EDGAR 10-K Filing

Company CIK: 1083743
Filing Year: 2022
Filename: 1083743_10-K_2022_0001493152-22-026952.json

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ITEM 1. BUSINESS
ITEM 1 - BUSINESS
Overview
We design, develop, manufacture, and sell a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of industrial commercial sectors which include material handling, airport ground support equipment (“GSE”), and other commercial and industrial applications. We believe our mobile and stationary energy storage solutions provide our customers a reliable, high performing, cost effective, and more environmentally friendly alternative as compared to traditional lead acid and propane-based solutions. Our modular and scalable design allows different configurations of lithium-ion battery packs to be paired with our proprietary wireless battery management system to provide the level of energy storage required and “state of the art” real time monitoring of pack performance. We believe that the increasing demand for lithium-ion battery packs and more environmentally friendly energy storage solutions in the material handling sector should continue to drive our revenue growth.
Our Strategy
Our long-term strategy is to meet the rapidly growing demand for lithium-ion energy solutions and to be the supplier of choice, targeting large companies having demanding energy storage needs. We have established selling relationships equipment OEMs and customers with large fleets of forklifts and GSEs. We intend to reach this goal by investing in research and development to expand our product mix, by expanding our sales and marketing efforts, improving our customer support efforts and continuing our efforts to increase production capacity and efficiencies. Our research and development efforts will continue to focus on providing adaptable, reliable and cost-effective energy storage solutions for our customers.
Our largest sector of penetration thus far has been the material handling sector which we believe is a multi-billion dollar addressable market. We believe the sector will provide us with an opportunity to grow our business as we enhance our product mix and service levels and grow our sales to large fleets of forklifts and GSEs. Applications of our modular packs for other industrial and commercial uses, such as solar energy storage, are providing additional current growth and further opportunities. We intend to continue to expand our supply chain and customer partnerships and seek further partnerships and/or acquisitions that provide synergy to meeting our growth and “building scale” objectives.
Supply Chain Issues and Higher Procurement Costs
Due to COVID-19 pandemic, supply chain disruptions continue, notably with delivery delays at the ports of Los Angeles and Long Beach. In addition, the price of steel and certain other electrical components used in our products have seen dramatic increases, along with increased shipping costs. It is impossible to predict how long the current disruptions to the cost and availability of raw materials and component parts will last. We implemented price increases on certain new product orders in October 2021 and April 2022 to offset rising global costs of raw materials and component parts. In addition, we increased our inventory of raw materials and component parts to $16.3 million as of June 30, 2022 to mitigate supply chain disruptions and support timely deliveries. However, there can be no assurance that our price increases, inventory levels or any future steps we take will be sufficient to offset the rising procurement costs and manage sourcing of raw materials and component parts effectively.
To address some of these negative consequences and to support the future growth of our business, we have implemented a number of new strategic initiatives:
Strategic Initiatives.
To support our high growth business and strategy, our first priority over the coming quarters is achieving “profitability,” specifically, cash flow breakeven. 	Accordingly, we have strategic initiatives underway in two areas:
○ Gross margin improvements
● Utilize lower cost, more reliable, and secondary suppliers of key components including cells, steel, electronics, circuit boards and other key components.
● Actively manage our suppliers to avoid supply chain disruptions and related risks.
● Introduce new designs, including a simplified “platform” that reduces part count, lowers cost, improves manufacturability and serviceability.
● Focus on ensuring profitability of all product lines including managing mix of products.
● Seek more competitive carriers to reduce shipping costs.
● Implement Lean Manufacturing process to enhance capacity utilization, efficiency, quality.
● Introduce comprehensive “cost of quality” initiative to ensure effective and robust processes.
● Implement “automated cell module assembly” to assemble purchased “individual” battery cells into a “module” for the battery pack. This will enable lower inventory from simplified SKU count and lower costs.
○ Business expansion to accelerate gross margin
● Leverage current high-profile “proven customer relationships” to respond to growing demand of large fleets for lithium-ion value proposition.
● Pursue new market that can leverage our technology and manufacturing capabilities.
● Expand features of our popular “SkyBMS” (telemetry) which provides customized fleet management, and real time reports.
● Expand our manufacturing and service capacities to ensure customer satisfaction from increased deliveries, and service.
● Capitalize on our leadership position with new offerings.
● While we are “agnostic to the type of lithium chemistry,” ensure our research to support other chemistries as they may become available. Ensure we have leadership with our core technology, without dependence on purchasing critical technology.
There can be no assurance that these initiatives and efforts will be successful.
DESCRIPTION OF OUR BUSINESS
Our Business
We have leveraged our experience in lithium-ion technology to design and develop a portfolio of industrial and commercial energy storage packs that we believe provide attractive solutions to customers seeking an alternative to lead acid and propane-based power products. We believe that the following attributes are significant contributors to our success:
Engineering and integration experience in lithium-ion for motive applications: Our engineers design, develop, test, and service our advanced lithium-ion energy storage solutions. We have been developing lithium-ion applications for the advanced energy storage market since 2010, starting with products for automotive electric vehicle manufacturers. We believe our engineering experience enables us to develop competitive solutions that meet our customers’ needs currently and in the foreseeable future.
UL Listing: We launched our Class 3 Walkie Pallet Pack product line in 2014 and obtained UL Listing for all three different power configurations. We have also obtained UL Listing for our Class 1 Packs, our Class 2 Packs, and our Class 3 End Rider. In addition, we have completed the process for obtaining UL Listings for our newest source of battery cells. We believe this UL Listing provides us a significant competitive advantage and provides assurance to customers that our technology has been rigorously tested by an independent third party and determined to be safe, durable and reliable.
Original equipment manufacturer (OEM) approvals: Many of our energy storage packs have been tested and approved for use by Toyota Material Handling USA, Inc., Crown Equipment Corporation, and The Raymond Corporation, among the top global lift truck manufacturers by revenue according to Material Handling & Logistics. We also provide a “private label” Class 3 Walkie Pallet Pack to a major forklift OEM.
Broad product offering and scalable design: We offer energy storage packs for use in a variety of industrial motive applications. We believe that our modular and scalable design enables us to optimize design, inventory, and part count to accommodate natural product extensions of our products to meet customer requirements. We have leveraged our Class 3 Walkie Pallet Pack design to develop larger energy storage packs for larger forklifts, GSE Packs, and other industrial equipment applications. Natural product extensions, based on our modular, scalable designs, include solar backup power for electric vehicle (“EV”) mobile charging stations and robotic warehouse equipment.
Significant advantages over lead acid and propane-based solutions: We believe that lithium-ion battery systems have significant advantages over existing technologies and will displace lead acid batteries and propane-based solutions, in most applications. Relative to lead acid batteries, such advantages include environmental benefits, no water maintenance, faster charge times, greater cycle life, longer run times, and less energy used that provide operational and financial benefits to customers. When compared to lead acid solutions, our energy storage solutions do not discharge carbon dioxide in the atmosphere due to lithium chemistry efficiencies. In addition, when compared to propane-based solutions, lithium-ion systems avoid the generation of exhaust emissions and associated odor and environmental contaminates, and maintenance of an internal combustion engine, which has substantially more parts subject to wear than an electric motor.
Proprietary Battery Management System: Critical to our success is our innovative and proprietary versatile BMS that optimizes the performance of our lithium-ion energy solutions and provides a platform for adding new battery pack features, including customized telemetry (pack data and reports available anytime, anywhere) for customers. The BMS serves as the brain of the battery pack, managing cell balancing, charging, discharging, monitoring and communication between the pack and the forklift. Our “next generation” versatile BMS is currently part of our full product lines and provides significant product features for improved customer productivity. Our BMS also enables ongoing feature development for reduced cost and higher performance. We have included our proprietary telemetry solution, branded “SkyBMS” which provides real time reports on pack performance, health, and remaining useful life.
Our Products
We design, develop, test and sell our energy storage packs for use in a broad range of lift trucks, industrial equipment including airport GSE, energy storage for solar applications, and other commercial applications. Within each of these product segments, we offer a range of power and equipment solutions. Our current product offering is summarized in the chart below.
Our battery pack system design is adaptable with three core design modules used in our entire family of small, medium, and large pack forklift products. A scalable modular design allows for core modules to be configured to address a variety of unique power and space requirements. We also have the capability to offer varying chemistries and configurations based on the specific application. Currently, our energy storage packs use lithium iron phosphate (LiFePO4) battery cells, which we source from a variety of overseas suppliers that meet our power, reliability, safety and other specifications. Our BMS works with a number of battery configurations providing the flexibility to use battery cells developed and manufactured by other suppliers. We believe we can readily adapt our energy storage packs to incorporate new chemistries as they become available in the future in order to meet changing customer preferences and to reduce the cost of our products.
We also offer 24-volt onboard chargers for our Class 3 Walkie Pallet Packs, and smart “wall mounted” chargers for larger applications. Our smart charging solutions are designed to interface with our BMS and integrate easily into most all major chargers in the market.
New Product Update
During the second half of the Fiscal 2022, we introduced new product designs to respond to customer requests and to allow for greater operational efficiencies for us. Some of the improvements included higher capacities for extra-long and demanding shifts, easier servicing, cost efficiencies, and other features to solve a variety of existing performance challenges of customer operations. We intend to continue to develop and to introduce new product designs for margin enhancement, part commonality and improved serviceability.
In March 2022, we introduced three (3) new products:
Product
Description
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L36 lithium-ion battery pack, a 36-volt option for 3-wheel forklifts;
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The L36 addresses the 3-wheel forklift market. According to our OEM partners the 3-wheel forklift offerings are some of their best selling products. We are now strategically placed to fully address this market.
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C48 lithium-ion battery pack for Automated Guided Vehicles (AGV) and Autonomous Mobile Robots (AMR); and
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The improved robustness and environmental protections mean it is no longer just a solar battery, but is now being sold into tugs and other types of industrial equipment, expanding our product offerings.
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S24 lithium-ion battery pack providing twice the capacity (210Ah) for Walkie Pallet Jacks for heavy duty
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The S24-210Ah is a new high-capacity variant of our ‘slim’ walkie battery and addresses some of the toughest walkie applications in the market, giving exceptional runtime and fast recharge times when paired with an external high-powered charger.
Industry Overview
Historically, lithium-ion battery solutions were unable to compete with lead acid and propane-based solutions in industrial applications on the basis of cost. However, the supply of lithium-ion batteries has rapidly expanded, leading to price declines of eighty-five percent (85%) since 2010 according to BloombergNEF. BloombergNEF also estimates that lithium-ion battery prices, which averaged $1,160 per kilowatt hour in 2010, were $156 per kWh in 2019 and could drop below $100 per kWh in 2024. Lithium metal itself represents well less than 5% cost of our packs.
The sharp decline in the price of lithium-ion batteries has made these energy solutions more cost competitive. Affordability has in turn enabled customers to shift away from lead acid and propane-based solutions for power lift equipment to lithium-ion based solutions with more favorable environmental and performance characteristics. We believe our position as a pioneer in the field and our extensive experience providing lithium-ion based energy storage solutions will enable us to take advantage of this shift in customer preferences.
Lift Equipment - Material Handling Equipment
We focus on energy storage solutions for industrial equipment and related industrial applications because we believe they represent large and growing markets that are just beginning to adopt lithium-ion based technology. We apply our scalable, modular designs to natural product extensions in the industrial equipment market. These markets include not only the sale of lithium-ion battery solutions for new equipment but also a replacement market for existing lead acid battery packs.
According to Modern Materials Handling, worldwide new lift truck orders reached approximately 1.4 million units in 2017. The Industrial Truck Association (“ITA”) has estimated that approximately 200,000 lift trucks had been sold yearly since 2013 in North America (Canada, the United States and Mexico), with sales relatively evenly distributed between electric rider (Class 1 and Class 2), motorized hand (Class 3), and internal combustion engine powered lift trucks (Class 4 and Class 5). The ITA estimates that electric products represented approximately sixty-nine percent (69%) of the North American shipments in 2020, reflecting the long-term trend of increasing mix of electric products versus internal combustion (propane) engines. Driven by growth in global manufacturing, e-commerce and construction, Research and Markets expects that the global lift truck market will grow at a compound annual growth rate of six and four-tenths percent (6.4%) through 2024.
Customers
Our customers include OEMs, lift equipment dealers, battery distributors and end users. Our customers vary from small companies to Fortune 500 companies.
During the year ended June 30, 2022, we had four (4) major customers that each represented more than 10% of our revenues on an individual basis, and together represented approximately $29,254,000 or 69% of our total revenues. During the year ended June 30, 2021, we had three (3) major customers that each represented more than 10% of our revenues on an individual basis, and together represented approximately $16,004,000 or 61% of our total revenues.
Shift Toward Lithium-ion Battery Technologies
The lithium-ion battery value proposition of higher performance, environmental benefit, and lower life cycle cost is driving an increase in demand for safe and efficient alternatives to lead acid and propane-based power products. The lithium-ion value proposition includes a number of factors impacting customer preferences:
Duration of Charge/Run Times: Lithium-based energy storage systems can perform for a longer duration compared to lead acid batteries. Lithium-ion batteries provide up to 50% longer run times than lead acid batteries of comparable capacity, or amps-per-hour rating, allowing equipment to be operated over a long period of time between charges.
High/Sustained Power: Lithium-ion batteries are better suited to deliver high power versus legacy lead acid. For example, a 100Ah lead acid battery will only deliver 80Ah if discharged over a four-hour period. In contrast, a 100Ah lithium-ion system will achieve over 92Ah even during a 30-minute discharge. Additionally, during discharge, the energy storage pack sustains its initial voltage, maximizing the performance of the forklift truck, whereas, lead acid voltages, and hence power, decline over the working shift.
Charging Time: Lead acid batteries are limited to one shift a day, as they discharge for eight hours, need eight hours for charging, and another eight hours for cooling. For multi-shift operations, this typically requires battery changeout for the equipment. Because lithium batteries can be recharged in as little as one hour and do not degrade when subjected to opportunity charging, hence, battery changeout is unnecessary.
Safe Operation: The toxic nature of lead acid batteries presents significant safety and environmental issues in the event of a cell breach. During charging, lead acid batteries emit combustible gases and increase in temperature. Lithium-ion (particularly LFP) batteries do not get as hot and avoid many of the safety and environmental issues associated with lead acid batteries.
Extended Life: The performance of lead acid batteries degrades after approximately 500 charging cycles in industrial equipment applications. In comparison, lithium-ion batteries last up to five times longer in the same application.
Size and Weight: Lithium is about one-third the weight of lead acid for comparable power ratings. Lower weight enables forklift OEMs the ability to optimize the design of the truck based on a smaller footprint for lithium-ion instead of lead acid.
Lower Cost: Lithium-ion batteries provide power dense solutions with extended cycle life, reduced maintenance and improved operational performance, resulting in lower total cost of ownership.
Less Energy Used: we believe our lithium-ion batteries use 20-50% less energy based on our internal studies comparing lithium-ion to lead acid.
Marketing and Sales
We sell our products through a number of different channels including OEMs, lift equipment dealers and battery distributors as well as directly to end users. In the industrial motive market, OEMs sell their lift products through dealer networks and directly to end customers. Because of environmental issues associated with lead acid batteries and to preserve customer choice, industrial lift products are typically sold without a battery pack. Equipment dealers source battery packs from battery distributors and battery pack suppliers based on demand or in response to customer specifications. End customers may specify a specific type and manufacturer of battery pack to the equipment dealer or may purchase battery packs from battery distributors or directly from battery suppliers.
Our direct sales staff is assigned to major geographies throughout North America to collaborate with our sales partners who have an established customer base. We plan to hire additional sales staff to support our expected sales growth. In addition, we have developed a nation-wide sales network of relationships with equipment OEMs, their dealers, and battery distributors. To support our products, we have a nation-wide network of service providers, typically forklift equipment dealers and battery distributors, who provide local customer service to large customers. We also maintain a customer support center and provide Tech Bulletins and training to our service and sales network out of our corporate headquarters. We have partnered with an experienced GSE distributor, to market our lithium-ion battery packs for airport GSE
Manufacturing and Assembly
Rather than manufacture our own battery cells and be limited to a single chemistry, our battery cells are sourced from a limited number of manufacturers located in China. We source the remainder of the components primarily from vendors in the United States. We developed our BMS to be agnostic to a battery’s lithium-ion chemistry and cell manufacturer. Despite such flexibility, we have experienced occasional supply interruptions in the past, and more recently, we have been forced to navigate supply chain and transportation issues stemming from the global pandemic. We are continuing to monitor and test potential new cell technologies on an ongoing basis to help mitigate our supply chain risks. Final assembly, testing and shipping of our products is done from our ISO 9001 certified facility in Vista, California, which includes three assembly lines.
We buy chargers from several sources, including a U.S. based supplier. Additionally, we are a qualified dealer for a well-known manufacturer of “high capacity, modular, smart chargers” which support our larger packs.
Research and Development
Our engineers design, develop, test, and service our advanced lithium-ion energy storage solutions at our company headquarters in Vista, California. We believe our strengths include our core competencies and capabilities in designing and developing proprietary technology for our BMS, lean manufacturing processes, systems engineering, engineering application, and software engineering for both battery packs and telemetry. We believe that our ability to develop new features and technology for our BMS is essential to our growth strategy.
As we continue to develop and expand our product offerings, we anticipate that research and development will continue to be a substantial part of our strategic priorities in the future. We seek to develop innovative new and improved products for cell and system management along with associated communication, display, current sensing and charging tools. Our research and development efforts are focused on improving performance, reliability and durability of our energy storage solutions for our customers and on lowering our costs of production.
Competition
Our competitors in the lift equipment market are primarily major lead acid battery manufacturers, including Stryten Energy, East Penn Manufacturing Company, EnerSys Corporation, and Crown Battery Corporation. Although these competitors have been introducing offerings of a lithium-ion battery, we do not believe that these suppliers offer lithium-based products for lift equipment in any significant volume to end users, equipment dealers, OEMs or battery distributors. Several OEMs offer lithium-ion battery packs on Class 3 forklifts for sale only with their own new forklifts. Some OEMs also offer forklift models designed with an integrated lithium-ion battery. As the demand for lithium-ion battery packs has increased, small lithium battery pack providers have entered the market, most of whom we believe are suppliers of other power products and have simply added a lithium product to their product lines.
The key competitive factors in this market are performance, reliability, durability, safety and price. We believe we compete effectively in all of these categories in light of our experience with lithium-ion technology, including our development capabilities and the performance of our proprietary BMS. We believe that the UL Listing covering many of our core products is a significant differentiating competitive advantage and we intend to extend that advantage by seeking to obtain UL Listings for our other energy storage pack products in the coming months. In addition, because our BMS is not reliant on any specific battery cell chemistry, we believe we can adapt rapidly to changes in advanced battery technology or customer preferences.
Intellectual Property
Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we rely on a combination of patents pending, patent applications, trade secrets, including know-how, employee and third-party nondisclosure agreements, copyright laws, trademarks, intellectual property licenses and other contractual rights to establish and protect our proprietary rights in our technology. In addition to such factors as innovation, technological expertise and experienced personnel, we believe that a strong patent position is important to remain competitive.
As of June 30, 2022, we have two issued patents and three trademark registrations protecting the Flux Power name and logo. We have filed three new patents on advanced technology related to lithium-ion battery packs. The technology behind these pending patents are designed to:
● increase battery life by optimizing the charging cycle,
● give users a better understanding of the health of their battery in use, and
● apply artificial intelligence to predictively balance the cells for optimal performance.
We do not know whether any of our efforts will result in the issuance of patents or whether the examination process will require us to narrow our claims. Even if granted, there can be no assurance that these pending patent applications will provide us with protection.
Suppliers
We obtain a limited number of components and supplies included in our products from a small group of suppliers. During the year ended June 30, 2022, we had one (1) supplier who accounted for more than 10% of our total purchases, which represented approximately $13,884,000 or 28% of our total purchases.
During the year ended June 30, 2021, we had two (2) suppliers who accounted for more than 10% of our total purchases, on an individual basis, and together represented approximately $9,260,000 or 27% of our total purchases.
Government Regulations
Product Safety Regulations. Our products are subject to product safety regulations by Federal, state, and local organizations. Accordingly, we may be required, or may voluntarily determine to obtain approval of our products from one or more of the organizations engaged in regulating product safety. These approvals could require significant time and resources from our technical staff and, if redesign were necessary, could result in a delay in the introduction of our products in various markets and applications.
Environmental Regulations. Federal, state, and local regulations impose significant environmental requirements on the manufacture, storage, transportation, and disposal of various components of advanced energy storage systems. Although we believe that our operations are in material compliance with current applicable environmental regulations, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities.
Moreover, Federal, state, and local governments may enact additional regulations relating to the manufacture, storage, transportation, and disposal of components of advanced energy storage systems. Compliance with such additional regulations could require us to devote significant time and resources and could adversely affect demand for our products. There can be no assurance that additional or modified regulations relating to the manufacture, storage, transportation, and disposal of components of advanced energy systems will not be imposed.
Occupational Safety and Health Regulations. The California Division of Occupational Safety and Health (Cal/OSHA) and other regulatory agencies have jurisdiction over the operations of our Vista, California facility. Because of the risks generally associated with the assembly of advanced energy storage systems we expect rigorous enforcement of applicable health and safety regulations. Frequent audits by, or changes, in the regulations issued by Cal/OSHA, or other regulatory agencies with jurisdiction over our operations, may cause unforeseen delays and require significant time and resources from our technical staff.
Human Capital Resources
As of June 30, 2022, we had 121 employees. We engage outside consultants for business development, operations and other functions from time to time. None of our employees is currently represented by a trade union.
Corporate Office
Our corporate headquarters and production facility totals approximately 63,200 square feet and is located in Vista, California. Our production facility is ISO 9001 certified. The telephone number at our principal executive office is (760)-741-FLUX or (760)-741-3589.
Other Information
Our Internet address is www.fluxpower.com. We make available on our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). Other than the information expressly set forth in this annual report, the information contained, or referred to, on our website is not part of this annual report.
The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the SEC.

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ITEM 1A. RISK FACTORS
ITEM 1A - RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the summary of risk factors described below, together with all of the other information included in this report, before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You also should read the section entitled “Special Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report. The risk factors below do not address all the risks relating to securities, business and operations, and financial condition.
Risk Factors Relating to Our Business
We have a history of losses and negative working capital.
For the fiscal years ended June 30, 2022 and 2021, we had net losses of $15,609,000 and $12,793,000, respectively. We have historically experienced net losses and until we generate sufficient revenue, we anticipate to continue to experience losses in the near future.
As of June 30, 2022 and 2021, we had a cash balance of $485,000 and $4,713,000, respectively. We expect that our existing cash balances, credit facilities, and cash resources from operations will be sufficient to fund our existing and planned operations for the next twelve months. Until such time as we generate sufficient cash to fund our operations, we will need additional capital to continue our operations thereafter.
We have relied on equity financings, borrowings under short-term loans with related parties, our credit facilities and/or cash resources from operating activities to fund our operations. However, there is no guarantee that we will be able to obtain additional funds in the future or that funds will be available on terms acceptable to us, if at all. Any future financing may result in dilution of the ownership interests of our stockholders. If such funds are not available on acceptable terms, we may be required to curtail our operations or take other actions to preserve our cash, which may have a material adverse effect on our future cash flows and results of operations.
We will need to raise additional capital or financing to continue to execute and expand our business.
While we expect that our existing cash and additional funding available under our SVB Line of Credit, combined with funds available to us under our subordinated line of credit and the potential net proceeds from our At-The-Market offering will be sufficient to meet our anticipated capital resources and to fund our planned operations for the next twelve months, such sources of funding are subject to certain restrictions and covenants and our ability to sell stock will be impacted by market conditions. If we are unable to meet the conditions provided in the loan documents, the funds will not be available to us. In addition, should there be any delays in the receipts of key component parts, due in part to supply change disruptions, our ability to fulfil the backlog of sales orders will be negatively impacted resulting in lower availability of cash resources from operations. In that event, we may be required to raise additional capital to support our expanded operations and execute on our business plan by issuing equity or convertible debt securities. In the event we are required to obtain additional funds, there is no guarantee that additional funds will be available on a timely basis or on acceptable terms. To the extent that we raise additional funds by issuing equity or convertible debt securities, our stockholders may experience additional dilution and such financing may involve restrictive covenants. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other convertible securities that will have additional dilutive effects. We cannot assure that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. Further, we may incur substantial costs in pursuing future capital and/or financing. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations. Our ability to obtain needed financing may be impaired by such factors as the weakness of capital markets, and the fact that we have not been profitable, which could impact the availability and cost of future financings. If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and product development, which may have a material adverse effect on future cash flows and results of operations.
Backlog may not be indicative of future operating results.
Future revenue for the Company can be influenced by order backlog. Backlog represents the dollar amount of revenues we expect to recognize in the future from contracts awarded and in progress. Backlog substantially represents new orders. Backlog is not a measure defined by generally accepted accounting principles and is not a measure of contract profitability. Our methodology for determining backlog may not be comparable to methodologies used by other companies in determining their backlog amounts. The backlog values we disclose include anticipated revenues associated with: (1) the original contract amounts; (2) change orders for which we have received written confirmations from the applicable customers; (3) change orders for which we expect to receive confirmations in the ordinary course of business; and (4) claims that we have made against customers. In addition, the timing of order placement, size, and customer delivery dates can create unusual fluctuations in backlog.
We include unapproved change orders for which we expect to receive confirmations in the ordinary course of business in backlog, generally to the extent of the lesser of the amounts management expects to recover or the associated costs incurred. Any revenue that would represent profit associated with unapproved change orders is generally excluded from backlog until written confirmation is obtained from the applicable customer. However, consideration is given to our history with the customer as well as the contractual basis under which we may be operating. Accordingly, in certain cases based on our historical experience in resolving unapproved change orders with a customer, the associated profit may be included in backlog. However, if an unapproved change order is under dispute or has been previously rejected by the customer, the associated amount of revenue is treated as a claim.
For amounts included in backlog that are attributable to claims, we include unapproved claims in backlog when we have a legal basis to do so, consider collection to be probable and believe we can reliably estimate the ultimate value. Claims revenue is included in backlog to the extent of the lesser of the amounts management expects to recover or associated costs incurred.
Backlog may not be indicative of future operating results, and projects in our backlog may be cancelled, modified or otherwise altered by customers. Our ability to realize revenue from the current backlog is dependent on among other things, the delivery of key parts from our vendors in a timely manner. We can provide no assurance as to the profitability of our contracts reflected in backlog.
Economic conditions may adversely affect consumer spending and the overall general health of our customers, which, in turn, may adversely affect our financial condition, results of operations and cash resources.
Uncertainty about the current and future global economic conditions may cause our customers to defer purchases or cancel purchase orders for our products in response to tighter credit, decreased cash availability and weakened consumer confidence. Our financial success is sensitive to changes in general economic conditions, both globally and nationally. Recessionary economic cycles, higher interest borrowing rates, higher fuel and other energy costs, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws or other economic factors that may affect consumer spending or buying habits could continue to adversely affect the demand for our products. If credit pressures or other financial difficulties result in insolvency for our customers, it could adversely impact our financial results. There can be no assurances that government and consumer responses to the disruptions in the financial markets will restore consumer confidence.
We are dependent on a few customers for the majority of our net revenues, and our success depends on demand from OEMs and other users of our battery products.
Historically a majority of our product sales have been generated from a small number of OEMs and customers, including four (4) customers who, on an aggregate basis, made up 69% of our sales for the year ended June 30, 2022, and three (3) customers who, on an aggregate basis, made up 61% of our sales for the year ended June 30, 2021. As a result, our success depends on continued demand from this small group of customers and their willingness to incorporate our battery products in their equipment. The loss of a significant customer would have an adverse effect on our revenues. There is no assurance that we will be successful in our efforts to convince end users to accept our products. Our failure to gain acceptance of our products could have a material adverse effect on our financial condition and results of operations.
Additionally, OEMs, their dealers and battery distributors may be subject to changes in demand for their equipment which could significantly affect our business, financial condition and results of operations.
Our business is vulnerable to a near-term severe impact from the COVID-19 outbreak, and the continuation of the pandemic could have a material adverse impact on our operations and financial condition.
COVID-19 and another public health epidemic/pandemic could pose the risk that we or our employees, contractors, customers, suppliers, third party shipping carriers, government and other partners may be prevented from or limited in their ability to conduct business activities for an indefinite period of time, including due to the spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the impact that COVID-19 could have on our business, the continued spread of COVID-19 and the measures taken by the governments of states and countries affected could disrupt, among other things, the supply chain and the manufacture or shipment of our products. Our manufacturing operations may be subject to closure or shut down for a variety of reasons. While manufacturing operations were not materially impacted, future operations could be affected by the continued spread of COVID-19. Any substantial disruption in our manufacturing operations from COVID-19, or its related impacts, would have a material adverse effect on our business and would impede our ability to manufacture and ship products to our customers in a timely manner, or at all.
The effect of the COVID-19 pandemic and its associated restrictions may adversely impact many aspects of our business, including customer demand, the length of our sales cycles, disruptions in our supply chain, lower the operating efficiencies at our facility, worker shortages and declining staff morale, and other unforeseen disruptions. The demand for our products may significantly decline if the COVID-19 pandemic continues, restrictions are implemented or re-implemented, or the virus resurges and spreads and our customers suffer losses in their businesses. The supply of our raw materials and our supply chain may be disrupted and adversely impacted by the pandemic. The occurrence of any of the foregoing events and their adverse effect on capital markets and investor sentiment may adversely impact our ability to raise capital when needed or on terms favorable to us and our stockholders to fund our operations, which could have a material adverse effect on our business, financial condition and results of operations. The extent to which the COVID-19 outbreak impacts our results, its effect on near or long-term value of our share price are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
We do not have long term contracts with our customers.
We do not have long-term contracts with our customers. Future agreements with respect to pricing, returns, promotions, among other things, are subject to periodic negotiation with each customer. No assurance can be given that our customers will continue to do business with us. The loss of any of our significant customers will have a material adverse effect on our business, results of operations, financial condition and liquidity. In addition, the uncertainty of product orders can make it difficult to forecast our sales and allocate our resources in a manner consistent with actual sales, and our expense levels are based in part on our expectations of future sales. If our expectations regarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls.
Real or perceived hazards associated with Lithium-ion battery technology may affect demand for our products.
Press reports have highlighted situations in which lithium-ion batteries in automobiles and consumer products have caught fire or exploded. In response, the use and transportation of lithium-ion batteries has been prohibited or restricted in certain circumstances. This publicity has resulted in a public perception that lithium-ion batteries are dangerous and unpredictable. Although we believe our battery packs are safe, these perceived hazards may result in customer reluctance to adopt our lithium-ion based technology.
Our products may experience quality problems from time to time that could result in negative publicity, litigation, product recalls and warranty claims, which could result in decreased revenues and harm to our brands.
A catastrophic failure of our battery modules could cause personal or property damages for which we would be potentially liable. Damage to or the failure of our battery packs to perform to customer specifications could result in unexpected warranty expenses or result in a product recall, which would be time consuming and expensive. Such circumstances could result in negative publicity or lawsuits filed against us related to the perceived quality of our products which could harm our brand and decrease demand for our products.
We may be subject to product liability claims.
If one of our products were to cause injury to someone or cause property damage, including as a result of product malfunctions, defects, or improper installation, then we could be exposed to product liability claims. We could incur significant costs and liabilities if we are sued and if damages are awarded against us. Further, any product liability claim we face could be expensive to defend and could divert management’s attention. The successful assertion of a product liability claim against us could result in potentially significant monetary damages, penalties or fines, subject us to adverse publicity, damage our reputation and competitive position, and adversely affect sales of our products. In addition, product liability claims, injuries, defects, or other problems experienced by other companies in the solar industry could lead to unfavorable market conditions for the industry as a whole, and may have an adverse effect on our ability to attract new customers, thus harming our growth and financial performance. Although we carry product liability insurance, it may be insufficient in amount to cover our claims.
Tariffs could be imposed on lithium-ion batteries or on any other component parts by the United States government or a resulting trade war could have a material adverse effect on our results of operations.
In 2018, the United States government announced tariffs on certain steel and aluminum products imported into the United States, which led to reciprocal tariffs being imposed by the European Union and other governments on products imported from the United States. The United States government has implemented tariffs on goods imported from China.
The lithium-ion battery industry has been subjected to tariffs implemented by the United States government on goods imported from China. There is an ongoing risk of new or additional tariffs being put in place on lithium-ion batteries or related part. Since all of our lithium-ion batteries are manufactured in China, current and potential tariffs on lithium-ion batteries imported by us from China could increase our costs, require us to increase prices to our customers or, if we are unable to do so, result in lower gross margins on the products sold by us. China has already imposed tariffs on a wide range of American products in retaliation for the American tariffs on steel and aluminum. Additional tariffs could be imposed by China in response to actual or threatened tariffs on products imported from China. The imposition of additional tariffs by the United States could trigger the adoption of tariffs by other countries as well. Any resulting escalation of trade tensions, including a “trade war,” could have a significant adverse effect on world trade and the world economy, as well as on our results of operations. At this time, we cannot predict how such enacted tariffs will impact our business. Tariffs on components imported by us from China could have a material adverse effect on our business and results of operations.
We are dependent on a limited number of suppliers for our battery cells, and the inability of these suppliers to continue to deliver, or their refusal to deliver, our battery cells at prices and volumes acceptable to us would have a material adverse effect on our business, prospects and operating results.
We do not manufacture the battery cells used in our energy storage packs. Our battery cells, which are an integral part of our battery products and systems, are sourced from a limited number of manufacturers located in China. While we obtain components for our products and systems from multiple sources whenever possible, we have spent a great deal of time in developing and testing our battery cells that we receive from our suppliers. We refer to the battery cell suppliers as our “limited source suppliers.” Additionally, our operations are materially dependent upon the continued market acceptance and quality of these manufacturers’ products and their ability to continue to manufacture products that are competitive and that comply with laws relating to environmental and efficiency standards. Our inability to obtain products from one or more of these suppliers or a decline in market acceptance of these suppliers’ products could have a material adverse effect on our business, results of operations and financial condition. From time to time we have experienced shortages, allocations and discontinuances of certain components and products, resulting in delays in filling orders. Qualifying new suppliers to compensate for such shortages may be time-consuming and costly. In addition, we may have to recertify our UL Listings for the battery cells from new suppliers, which in turn has led to delays in product acceptance. Similar delays may occur in the future. Furthermore, the performance of the components from our suppliers as incorporated in our products may not meet the quality requirements of our customers.
To date, we have no qualified alternative sources for our battery cells although we research and assess cells from other suppliers on an ongoing basis. We generally do not maintain long-term agreements with our limited source suppliers. While we believe that we will be able to establish additional supplier relationships for our battery cells, we may be unable to do so in the short term or at all at prices, quality or costs that are favorable to us.
Changes in business conditions, wars, regulatory requirements, economic conditions and cycles, governmental changes, pandemic, and other factors beyond our control could also affect our suppliers’ ability to deliver components to us on a timely basis or cause us to terminate our relationship with them and require us to find replacements, which we may have difficulty doing. Furthermore, if we experience significant increased demand, or need to replace our existing suppliers, there can be no assurance that additional supplies of component parts will be available when required on terms that are favorable to us, at all, or that any supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner. In the past, we have replaced certain suppliers because of their failure to provide components that met our quality control standards. The loss of any limited source supplier or the disruption in the supply of components from these suppliers could lead to delays in the deliveries of our battery products and systems to our customers, which could hurt our relationships with our customers and also materially adversely affect our business, prospects and operating results.
Increases in costs, disruption of supply or shortage of raw materials, in particular lithium-ion phosphate cells, could harm our business.
We may experience increases in the costs, or a sustained interruption in the supply or shortage, of raw materials. Any such cost increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. For instance, we are exposed to multiple risks relating to price fluctuations for lithium-iron phosphate cells.
These risks include:
● the inability or unwillingness of battery manufacturers to supply the number of lithium-iron phosphate cells required to support our sales as demand for such rechargeable battery cells increases;
● disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and
● an increase in the cost of raw materials, such as iron and phosphate, used in lithium-iron phosphate cells.
Our success depends on our ability to develop new products and capabilities that respond to customer demand, industry trends or actions by our competitors and failure to do so may cause us to lose our competitiveness in the battery industry and may cause our profits to decline.
Our success will depend on our ability to develop new products and capabilities that respond to customer demand, industry trends or actions by our competitors. There is no assurance that we will be able to successfully develop new products and capabilities that adequately respond to these forces. In addition, changes in legislative, regulatory or industry requirements or in competitive technologies may render certain of our products obsolete or less attractive. If we are unable to offer products and capabilities that satisfy customer demand, respond adequately to changes in industry trends or legislative changes and maintain our competitive position in our markets, our financial condition and results of operations would be materially and adversely affected.
The research and development of new products and technologies is costly and time consuming, and there are no assurances that our research and development efforts will be either successful or completed within anticipated timeframes, if at all. Our failure to technologically evolve and/or develop new or enhanced products may cause us to lose competitiveness in the battery market. In addition, in order to compete effectively in the renewable battery industry, we must be able to launch new products to meet our customers’ demands in a timely manner. However, we cannot provide assurance that we will be able to install and certify any equipment needed to produce new products in a timely manner, or that the transitioning of our manufacturing facility and resources to full production under any new product programs will not impact production rates or other operational efficiency measures at our manufacturing facility. In addition, new product introductions and applications are risky, and may suffer from a lack of market acceptance, delays in related product development and failure of new products to operate properly. Any failure by us to successfully launch new products, or a failure by us to meet our customers criteria in order to accept such products, could adversely affect our results.
Our business will be adversely affected if we are unable to protect our intellectual property rights from unauthorized use or infringement by third parties.
Any failure to protect our intellectual proprietary rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating results. Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we rely on a combination of patents, patent applications, trade secrets, including know-how, employee and third-party nondisclosure agreements, copyright laws, trademarks, intellectual property licenses and other contractual rights to establish and protect our proprietary rights in our technology.
The protections provided by patent laws will be important to our future opportunities. However, such patents and agreements and various other measures we take to protect our intellectual property from use by others may not be effective for various reasons, including the following:
● the patents we have been granted may be challenged, invalidated or circumvented because of the pre-existence of similar patented or unpatented intellectual property rights or for other reasons;
● the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make aggressive enforcement impracticable; and
● existing and future competitors may independently develop similar technology and/or duplicate our systems in a way that circumvents our patents.
Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
We cannot be certain that we are the first creator of inventions covered by pending patent applications or the first to file patent applications on these inventions, nor can we be certain that our pending patent applications will result in issued patents or that any of our issued patents will afford protection against a competitor. In addition, patent applications that we intend to file in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issue United States patents will be issued. Furthermore, if these patent applications issue, some foreign countries provide significantly less effective patent enforcement than in the United States.
The status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain. As a result, we cannot be certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may be issued to us in the near future will afford protection against competitors with similar technology. In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either of which would increase costs and may adversely affect our business, prospects, financial condition and operating results.
We rely on trade secret protections through confidentiality agreements with our employees, customers and other parties; the breach of such agreements could adversely affect our business and results of operations.
We rely on trade secrets, which we seek to protect, in part, through confidentiality and non-disclosure agreements with our employees, customers and other parties. There can be no assurance that these agreements will not be breached, that we would have adequate remedies for any such breach or that our trade secrets will not otherwise become known to or independently developed by competitors. To the extent that consultants, key employees or other third parties apply technological information independently developed by them or by others to our proposed projects, disputes may arise as to the proprietary rights to such information that may not be resolved in our favor. We may be involved from time to time in litigation to determine the enforceability, scope and validity of our proprietary rights. Any such litigation could result in substantial cost and diversion of effort by our management and technical personnel.
Our business depends substantially on the continuing efforts of the members of our senior management team, and our business may be severely disrupted if we lose their services.
We believe that our success is largely dependent upon the continued service of the members of our senior management team, who are critical to establishing our corporate strategies and focus, overseeing the execution of our business strategy and ensuring our continued growth. Our continued success will depend on our ability to attract and retain a qualified and competent management team in order to manage our existing operations and support our expansion plans. Although we are not aware of any change, if any of the members of our senior management team are unable or unwilling to continue in their present positions, we may not be able to replace them readily. Therefore, our business may be severely disrupted, and we may incur additional expenses to recruit and retain their replacement. In addition, if any of the members of our senior management team joins a competitor or forms a competing company, we may lose some of our customers.
If we are forced to implement workforce reductions, our staff resources will be stretched making our ability to comply with legal and regulatory requirements as a Public Company difficult.
There can be no assurance that our management team will be able to implement and affect programs and policies in an effective and timely manner especially if subject to workforce reductions, that adequately respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.
Compliance with changing regulations concerning corporate governance and public disclosure may result in additional expenses.
There have been changing laws, regulations and standards relating to corporate governance and public disclosure, including the (Sarbanes-Oxley) Act of 2002, new regulations promulgated by the SEC and rules promulgated by the national securities exchanges. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Members of our Board of Directors and our chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors and executive officers, which could harm our business. If the actions we take in our efforts to comply with new or changed laws, regulations and standards differ from the actions intended by regulatory or governing bodies, we could be subject to liability under applicable laws or our reputation may be harmed.
In addition, Sarbanes-Oxley specifically requires, among other things, that we maintain effective internal controls for financial reporting and disclosure of controls and procedures. In particular, 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, as required by Section 404 of Sarbanes-Oxley. Our testing, or the subsequent testing by our independent registered public accounting firm, when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.
Based on management’s evaluation of our disclosure controls and procedures as of June 30, 2022, we identified material weaknesses in our internal controls over financial reporting. The material weaknesses were based on our ineffective oversight of our internal control over financial reporting and lack of sufficient review and approval of the underlying data used in the calculation of warranty reserve. We are taking remedial measures designed to improve our internal control over financial reporting to remediate material weaknesses, We are implementing additional control procedures to strengthen the oversight of the Company’s internal control over financial reporting through review and sign off by the senior management of all significant assumptions and estimates being used and the underlying the data used in producing financial schedules/estimates and financial reporting. We are also adding a second level of review and approval for all manual journal entries for significant estimates and assumptions made by management.
We are committed to remediating our material weakness. However, there can be no assurance as to when this material weakness will be remediated or that additional material weaknesses will not arise in the future. If we are unable to maintain effective internal control over financial reporting, our ability to record, process and report financial information timely and accurately could be adversely affected and could result in a material misstatement in our financial statements, which could subject us to litigation or investigations, require management resources, increase our expenses, negatively affect investor confidence in our financial statements and adversely impact the trading price of our common stock.
We may face significant costs relating to environmental regulations for the storage and shipment of our lithium-ion battery packs.
Federal, state, and local regulations impose significant environmental requirements on the manufacture, storage, transportation, and disposal of various components of advanced energy storage systems. Although we believe that our operations are in material compliance with applicable environmental regulations, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities. Moreover, Federal, state, and local governments may enact additional regulations relating to the manufacture, storage, transportation, and disposal of components of advanced energy storage systems. Compliance with such additional regulations could require us to devote significant time and resources and could adversely affect demand for our products. There can be no assurance that additional or modified regulations relating to the manufacture, storage, transportation, and disposal of components of advanced energy systems will not be imposed.
Natural disasters, public health crises, political crises and other catastrophic events or other events outside of our control may damage our sole facility or the facilities of third parties on which we depend, and could impact consumer spending.
Our sole production facility is located in southern California near major geologic faults that have experienced earthquakes in the past. An earthquake or other natural disaster or power shortages or outages could disrupt our operations or impair critical systems. Any of these disruptions or other events outside of our control could affect our business negatively, harming our operating results. In addition, if our sole facility, or the facilities of our suppliers, third-party service providers or customers, is affected by natural disasters, such as earthquakes, tsunamis, power shortages or outages, floods or monsoons, public health crises, such as pandemics and epidemics, political crises, such as terrorism, war, political instability or other conflict, or other events outside of our control, our business and operating results could suffer. Moreover, these types of events could negatively impact consumer spending in the impacted regions or, depending upon the severity, globally, which could adversely impact our operating results. Similar disasters occurring at our vendors’ manufacturing facilities could impact our reputation and our consumers’ perception of our brands.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation.
We utilize information technology systems and networks to process, transmit and store electronic information in connection with our business activities. As the use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks and divert financial resources, have increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data, all of which are vital to our operations and business strategy. There can be no assurance we will succeed in preventing cyber-attacks or successfully mitigating their effects.
Despite implementing security measures, any of the internal computer systems belonging to us or our suppliers are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failure. Any system failure, accident, security breach or data breach that causes interruptions could result in a material disruption of our product development programs. Further, our information technology and other internal infrastructure systems, including firewalls, servers, leased lines and connection to the Internet, face the risk of systemic failure, which could disrupt our operations. If any disruption or security breach results in a loss or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur resulting liability, and competitive position may be adversely affected, and the further development of our products may be delayed. Furthermore, we may incur additional costs to remedy the damage caused by these disruptions or security breaches.
Risks Related to Our Common Stock and Market
The market price of our common stock could become volatile, or our trading volume become weak, either of which could lead to the price of our stock being depressed at a time when you may want to sell.
Our common stock is being traded on The NASDAQ Capital Market under the symbol “FLUX.” We cannot predict the extent to which investor interest in our common stock will lead to the development of an active trading market on that stock exchange or any other exchange in the future. An active market for our common stock may never develop. We cannot assure you that the volume of trading in shares of our common stock will increase in the future. The trading price of our common stock has experienced volatility and is likely to continue to be highly volatile in response to numerous factors, many of which are beyond our control, including, without limitation, the following:
● our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors;
● changes in financial estimates by securities analysts, if any, who might cover our stock;
● speculation about our business in the press or the investment community;
● significant developments relating to our relationships with our customers or suppliers;
● stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry;
● customer demand for our products;
● investor perceptions of our industry in general and our Company in particular;
● general economic conditions and trends;
● announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;
● changes in accounting standards, policies, guidance, interpretation or principles;
● loss of external funding sources;
● sales of our common stock, including sales by our directors, officers or significant stockholders; and
● additions or departures of key personnel.
The trading price and volume of our common stock may impact your ability to sell your shares of common stock, causing you to lose all or part of your investment.
The ownership of our stock is highly concentrated in our management, and we have one controlling stockholder.
As of September 12, 2022, our directors and executive officers, and their respective affiliates beneficially owned approximately 29% of our outstanding common stock, including common stock underlying options, and warrants that were exercisable or convertible or which would become exercisable or convertible within 60 days. Michael Johnson, our director and beneficial owner of Esenjay, beneficially owns approximately 28% of such outstanding common stock. As a result of their ownership, our directors and executive officers and their respective affiliates collectively, and Esenjay, individually, are able to significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control.
We do not intend to pay dividends on shares of our common stock for the foreseeable future.
We have never declared or paid any cash dividends on shares of our common stock. We intend to retain any future earnings to fund the operation and expansion of our business and, therefore, we do not anticipate paying cash dividends on shares of our common stock in the foreseeable future.
Although our common stock is listed on The NASDAQ Capital Market, there can be no assurance that we will be able to comply with continued listing standards of The NASDAQ Capital Market.
Although our common stock is listed on The NASDAQ Capital Market, we cannot assure you that we will be able to continue to comply with the minimum bid price requirement, stockholder equity requirement and the other standards that we are required to meet in order to maintain a listing of our common stock on The NASDAQ Capital Market. Our failure to continue to meet these requirements may result in our common stock being delisted from The NASDAQ Capital Market. There can be no assurance that our common stock will continue to trade on The Nasdaq Capital Market or trade on the over-the counter markets or any public market in the future. In the event our common stock is delisted, our stock price and market liquidity of our stock will be adversely affected which will impact your ability to sell your securities in the market.
Preferred Stock may be issued under our Articles of Incorporation which may have superior rights to our common stock.
Our Articles of Incorporation authorize the issuance of up to 500,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance. These terms may include voting rights including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. In addition, these voting, conversion and exchange rights of preferred stock could negatively affect the voting power or other rights of our common stockholders. The issuance of any preferred stock could diminish the rights of holders of our common stock, or delay or prevent a change of control of our Company, and therefore could reduce the value of such common stock.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B - UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2 - PROPERTIES
Our corporate headquarters and production facility totals approximately 63,200 square feet and is located in Vista, California. Our production facility is ISO 9001 certified. We lease this property. Rent during the year ended June 30, 2022 was approximately $62,000 per month, and our annual rent will escalate approximately 3% per year through the end of the lease term on November 20, 2026. Total rent expense was approximately $867,000 and $841,000 for the years ended June 30, 2022 and 2021, respectively.
We believe that our leased property is in good condition and suitable for the conduct of our business.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3 - LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. To the best knowledge of management, there are no material legal proceedings pending against us.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Common Stock
Our common stock is traded on The NASDAQ Capital Market under the symbol “FLUX.”
Holders of Record of Common Stock
As of September 12, 2022, we had approximately 1,370 stockholders of record for our common stock. The foregoing number of stockholders of record does not include an unknown number of stockholders who hold their stock in “street name.”
Dividend Policy
We have never declared or paid cash dividends on our common stock. We presently do not expect to declare or pay such dividends in the foreseeable future and expect to reinvest all undistributed earnings to expand our operations, which the management believes would be of the most benefit to our stockholders. The declaration of dividends, if any, will be subject to the discretion of our Board of Directors, which may consider such factors as our results of operations, financial condition, capital needs and acquisition strategy, among others.
Recent Sales of Unregistered Securities
Unregistered securities sold by the Company during the period covered by this report have been previously reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
Purchases of Equity Securities
None.
Equity Compensation Plan Information
The following table provides certain information with respect to our equity compensation plans in effect as of June 30, 2022:
Number of
securities to be
issued upon
exercise of
outstanding
options, and
settlement of
RSUs
(a)
Weighted-
average exercise
price of
outstanding
options, and
issuance price of
RSUs
(b)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column a)
(c)
Equity compensation plans approved by security holders(1) 481,489 $ 11.08 170,725
Equity compensation plans approved by security holders(2) - - 2,000,000
Equity compensation plans not approved by security holders(3) 21,944 $ 10.00 -
Total 503,433 $ 11.03 2,170,725
(1) 211,800 incentive stock options (“ISO”) and 80,700 non-qualified stock options (“NQSO”) of our common stock were granted under the 2014 Equity Incentive Plan (the “2014 Plan”) during the year ended June 30, 2018. We granted 147,411 incentive stock options and 97,616 non-qualified stock options under the 2014 Plan during Fiscal 2019. We granted 15,324 incentive stock options and 3,948 non-qualified stock options under the 2014 Plan during Fiscal 2020. We granted 153,177 restricted stock units under the 2014 Plan during Fiscal 2021. We granted 250,786 restricted stock units under the 2014 Plan during Fiscal 2022. The 2014 Plan was approved on February 17, 2015, and was amended on October 25, 2017.
(2) Consists of 2,000,000 shares of common stock reserved for issuance under the 2021 Equity Incentive Plan (the “2021 Plan”) which was approved by our shareholders on April 29, 2021.
(3) Consists of 7,200 options granted under the 2010 Stock Option Plan (the “2010 Plan”) and assumed by us in the reverse acquisition. An additional 30,700 non-qualified options were issued. At June 30, 2022, there was 21,944 options outstanding.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6 - RESERVED
Not Applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in this Annual Report on Form 10-K. Some of the statements contained in the following discussion of the Company’s financial condition and results of operations refer to future expectations or include other “forward-looking” information. Those statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated, including, but not limited to, those discussed in Part I, Item 1A of this report under the heading “Risk Factors,” which are incorporated herein by reference. See “Special Note regarding Forward-Looking Statements” included in this Report on Form 10-K for a discussion of factors to be considered when evaluating forward-looking information detailed below. These factors could cause our actual results to differ materially from the forward-looking statements.
Business Overview
We design, develop, manufacture, and sell a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of industrial and commercial sectors which include material handling, airport ground support equipment (“GSE”), and stationary energy storage. We believe our mobile and stationary energy storage solutions provide our customers a reliable, high performing, cost effective, and more environmentally friendly alternative as compared to traditional lead acid and propane-based solutions. Our modular and scalable design allows different configurations of lithium-ion battery packs to be paired with our proprietary wireless battery management system to provide the level of energy storage required and “state of the art” real time monitoring of pack performance. We believe that the increasing demand for lithium-ion battery packs and more environmentally friendly energy storage solutions in the material handling sector should continue to drive our revenue growth.
Our long-term strategy is to meet the rapidly growing demand for lithium-ion energy solutions and to be the supplier of choice, targeting large companies having energy storage needs. We have established selling relationships with large fleets of forklifts and GSEs. We intend to reach this goal by investing in research and development to expand our product mix, by expanding our sales and marketing efforts, improving our customer support efforts and continuing our efforts to improve production capacity and efficiencies. Our research and development efforts will continue to focus on providing adaptable, reliable and cost-effective energy storage solutions for our customers. We have filed three new patents on advanced technology related to lithium-ion battery packs. The technology behind these pending patents are designed to:
● increase battery life by optimizing the charging cycle,
● give users a better understanding of the health of their battery in use, and
● apply artificial intelligence to predictively balance the cells for optimal performance.
Our largest sector of penetration thus far has been the material handling sector which we believe is a multi-billion dollar addressable market. We believe the sector will provide us with an opportunity to grow our business as we enhance our product mix and service levels and grow our sales to large fleets of forklifts and GSEs. Applications of our modular packs for other industrial and commercial uses, such as solar energy storage, are providing additional current growth and further opportunities. We intend to continue to expand our supply chain and customer partnerships and seek further partnerships and/or acquisitions that provide synergy to meeting our growth and “building scale” objectives.
The following table summarizes the new orders, shipments, and backlog activities for the last six (6) fiscal quarters:
Fiscal Quarter Ended Beginning
Backlog New Orders Shipments Ending
Backlog
March 31, 2021 $ 2,759,000 $ 9,977,000 $ 6,826,000 $ 5,910,000
June 30, 2021 $ 5,910,000 $ 15,053,000 $ 8,339,000 $ 12,624,000
September 30, 2021 $ 12,624,000 $ 13,122,000 $ 6,313,000 $ 19,433,000
December 31, 2021 $ 19,433,000 $ 19,819,000 $ 7,837,000 $ 31,415,000
March 31, 2022 $ 31,415,000 $ 20,495,000 $ 13,317,000 $ 38,593,000
June 30, 2022 $ 38,593,000 $ 11,622,000 $ 15,195,000 $ 35,020,000
“Backlog” represents the amount of anticipated revenues we may recognize in the future from existing contractual orders with customers that are in progress and have not yet shipped. Backlog values may not be indicative of future operating results as orders may be cancelled, modified or otherwise altered by customers. In addition, our ability to realize revenue from our backlog will be dependent on the delivery of key parts from our suppliers and our ability to manufacture and ship our products to customers in a timely manner. There can be no assurance that outstanding customer orders will be fulfilled as expected and that our backlog will result in future revenues.
As of September 12, 2022, our order backlog was approximately $29.4 million.
Business Updates
Due to the growth in orders for our energy storage solutions and accessories, coupled with supply chain disruptions due to COVID-19 delaying our ability to fulfill such orders, we have experienced an increase in our backlog of open orders during Fiscal 2022.
Supply Chain Issues and Higher Procurement Costs
Due to COVID-19 pandemic, supply chain disruptions continue, notably with delivery delays at the ports of Los Angeles and Long Beach. In addition, the price of steel and certain other electrical components used in our products have seen dramatic increases, along with increased shipping costs. It is impossible to predict how long the current disruptions to the cost and availability of raw materials and component parts will last. We implemented price increases on certain new product orders in October 2021 and April 2022 to offset rising global costs of raw materials and component parts. In addition, we increased our inventory of raw materials and component parts to $16.3 million as of June 30, 2022 to mitigate supply chain disruptions and support timely deliveries. However, there can be no assurance that our price increases, inventory levels or any future steps we take will be sufficient to offset the rising procurement costs and manage sourcing of raw materials and component parts effectively.
To address some of these negative consequences and to support the future growth of our business, we have implemented a number of new strategic initiatives:
Strategic Initiatives.
To support our high growth business and strategy, our first priority over the coming quarters is achieving “profitability,” specifically, cash flow breakeven. Accordingly, we have strategic initiatives underway in two areas:
○ Gross margin improvements
● Utilize lower cost, more reliable, and secondary suppliers of key components including cells, steel, electronics, circuit boards and other key components.
● Actively manage our suppliers to avoid supply chain disruptions and related risks.
● Introduce new designs, including a simplified “platform” that reduces part count, lowers cost, improves manufacturability and serviceability.
● Focus on ensuring profitability of all product lines including managing mix of products.
● Seek more competitive carriers to reduce shipping costs.
● Implement Lean Manufacturing process to enhance capacity utilization, efficiency, quality.
● Introduce comprehensive “cost of quality” initiative to ensure effective and robust processes.
● Implement “automated cell module assembly” to assemble purchased “individual” battery cells into a “module” for the battery pack. This will enable lower inventory from simplified SKU count and lower costs.
○ Business expansion to accelerate gross margin
● Leverage current high-profile “proven customer relationships” to respond to growing demand of large fleets for lithium-ion value proposition.
● Pursue new market that can leverage our technology and manufacturing capabilities.
● Expand features of our popular “SkyBMS” (telemetry) which provides customized fleet management, and real time reports.
● Expand our manufacturing and service capacities to ensure customer satisfaction from increased deliveries, and service.
● Capitalize on our leadership position with new offerings.
● While we are “agnostic to the type of lithium chemistry,” ensure our research to support other chemistries as they may become available. Ensure we have leadership with our core technology, without dependence on purchasing critical technology.
There can be no assurance that these initiatives and efforts will be successful.
New Product Update
During the second half of the Fiscal 2022, we introduced new product designs to respond to customer requests and to allow for greater operational efficiencies for us. Some of the improvements included higher capacities for extra-long and demanding shifts, easier servicing, cost efficiencies, and other features to solve a variety of existing performance challenges of customer operations. We intend to continue to develop and to introduce new product designs for margin enhancement, part commonality and improved serviceability.
In March 2022, we introduced three (3) new products:
Product
Description
●
L36 lithium-ion battery pack, a 36-volt option for 3-wheel forklifts;
●
The L36 addresses the 3-wheel forklift market. According to our OEM partners the 3-wheel forklift offerings are some of their best selling products. We are now strategically placed to fully address this market.
●
C48 lithium-ion battery pack for Automated Guided Vehicles (AGV) and Autonomous Mobile Robots (AMR); and
●
The improved robustness and environmental protections mean it is no longer just a solar battery, but is now being sold into tugs and other types of industrial equipment, expanding our product offerings.
●
S24 lithium-ion battery pack providing twice the capacity (210Ah) for Walkie Pallet Jacks for heavy duty
●
The S24-210Ah is a new high-capacity variant of our ‘slim’ walkie battery and addresses some of the toughest walkie applications in the market, giving exceptional runtime and fast recharge times when paired with an external high-powered charger.
Overview of 2022 Financing Activities
Registered Direct Offering
On September 22, 2021, we entered into a securities purchase agreement (the “Purchase Agreement”) with several institutional and accredited investors (the “Purchasers”), pursuant to which we sold in a registered direct offering an aggregate of 2,142,860 shares of or Common Stock (the “Shares”) and warrants to purchase up to 1,071,430 shares of our common stock (the “Warrants”), at a combined purchase price of $7.00 per share and related Warrant. The aggregate gross proceeds of the Registered Offering were approximately $15 million, before deducting placement agent fees and offering expenses (the “Registered Offering”). H.C. Wainwright & Co., LLC (“HCW” or the “Placement Agent”) acted as our exclusive Placement Agent in connection with the Registered Offering and was paid a cash fee equal to 6.0% of the gross proceeds of the Registered Offering. The net proceeds from the Registered Offering, after deducting Placement Agent fees and other offering expenses, were approximately $13.7 million. The Registered Offering closed on September 27, 2021.
At-The-Market Offering
On October 16, 2020, we filed a shelf registration on Form S-3 for up to $50 million to support our ability to raise capital to support our business growth. In connection with the shelf registration statement, in December 2020, we entered into a Sales Agreement with H.C. Wainwright & Co., LLC enabling us to sell shares of our common stock in an “At-The-Market” offering from time to time. On May 27, 2021 we filed an amendment to the prospectus supplement dated December 21, 2020 allowing us to sell up to $20 million of shares under the At-The-Market offering program (“ATM Offering”). In Fiscal 2021 we sold an aggregate of 978,782 shares of common stock at an average price of $12.93 per share for gross proceeds of approximately $12.7 million in the ATM Offering, prior to deducting commissions and other offering related expenses. In Fiscal 2022, we sold an additional 190,782 shares of common stock at average price of $8.70 per share for gross proceeds of approximately $1.7 million in the ATM Offering, prior to deducting commissions and other offering related expenses. As of June 30, 2022, approximately $5.7 million remained available under the ATM Offering for future sales of our common stock.
SVB Revolving Line of Credit
On June 23, 2022, we entered into a Second Amendment to Loan and Security Agreement (“Second Amendment”) with Silicon Valley Bank (“SVB”), which amended certain terms of the Loan and Security Agreement dated November 9, 2020, as amended on October 29, 2021 (together with the Second Amendment, the “Agreement”), including but not limited to, (i) to increase the amount of the revolving line of credit from $6.0 million to $8.0 million (the “SVB Credit Facility”), (ii) to change the financial covenants of the Company from tangible net worth to adjusted EBITDA (as defined in the Second Amendment) on a trailing six (6) month basis and liquidity ratio certified as of the end of each month pursuant to the calculations set forth therein, and (iii) to allow for the assignment and transfer by SVB of all of its obligations, rights and benefits under the Agreement and Loan Documents (as defined in the Agreement and except for the Warrants).
We have used the SVB Credit Facility from-time-to-time. As of June 30, 2022, the outstanding balance of the revolving line of credit was approximately $4.9 million, with approximately $3.1 million of the SVB Credit Facility remained available for future draws through November 7, 2022, unless the credit facility is renewed and its term is extended prior to its expiration.
Subordinate Line of Credit
On May 11, 2022, we entered into a subordinated Credit Facility Agreement with Cleveland Capital, L.P., a Delaware limited partnership (“Cleveland”), Herndon Plant Oakley, Ltd., (“HPO”), and other lenders (together with Cleveland and HPO, the “Lenders”) which provided us with a short-term line of credit (the “LOC”) of not less than $3,000,000 and not more than $5,000,000, the proceeds of which are to be used by us for working capital purposes. Each Lender severally agreed to make loans (each such loan, an “Advance”) up to such Lender’s Commitment Amount (“Commitment Amount”) to the Company from time to time, until the December 31, 2022 (the “Due Date”). Pursuant to the LOC and Form of Promissory Note, Advances made by any Lender, while outstanding, will bear an interest rate of 15.0% per annum in favor of each respective Lender.
Amount due under the LOC, if any, is due and payable on (i) the “Due Date in cash or shares of common stock of the Company (the “Common Stock”) at the sole election of the Company, unless extended, or (ii) on occurrence of an event of Default (as defined in the Form of Promissory Note). The Due Date may be extended (i) at the sole election of the Company for one (1) additional year from the Due Date upon the payment of a commitment fee equal to two percent (2%) of the Commitment Amount to the Lender within thirty (30) days prior to the original Due Date, or (ii) by the Lender in writing. In addition, each Lender subordinated their respective right to payment under the LOC to SVB’s indebtedness under the SVB Credit Facility. As of June 30, 2022, the Lenders’ commitment was for an aggregate amount of $4,000,000, with no outstanding balance under the LOC.
In connection with entry into the LOC, we paid each Lender a one-time committee fee in cash equal to 3.5% of such Lender’s Commitment Amount for an aggregate amount of $140,000. In addition, in consideration of the Lenders’ commitment to provide the Advances to the Company, we issued each Lender warrants to purchase the number of shares of common stock equal to the product of (i) 160,000 shares of common stock multiplied by (ii) the ratio represented by each Lender’s Commitment Amount divided by the $5,000,000 (the “Warrants”). Subject to certain ownership limitations, the Warrants became exercisable immediately from the date of issuance, and expire on the five (5) year anniversary of the date of issuance and subject to adjustments, has an exercise price of $2.53 per share. Pursuant to a selling agreement, dated as of May 11, 2022, we retained HPO as our placement agent in connection with the Credit Facility. As compensation for services rendered in conjunction with the Credit Facility, we paid HPO a finder fee equal to three percent (3%) of the Commitment Amount from each such Lender placed by HPO in cash.
Segment and Related Information
We operate as a single reportable segment.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of the Company’s consolidated financial statements, and believes that these recent pronouncements will not have a material effect on the Company’s condensed consolidated financial statements.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on its historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies and estimates affect the preparation of our financial statements:
Accounts Receivable
Accounts receivable are carried at their estimated collectible amounts. The Company has not experienced collections issues related to its accounts receivable and has not recorded an allowance for doubtful accounts during the years ended June 30, 2022 and 2021.
Inventories
Inventories consist primarily of battery management systems and the related subcomponents and are stated at the lower of cost (first-in, first-out) or net realizable value. The Company evaluates inventories to determine if write-downs are necessary due to obsolescence or if the inventory levels are in excess of anticipated demand at market value based on consideration of historical sales and product development plans. The Company has no adjustment related to obsolete inventory during the years ended June 30, 2022 and 2021.
Revenue Recognition
The Company recognizes revenue in accordance to the Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) for all contracts. The Company derives its revenue from the sale of products to customers. The Company sells its products primarily through a distribution network of equipment dealers, OEMs and battery distributors in primarily North America. The Company recognizes revenue for the products when all significant risks and rewards have been transferred to the customer, there is no continuing managerial involvement associated with ownership of the goods sold is retained, no effective control over the goods sold is retained, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transactions will flow to the Company and the costs incurred or to be incurred with respect to the transaction can be measured reliably.
Product revenue is recognized as a distinct single performance obligation which represents the point in time that our customer receives delivery of the products. Our customers do have a right to return product, but our returns have historically been minimal.
Product Warranties
The Company evaluates its exposure to product warranty obligations based on historical experience. Our products, primarily lift equipment packs, are warrantied for five years unless modified by a separate agreement. As of June 30, 2022 and 2021, the Company carried warranty liability of approximately $1,012,000 and $895,000, respectively, which is included in accrued expenses on the Company’s consolidated balance sheets.
Stock-based Compensation
Pursuant to the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 718-10, Compensation-Stock Compensation, which establishes accounting for equity instruments exchanged for employee service, we utilize the Black-Scholes option pricing model to estimate the fair value of employee stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances.
Common stock or equity instruments such as warrants issued for services to non-employees are valued at their estimated fair value at the measurement date (the date when a firm commitment for performance of the services is reached, typically the date of issuance, or when performance is complete). If the total value exceeds the par value of the stock issued, the value in excess of the par value is added to the additional paid-in-capital.
Recently Adopted Accounting Pronouncements
The Company did not adopt any new accounting pronouncements for the year ended June 30, 2022.
Results of Operations
Comparison of Results of Operations of the Years ended June 30, 2022 and 2021
The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this Annual Report.
The following table represents our statement of operations for the years ended June 30, 2022 (“Fiscal 2022”) and June 30, 2021 (“Fiscal 2021”).
Year Ended June 30,
Year Ended June 30,
$ % of Revenues $ % of Revenues
Revenues $ 42,333,000 100 % $ 26,257,000 100 %
Cost of sales 35,034,000 83 % 20,467,000 78 %
Gross profit 7,299,000 17 % 5,790,000 22 %
Operating expenses:
Selling and administrative 15,515,000 37 % 12,599,000 48 %
Research and development 7,141,000 17 % 6,669,000 25 %
Total operating expenses 22,656,000 54 % 19,268,000 73 %
Operating loss (15,357,000 ) -36 % (13,478,000 ) -51 %
Other income (expense):
Other income - - % 1,307,000 4 %
Interest expense (252,000 ) -1 % (622,000 ) -2 %
Net loss $ (15,609,000 ) -37 % $ (12,793,000 ) -49 %
Revenues
Historically our product focus has been on lift equipment, reflecting a mix of walkie pallet jacks and higher capacity packs for Class 1, 2, and 3 forklifts. Over the past two years, we expanded our product offering into adjacent applications, including airport GSE, stationary energy storage and other solutions for industrial and commercial applications. The launch of larger packs over the past two years has shifted our portfolio mix to include packs with higher selling prices as compared to our historical mix. We believe that we are well positioned to address the needs of many segments within the material handling sector in light of our modular and scalable battery pack design coupled with our proprietary battery management system that can be coupled with our telemetry based “SkyBMS” product offering.
We sell our products through a number of different channels including OEMs, lift equipment dealers and battery distributors as well as directly to end users, primarily in North America. The channels sell principally to large company, national accounts. We sell certain battery packs directly to other accounts including industrial equipment manufacturers and end users.
Revenues for Fiscal 2022 increased $16,076,000 or 61%, to $42,333,000, compared to $26,257,000 for Fiscal 2021. The increase in revenues was due to sales of energy storage solutions with higher average selling prices and a higher volume of units sold. The increase in revenues included both greater sales to existing customers as well as initial sales to new customers.
Cost of Sales
Cost of sales for Fiscal 2022 increased $14,567,000 or 71%, to $35,034,000, compared to $20,467,000 for Fiscal 2021. The increase in cost of sales was directly associated with higher sales of energy storage solutions, as well as increased costs of steel, electronic parts, and common off the shelf parts chiefly as a result of the supply chain interruptions. Cost of sales as a percentage of revenues for Fiscal 2022 was 83%, an increase of 5 percentage points over 78% for the Fiscal 2021.
Gross Profit
Gross profit for Fiscal 2022 increased $1,509,000 or 26%, to $7,299,000, compared to $5,790,000 for the Fiscal 2021. The gross profit margin (gross profit as a percent of revenues) decreased to 17% for Fiscal 2022 compared to 22% for Fiscal 2021. Gross profit was negatively impacted by higher costs for steel, electronic parts, and common off the shelf parts during Fiscal 2022, partially offset by higher revenues associated with increased sales of energy storage solutions.
Selling and Administrative
Selling and administrative expenses for Fiscal 2022 increased $2,916,000 or 23%, to $15,515,000, compared to $12,599,000 for Fiscal 2021. The increase was primarily attributable to increases in personnel expenses related to new hires and temporary labor of approximately $1,400,000, outbound shipping costs of $248,000, insurance premiums of $440,000, marketing expenses of $273,000, depreciation expense of $301,000, travel expenses of $153,000, facility related expenses of $131,000, bad debt expense of $76,000, and total other administrative operating expenses of $218,000, partially offset by decreases in stock-based compensation of $49,000 and accounting and legal expenses of $226,000.
Research and Development
Research and development expenses for Fiscal 2022 increased $472,000 or 7%, to $7,141,000, compared to $6,669,000 for Fiscal 2021. Such expenses consisted primarily of materials, supplies, salaries and personnel related expenses, product testing, consulting, and other expenses associated with revisions to existing product designs and new product development. The increase in research and development expenses was primarily due to expenses related to development of new products and UL certifications of approximately $233,000, higher personnel expenses related to new hires and temporary labor of $204,000, travel expenses of $15,000, and facility related expenses of $58,000, partially offset by a decrease in stock-based compensation of $33,000.
Other Income
Other income for Fiscal 2021 represented the forgiveness of the entire PPP Loan of approximately $1,297,000 in principal, together with all accrued interest of approximately $10,000. The Small Business Administration notified us that our loan and accrued interest had been forgiven on February 9, 2021.
Interest Expense
Interest expense for Fiscal 2022 decreased $370,000 or 59%, to $252,000, compared to $622,000 for Fiscal 2021. Interest expense was primarily related to our outstanding lines of credit and convertible promissory note. Also included in interest expense during Fiscal 2021 was additional interest expense of approximately $174,000 representing the amortization of debt discount related to Cleveland Loan that was paid off during Fiscal 2021.
Net Loss
Net loss during Fiscal 2022 increased $2,816,000 or 22%, to $15,609,000 compared to $12,793,000 for Fiscal 2021. The higher net loss for Fiscal 2022 was primarily attributable to increased operating expenses, and decreased other income, partially offset by an increase in gross profit and a decrease in interest expense.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is calculated taking net income and adding back the expenses related to interest, income taxes, depreciation, amortization, and stock-based compensation, each of which has been calculated in accordance with GAAP. Adjusted EBITDA was a loss of approximately $14,071,000 for the Fiscal 2022 compared to a loss of $11,100,000 for the Fiscal 2021.
Management believes that Adjusted EBITDA, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management team.
As Adjusted EBITDA is a non-GAAP financial measure, it should not be construed as a substitute for Net income (loss) (as determined in accordance with GAAP) for the purpose of analyzing our operating performance or financial position.
A reconciliation of our Adjusted EBITDA to Net loss is included in the table below:
Years Ended June 30,
Net loss $ (15,609,000 ) $ (12,793,000 )
Interest, net 252,000 622,000
Income tax provision - -
Depreciation and amortization 575,000 274,000
EBITDA (14,782,000 ) (11,897,000 )
Stock-based compensation 711,000 797,000
Adjusted EBITDA $ (14,071,000 ) $ (11,100,000 )
Liquidity and Capital Resources
Overview
As of June 30, 2022, we had a cash balance of $485,000 and an accumulated deficit of $81,814,000. For the year ended June 30, 2022, we had negative cash flow of $23.9 million. Historically our business has not generated sufficient cash to fund our operations. However, based on our ability to recognize revenue from our existing backlog we anticipate increased revenues along with the planned improvements in our gross margin over the next twelve (12) months. Our planned gross margin improvement tasks include, but is not limited to, a plan to drive bill of material costs down while increasing price of our products for new orders. We have received new orders in fiscal year ended June 30, 2022, of approximately $65 million and believe through conversations with our customers that our anticipation of continued new order increases is probable.
We believe that our existing cash, together with $3.2 million that currently remains available under our $8.0 million revolving line of credit with Silicon Valley Bank (“SVB Credit Facility”), and $4.0 million available under the subordinated line of credit (“Subordinated LOC”) as of September 12, 2022, will be sufficient to meet our anticipated capital resources to fund planned operations for the next twelve (12) months. See “Future Liquidity Needs” below.
Cash Flow Summary
Year Ended June 30,
Net cash used in operating activities $ (23,893,000 ) $ (18,358,000 )
Net cash used in investing activities (797,000 ) (1,102,000 )
Net cash provided by financing activities 20,462,000 23,447,000
Net change in cash $ (4,228,000 ) $ 3,987,000
Operating Activities
Net cash used in operating activities was $23,893,000 for Fiscal 2022, compared to net cash used in operating activities of $18,358,000 for Fiscal 2021. The primary usages of cash for the Fiscal 2022 were the net loss of $15,609,000 and increases in accounts receivable, inventory, and other assets, and decreases in accounts payable, accrued expenses and office lease payable, that were partially offset by increases in customer deposits, deferred revenue and non-cash operating costs. The primary usages of cash for the Fiscal 2021 were the net loss of $12,793,000, increases in accounts receivable, inventory, and other assets, and decreases in customer deposits, amount due to factoring facility, accrued interest, and office lease payable, that were partially offset by increases in accounts payable, accrued expenses, deferred revenue, and non-cash operating costs.
Investing Activities
Net cash used in investing activities for Fiscal 2022 was $797,000 and consisted primarily of the costs of internally developed software, purchase of furniture and office equipment, and warehouse equipment.
Net cash used in investing activities for Fiscal 2021 was $1,102,000 and consisted primarily of the costs of internally developed software, and purchases of furniture and office equipment, computer software, and warehouse equipment.
Financing Activities
Net cash provided by financing activities was $20,462,000 for Fiscal 2022, and primarily consisted of $13,971,000 in net proceeds from the issuance of common stock in the registered offering completed in September 2021, $4,889,000 in net borrowings under the SVB Credit Facility, and $1,602,000 in net proceeds from sales of common stock under our ATM Offering.
Net cash provided by financing activities was $23,447,000 for the Fiscal 2021, and primarily consisted of $10,698,000 in net proceeds from issuances of common stock in the public offering completed in August 2020, $3,200,000 from a private placement completed in July 2021, $12,102,000 in net proceeds from sales of common stock under our ATM Offering, and $55,000 proceeds from stock option and warrant exercises, which were partially offset by $2,580,000 in payments of outstanding related party borrowings, and $28,000 in payment of financing lease payable.
Future Liquidity Needs
We have evaluated our expected cash requirements over the next twelve (12) months, which include, but are not limited to, investments in additional sales and marketing and research and development, capital expenditures, and working capital requirements. We believe that our existing cash and additional funding available under our SVB Credit Facility, combined with funds available to us under our Subordinated LOC of up to $4.0 million will be sufficient to meet our anticipated capital resources to fund planned operations for the next twelve (12) months. As of September 12, 2022, $3.2 million remained available under the SVB Credit Facility and $4.0 million was available for future draws under the Subordinated LOC. In addition, to support our operations and anticipated growth, we intend to continue our efforts to secure additional capital from a variety of current and new sources including, but not limited to, sales of our equity securities. We also continue to execute our cost reduction, sourcing, pricing recovery initiatives in efforts to increase our gross margins and improve cash flow from operations.
Although management believes that our existing cash and the additional funding sources currently available to us under the lines of credit are sufficient to fund planned operations, our ability to draw funds from the line of credit are subject to certain restrictions and covenants. If we are unable to meet the conditions provided in the loan documents, the funds will not be available to us. In addition, should there be any delays in the receipts of key component parts, due in part to supply change disruptions, our ability to fulfil the backlog of sales orders will be negatively impacted resulting in lower availability of cash resources from operations. In that event, we may be required to raise additional funds by issuing equity or convertible debt securities. If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and product development, which may have a material adverse effect on future cash flows and results of operations. In addition, any, unforeseen factors in the general economy beyond management’s control could potentially have negative impact on the planned gross margin improvement plan.
In the event we are required to obtain additional funds, there is no guarantee that additional funds will be available on a timely basis or on acceptable terms. To the extent that we raise additional funds by issuing equity or convertible debt securities, our stockholders may experience additional dilution and such financing may involve restrictive covenants.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item begin on page with the index to financial statements followed by the financial statements.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of the end of the period covered by this report, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Act of 1934. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, relating to the Company, including our consolidated subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2022 because of the material weaknesses identified in our internal controls over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. As of June 30, 2022, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). A Material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight Board (United States) Auditing Standard No. 2) or a combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Based on such assessment, management concluded that as of June 30, 2022, our internal control over financial reporting was not effective. Management has identified the following material weakness:
● Ineffective oversight of the Company’s internal control over financial reporting and lack of sufficient review and approval of the underlying data used in the calculation of warranty reserve.
Planned Remediation
We are implementing measures designed to improve our internal control over financial reporting to remediate material weaknesses, including the following:
● We are implementing additional control procedures to strengthen the oversight of the Company’s internal control over financial reporting through review and sign off by the senior management of all significant assumptions and estimates being used and the underlying the data used in producing financial schedules/estimates and financial reporting. We are also adding a second level of review and approval for all manual journal entries for significant estimates and assumptions made by management.
This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding the effectiveness of the Company’s internal control over financial reporting, as such report is not required due to the Company’s status as a smaller reporting company.
Change in Internal Control over Financial Reporting
Except as discussed above, there have been no changes in the Company’s internal controls over financial reporting during the fiscal quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B - OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors, Executive Officers and Significant Employees
The following table and text set forth the names and ages of our current directors, executive officers and significant employees as of September 12, 2022. Our Board of Directors is comprised of only one class. All of the directors will serve until the next annual meeting of stockholders or until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. There are no family relationships among any of the directors and executive officers. From time to time, our directors have received compensation in the form of cash and equity grant for their services on the Board.
Name
Age
Position
Ronald F. Dutt
Director, Chief Executive Officer and President
Charles A. Scheiwe
Chief Financial Officer and Secretary
Michael Johnson
Director
Lisa Walters-Hoffert(1)(2)
Director
Dale Robinette(1)(3)
Director
Cheemin Bo-Linn (1)(4)
Director
(1) Independent Director
(2) Chairperson of the Audit Committee, Member of Compensation Committee and Governance Committee
(3) Lead Independent Director, Chairperson of the Compensation Committee, Member of Audit Committee and Governance Committee
(4) Ms. Bo-Linn was appointed to the Board on January 14, 2022. Ms. Bo-Linn is the Chairperson of the Nominating and Corporate Governance Committee (“Governance Committee”) and a Member of the Audit Committee and Compensation Committee.
There are no arrangements or understandings between our directors and executive officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer.
Business Experience
Ronald F. Dutt. Chairman, Chief Executive Officer, President, and Director. Mr. Dutt has been our chief executive officer, former interim chief financial officer and director since March 19, 2014. He became our chairman on June 28, 2019. On September 19, 2017, he was also appointed as our president, chief financial officer and corporate secretary. He resigned as chief financial officer and corporate secretary as of December 16, 2018. Previously, he was our chief financial officer since December 7, 2012, and our interim chief executive officer since June 28, 2013. Mr. Dutt has served as the Company’s interim corporate secretary since June 28, 2013. Prior to Flux Power, Mr. Dutt provided chief financial officer and chief operating officer consulting services during 2008 through 2012. In this capacity Mr. Dutt provided financial consulting, including strategic business modeling and managed operations. Prior to 2008, Mr. Dutt served in several capacities as executive vice president, chief financial officer and treasurer for various public and private companies including SOLA International, Directed Electronics, Fritz Companies, DHL Americas, Aptera Motors, Inc., and Visa International. Mr. Dutt holds an MBA in Finance from University of Washington and an undergraduate degree in Chemistry from the University of North Carolina. Additionally, Mr. Dutt served in the United States Navy and received an honorable discharge as a Lieutenant.
Charles A. Scheiwe, Chief Financial Officer and Secretary. Mr. Scheiwe joined the Company in July of 2018 and has been acting as the Company’s Controller since July 9, 2018. He was appointed as our chief financial officer and secretary on December 17, 2018. Prior to joining the Company, Mr. Scheiwe was the controller of Senstay, Inc. and provided financial and accounting consulting services to start-up companies from 2016 to 2018. From 2006 to 2016, Mr. Scheiwe was the vice president of finance and controller for GreatCall, Inc. Mr. Scheiwe’s experience in accounting, financial planning and analysis, business intelligence, cash management, and equity management has prepared and qualified him for the position of chief financial officer and secretary of the Company. Mr. Scheiwe has a Bachelor of Science degree in Business Management, with emphasis in Accounting, from the University of Colorado. Mr. Scheiwe also holds a CPA certificate.
Michael Johnson, Director. Mr. Johnson has been our director since July 12, 2012. Mr. Johnson has been a director of Flux Power since it was incorporated. Since 2002, Mr. Johnson has been a director and the chief executive officer of Esenjay Petroleum Corporation (Esenjay Petroleum), a Delaware company located in Corpus Christi, Texas, which is engaged in the business oil exploration and production. Mr. Johnson’s primary responsibility at Esenjay Petroleum is to manage the business and company as chief executive officer. Mr. Johnson is a director and beneficial owner of Esenjay Investments LLC, a Delaware limited liability company engaged in the business of investing in companies, and an affiliate of the Company owning approximately 28.0% of our outstanding shares, including common stock underlying options, and warrants that were exercisable or convertible or which would become exercisable or convertible within sixty (60) days. As a result of Mr. Johnson’s leadership and business experience, he is an industry expert in the natural gas exploration industry and brings a wealth of management and successful company building experience to the board. Mr. Johnson received a Bachelor of Science degree in mechanical engineering from the University of Southwestern Louisiana.
Lisa Walters-Hoffert, Director. Ms. Walters-Hoffert was appointed to our Board on June 28, 2019. Ms. Walters-Hoffert was a co-founder of Daré Bioscience, Inc. and following the company’s merger with Cerulean Pharma, Inc. in July of 2017, became Chief Financial Officer of the surviving public company (NASDAQ: DARE). For over twenty-five (25) years, Ms. Walters-Hoffert was an investment banker focused on small-cap public companies in the technology and life science sectors. From 2003 to 2015, Ms. Walters-Hoffert worked at Roth Capital Partners as Managing Director in the Investment Banking Division. Ms. Walters-Hoffert has held various positions in the corporate finance and investment banking divisions of Citicorp Securities in San José, Costa Rica and Oppenheimer & Co, Inc. in New York City, New York. Ms. Walters-Hoffert has served as a member of the Board of Directors of the San Diego Venture Group, as Past Chair of the UCSD Librarian’s Advisory Board, and as Past Chair of the Board of Directors of Planned Parenthood of the Pacific Southwest. Ms. Walters-Hoffert currently serves as a member of the Board of Directors of The Elementary Institute of Science in San Diego. Ms. Walters-Hoffert graduated magna cum laude from Duke University with a B.S. in Management Sciences. As a senior financial executive with over twenty-five years of experience in investment banking and corporate finance and based on Ms. Walters-Hoffert’s expertise in audit, compliance, valuation, equity finance, mergers, and corporate strategy, the Company believes Ms. Walters-Hoffert is qualified to be on the Board.
Dale T. Robinette, Director. Mr. Robinette was appointed to our Board on June 28, 2019 and our lead independent director on September 10, 2021. Mr. Robinette has been a CEO Coach and Master Chair since 2013 as an independent contractor to Vistage Worldwide, Inc., an executive coaching company. In addition, since 2013 Mr. Robinette has been providing business consulting related to top-line growth and bottom-line improvement through his company EPIQ Development. From 2013 to 2019, Mr. Robinette was the Founder and CEO of EPIQ Space, a marketing website for the satellite industry, a member-based community of suppliers promoting their offerings. Mr. Robinette was with Peregrine Semiconductor, Inc., a manufacturer of high-performance RF CMOS integrated circuits, from 2007 to 2013 in two roles as a Director of Worldwide Sales as well as the Director of the High Reliability Business Unit. Mr. Robinette started his career from 1991 to 2007 at Tyco Electronics Ltd. (known today as TE Connectivity Ltd.), a passive electronics manufacturer, in various sales, sales leadership and product development leadership roles. Mr. Robinette received a Bachelor of Science degree in Business Administration, Marketing from San Diego State University. Based on the above qualifications, the Company believes Mr. Robinette is qualified to be on the Board.
Cheemin Bo-Linn, Director. Ms. Bo-Linn was appointed to our board January 14, 2022. Ms. Bo-Linn is currently a director of Data I/O Corp (Nasdaq: DAIO), a company in advanced security and data deployment, since December 2021, as a director KORE Group Holdings, Inc. (NYSE: KORE), an Internet of Things (“IoT”) solutions and connectivity-as-a-service company since October 2021, and as a director of Blackline Safety Corp. (TSX: BLN), a Canadian public company specializing in advanced security and data deployment, since November 2020. In addition, Ms. Bo-Linn was the Chief Executive Officer of Peritus Partners, Inc., a valuation accelerator and information technology operations and consulting company, from 2013 to 2022. Ms. Bo-Linn experience include 20+ years in multiple senior executive roles with International Business Machines Corporation (NYSE: IBM), including leading global teams as IBM’s Vice-President, and has also held C-suite roles or board positions at small to midcap public and private companies. Ms. Bo-Linn holds a Doctorate in Education in “Computer-based Management Information Systems and Organizational Change” from the University of Houston. The Board believes that Dr. Bo-Linn’s extensive executive management and board experience in private and public companies qualifies her to serve on the Board of Directors.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of our directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Board Leadership Structure and Role in Risk Oversight
Our Board of Directors (“Board”) recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure to provide independent oversight of management. Our Board is currently led by a Chairman of the Board who also serves as our Chief Executive Officer. The Board understands that the right Board leadership structure may vary depending on the circumstances, and our independent directors periodically assess these roles and the Board leadership to ensure the leadership structure best serves the interests of the Company and stockholders.
On September 10, 2021, the Board adopted the Lead Independent Director Guidelines (“Guidelines.). The Guidelines provide that when the positions of Chief Executive Officer and Chairman of the Board are combined or the Chairman is not an independent director, the independent directors will appoint a lead independent director to serve with the authority and responsibility described in such Guidelines, and as the Board and/or the independent directors may determine from time to time. The Guidelines are available on our website at www.fluxpower.com.
Mr. Dutt currently holds the Chairman and Chief Executive Officer roles. Mr. Robinette currently serves as the Lead Independent Director elected by the majority of the Board on September 10, 2021.
The responsibilities of the Lead Independent Director include, among others: (i) serving as primary intermediary between non-employee directors and management; (ii) working with the Chairman of the Board to approve the agenda and meeting schedules for the Board; (iii) working with the Chairman of the Board as to the quality, quantity and timeliness of the information provided to directors; (iv) in consultation with the Nominating and Governance Committee, reviewing and reporting on the results of the Board and Committee performance self-evaluations; (v) calling additional meetings of independent directors; and (vi) serving as liaison for consultation and communication with stockholders.
We believe the current leadership structure, with combined Chairman and Chief Executive Officer roles and a Lead Independent Director, best serves the Company and its stockholders at this time. Mr. Robinette possesses understanding and knowledge of the business and affairs of the Company and has the ability to devote a substantial amount of time to serve in this capacity. In addition, we believe having one leader serving as both the Chairman and Chief Executive Officer provides decisive, consistent and effective leadership, as well as clear accountability to our stockholders and customers. This enhances our ability to communicate our message and strategy clearly and consistently to our stockholders, employees, customers and suppliers. The Board believes the appointment of a strong Lead Independent Director and the use of regular executive sessions of the non-management directors, along with a majority the Board being composed of independent directors, allow it to maintain effective oversight of management. We believe that the combination of the Chairman and Chief Executive Officer roles is appropriate in the current circumstances and, based on the relevant facts and circumstances, separation of these offices would not serve our best interests and the best interests of our stockholders at this time.
In addition, our Board as a whole has responsibility for risk oversight. Our Board exercises this risk oversight responsibility directly and through its committees. The risk oversight responsibility of our Board and its committees is informed by reports from our management teams to provide visibility to our Board about the identification, assessment and management of key risks, and our management’s risk mitigation strategies. Our Board has primary responsibility for evaluating strategic and operational risk, including related to significant transactions. Our audit committee has primary responsibility for overseeing our major financial and accounting risk exposures, and, among other things, discusses guidelines and policies with respect to assessing and managing risk with management and our independent auditor. Our compensation committee has responsibility for evaluating risks arising from our compensation and people policies and practices. Our nominating and corporate governance committee has responsibility for evaluating risks relating to our corporate governance practices. Our committees and management provide reports to our Board on these matters.
In its governance role, and particularly in exercising its duty of care and diligence, our Board is responsible for ensuring that appropriate risk management policies and procedures are in place to protect the Company’s assets and business. Our Board has broad and ultimate oversight responsibility for our risk management processes and programs and executive management is responsible for the day-to-day evaluation and management of risks to the Company.
Board Composition, Committees and Independence
Under the rules of NASDAQ, “independent” directors must make up a majority of a listed company’s Board of Directors. In addition, applicable NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable NASDAQ rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.
Our Board has undertaken a review of the independence of each director and considered whether any director has a material relationship with us that could compromise the director’s ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board determined that Ms. Walters-Hoffert, Ms. Bo-Linn and Mr. Robinette are independent directors as defined in the listing standards of NASDAQ and SEC rules and regulations. A majority of our directors are independent, as required under applicable NASDAQ rules. As required under applicable NASDAQ rules, our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present.
Board Committees
Our Board has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee. The composition and responsibilities of each of the committees is described below.
Audit Committee
The Audit Committee of the Board of Directors currently consists of three independent directors of which at least one, the Chairman of the Audit Committee, qualifies as a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Ms. Walters-Hoffert is the Chairperson of the Audit Committee and financial expert, and Mr. Robinette and Ms. Bo-Linn are the other directors who are members of the Audit Committee. The Audit Committee’s duties are to recommend to our Board of Directors the engagement of the independent registered public accounting firm to audit our consolidated financial statements and to review our accounting and auditing principles. The Audit Committee reviews the scope, timing and fees for the annual audit and the results of audit examinations performed by any internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls. The Audit Committee will at all times be composed exclusively of directors who are, in the opinion of our Board of Directors, free from any relationship that would interfere with the exercise of independent judgment as a committee member and who possess an understanding of consolidated financial statements and generally accepted accounting principles. Our Audit Committee operates under a written charter, which is available on our website at www.fluxpower.com.
Compensation Committee
The Compensation Committee establishes our executive compensation policy, determines the salary and bonuses of our executive officers and recommends to the Board stock option grants or other incentive equity awards for our executive officers. Mr. Robinette is the Chairperson of the Compensation Committee, and Ms. Walters-Hoffert and Ms. Bo-Linn are members of the Compensation Committee. Each of the members of our Compensation Committee are independent under NASDAQ’s independence standards for compensation committee members. Our chief executive officer often makes recommendations to the Compensation Committee and the Board concerning compensation of other executive officers. The Compensation Committee seeks input on certain compensation policies from the chief executive officer. Our Compensation Committee operates under a written charter, which is available on our website at www.fluxpower.com.
Nominating and Governance Committee
The Nominating and Governance Committee is responsible for matters relating to the corporate governance of our Company and the nomination of members of the Board and committees of the Board. Ms. Bo-Linn is Chairperson of the Nominating and Governance Committee, and Ms. Walters-Hoffert and Mr. Robinette are members. Each of the members of our Nominating and Governance Committee is independent under NASDAQ’s independence standards. The Nominating and Governance Committee operates under a written charter, which was amended on January 14, 2022. The Amended Nominating and Corporate Governance Committee Charter is available on our website at www.fluxpower.com.
We seek directors with established strong professional reputations and experience in areas relevant to the strategy and operations of our business. We seek directors who possess the qualities of integrity and candor, who have strong analytical skills and who are willing to engage management and each other in a constructive and collaborative fashion. We also seek directors who have the ability and commitment to devote significant time and energy to serve on the Board and its committees. We believe that all of our directors meet the foregoing qualifications. We do not have a formal policy with respect to diversity.
Code of Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all of our directors, officers, and employees. Any waivers of any provision of this Code for our directors or officers may be granted only by the Board or a committee appointed by the Board. Any waivers of any provisions of this Code for an employee or a representative may be granted only by our chief executive officer or principal accounting officer. We have filed a copy of the Code with the SEC and have made it available on our website at https://www.fluxpower.com/corporate-governance. In addition, we will provide any person, without charge, a copy of this Code. Requests for a copy of the Code may be made by writing to the Company at is c/o Flux Power Holdings, Inc., 2685 S. Melrose Drive, Vista, California 92081.
Indemnification Agreements
We executed a standard form of indemnification agreement (“Indemnification Agreement”) with each of our Board members and executive officers (each, an “Indemnitee”).
Pursuant to and subject to the terms, conditions and limitations set forth in the Indemnification Agreement, we agreed to indemnify each Indemnitee, against any and all expenses incurred in connection with the Indemnitee’s service as our officer, director and or agent, or is or was serving at our request as a director, officer, employee, agent or advisor of another corporation, partnership, joint venture, trust, limited liability company, or other entity or enterprise but only if the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to our best interest, and in the case of a criminal proceeding, had no reasonable cause to believe that his conduct was unlawful. In addition, the indemnification provided in the indemnification agreement is applicable whether or not negligence or gross negligence of the Indemnitee is alleged or proven. Additionally, the Indemnification Agreement establishes processes and procedures for indemnification claims, advancement of expenses and costs and contribution obligations.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11 - EXECUTIVE COMPENSATION
Compensation for our Named Executive Officers
The following table sets forth information concerning all forms of compensation earned by our named executive officers during Fiscal 2022 and Fiscal 2021 for services provided to the Company and its subsidiary.
Name
and Principal
Position
Year Salary ($) Bonus ($) Stock Awards(1)
($) Option Awards(2)
($) Non-Equity Incentive Plan Compensation
($) All Other Compensation ($) Total
($)
Ronald F. Dutt, Chief Executive $ 275,000 $ 55,055 $ 138,702 $ - $ - $ - $ 468,757
Officer, President, and Chairman $ 242,288 $ 133,525 $ 234,681 $ - $ - $ - $ 610,494
Charles A. Scheiwe $ 205,200 $ 28,757 $ 72,450 $ - $ - $ - $ 306,407
Chief Financial Officer and Corporate Secretary $ 187,635 $ 77,055 $ 124,853 $ - $ - $ - $ 389,543
Jonathan A. Berry $ 205,200 $ - $ 72,450 $ - $ - $ - $ 277,650
Former Chief Operating Officer(3) $ 188,077 $ 77,055 $ 124,853 $ - $ - $ - $ 389,985
(1) Represent the fair value of the RSUs granted on grant date.
(2) The grant date fair value was determined in accordance with the provisions of FASB ASC Topic No. 718 using the Black-Scholes valuation model with assumptions described in more detail in the notes to our audited financial statements included in this report.
(3) Mr. Berry separated from the Company on August 12, 2022.
Benefit Plans
We do not have any profit sharing plan or similar plans for the benefit of our officers, directors or employees. However, we may establish such plan in the future.
Equity Compensation Plan Information
In connection with the reverse acquisition of Flux Power, Inc. in 2012, we assumed the 2010 Plan. As of June 30, 2022, the number of options outstanding to purchase common stock under the 2010 Plan was 21,944. No additional options to purchase common stock may be granted under the 2010 Plan.
On February 17, 2015, our shareholders approved our 2014 Equity Incentive Plan (“2014 Plan”), which was amended on July 23, 2018 and on November 5, 2020. The 2014 Plan authorizes the issuance of awards for up to 1,000,000 shares of our common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates. No options were granted during Fiscal 2022 and 2021. We granted 250,786 and 153,177 restricted stock units under the 2014 Plan during Fiscal 2022 and 2021, respectively.
On April 29, 2021, at the Company’s annual stockholders meeting, the 2021 Equity Incentive Plan (the “2021 Plan”) was approved by our stockholders. The 2021 Plan authorizes the issuance of awards for up to 2,000,000 shares of our common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates. No awards were granted under the 2021 Plan during Fiscal 2022 and 2021.”
As of June 30, 2022, we had 503,433 options outstanding and exercisable under the 2014 Plan and the 2010 Plan. In addition, as of June 30, 2022, we had 304,221 RSUs outstanding under the 2014 Plan. There were no options or RSUs issued or outstanding under the 2021 Plan as of June 30, 2022.
The following table sets forth certain information concerning unexercised options, stock that has not vested, and equity compensation plan awards outstanding as of June 30, 2022 for the named executive officers below:
Option Awards (1)
Stock Awards
Name
Award Grant Date
Number of Securities Underlying Unexercised Options Exercisable
Number of Securities Underlying Unexercised Options Unexercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
Option Exercise Price ($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested
Market Value of Shares or Units of Stock That Have Not Vested ($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
Equity Incentive Plan: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Ronald Dutt
3/15/2019
50,000
-
-
$ 13.60
3/15/2029
-
$ -
-
$ -
7/25/2018
33,527
-
-
19.80
7/25/2028
-
$ -
-
$ -
6/29/2018
50,000
-
-
14.40
6/29/2028
-
$ -
-
$ -
10/26/2017
50,000
-
-
4.60
10/26/2027
-
$ -
-
$ -
12/22/2015
19,000
-
-
5.00
12/22/2025
-
$ -
-
$ -
7/30/2013
17,500
-
-
10.00
7/29/2023
-
$ -
-
$ -
11/12/2020
-
-
-
-
11/11/2030
6,607
$ 58,670
6,607
$ 58,670
11/12/2020
-
-
-
-
11/11/2030
6,607
$ 58,670
6,607
$ 58,670
11/12/2020
-
-
-
-
11/11/2030
13,214
$ 117,340
13,214
$ 117,340
10/29/2021
-
-
-
-
10/29/2031
12,061
$ 69,350
12,061
$ 69,350
10/29/2021
-
-
-
-
10/29/2031
12,061
$ 69,350
12,061
$ 69,350
Charles Scheiwe
3/15/2019
30,000
-
-
13.60
3/15/2029
-
$ -
-
$ -
11/12/2020
-
-
-
-
11/11/2030
3,515
$ 31,213
3,515
$ 31,213
11/12/2020
-
-
-
-
11/11/2030
3,515
$ 31,213
3,515
$ 31,213
11/12/2020
-
-
-
-
11/11/2030
7,030
$ 62,426
7,030
$ 62,426
10/29/2021
-
-
-
-
10/29/2031
6,300
$ 36,224
6,300
$ 36,224
10/29/2021
-
-
-
-
10/29/2031
6,300
$ 36,224
6,300
$ 36,224
Jonathan Berry(2)
3/15/2019
24,375
5,625
5,625
13.60
3/15/2029
-
$ -
-
$ -
6/29/2018
45,500
-
-
14.40
6/29/2028
-
$ -
-
$ -
10/26/2017
22,500
-
-
4.60
10/26/2027
-
$ -
-
$ -
11/12/2020
-
-
-
-
11/11/2030
3,515
$ 31,213
3,515
$ 31,213
11/12/2020
-
-
-
-
11/11/2030
3,515
$ 31,213
3,515
$ 31,213
11/12/2020
-
-
-
-
11/11/2030
7,030
$ 62,426
7,030
$ 62,426
10/29/2021
-
-
-
-
10/29/2031
6,300
$ 36,224
6,300
$ 36,224
10/29/2021
-
-
-
-
10/29/2031
6,300
$ 36,224
6,300
$ 36,224
(1) The fair value of each option grant is estimated at the date of grant using the Black-Scholes option pricing model. Expected volatility is calculated based on the historical volatility of the Company’s stock. The risk free interest rate is based on the U.S. Treasury yield for a term equal to the expected life of the options at the time of grant. The fair value of each restricted stock unit is the fair value of the Company’s common stock on the grant date.
(2) Mr. Berry separated from the Company on August 12, 2022.
Aggregated Option/Stock Appreciation Right (“SAR”) exercised and Fiscal year-end Option/SAR value table
Neither our executive officers nor the other individuals listed in the tables above, exercised options or SARs during Fiscal 2022.
Employment Agreements with Executive Officers
On February 12, 2021, we entered into an Amended and Restated Employment Agreement with the Company’s president and chief executive officer, Ronald F. Dutt (the “Dutt Employment Agreement”), which amends and restates the Employment Agreement effective December 11, 2012, as amended (the “Prior Agreement”). In addition to the inclusion of terms relating to change in control, termination, severance, benefits and the acceleration of vesting of options and restricted stock units upon certain events, the Dutt Employment Agreement memorialized Mr. Dutt’s continued services as the president and chief executive officer of the Company and its wholly-owned subsidiary, Flux Power, Inc. (“Flux Power”), and the terms pursuant to which he would provide such services. Pursuant to the terms of the Dutt Employment Agreement, Mr. Dutt’s current annual base salary is $275,000.
On February 12, 2021, we entered into an Employment Agreement with the Company’s chief financial officer, treasurer and secretary, Charles A. Scheiwe (the “Scheiwe Employment Agreement”). In addition to the inclusion of terms relating to change in control, termination, severance, benefits and the acceleration of vesting of options and restricted stock units upon certain events, the Employment Agreement memorialized Mr. Scheiwe’s continued services as the chief financial officer and secretary of the Company, and as chief financial officer/treasurer and secretary of Flux Power. Pursuant to the terms of the Scheiwe Employment Agreement, Mr. Scheiwe’s current annual base salary is $205,200.
Under their respective employment agreement, Messrs. Dutt and Scheiwe, among other things, are (i) eligible for annual target cash bonus and awards of restricted stock units or other equity-based incentive compensation consistent with his position as determined by the Board of Directors (the “Board”) and the Compensation Committee; (ii) entitled to reimbursement for all reasonable business expenses incurred in performing services; and (iii) entitled to certain severance and change of control benefits contingent upon such employee’s agreement to a general release of claims in favor of the Company following termination of employment. Messrs. Dutt and Scheiwe and are also eligible to participate in all customary employee benefit plans or programs generally made available to the senior executive officers. Messrs. Dutt and Scheiwe have each agreed to observe the terms of a standard confidentiality and non-compete agreement for a restricted period of two (2) years. Each of Messrs. Dutt and Scheiwe employment is “at-will” and may be terminated at any time for any reason.
Separation Agreement
On August 12, 2022, Jonathan Berry, the Company’s Chief Operating Officer, separated from the Company and entered into an Employee Separation and Release dated August 24, 2022 (“Separation Agreement”). Under the Separation Agreement, the Company agreed to provide Mr. Berry with certain payments and benefits comprising of: (i) a separation payment of two hundred five thousand two hundred dollars, less required withholdings, (ii) twenty-eight thousand nine hundred seven and 52/100 dollars, less require holdings, to defray costs for COBRA coverage, and (iii) reimbursement for an amount equal to twelve months for life insurance continuation (collectively, the “Separation Benefits”). In exchange for the Separation Benefits, among other things as set forth in the Separation Agreement, Mr. Berry agreed to a release of claims and waivers in favor of the Company and to certain restrictive covenant obligations, and also reaffirmed his commitment to comply with his existing restrictive covenant obligations.
Annual Bonus Plan
On November 5, 2020, the Board approved an annual cash bonus plan (the “Annual Bonus Plan”) which allows the Compensation Committee and/or the Board of the Company to set the amount of bonus each fiscal year and the performance criteria. Executive officers and all employees (other than part-time employees and temporary employees) are eligible to participate in the Annual Bonus Plan (“Participants”) as long as the Participant remains an active regular employee of the Company. The Annual Bonus Plan was effective for Fiscal 2021 and is effective each fiscal year thereafter (the “Plan Year”). For each Plan Year, the Compensation Committee establishes an aggregate amount of allocable Bonus under the Annual Bonus Plan and determines the performance goals applicable to a bonus during a Plan Year (the “Participation Criteria”). The Participation Criteria may differ from Participant to Participant and from bonus to bonus. The Participation Criteria for each Plan Year is based on the Company achieving certain performance targets based on annual revenue, gross margin, operating expense and new business development. All of the Company’s executive officers are eligible to participate in the Annual Bonus Plan.
Fiscal
On November 5, 2020, the Board approved target cash bonuses under the Annual Bonus Plan for Fiscal 2021 (“2021 Bonus Grant”) to the following executive officers, which target bonus was calculated based on percentage of the executive’s current base salary:
Name Position Current Base
Salary
Percentage
of Salary
Target Cash
Bonus
Ronald F. Dutt Chief Executive Officer $ 250,000 50 % $ 125,000
Charles Scheiwe Chief Financial Officer $ 190,000 35 % $ 66,500
Jonathan Berry Chief Operating Officer $ 190,000 35 % $ 66,500
Under the 2021 Bonus Grant, the Company’s executives are eligible to receive cash incentive bonus payments based on the target cash bonus amount and on the achievement of financial targets and corporate objectives as follows:
Achievements Minimum Target Maximum
Bonus payments based on Target Cash Bonus Amount 70 % 100 % 150 %
On June 30, 2021, the Compensation Committee of the Company amended the performance goals for the 2021 plan year (from July 1, 2020 through June 30, 2021) (the “2021 Plan Year”), under the Annual Cash Bonus Plan, which was previously approved by the Compensation Committee on November 5, 2020. The performance goals for the 2021 Plan Year were amended to the Company achieving certain performance targets measured by annual revenue, gross margin and new business development. The Compensation Committee made the equitable adjustment to better align the objectives and activities of the Company’s executives and employees with the goals of the Company during a very challenging 2021 Plan Year.
On June 30, 2021, the Compensation Committee approved an addendum to the Performance Restricted Stock Unit Award under the 2014 Equity Incentive Plan approved by the Compensation Committee on November 5, 2020 to provide clarification for the calculation of vesting
Fiscal
For the Company’s fiscal year ending on June 30, 2022, or Fiscal 2022, the performance goals applicable to a bonus are based on the Company achieving certain targets based on the Company’s annual revenue, gross margin, EBITDAS (earnings before interest expense (excluding interest income), taxes, depreciation, amortization and stock compensation expense in accordance with U.S. GAAP), new strategic customers, demonstrated direct cost reduction and working capital and inventory turnover (the “Financial Targets”) and additional bonus amounts if the Company’s financial results exceeds certain thresholds of the Financial Targets.
On October 29, 2021, the Compensation Committee approved target cash bonuses under the Annual Cash Bonus Plan for Fiscal 2022 to the following executive officers, which target bonus was calculated based on percentage of the executive’s current base salary:
Name Position Current Base Salary Percentage of Salary Target Cash Bonus
(“TCB”)
Maximum Payout(1)
Ronald F. Dutt Chief Executive Officer $ 275,000 50 % $ 137,500 $ 165,000
Charles Scheiwe Chief Financial Officer $ 205,200 35 % $ 71,820 $ 86,184
Jonathan Berry Chief Operating Officer $ 205,200 35 % $ 71,820 $ 86,184
(1) There are no bonus caps for achieving above set revenue target and gross margin target. If actual results exceed 100% of revenue target and/or gross margin target, every 1% of revenue target and/or gross margin target would result in an increase in bonus equal to 0.2% of the TCB for such executive officers.
Amendment to 2014 Plan
On November 5, 2020, the Board approved an amendment to the 2014 Plan as amended to include the right to grant Restricted Stock Units (“RSUs”). All of the Company’s executive officers are eligible to participate in the 2014 Plan.
Restricted Stock Unit Grants
Fiscal 2021 Grants
On November 5, 2020, the Board approved the grant of RSUs under the 2014 Option Plan to certain employees of the Company. The RSUs are subject to the terms and conditions provided in (i) the form of Restricted Stock Unit Award Agreement which is time based (“Time Based Awards”), and (ii) the form of Performance Restricted Stock Unit Award Agreement which is performance based (“Performance Based Awards”). In addition, the Compensation Committee approved the grant of one-time retention based RSUs pursuant to the form of the Restricted Stock Unit Award Agreement (“Retention Awards”).
The following named executive officers of the Company were granted RSUs under the 2014 Option Plan in the amounts and according to the vesting schedule indicated below:
Time Based Awards:
Name Position No. of RSUs Vesting Schedule
Ronald F. Dutt Chief Executive Officer 6,607 Three Years from Award’s grant date
Charles Scheiwe Chief Financial Officer 3,515 Three Years from Award’s grant date
Jonathan Berry Chief Operating Officer 3,515 Three Years from Award’s grant date
Performance Based Awards:
Name Position No. of RSUs
Maximum
Grant
Vesting Schedule
Ronald F. Dutt Chief Executive Officer 9,910 Vest in installments of up to one-third annually based on target performance goals
Charles Scheiwe Chief Financial Officer 5,272 Vest in installments of up to one-third annually based on target performance goals
Jonathan Berry Chief Operating Officer 5,272 Vest in installments of up to one-third annually based on target performance goals
Retention Awards:
Name Position No. of RSUs Vesting Schedule
Ronald F. Dutt Chief Executive Officer 13,214 Four Years from Award’s grant date
Charles Scheiwe Chief Financial Officer 7,030 Four Years from Award’s grant date
Jonathan Berry Chief Operating Officer 7,030 Four Years from Award’s grant date
Fiscal 2022 Grants
On October 29, 2021, the Compensation Committee approved the grant of Restricted Stock Units (“RSUs”) under the Company’s 2014 Equity Incentive Plan (the “2014 Plan”) to certain employees of the Company or its subsidiary, Flux Power, Inc. The RSUs are subject to the terms and conditions provided in (i) the form of Restricted Stock Unit Award Agreement which is time based (“Time Based Awards”), and (ii) the form of Performance Restricted Stock Unit Award Agreement which is performance based (“Performance Based Awards”). The following named executive officers of the Company were granted RSUs under the 2014 Plan in the amounts and according to the vesting schedule indicated below:
Time Based Awards:
Name Position No. of RSUs Vesting Schedule
Ronald F. Dutt Chief Executive Officer 12,061 Vest annually over 3 years with the first vest date on October 27, 2022
Charles Scheiwe Chief Financial Officer 6,300 Vest annually over 3 years with the first vest date on October 27, 2022
Jonathan Berry Chief Operating Officer 6,300 Vest annually over 3 years with the first vest date on October 27, 2022
Performance Based Awards:
Name Position No. of RSUs
Maximum Grant
Vesting Schedule
Ronald F. Dutt Chief Executive Officer 18,092 Three years from grant upon meeting performance target*
Charles Scheiwe Chief Financial Officer 9,450 Three years from grant upon meeting performance target *
Jonathan Berry Chief Operating Officer 9,450 Three years from grant upon meeting performance target *
* The performance target for the RSU to be based on EBITDAS (earnings before interest expense (excluding interest income), taxes, depreciation, amortization and stock compensation expense in accordance with U.S. GAAP) for the second half of the Company’s fiscal year ending June 30, 2022.
Incentive Plans
Management, the Committee and the Board will continue to explore and evaluate different long-term and short-term incentives to help attract, retain and motivate our employees to align their interest to our business and financial success through the use of equity award and cash bonuses.
Compensation of Non-Executive Directors
In December 2020, pursuant to the recommendation and advice of the Committee, the Board approved the annual compensation package for non-executive directors of the Company for calendar year 2021 as follows:
Independent
Non-Executive Director
Position Base
Retainer
Chair Fee Total
Comp
Lisa Walters-Hoffert X Audit Chair $ 50,000 $ 7,500 $ 57,500
Dale Robinette X Compensation Chair $ 50,000 $ 5,000 $ 55,000
John A. Cosentino Jr.(1) X Governance Chair $ 50,000 $ 5,000 $ 55,000
Michael Johnson
Board Member $ 50,000 $ - $ 50,000
(1) Former director
On January 14, 2022, pursuant to the recommendation and advice of the Compensation Committee of the Board of the Company, the Board approved the following annual compensation package for non-executive directors of the Company for calendar year 2022, as follows:
Name Independent
Non-Executive Director
Position Base Retainer
(cash)
Chair Fee
(cash)
Lead
Independent Director
(cash)
Lisa Walters-Hoffert X Audit Chair $ 50,000 $ 7,500 $ -
Dale Robinette X Compensation Chair $ 50,000 $ 5,000 $ 20,000
John A. Cosentino Jr.(1) X Governance Chair $ 50,000 $ 5,000 (1) $ -
Cheemin Bo-Linn (2) X Board Member $ 50,000 $ - $ -
Michael Johnson
Board Member $ 50,000 $ - $ -
(1) Mr. Cosentino resigned as our director on March 1, 2022. As appreciation for Mr. Cosentino’s board services, the Board approved to (i) accelerate the vesting of the following securities the Board granted in connection with his board services: 435 unvested options and 4,578 restricted stock awards, and (iii) pay his board fees for 3rd quarter of Fiscal 2022.
(2) Dr. Bo-Linn was appointed as Chairperson of the Governance Committee on March 3, 2022. For Dr. Bo-Linn’s services as Chairperson, she is entitled to a Chair Fee of $5,000 for calendar year 2022.
Equity Component of Non-Executive Director Compensation
In addition, our directors are eligible to receive an annual equity grant of RSUs. Pursuant to grants approved by our Board at the recommendation of the Compensation Committee in April 2021 and 2022, our non-executive directors were granted RSUs under the 2014 Plan. The number of RSUs granted to each non-executive director was equal to the amount of $50,000 divided by the fair market value of the RSUs, with all RSUs subject to vesting restrictions. The fair market value of the RSUs was determined by applying a 10-day volume weighted average stock price prior to the grant issuance date.
In April 2021, each of our non-executive directors were granted 4,578 RSUs, of which 1/3 of the RSUs vested on April 29, 2022, and each subsequent 1/3 to vest every twelve (12) months thereafter until fully vested. In April 2022, each of our non-executive directors were granted 17,793 RSUs which are subject to fully vest on April 28, 2023. In addition, in August 2022, as compensation for board services provided during the last quarter of Fiscal 2022, Ms. Bo-Linn was granted 5,034 RSUs, of which 1/3 vested immediately, each of the remaining 1/3 of the RSUs will vest on April 29, 2023, and April 29, 2024. Ms. Bo-Linn’s s grant was consistent with the standard equity component of Non-Executive Director Compensation Package as approved by the Board.
Director Compensation Table
Below is summary of compensation accrued or paid to our non-executive directors during Fiscal 2022 and Fiscal 2021. Mr. Dutt, our chief executive officer and president, received no compensation for his service as a director and is not included in the table. The compensation Mr. Dutt receives as an employee of the Company is included in the section titled “Executive Compensation.”
Name Year Fees Earned or
Paid in
Cash
($)
Stock Awards(2) ($) Option Awards(3)
($)
All Other Compensation ($) Total ($)
Lisa Walters-Hoffert $ 57,500 50,000 $ - - $ 107,500
58,125 50,000 - - 108,125
Dale Robinette $ 65,000 50,000 $ - - $ 115,000
55,625 50,000 - - 105,625
John A. Cosentino Jr.(1) $ 41,250 - $ - - $ 41,250
55,000 50,000 - - 105,000
Michael Johnson $ 50,000 50,000 $ - - $ 100,000
42,500 50,000 - - 92,500
Cheemin Bo-Linn (4) $ 26,667 50,000 $ - - $ 76,667
(1) Mr. Cosentino resigned as our director on March 1, 2022.
(2) Represent the fair value of the RSUs granted using the volume weighted average price of the ten days of trading prior to grant date.
(3) The amounts shown in this column represent the full grant date fair value of the award granted, excluding any as computed in accordance with Financial Accounting Standards Board (“FASB”).
(4) Ms. Bo-Linn joined our board of director on January 14, 2022.
The following table shows the aggregate number of vested stock options held by our non-employee directors as of June 30, 2022 and June 30, 2021:
Name Year Vested Stock Options
Lisa Walters-Hoffert 3,948
2,467
Dale Robinette 3,948
2,467
Cheemin Bo-Linn (1) -
Michael Johnson 12,948
10,904
John A. Cosentino Jr. (2) -
-
(1) Ms. Bo-Linn joined our board of director on January 14, 2022.
(2) Mr. Cosentino resigned as our director on March 1, 2022.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
BENEFICIAL OWNERSHIP
Security Ownership of Principal Stockholders and Management
As used in this section, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Exchange Act, as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose of or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, subject to community property laws where applicable. As of September 12, 2022, we had a total of 15,998,336 shares of common stock issued and outstanding.
The following table sets forth, as of September 12, 2022, information concerning the beneficial ownership of shares of our common stock held by our directors, our named executive officers, our directors and executive officers as a group, and each person known by us to be a beneficial owner of more than five percent (5%) of our outstanding common stock. Unless otherwise indicated, the business address of each of our directors, executive officers and beneficial owners of more than five percent (5%) of our outstanding common stock is c/o Flux Power Holdings, Inc., 2685 S. Melrose Drive, Vista, California 92081. Each person has sole voting and investment power with respect to the shares of our common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
Name and Address of Beneficial Owner (1) Shares
Beneficially
Owned
% of
Ownership
Officers and Directors
Michael Johnson, Director 4,478,703 (2) 28.0 %
Ronald Dutt, Chief Executive Officer, President, and Director 250,408 (3) 1.5 %
Charles A Scheiwe, Chief Financial Officer and Secretary 40,118 (4) *
Cheemin Bo-Linn, Director 1,678 (5) *
Lisa Walters-Hoffert, Director 5,474 (6) *
Dale Robinette, Director 5,474 (7) *
All Officers and Directors as a group (6 people) 4,781,855 29.4 %
5% Stockholders
Cleveland Capital Management L.L.C.
1250 Linda Street, Suite 304
Rocky River, OH 44116 811,419 (8) 5.1 %
* Represents less than 1% of shares outstanding.
(1)
All addresses above are 2685 S. Melrose Drive, Vista, California 92081, unless otherwise stated.
(2)
Includes 4,465,755 shares of common stock held by Esenjay Investments, LLC, of which Mr. Johnson is the sole director and beneficial owner, and (ii) 12,948 shares of common stock issuable to Mr. Johnson upon exercise of stock options.
(3)
Includes 26,360 shares of common stock and 224,048 shares of common stock issuable upon exercise of stock options and settlement of vested RSUs.
(4)
Includes 8,018 shares of common stock and 32,100 shares of common stock issuable upon exercise of stock options and settlement of vested RSUs.
(5) Includes 1,678 shares of common stock.
(6)
Includes 1,526 shares of common stock and 3,948 shares of common stock issuable upon exercise of stock options.
(7)
Includes 1,526 shares of common stock and 3,948 shares of common stock issuable upon exercise of stock options.
(8)
Based on Amendment No. 5 to Schedule 13G filed jointly by Cleveland, Wade Massad and Cleveland Capital Management, L.L.C. with the SEC on February 14, 2022. Reflects 811,419 shares of common stock beneficially owned by certain private funds managed by Cleveland Capital Management, L.L.C., or by its principals.
* Represents less than 1% of shares outstanding.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following includes a summary of certain relationships and transactions, including transactions since July 1, 2020 to September 12, 2022 and any currently proposed transactions, to which we were or are to be a participant, in which (1) the amount involved exceeded or will exceed the lesser of (i) $120,000 or (ii) one percent (1%) of the average of our total assets for the last two completed fiscal years, and (2) any of our directors, executive officers or holders of more than five percent (5%) of our capital stock, or any affiliate or member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest other than compensation and other arrangements that are described under the section titled “Executive Compensation.”
Pursuant to the Audit Committee’s written charter, our Audit Committee has the responsibility to review, approve and oversee transactions between the Company and any related person (as defined in Item 404 of Regulation S-K) and any potential conflict of interest situations on an ongoing basis, in accordance with our policies and procedures, and to develop policies and procedures for the Audit Committee’s approval of related party transactions.
Subordinated Line of Credit Facility
On May 11, 2022, we entered into a Credit Facility Agreement (the “Subordinated LOC”) with Cleveland Capital, L.P. (“Cleveland”), Herndon Plant Oakley, Ltd., (“HPO”), and other lenders (together with Cleveland and HPO, the “Lenders”). The Subordinated LOC provides us with a short-term line of credit (the “LOC”) not less than $3,000,000 and not more than $5,000,000, the proceeds of which shall be used by us for working capital purposes. As of June 30, 2022, the Lenders committed an aggregate of $4,000,000.
In connection with entry into the Subordinated LOC, we paid to each Lender a one-time committee fee in cash equal to 3.5% of such Lender’s Commitment Amount. In addition, in consideration of the Lenders’ commitment to provide the Advances to us, we issued the Lenders five-year warrants to purchase an aggregate of 128,000 shares of common stock at an exercise price of $2.53 per share that are, subject to certain ownership limitations, exercisable immediately.
Pursuant to a selling agreement, dated as of May 11, 2022, the Company retained HPO as its placement agent in connection with the Subordinated LOC. As compensation for services rendered in conjunction with the Subordinated LOC, the Company paid HPO a finder fee equal to 3% of the commitment amount from each such Lender placed by HPO in cash.
Private Placement
From April 2020 to July 2020, pursuant to private placement offerings, we sold and issued an aggregate of 1,141,250 shares of common stock, at $4.00 per share, for an aggregate purchase price of $4,565,000 in cash to twenty-seven (27) accredited investors. Esenjay, our major stockholder and an entity controlled by our director, Mr. Johnson, participated in the offering in the amount of $300,000. In addition, Mr. Cosentino, a former director, also participated in the offering in the amount of $250,000.
Esenjay Loan
On March 9, 2020, the Company and Esenjay Investments, LLC (“Esenjay”) entered into a certain convertible promissory note (“Original Esenjay Note”) pursuant to which Esenjay provided the Company with a loan in the principal amount of $750,000 (the “Esenjay Loan”). On June 2, 2020, the Original Esenjay Note was amended and restated to (i) extend the maturity date from June 30, 2020 to September 30, 2020, and (ii) to increase the principal amount outstanding under the Original Esenjay Note to $1,400,000 (the “Esenjay Note”).
Between June 26, 2020 and July 22, 2020, Esenjay assigned a total of $900,000 of the Esenjay Note to three (3) accredited investors and the $900,000 note balance was converted into shares of common stock at $4.00 per share, which was the cash price per share, and resulted in the issuance of 225,000 shares of common stock.
On August 31, 2020, the Company entered into the Third Amended and Restated Credit Facility Agreement and pursuant to which the Company further amended the Esenjay Note to, among other items, transfer all remaining principal and accrued interest outstanding of approximately $564,000 into the amended Credit Facility Agreement. (See “Credit Facility” below).
Credit Facility
On March 22, 2018, we entered into a credit facility agreement with Esenjay with a maximum borrowing amount of $5,000,000 (the “Original Agreement”). The Original Agreement was amended multiple times to allow for, among other things, an increase in the maximum principal amount available under line of credit (“LOC”) to $12,000,000, the inclusion of additional lenders and extension of the maturity date to September 30, 2021.
In August 2020, we paid down an aggregate principal amount of approximately $1,402,000 of the outstanding balance under the LOC. On August 31, 2020, we entered into the Third Amended and Restated Credit Facility Agreement (“Third Amended and Restated Facility Agreement”) pursuant to which we (i) extended the maturity date to September 30, 2021, and (ii) allowed for the transfer of outstanding obligations under the Esenjay Note of approximately $564,000 into the LOC as noted above. In November 2020, lenders holding an aggregate of approximately $2,161,000 in principal and accrued interest elected to convert their notes into 540,347 shares of common stock at a price of $4.00 per share. In January and March 2021, the lenders holding an aggregate of approximately $2,632,000 in principal and accrued interest elected to convert their notes into 658,103 shares of common stock at a price of $4.00 per share of which approximately $1,045,000 was held by Esenjay and converted to 261,133 shares of common stock.
On June 10, 2021, we repaid all obligations in full and without additional fees or termination penalties, and the Third Amended and Restated Credit Facility Agreement and the related Second Amended and Restated Security Agreement were terminated.
Cleveland Loan
On July 3, 2019, we entered into a loan agreement with Cleveland, pursuant to which Cleveland agreed to loan the Company $1,000,000 (the “Cleveland Loan”) and issued Cleveland an unsecured short-term promissory note in the amount of $1,000,000 (the “Unsecured Promissory Note”). The Unsecured Promissory Note had an interest rate of 15.0% per annum and was originally due on September 1, 2019, unless repaid earlier from a percentage of proceeds from certain identified accounts receivable. In connection with the Cleveland Loan, we issued Cleveland a three-year warrant (the “Cleveland Warrant”) to purchase the Company’s common stock in a number equal to 0.5% of the number of shares of common stock outstanding after giving effect to the shares of common stock sold in a contemplated public offering and with an exercise price equal to the per share price of the common stock sold in the public offering.
On September 1, 2019, we entered into the First Amendment to the Unsecured Promissory Note pursuant to which the maturity date was extended to December 1, 2019 (the “First Amendment”) and the Cleveland Warrant terms were amended (the “Amended Warrant”). The Amended Warrant increased the warrant coverage from 0.5% to 1% of the number of shares of common stock outstanding after giving effect to the shares of common stock sold in the next private or public offering and with an exercise price equal to the per share price of common stock sold in such private or public offering, as the case may be.
On July 9, 2020, we made a payment to Cleveland in the amount of $200,000 as a partial payment of the Cleveland Loan. On July 27, 2020, in connection with the outstanding loan from Cleveland to us in the principal amount of $957,000, we entered into the Eighth Amendment to the Unsecured Promissory Note which extended the maturity date from July 31, 2020 to August 31, 2020, and capitalized all accrued and unpaid interest as of July 27, 2020 to the principal amount. On August 19, 2020, we paid Cleveland the entire remaining principal balance due under the Cleveland Loan, together with all accrued interest payable as of August 19, 2020, in an aggregate amount of approximately $978,000.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
Independent Auditor
For the fiscal years ended June 30, 2022 and 2021, the Company’s independent public accounting firm was Baker Tilly US, LLP (formerly Squar Milner LLP, which, effective as of November 1, 2020, merged with Baker Tilly US, LLP).
Fees Paid to Principal Independent Registered Public Accounting Firm
The aggregate fees billed by our Independent Registered Public Accounting Firm, for the fiscal years ended June 30, 2022 and 2021 are as follows:
Audit fees(1) $ 131,000 $ 107,000
Audit related fees(2)
22,000 103,000
Tax fees(3)
- -
All other fees(4)
- -
Total $ 153,000 $ 210,000
(1) Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review of our quarterly financial statements and those services normally provided in connection with statutory or regulatory filings or engagements including comfort letters, consents and other services related to SEC matters. This information is presented as of the latest practicable date for this annual report.
(2) Audit-related fees represent fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and not reported above under “Audit Fees.”
(3) Baker Tilly US, LLP did not provide us with tax compliance, tax advice or tax planning services.
(4) All other fees include fees billed by our independent auditors for products or services other than as described in the immediately preceding three categories. No such fees were incurred during the fiscal years ended June 30, 2022 or 2021.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Our audit committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm, the scope of services provided by our independent registered public accounting firm and the fees for the services to be performed. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget.
Our independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by our independent registered public accounting firm in accordance with this preapproval, and the fees for the services performed to date.
All of the services relating to the fees described in the table above were approved by our audit committee.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements
The following financial statements of Flux Power Holdings, Inc., and Report of Baker Tilly US, LLP, independent registered public accounting firm, are included in this report:
Page
Report of Independent Registered Public Accounting Firm - (Baker Tilly US, LLP, San Diego, CA PCAOB Firm ID# 23)
Consolidated Balance Sheets as of June 30, 2022 and 2021
Consolidated Statements of Operations for the Years Ended June 30, 2022 and 2021
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended June 30, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended June 30, 2022 and 2021
Notes to the Consolidated Financial Statements
(2) Financial Statement Schedules: All schedules have been omitted because the required information is included in the financial statements or notes thereto or because they are not required.
(3) Exhibits:
The exhibits required by Item 601 of Regulation S-K are listed in subparagraph (b) below.
(b) The following exhibits are filed as part of this Report
Exhibit
No.
Description
2.1
Securities Exchange Agreement dated May 18, 2012. Incorporated by reference to Exhibit 2.1 on Form 8-K filed with the SEC on May 24, 2012.
2.2
Amendment No. 1 to the Securities Exchange Agreement dated June 13, 2012. Incorporated by reference to Exhibit 2.2 on Form 8-K filed with the SEC on June 18, 2012.
3.1
Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on February 19, 2015.
3.2
Amended and Restated Bylaws of Flux Power Holdings, Inc. Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on May 31, 2012.
3.3
Certificate of Amendment to Articles of Incorporation. Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on August 18, 2017.
3.4
Certificate of Change. Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on July 12, 2019.
4(vi)
Description of Securities. Incorporated by reference to Exhibit 4(vi) on Form 10-K filed with the SEC on September 28, 2020.
4.1
Form of Warrant. Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on September 23, 2021.
4.2
Form of Warrant Certificate. Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on May 13, 2022.
4.3
Warrant to Purchase Stock issued to Silicon Valley Bank, dated June 23, 2022. Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on June 28, 2022.
10.1#
Form of Indemnification Agreement. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on April 9, 2019.
10.2
Lease Agreement dated April 25, 2019. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on April 30, 2019.
10.3
First Amendment to Standard Industrial/Commercial Multi Tenant Lease with Accutek dated March 1, 2020. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on March 5, 2020.
10.4
Form of Representative Warrant. Incorporated by reference to Exhibit 10.1 on Form 10-Q filed with the SEC on November 12, 2020.
10.5#
Flux Power Holdings, Inc. 2010 Stock Plan: Form of Stock Option Agreement. Incorporated by reference to Exhibit 10.6 on Form 8-K filed with the SEC on June 18, 2012.
10.6#
Equity Incentive Plan. Incorporated by reference to Exhibit 10.23 on Form 10-Q filed with the SEC on May 15, 2015.
10.7#
Amendment to the Flux Power Holdings Inc. 2014 Equity Incentive Plan. Incorporated by reference to Exhibit 10.20 on Form 10-K filed with the SEC on September 27, 2018.
10.8#
Amendment No. 2 to the Flux Power Holdings Inc. 2014 Equity Incentive Plan Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on November 9, 2020.
10.9#
Form of Restricted Stock Unit Award Agreement. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on November 9, 2020.
10.10#
Form of Performance Restricted Stock Unit Award Agreement. Incorporated by reference to Exhibit 10.3 on Form 8-K filed with the SEC on November 9, 2020.
10.11#
Annual Cash Bonus Plan. Incorporated by reference to Exhibit 10.4 on Form 8-K filed with the SEC on November 9, 2020.
10.12
Loan and Security Agreement with Silicon Valley Bank. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on November 12, 2020.
10.13
Intellectual Property Security Agreement. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on November 12, 2020.
10.14#
Amended and Restated Employment Agreement by and between Flux Power Holdings, Inc. and Ronald F. Dutt. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on February 17, 2021.
10.15#
Employment Agreement by and between Flux Power Holdings, Inc. and Charles A. Scheiwe. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on February 17, 2021.
10.16#
Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on May 4, 2021.
10.17#
Form of Restricted Stock Unit Award Agreement - Non-Executive Director. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on May 4, 2021.
10.18
Form of Securities Purchase Agreement. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on September 23, 2021.
10.19#
Form of Performance Restricted Stock Unit Award. Incorporated by reference to Exhibit 10.3 on Form 8-K filed with the SEC on November 2, 2021
10.20
First Amendment to Loan and Security Agreement with Silicon Valley Bank. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on November 3, 2021
10.21
Credit Facility Agreement dated May 11, 2022. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on May 13, 2022.
10.22
Form of Subordinated Unsecured Promissory Note. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on May 13, 2022.
10.23
Second Amendment to Loan and Security Agreement with Silicon Valley Bank. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on June 28, 2022.
10.24#
Employee Separation and Release with Jonathan Berry dated August 24, 2022. Incorporated by reference to Exhibit 10.1 on Form 8-K/A filed with the SEC on August 26, 2022.
14.1
Code of Business Conduct and Ethics. Incorporated by reference to Exhibit 99.4 on Form 8-K filed with the SEC on July 2, 2019.
21.1
Subsidiaries. Incorporated by reference to Exhibit 21.1 on Form 8-K filed with the SEC on June 18, 2012
23.1*
Consent of Independent Registered Public Accounting Firm
31.1*
Certifications of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act.
31.2*
Certifications of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act.
32.1*
Certifications of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act.
32.2*
Certifications of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act.
101.INS*
XBRL Instance Document*
101.SCH*
XBRL Taxonomy Extension Schema
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase
101.DEF*
XBRL Taxonomy Extension Definition Linkbase
101.LAB*
XBRL Taxonomy Extension Label Linkbase
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase
* Filed herewith.
# Indicates management contract or compensatory plan or arrangement.