additional paid in capital of $2,667,000.
On April 22, 2024, the Company amended its articles
of incorporation. Pursuant to the Series A Amendment, the conversion price, for purposes of determining the number of votes the holder
of Series A Preferred Stock is entitled to cast, shall not be lower than $0.072. Further, the price at which the Series A Preferred Stock
shall become convertible into shares of common stock of the Company shall be equal to the greater of (i) $0.02 per share or (ii) eighty
(80%) percent of the Market Price as at the Conversion Date.
Each holder shall be
entitled to vote on an as converted basis with holders of outstanding shares of our common stock, voting together as a single
class, with respect to any and all matters presented to the shareholders for their action or consideration. For so long as the holder
shall continue to hold any shares of Series A Preferred Stock originally issued to it, the holder shall be entitled to elect a number
of directors to the Board equal to a percentage determined by the number of Series A Preferred Stock beneficially owned by the holders,
determined on an as converted basis, divided by the sum of the number of shares of Common Stock outstanding plus the number
of Series A Preferred Stock outstanding on an as converted basis, provided, that the number of directors that the holders
are entitled to elect shall never be less than a majority of our Board.
Beginning January 1,
2026, the shares of Series A Preferred Stock shall be subject to redemption in cash at the option of the holder in an amount per share
equal to the stated value plus all accrued and unpaid dividends thereon. In accordance with FASB ASC Topic 480, *Distinguishing
Liabilities from Equity*, paragraph 10-S99, redemption provisions not solely within the control of a company require ordinary
shares subject to redemption to be classified outside of permanent equity. Accordingly, all of the shares of Series A Preferred Stock
are presented as temporary equity, outside of the shareholders deficit section of the Companys balance sheets.
****
**19. WARRANTS**
****
A summary of warrant activity for the
years ended December 31, 2025, and 2024 is presented below:
|
Schedule of warrant activity | |
| | | |
| | | |
| | | |
|
| |
Warrants | | |
Weighted- Average Exercise Price | | |
Weighted- Average Remaining Contractual Life (Years) | | |
|
Outstanding on December 31, 2023 | |
| 116,010,720 | | |
$ | 0.1 | | |
| 4.6 | | |
|
Granted | |
| 24,954,170 | | |
| 0.1 | | |
| | | |
|
Exercised | |
| (9,161 | ) | |
| 0.1 | | |
| | | |
|
Outstanding on December 31, 2024 | |
| 140,955,729 | | |
| 0.1 | | |
| 3.7 | | |
|
Granted | |
| - | | |
| 0.1 | | |
| | | |
|
Exercised | |
| (33,199 | ) | |
| 0.1 | | |
| | | |
|
Outstanding on December 31, 2025 | |
| 140,922,530 | | |
$ | 0.1 | | |
| 2.7 | | |
| | F-22 | | |
| | |
The following summarizes information
about common stock warrants outstanding on December 31, 2025, and 2024:
Warrants
held by related parties consisted of 13,235,252, and 13,235,252 as of December 31, 2025, and 2024 respectively.
**Commitment Fee; Warrant**
On July 25, 2024, the Company entered into a purchase
agreement (the ELOC Purchase Agreement) with GCEF Opportunity Fund, LLC (GCEF), which provides that, upon
the terms and subject to the conditions and limitations set forth therein, the Company has the right to direct GCEF to purchase up to
an aggregate of $25.0 million of shares of the Companys common stock, par value $0.001 per share (the Common Stock)
over the 36-month term of the ELOC Purchase Agreement and the Company will execute a warrant to purchase shares of Common Stock (ELOC
Warrant), granting the GCEF the right to purchase Common Stock issuable upon the exercise of the ELOC Warrants, with an expiration
date that is the third anniversary of the First Trading Day (as defined ELOC Purchase Agreement). Under the ELOC Warrant, GCEF has the
right to buy up to 2% of our outstanding Common Stock within three business days after our Common Stock is publicly listed for trading
on a U.S. national securities exchange or other trading platform.
In consideration for GCEFs execution of
the ELOC Purchase Agreement, the Company is required to issue to GCEF, as a commitment fee, a number of Common Stock equivalent to 2.0%
of the Aggregate Limit or $0.5 million (Commitment Fee Shares), payable either in cash or freely tradeable Common Stock
on the first trading day after 30 consecutive trading days commencing with the first trading day designated in each draw down notice.
The draw down notice shall specify the draw down amount requested, set the threshold price for such draw down and designate the first
trading day of the draw down pricing period that the Company wishes to grant to the purchaser during the draw down pricing period.
**20. SEGMENT INFORMATION**
ASC Topic 280, Segment Reporting,
establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic
areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which
it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by
the Companys Chief Operating Decision Maker (CODM), or group, in deciding how to allocate resources and assess performance.
The Companys CODM has been identified as
the Chief Executive and Financial Officer, who reviews the assets, operating results, and financial metrics for the Company to make decisions
about allocating resources and assessing financial performance. Accordingly, management has determined that there is only one reportable
segment.
The CODM assesses performance for the single segment
and decides how to allocate resources based on gross profit and net loss that are also reported on the statement of operations as net
income or loss. The measure of segment assets is reported on the balance sheet as total assets. When evaluating the Companys performance
and making key decisions regarding resource allocation, the CODM reviews several key metrics included in net loss, which include the following:
|
Schedule of segment reporting | |
| | | |
| | | |
|
| |
Years ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Revenue | |
$ | 7,228,000 | | |
$ | 4,912,000 | | |
|
Cost of revenue | |
| | | |
| | | |
|
Manufacturing costs | |
| 2,553,000 | | |
| 1,524,000 | | |
|
Distribution costs | |
| 358,000 | | |
| 481,000 | | |
|
Inventory adjustment | |
| - | | |
| 270,000 | | |
|
EV chargers | |
| 801,000 | | |
| 206,000 | | |
|
Other | |
| 197,000 | | |
| 309,000 | | |
|
Cost of revenue | |
| 3,909,000 | | |
| 2,790,000 | | |
|
Gross profit | |
| 3,319,000 | | |
| 2,122,000 | | |
|
Operating expenses: | |
| | | |
| | | |
|
Research and development: | |
| | | |
| | | |
|
Payroll and benefits | |
| 253,000 | | |
| 238,000 | | |
|
Occupancy costs | |
| 98,000 | | |
| 93,000 | | |
|
Other research and development | |
| 93,000 | | |
| 76,000 | | |
|
Total research and development | |
| 444,000 | | |
| 407,000 | | |
|
Selling and marketing: | |
| | | |
| | | |
|
Payroll and benefits | |
| 742,000 | | |
| 972,000 | | |
|
Occupancy costs | |
| 110,000 | | |
| 164,000 | | |
|
Other selling and marketing | |
| 203,000 | | |
| 157,000 | | |
|
Total selling and marketing | |
| 1,055,000 | | |
| 1,293,000 | | |
|
General and administrative | |
| | | |
| | | |
|
Payroll and benefits | |
| 1,389,000 | | |
| 1,209,000 | | |
|
Professional fees and outside services | |
| 370,000 | | |
| 422,000 | | |
|
Write off EV related assets | |
| - | | |
| 763,000 | | |
|
Occupancy costs | |
| 695,000 | | |
| 660,000 | | |
|
Other general and administrative | |
| 700,000 | | |
| 862,000 | | |
|
Total general and administrative | |
| 3,154,000 | | |
| 3,966,000 | | |
|
Total operating expenses | |
| 4,653,000 | | |
| 5,666,000 | | |
|
Operating loss | |
$ | (1,334,000 | ) | |
$ | (3,544,000 | ) | |
| | F-23 | | |
| | |
**21.
SUBSEQUENT EVENTS**
**New Operating lease**
****
The Company entered into a 5-year operating lease
beginning January 1, 2026, for new office and warehouse space with annual lease payments of approximately $.5 million. The total estimated
lease commitment is approximately $2.4 million. This lease agreement begins subsequent to December 31, 2025, and accordingly, no amounts
related to this lease are reflected in the accompanying balance sheet.
****
**Convertible debt issued pursuant to the
SPA**
The Agreement provides that the Loan shall be
conducted through seven (7) separate tranche closings, provided, that SJC has the ability, exercisable in its sole discretion, to purchase
any principal face amounts of convertible notes prior to the dates of the tranche closings provided for in the Agreement. Four additional
tranches closed prior to the filing of our 2025 Form 10K as described below.
Pursuant to the Agreement, the second
tranche closed on January 9, 2026, the third tranche closed on January 30,2026, and the fourth and fifth tranches on March 27, 2026.
These closings consisted of the issuance of Convertible Notes to SJC in the total principal face amount of $880,000,
for a total purchase price of $800,000.
The convertible notes accrue interest at 12%
per annum and will mature one year from issuance of the notes. The convertible notes are convertible into shares of the
Companys common stock at any time at a conversion price equal to the greater of (i) $0.035 per share, which shall not be
adjusted for stock dividends, stock splits, stock combinations and other similar transactions and (ii) 20% discount to the
Companys lowest VWAP (as defined in the convertible notes) of the common stock during the ten trading days immediately prior
to the date of conversion into shares of common stock.
| | F-24 | | |
| | |
**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE**
Not applicable.
**ITEM 9A. CONTROLS AND PROCEDURES**
****
**Evaluation of Disclosure Controls and Procedures**
As of December 31, 2025, our management, with
the participation and supervision of our principal executive officer and our principal financial officer, evaluated our disclosure controls
and procedures (as defined in Rules 13a-15I and 15d-15(e) under the Exchange Act). The term disclosure controls and procedures,
as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed
to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the Companys management, including its
principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and
procedures. Based upon their evaluation, our principal executive officer and our principal financial officer concluded that, solely as
a result of the material weaknesses identified by management and described below, our disclosure controls and procedures were not effective
to ensure that material information relating to the Company required to be disclosed by the Company in reports we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and to ensure
that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
****
**Changes in Internal Control over Financial
Reporting**
Other than
the changes in connection with the remediation of the previously identified material weakness discussed below, there were no changes in
the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
the year ended December 31, 2025 that materially affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.
**Managements Annual Report on Internal Control Over Financial
Reporting**
Effective internal control over financial reporting
is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent
fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business
and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect
our financial condition, results of operations and access to capital. We have carried out an evaluation under the supervision and with
the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of
the design and operation of our disclosure controls and procedures as of the end of the most recent period covered by this report. Based
on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures
were not effective at the reasonable assurance level due to the material weaknesses described below.
**Material Weakness**
A material weakness is a deficiency, or a combination
of deficiencies, within the meaning of Public Company Accounting Oversight Board (PCAOB) Audit Standard No. 5, in internal
control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis.
Based on the results of managements testing,
management concluded that the previously identified material weaknesses related to inventory, revenue recognition, accounts receivable,
complex financial instruments and fair value estimates were remediated as of December 31, 2025.
Management has identified the following material
weakness which caused management to conclude that as of December 31, 2025, our internal control over financial reporting (ICFR)
was not effective at the reasonable assurance level:
| | 36 | | |
| | |
We do not have sufficient resources in our accounting
function, which restricts our ability to gather, analyze and properly review information related to financial reporting, including fair
value estimates, in a timely manner. Due to our size and nature, segregation of all conflicting duties may not always be possible and
may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording
of transactions should be performed by separate individuals. The companys primary user access controls to ensure appropriate authorization
and segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate
personnel were not designed and/or implemented effectively.
Management evaluated the impact of our failure to have segregation
of duties and concluded that the control deficiency represented a material weakness.
While management evaluates the effectiveness of
our internal controls on a regular basis, these controls may not always be effective. There are inherent limitations on the effectiveness
of internal controls, including collusion, management override, and failure in human judgment. In addition, control procedures are designed
to reduce rather than eliminate business risks. In the event our Chief Executive Officer or Chief Financial Officer, our certifying officers
under the Sarbanes-Oxley Act of 2002 (the SOX), or our independent registered public accounting firm determines our internal
controls over financial reporting are not effective as defined under Section 404 of SOX, we may be unable to produce reliable financial
reports or prevent fraud, which could materially harm our business. In addition, we may be subject to sanctions or investigation by government
authorities or self-regulatory organizations, such as the SEC or the Financial Industry Regulatory Authority (FINRA). Any
such actions could affect investor perceptions of our company and result in an adverse reaction in the financial markets due to a loss
of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline or limit
our access to capital.
**ITEM 9B. OTHER INFORMATION**
None.
**ITEM 9C. DISCLOSURE
REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS**
Not applicable.
| | 37 | | |
| | |
**PART III**
**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE**
The following table sets forth the names and positions
of our executive officers and directors. Directors will be elected at our annual meeting of shareholders and serve for one year or until
their successors are elected and qualify. Officers are elected by the Board and their terms of office are, except to the extent governed
by employment contract, at the discretion of the Board.
|
Name |
|
Age |
|
Positions | |
|
Amos Kohn |
|
65 |
|
Founder, Chief Executive Officer, Chief Financial Officer and Director | |
|
Marcus Charuvastra |
|
47 |
|
President and Director | |
|
Douglas Gintz |
|
59 |
|
Director | |
**Amos Kohn** Mr. Kohn is the Founder, Chief Executive Officer, and Chairman of the
Board of Directors of TurnOnGreen, Inc. (formerly Coolisys Technologies Corp.), positions he has held since January 7, 2020. He has also
served as Chief Financial Officer of the Company since September 5, 2023. Mr. Kohn founded TOG Technologies in 2021 and has served as
its Chief Executive Officer since that time. In 2017, he founded Digital Power Corporation and has served as its Chief Executive Officer
since its inception. Previously, Mr. Kohn served as President and Chief Executive Officer from 2008 to 2017, and as President from 2017
to 2020, of a publicly traded company formerly known as Digital Power Corporation (now Hyperscale Data, Inc.). He also served on its board
of directors from 2003 to 2020. Mr. Kohn has over 30 years of experience in the high-technology sector. He holds a Bachelor of Science
degree in Electrical and Electronics Engineering and a Certificate in Business Administration from the University of California, Berkeley.
He is a retired Major in the Israel Defense Forces and is named as an inventor on several U.S. and international patents.
**Marcus Charuvastra**has served as our President since September 20, 2022. Mr. Charuvastra
served as the President of TurnOnGreen, Inc. between January 2022 and September 2022 and served as its Chief Revenue Officer between June
2021 and December 2025. On January 1, 2026, Mr. Charuvastrawas named Chief Executive Officer of Gresham Worldwide, Inc. Mr. Charuvastra
is an accomplished leader with 20 years of experience in strategic planning, sales, services, marketing and business and organizational
development. Mr. Charuvastra spent nine years at Targeted Medical Pharma, Inc. serving as Vice President of Operations and as the Managing
Director of this microcap biotech start-up, from 2012 to May 2021. During his tenure, he was instrumental in guiding Targeted Medical
Pharmas initial public offering. Mr. Charuvastra was previously Director of Sales and Marketing at Physician Therapeutics from
2009 to 2012 and was responsible for building the sales and distribution network in the United States and abroad. He is a graduate of
UCLA.
**Douglas Gintz**served as Chief Technology
Officer of TurnOnGreen, Inc. from February 2021 to May 2025 . In these roles, Mr. Gintz was responsible for driving strategic software
initiatives and delivering key technologies essential to the development, commercialization, and market penetration of the Companys
EV charging solutions business. Effective January 1, 2026, Mr. Gintz was appointed Chief Technology Officer and Chief AI Officer of Gresham
Worldwide, Inc., where he oversees enterprise technology platforms and artificial intelligence initiatives across a diversified portfolio
of operating companies. From February 2021 to January 2025, Mr. Gintz also served as Chief Technology Officer and Director of Global Technology
Implementation at HSD, supporting digital transformation initiatives and technology due diligence activities. Mr. Gintz previously served
as Chief Executive Officer of Pacific Coders, LLC from August 2002 to January 2022 and held senior technology and executive roles at Endocanna
Health, Inc. and Targeted Medical Pharma, Inc., a publicly traded microcap company.
**Family Relationships**
No family relationship exists among any of our
directors or executive officers. No arrangement or understanding exists between any director or executive officer and any other person
pursuant to which any director or executive officer was selected as a director or executive officer of our company. All executive officers
are appointed annually by the board of directors. Directors serve until the next annual meeting of our shareholders and until their successors
are elected and qualified.
**Code of Business Conduct and Code of Ethics**
Our board of directors has adopted a code of business
conduct, which applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer
and other executive and senior financial officers. Our board of directors has also adopted a code of ethics that applies to all our employees,
officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers.
The full text of our code of business conduct and code of ethics will be posted on the investor relations page on our website. We intend
to disclose any amendments to our code of ethics, or waivers of its requirements, on our website or in filings under the Exchange Act.
| | 38 | | |
| | |
**Board of Directors**
Our business and affairs are managed under the
direction of our board of directors. Our board of directors is currently composed of three members, none of whom qualifies as independent
under the listing standards of Nasdaq Marketplace Rules.
**ITEM 11. EXECUTIVE COMPENSATION**
**Summary Compensation Table**
The following table sets forth summary compensation
information for the following persons: (i)all persons serving as our principal executive officer during the years ended December
31, 2025, and 2024, and (ii)our two other most highly compensated executive officers who received compensation during the years
ended December 31, 2025, and 2024 of at least $100,000 and who were executive officers on December 31, 2025. We refer to these persons
as our Named Executive Officers. The following table includes all compensation earned by the Named Executive Officers for
the respective period, regardless of whether such amounts were actually paid during the period:
|
Name and principal position |
|
Year |
|
|
Salary ($) |
|
|
Bonus ($) |
|
|
Stock
Awards
($) |
|
|
Option
Awards
($) |
|
|
All Other
Compensation ($) |
|
|
Total ($) |
| |
|
Amos Kohn |
|
|
2025 |
|
|
|
350,000 |
|
|
|
25,000 |
|
|
|
- |
|
|
|
- |
|
|
|
33,720 |
|
|
|
408,720 |
| |
|
Chief Executive Officer, Chief Financial |
|
|
2024 |
|
|
|
350,000 |
|
|
|
10,000 |
|
|
|
- |
|
|
|
- |
|
|
|
33,800 |
|
|
|
393,800 |
| |
|
Officer and Chairman |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Marcus Charuvastra |
|
|
2025 |
|
|
|
140,000 |
|
|
|
25,000 |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
165,000 |
| |
|
President and Director |
|
|
2024 |
|
|
|
140,000 |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
140,000 |
| |
**Termination Provisions**
As of the date of this Form 10-K, we have no contract,
agreement, plan, or arrangement, whether written or unwritten, that provides for payments to a Named Executive Officer at, following,
or in connection with any termination, including without limitation resignation, severance, retirement or a constructive termination of
a Named Executive Officer, or a change in control of the company or a change in the Named Executive Officers responsibilities,
with respect to each Named Executive Officer, other than with respect to Mr. Kohn.
**Outstanding Equity Awards at Fiscal Year
End**
As of December 31, 2025, none of our Named Executive
Officers held any unexercised options, stock that have not vested, or other equity incentive plan awards.
**Director Compensation**
To date, we have not paid any of our directors
any compensation for serving on our Board.
**Equity Compensation Plan Information**
On June 27, 2023, the Company held a special meeting
of shareholders, and the shareholders voted and approved three proposals presented for a vote, including approving the TurnOnGreen, Inc.
2023 Stock Incentive Plan which reserved 100,000,000 shares for issuance. As of December 31, 2025, no shares had been issued under the
plan.
| | 39 | | |
| | |
**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS**
The following table sets forth certain information
regarding beneficial ownership of our common stock based on 183,983,122 shares issued and
outstanding as of the close of business on March 30, 2026 by (i) each person who is
known by the company to own beneficially more than 5% of any classes of outstanding common stock, (ii) each director of the company, (iii)
each of the Named Executive Officers and (iv) all directors and executive officers of the company as a group.
|
Name and Address of Beneficial Owners of Common Stock(1) |
|
Number of
shares
beneficially
owned |
|
|
% of
Common
Stock |
| |
|
Amos Kohn (2) |
|
|
27,900 |
|
|
|
* |
| |
|
Marcus Charuvastra |
|
|
- |
|
|
|
- |
| |
|
Douglas Gintz (3) |
|
|
18,080 |
|
|
|
* |
| |
|
All Directors and Officers as a group (Three persons) |
|
|
45,980 |
|
|
|
* |
| |
|
Hyperscale Data, Inc. (4) |
|
|
60,461,470 |
|
|
|
18.6 |
% | |
|
|
|
|
|
|
|
|
|
| |
* Less than 1%.
(1) Unless otherwise indicated, the business address
of each of the individuals is c/o TurnOnGreen, Inc., 2030 Ringwood Ave., San Jose, California 95131.
(2) Represents 12,400 shares and an equal number
of warrants.
(3) Represents 9,040 shares and an equal number
of warrants.
(4) Consisting of (i) 30,555 shares held by Sentinum,
Inc., (ii) 13,806,817 shares held by Ault Lending, (iii) 12,452,919 shares underlying warrants held by Ault Lending, (iv) 33,539,181 shares
underlying the Series A Preferred Stock, (iv) 315,999 shares and 315,999 underlying warrants are held by Ault and Company, Inc. Hyperscale
may be deemed to beneficially own the shares beneficially owned by Sentinum, Inc. and Ault Lending as Sentinum, Inc. and Ault Lending
are wholly owned subsidiary of Hyperscale. Milton C. Ault, III, the Executive Chairman of Hyperscale, exercises voting and dispositive
power over the shares owned by Hyperscale and subsidiaries. The business address of each of these entities and individuals is 11411 Southern
Highlands Parkway, Suite 240, Las Vegas, Nevada 89141.
| | 40 | | |
| | |
**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE**
**Director Independence**
**
We use the definition of independence
of the Nasdaq Marketplace Rules to make this determination. Rule 5605(a)(2) of the Nasdaq Marketplace Rules provides that an independent
director is a person other than an officer or employee of the company or any other individual having a relationship which, in the
opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.Rule
5605(a)(2) generally provides that a director cannot be considered independent if:
|
| the director is, or at any time during the past three years was, an employee of the company or its parent; | |
|
| the director or a family member of the director accepted any compensation from the company in excess of
$120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain
exemptions, including, among other things, compensation for board or board committee service); | |
|
| the director is an immediate family member of an individual who is, or at any time during the past three
years was, employed by the company as an executive officer; | |
|
| the director or a family member of the director is a partner in, controlling shareholder of, or an executive
officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal
years that exceed 5% of the recipients consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain
exemptions); | |
|
| the director or a family member of the director is employed as an executive officer of an entity where,
at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other
entity; or | |
|
| the director or a family member of the director is a current partner of the Companys outside auditor,
or at any time during the past three years was a partner or employee of the Companys outside auditor, and who worked on the companys
audit. | |
**Policies and Procedures for Related Party
Transactions**
The TurnOnGreen audit committee, when established,
will have the primary responsibility for reviewing and approving or disapproving related party transactions, which are transactions
between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related
person has or will have a direct or indirect material interest. The policy regarding transactions between us and related persons will
provide that a related person is defined as a director, executive officer or greater than 5% beneficial owner of common stock, in each
case since the beginning of the most recently completed year, and any of their immediate family members. An investor may obtain a written
copy of this policy, once adopted, by sending a written request to TurnOnGreen, Inc., 2030 Ringwood Ave., San Jose, California 95131,
Attention: Legal Department. Our audit committee charter that will be in effect, once adopted, will provide that the audit committee shall
review and approve or disapprove certain related party transactions, including material transactions with Hyperscale.
**Allocation of General Corporate Expenses**
Hyperscale provides human resources, accounting
and other services to the Company, which are included as allocations of these expenses. The allocation method calculates an appropriate
share of overhead costs by using Company revenue as a percentage of total revenue. This method is reasonable and consistently applied.
Costs incurred in connection with the allocation of these costs are reflected in selling, general and administrative of $196,000 and $401,000
for the fiscal year end December 31, 2025, and 2024, respectively and were recorded in Hyperscale advance payable.
**Related Party Sales and Receivables**
The Company recognized $0 and $28,000 in revenue
in the years ended December 31, 2025, and 2024, respectively, from sales to another subsidiary of Hyperscale. As of December 31, 2025,
and 2024, the Company had related party receivables of $0 and $17,000, respectively.
| | 41 | | |
| | |
**Related Party Notes and Advances Payable**
****
Related party notes and advances payable were
used for working capital purposes and on December 31, 2025, and 2024, were comprised of the following:
|
|
|
Interest
rate |
|
Due date |
|
December 31,
2025 |
|
|
December 31,
2024 |
| |
|
Hyperscale advance payable |
|
10% |
|
- |
|
$ |
7,803,000 |
|
|
$ |
5,118000 |
| |
|
Chief Executive Officer |
|
14% and 22% |
|
Default |
|
|
51,000 |
|
|
|
46,000 |
| |
|
Non-officer advance payable |
|
- |
|
- |
|
|
- |
|
|
|
21,000 |
| |
|
Total related party notes and advances payable |
|
|
|
|
|
$ |
7,854,000 |
|
|
$ |
5,185,000 |
| |
On September 26, 2024, The Company entered into
an Amendment to the Loan and Security Agreement (the Amendment) with Hyperscale dated August 15, 2023 (the Credit
Agreement). The Credit Agreement provided for a secured, non-revolving credit facility with an aggregate principal amount of up
to $2,000,000 (the Credit Limit) through December 31, 2023 (the Credit Termination Date). All loans under
the Credit Agreement (collectively, the Advances) were payable within five business days of a request by Hyperscale, and
Hyperscale was not obligated to provide any further Advances after the Credit Termination Date.
Pursuant to the Amendment, the Company and Hyperscale
have agreed to, among other things, amend the Credit Agreement to increase the Credit Limit to $8,000,000, extend the Credit Termination
Date to December 31, 2026, and provide for additional loans made in excess of the initial Credit Limit to become Advances.
The Company recorded related party interest expense
of $583,000 and $368,000 for the years ended December 31, 2025, and 2024, respectively in interest expense, related party.
**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
The following table sets
forth the aggregate fees for professional audit services rendered by CBIZ CPAs P.C. and Marcum LLP for the fiscal years ended December
31, 2025, and 2024, respectively.
|
|
|
2025 |
|
|
2024 |
| |
|
Audit fees |
|
$ |
221,000 |
|
|
$ |
196,000 |
| |
_________
Audit Fees consist of the aggregate fees billed
for professional services rendered for the audit of our annual financial statements and the reviews of the financial statements included
in our Forms 10-Q and registration statement and for any other services that were normally provided in connection with our statutory and
regulatory filings or engagements.
| | 42 | | |
| | |
**PART IV**
**ITEM 15. EXHIBITS**
|
2.1 |
|
Securities Purchase Agreement dated March 20, 2022 by and among Imperalis Holding Corp., BitNile Holdings, Inc and TurnOnGreen, Inc. Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed March 21, 2022. | |
|
2.2 |
|
Form of Amendment to Securities Purchase Agreement, dated September 5, 2022. Incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed September 6, 2022. | |
|
3.1 |
|
Amended and Restated Articles of Incorporation.Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed August 31, 2023. | |
|
3.2 |
|
Certificate of Amendment filed with the Nevada Secretary of State on December 21, 2023. Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed January 18, 2024. | |
|
3.3 |
|
By-Laws of TurnOnGreen, Inc. Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form 10 filed April 13, 2021. | |
|
3.4 |
|
Certificate of Designations of Rights and Preferences of Series A Convertible Redeemable Preferred Stock. Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed September 6, 2022. | |
|
3.5 |
|
Amended and Restated Articles of Incorporation dated August 29, 2023. Incorporated by reference to Exhibit 3.1 to the Current report on Form 8-K filed August 31, 2023. | |
|
3.6 |
|
Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series A Convertible Redeemable Preferred Stock, filed with the Nevada Secretary of State on March 21, 2024. | |
|
3.7 |
|
Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series A Convertible Redeemable Preferred Stock, filed with the Nevada Secretary of State on April 22, 2024. | |
|
3.8 |
|
Amendment to the Certificate of Designations of Preferences, Rights and Limitations of Series A Convertible Redeemable Preferred Stock, filed with the Nevada Secretary of State on August 9, 2024. Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed August 15, 2024. | |
|
3.9 |
|
| |
|
4.1 |
|
Form of Convertible Note. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed October 29, 2025. | |
|
4.2** |
|
Description of Capital Stock | |
|
10.1 |
|
Form of Loan and Security Agreement. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed August 21, 2023. | |
|
10.2 |
|
Purchase Agreement dated July 25, 2024,by and between TurnOnGreen, Inc. and GCEF Opportunity Fund, LLC. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed July 31, 2024. | |
|
10.3 |
|
Form of Amendment to Loan and Security Agreement. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed October 2, 2024. | |
|
10.4 |
|
Securities Purchase Agreement dated October 29, 2025, by and between TurnOnGreen, Inc. and SJC Lending LLC. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed October 29, 2025. | |
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10.5 |
|
Form of IP Security Agreement. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed October 29, 2025. | |
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10.6 |
|
Form of Security Agreement. Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed October 29, 2025. | |
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10.7 |
|
Form of Pledge Agreement. Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed October 29, 2025. | |
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21.1 |
|
List of Subsidiaries, Incorporated by reference to Exhibit 21.1 to the Registration Statement on Form S-1 filed December 16,2025. | |
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31.1* |
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Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). | |
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31.2* |
|
Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). | |
|
32.1** |
|
Certifications of Chief Executive and Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code. | |
|
101 |
|
Pursuant to Rule 406 of Regulation S-T, the cover page is formatted in Inline XBRL (Inline eXtensible Business Reporting Language). | |
|
101.INS* |
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Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document. | |
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101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
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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. | |
|
** | Furnished herewith. | |
| | 43 | | |
| | |
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ITEM 16. | FORM 10K SUMMARY | |
None.
| | 44 | | |
| | |
**SIGNATURES**
In accordance with the requirements of the Exchange
Act, the registrant caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated:March 31, 2026
|
|
TURNONGREEN, INC. | |
|
|
|
| |
|
|
By: |
/s/ Amos Kohn | |
|
|
|
Amos Kohn | |
|
|
|
Chief Executive Officer | |
|
|
|
(Principal Executive Officer) and
Chief Financial Officer
(Principal Financial and Accounting Officer) | |
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated.
|
|
| |
|
March 31, 2026 |
/s/ Amos Kohn | |
|
|
Amos Kohn, Chief Executive Officer, Chief Financial Officer and Director | |
|
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| |
|
March 31, 2026 |
/s/ Marcus Charuvastra | |
|
|
Marcus Charuvastra, Director | |
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|
| |
|
March 31, 2026 |
/s/ Douglas Gintz | |
|
|
Douglas Gintz, Director | |
45