What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-09-27 compared with 2020-09-28 · 333 added, 467 removed, 43 unchanged (95% of the section changed)

5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

August 14, 2020, we priced an underwritten public offering of common stock, and as a result of this equity offering and our compliance

with other listing requirements, shares of our common stock commenced trading on The NASDAQ Capital Market under the symbol “FLUX.”

Prior to the listing of our shares on The NASDAQ Capital Market, our common stock was quoted on the OTCQB.

The following table

sets forth the range of the high and low prices for our common stock during each quarter for the period July 1, 2018 through June

30, 2020, which has been adjusted retroactively to reflect the 1 for 10 reverse stock split, effective July 11, 2019.

do not represent actual transactions, and do not include retail mark-ups, mark-downs or commissions.

Fiscal year ended June 30, 2020

First quarter

Second quarter

Third quarter

Fourth quarter

Fiscal year ended June 30, 2019

First quarter

Second quarter

Third quarter

Fourth quarter

approximate number of record holders of our common stock as of September 15, 2020 was 1,408, based on information provided by

our transfer agent.

The foregoing number of record holders does not include an unknown number of stockholders who hold their stock

in “street name.”

for Common Stock

common stock is traded on The NASDAQ Capital Market under the symbol “FLUX.”

of Record of Common Stock

of September 10, 2021, we had approximately 1,454 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.”

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.

Sales of Unregistered Securities

July 3, 2019, we issued Cleveland a three-year warrant (the Cleveland Warrant) to purchase our common stock in a number equal

to one-half percent (0.5%) of the number of shares of common stock outstanding after giving effect to the total number of shares

of common stock sold in a public offering.

The Cleveland Warrant had an exercise price equal to the per share public offering

On September 1, 2019, the Cleveland Warrant was amended and restated to change the warrant coverage from 0.5% to 1% of

the number of shares of common stock outstanding after giving effect to the total number of shares of common stock sold in the

next private or public offering (Offering).

In addition, the exercise price was also changed to equal the per share price of common

stock sold in the Offering.

The closing of a private offering constituting the Offering occurred on July 24, 2020.

Upon such closing,

the Warrant represented a right to purchase up to 83,205 shares of common stock at $4.00 per share (subject to beneficial ownership

limitations).

The Warrant and the common stock underlying the Cleveland Warrant, as amended, have not been registered under the

Securities Act of 1933, as amended (Securities Act), and may not be offered or sold in the United States absent registration or

an applicable exemption from the registration requirements of the Securities Act.

Such securities were offered and sold in reliance

upon exemptions from registration pursuant to Rule 506(b) of Regulation D promulgated under Section 4(a)(2) under the Securities

May 2016 to August 2016, we sold 975,000 shares of common stock to eight (8) accredited investors, at $4.00 per share, for an

aggregate of $3,900,000, of which $2,125,000 was in cash and $1,775,000 was settlement of outstanding loan.

March 2018 to June 2018, we sold an aggregate of 571,429 shares of our common stock to fifteen (15) accredited investors, at $7.00

per share, for an aggregate purchase price of $4,000,000.

December 2018 to January 2019, we sold an aggregate of 399,257 shares of common stock to three (3) accredited investors, at $11.00

per share, for an aggregate purchase price of approximately $4,392,000.

April 22, 2020, we sold and issued an aggregate of 66,250 shares of common stock, at $4.00 per share, for an aggregate purchase

price of $265,000 in cash to two (2) accredited investors.

June 30, 2020, we completed an initial closing of the private placement offering of up to 2,000,000 shares of our common stock,

pursuant to which we sold an aggregate of 275,000 shares of our common stock at $4.00 per share, for an aggregate purchase price

of $1,100,000 to six (6) accredited investors.

The $1,100,000 aggregate purchase price for such shares was paid in cash.

Dutt, our president and chief executive officer, participated in the initial closing in the amount of $300,000 and $50,000,

respectively.

2020, we completed an additional closing of the private placement offering of up to 2,000,000 shares of common stock,

pursuant to which we sold an aggregate of 800,000 shares of our common stock at $4.00 per share, for an aggregate purchase price

of $3,200,000, to twenty (20) accredited investors.

The aggregate purchase price for such shares was paid in cash.

our director, participated in the closing by acquiring 62,500 shares common stock at a purchase price of $250,000.

offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities

Act in reliance on Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated thereunder as transactions by

an issuer not involving a public offering.

Each of the recipients of securities in these transactions was an accredited investor

within the meaning of Rule 501 of Regulation D under the Securities Act.

October 2018, we issued 1,502,714 shares of common stock in connection with the conversion of an outstanding principal amount

of $7,975,000 plus accrued and unpaid interest of $1,041,280.

As an inducement for the conversion of principal and interest, we

also issued 26,802 additional shares of common stock.

October 2018, we issued 50,209 shares of common stock in exchange for the cancellation of a loan in the amount of $500,000 plus

accrued interest of $102,510.

June 30, 2020, we issued 1,845,830 shares of common stock to eight (8) accredited investors in connection with the conversion

of approximately $7,383,000 in principal and accrued interest, under the LOC.

June 30, 2020, we issued 125,000 shares of common stock to two (2) accredited investors in connection with the conversion of $500,000

in principal under the Esenjay Note.

July 22, 2020, we issued 100,000 shares of common stock to one investor in connection with the conversion of $400,000 in principal

under the Esenjay Note.

offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities

Act in reliance on Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated thereunder as transactions by

an issuer not involving a public offering.

Each of the recipients of securities in these transactions was an accredited investor

within the meaning of Rule 501 of Regulation D under the Securities Act.

December 31, 2019, the promissory notes previously issued to the Lenders in connection with the LOC were amended to grant each

of the Lenders a right convert their respective promissory note under the LOC into shares of our common stock at any time after

the close of our next financing of at least $1,000,000 on or after December 31, 2019, and on or before the maturity date.

financing occurred on June 30, 2020 and, as a result, each of the Lenders had a right to convert the principal and accrued interest

outstanding under their respective promissory notes into shares of common stock at $4.00 per share.

As of August 31, 2020, there

was approximately $4,396,000 in principal outstanding under such notes, which is convertible into approximately 1,099,000 shares

of common stock at $4.00 per share (subject to any beneficial ownership limitations).

March 9, 2020, we issued Esenjay a convertible promissory note in the amount of $750,000 (the “Esenjay Note”).

Esenjay Note was convertible into shares of common stock at any time after the close of the next financing of at least $1,000,000

on or after December 31, 2019, and on or before the maturity date.

The financing occurred on June 30, 2020 and, as a result, Esenjay

has a right to convert the principal and accrued interest outstanding under the Esenjay Note into shares of common stock at $4.00

On June 2, 2020, the convertible promissory note was amended to increase the principal amount to $1,400,000.

July 28, 2020, following the conversion of $900,000 under the Esenjay Note into 225,000 shares of common stock at $4.00 per share,

there was approximately $500,000 in principal outstanding under the Esenjay Note.

In connection with the Third Amended and Restated

Credit Facility Agreement, the outstanding principal and accrued interest was consolidated into the LOC, which obligations continue

to be convertible into shares of common stock at $4.00 per share at the option of the note holder.

offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities

Act in reliance on Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated thereunder as transactions by

an issuer not involving a public offering.

Each of the recipients of securities in these transactions was an accredited investor

within the meaning of Rule 501 of Regulation D under the Securities Act.

April 1, 2016, we agreed to issue 5,400 shares of common stock;

on April 1, 2017, we agreed to issue 9,333 shares of common stock;

and on April 1, 2018, we agreed to issue 3,884 to an entity to provide investor relations services.

All shares of common stock

issued to the entity was issued in reliance upon exemption from registration pursuant to Section 4(a)(2).

March 14, 2018 to October 24, 2019, we issued an aggregate of 17,468 shares of restricted common stock, valued at approximately

$233,000, to a consultant for services provided to us relating to the identification of strategic partners, suppliers and manufacturers

The common stock was issued in reliance upon exemption from registration pursuant to Section 4(a)(2) or Regulation S

promulgated thereunder.

July 1, 2017 through June 30, 2020, we granted to our directors, officers and employee options to purchase an aggregate of 556,811

shares of our common stock under our equity compensation plans.

Of such total options granted, options that were granted prior

to February 13, 2019, in an aggregate of 326,039 shares at exercise prices ranging from approximately $4.60 to $19.80 per share

were issued in reliance upon exemption from registration pursuant to Section 4(a)(2) or Rule 506 of Regulation D.

of the foregoing transactions involved any underwriters, underwriting discounts or commissions or any public offering.

All recipients

had adequate access, through their relationships with us, to information about us.

The recipients of the securities in each of

these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale

in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.

The sales of these securities were made without any general solicitation or advertising.

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.

of Equity Securities

have never repurchased any of our equity securities.

did not declare or pay dividends on our common stock during fiscal years 2020 and 2019 and 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.

Compensation Plan Information

for our equity compensation plans in effect as of June 30, 2020 is as follows:

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)

Equity compensation plans approved by security holders(1)

Equity compensation plans not approved by security holders(2)

incentive stock options (“ISO”) and 80,700 non-qualified stock options (“NQSO”) of our common stock

were granted under the 2014 Option Plan during the fiscal 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 year ended June 30, 2019.

We granted 15,324 incentive

stock options and 3,948 non-qualified stock options under the 2014 plan during the fiscal year ended June 30, 2020.

Option Plan was approved February 17, 2015, and was amended on October 25, 2017.

of 7,200 options granted under the 2010 Stock Option Plan (“2010 Option Plan”) and assumed by us in the reverse

following table provides certain information with respect to our equity compensation plans in effect as of June 30, 2021:

of securities to be issued upon exercise of outstanding options, and settlement of RSUs

Weighted-average

exercise price of outstanding options, and issuance price of RSUs

of securities remaining available for future issuance under equity compensation plans (excluding

securities reflected in column a)

compensation plans approved by security holders (1)

compensation plans approved by security holders (2)

compensation plans not approved by security holders (3)

211,800 incentive stock options (“ISO”) and 80,700 non-qualified

stock options (“NQSO”) of our common stock were granted under the 2014 Option Plan during the year ended June 30, 2018.

granted 147,411 incentive stock options and 97,616 non-qualified stock options under the 2014 Option Plan during Fiscal 2019.

15,324 incentive stock options and 3,948 non-qualified stock options under the 2014 Option Plan during Fiscal 2020.

We granted 153,177

restricted stock units under the 2014 Option Plan during Fiscal 2021.

The 2014 Option Plan was approved February 17, 2015, and was amended

on October 25, 2017.

of 2,000,000 shares of common stock reserved for issuance under the 2021 Equity Incentive Plan which was approved by our shareholders

on April 29, 2021.

of 7,200 options granted under the 2010 Stock Option Plan (“2010 Option Plan”) and assumed by us in the reverse acquisition.

An additional 30,700 non-qualified options were issued.

1 unchanged sentence

6 - SELECTED FINANCIAL DATA

a Smaller Reporting Company as defined by Rule12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing

scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

a smaller reporting company as defined by Rule12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled

disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion provides information which management believes is relevant to an assessment and understanding of the Company’s

results of operations and financial condition.

The discussion should be read in conjunction with the Consolidated Financial Statements

and Notes thereto contained in this Annual Report on Form 10-K.

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”

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,”

incorporated herein by reference.

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”

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,”

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.

design, develop, manufacture, and sell advanced rechargeable lithium-ion energy storage solutions for lift trucks, and other industrial

equipment including airport ground support equipment (“GSE”), energy storage for solar applications, and industrial

robotic applications.

Our “LiFT Pack”

battery packs, including our proprietary battery management system (“BMS”),

provide our customers with a better performing, lower cost of ownership, and more environmentally friendly alternative, in many

instances, to traditional lead acid and propane-based solutions.

have received Underwriters Laboratory (“UL”) Listing on our Class 3 Walkie Pallet Jack LiFT Pack product line, our

Class 1 Counterbalance/Sit down/Ride-on LiFT Packs, currently have in testing our Class 2 Narrow Aisle LiFT Packs, and are scheduling

this year our Class 3 End Rider LiFT Pack.

We believe that a UL Listing demonstrates the safety, reliability and durability of

our products and gives us an important competitive advantage over other lithium-ion energy suppliers.

Many of our LiFT Packs have

been approved for use by leading industrial motive manufacturers, including Toyota Material Handling USA, Inc., Crown Equipment

Corporation, and Raymond Corporation.

effected a 1-for-10 reverse split of our common stock and preferred stock on July 11, 2019 (“2019 Reverse Split”).

No fractional shares were issued in connection with the 2019 Reverse Split.

If, as a result of the 2019 Reverse Split, a stockholder

would otherwise have been entitled to a fractional share, each fractional share was rounded up.

The 2019 Reverse Split resulted

in a reduction of our outstanding shares of common stock from 51,000,868 to 5,101,580.

In addition, it resulted in a reduction

of our authorized shares of common stock from 300,000,000 to 30,000,000, and a reduction of our authorized shares of preferred

stock from 5,000,000 to 500,000.

The par value of our stock remained unchanged at $0.001.

In addition, by reducing the number

of our outstanding shares, our loss per share in all periods presented was increased by a factor of ten.

Financing Activities

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 and Mr.

Dutt, our president and chief executive officer, participated in the initial closing

in the amount of $300,000 and $50,000, respectively.

Cosentino, our director, also participated in the offering in the amount

On June 30, 2020, there was a partial conversion of the debt underlying the secured promissory notes issued to

lenders under the LOC at a conversion price of $4.00 per share (the “Conversion”).

Immediately prior to the Conversion,

there was an aggregate of approximately $11,791,000 in principal and accrued interest outstanding under all the secured promissory

notes evidencing the advance under the LOC.

At the option of the lenders, on June 30, 2020, an aggregate of approximately $7,383,000

in principal and accrued interest outstanding under the LOC was converted into 1,845,830 shares of common stock, which consisted

of (a) partial conversion of Principal plus interest under the Esenjay LOC Note in the amount of $4,400,000 into 1,100,000 shares

of common stock at $4.00 per share, and (b) conversion of approximately $2,983,000 of the secured promissory notes issued in connection

with the LOC, principal plus accrued interest, by other lenders, including certain assignees of the Esenjay LOC Note, into 745,830

shares of common stock.

Immediately after the Conversion, there was approximately $5,289,709, principal, of which approximately

$984,000 was outstanding under the Esenjay LOC Note and approximately $4,306,000 was outstanding under the other lender’s

respective notes.

Note Conversion .

On June 30, 2020, two (2) accredited individuals, who became note holders to the Esenjay Note pursuant to

the assignment of such notes by Esenjay to the note holders, converted $500,000 in principal into 125,000 shares of common stock

at $4.00 per share (“Esenjay Initial Conversion”).

In addition, on July 22, 2020, one (1) individual, who became a

note holder to the Esenjay Note pursuant to the assignment of such note to the note holder, elected to convert $400,000 in principal,

into 100,000 shares of common stock at $4.00 per share (together with Esenjay Initial Conversion, the “Esenjay Note Conversion”).

Immediately prior to the Esenjay Initial Conversion, there was an aggregate of approximately $1,400,000 in principal outstanding

under the Esenjay Note.

Immediately after the Esenjay Note Conversion, there was approximately $500,000 in principal outstanding

under the Esenjay Note, which is convertible into approximately 125,000 shares of common stock at the option of the note holder(s)

at $4.00 per share.

Public Offering.

On August 14, 2020, we priced an underwritten public offering of our common stock, and as a result of this

equity offering and our compliance with other listing requirements, shares of our common stock commenced trading on The NASDAQ

Capital Market under the symbol “FLUX.”

Prior to the listing on The NASDAQ Capital Market, our common stock was quoted

on the OTCQB.

On August 18, 2020, we closed this underwritten offering which represented 3,099,250 shares of our common stock

at a public offering price of $4.00 per share for gross proceeds of approximately $12.4 million to us prior to deducting underwriting

discounts and commissions and offering expenses payable by us, and included the full exercise of the underwriters’

over-allotment

The shares of common stock offered by us through this underwritten offering were offered pursuant to a registration statement

on Form S-1 (File No.

333-231766), which was declared effective by the United States Securities and Exchange Commission on August

and Esenjay Note Consolidation.

In August 2020, we made a payment of $1,000,000 to some of our lenders, including $600,000

to Esenjay, as partial repayment of outstanding principal under the Notes relating to the LOC.

On August 31, 2020, we entered

into a certain Third Amended and Restated Credit Facility Agreement relating to a secured line of credit for up to a principal

amount of $12,000,000 to (i) extend the maturity date from December 31, 2020 to September 30, 2021, and (ii) to include outstanding

obligations for an aggregate amount of approximately $564,000, consisting of $500,000 in principal and approximately $64,000 in

accrued interest, under the Esenjay Note, into the LOC.

As of August 31, 2020, after the consolidation there was approximately

$4,396,000 in principal outstanding under the LOC which is convertible, at the option of the note holder, into approximately 1,099,000

shares of common stock (subject to any beneficial ownership limitations) at $4.00 per share.

As of August 31, 2020, there was

approximately $7,604,000 available for future draws.

On May 1, 2020, Flux Power applied for and received a loan from the Bank of America, NA (the “BOA”) in the

aggregate principal amount of $1,297,083 (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”)

under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The PPP Loan is evidenced by a promissory

note dated May 1, 2020, issued by Flux Power to the BOA (the “PPP Note”).

The PPP Loan has a two-year term and bears

interest at a rate of 1.0% per annum.

Monthly principal and interest payments are deferred for six months after the date of disbursement.

The Borrower received the funds on or around May 4, 2020.

The PPP Note may be prepaid by Flux Power at any time prior to maturity

with no prepayment penalties.

Proceeds from the PPP Loan are available to Flux Power to fund designated expenses, including certain

payroll costs, group health care benefits and other permitted expenses, in accordance with the PPP.

Under the terms of the PPP,

up to the entire amount of principal and accrued interest may be forgiven to the extent PPP Loan proceeds are used for qualifying

expenses as described in the CARES Act and applicable implementing guidance issued by the U.S.

Small Business Administration under

Flux Power intends to use the entire PPP Loan amount for designated qualifying expenses and to apply for forgiveness

of the PPP Loan in accordance with the terms of the PPP.

No assurance can be given that Flux Power will obtain forgiveness of

the PPP Loan in whole or in part.

With respect to any portion of the PPP Loan that is not forgiven, the PPP Loan will be subject

to customary provisions for a loan of this type, including customary events of default relating to, among other things, payment

defaults, and breaches of the provisions of the PPP Note.

As of September 25, 2020, the outstanding balance was approximately

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.

design, develop, manufacture, and sell a portfolio of advanced lithium-ion energy storage solutions for the material handling sector

which includes lift trucks, airport ground support equipment (“GSE”), and other industrial and commercial applications.

believe our mobile and stationary energy storage solutions provide customers with 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 (“SkyBMS”)

to provide the level of energy storage required and “state of the art”

real time monitoring of pack performance.

that the increasing demand for lithium-ion battery packs in the material handling sector continues to drive our current revenue growth.

long-term strategy is to meet the rapidly growing demand for lithium-ion energy solutions and to be the supplier of choice,

targeting large fleets of forklifts and GSEs as a priority.

We intend to reach this goal by investing in research and development to

expand our product mix, and 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 customers.

We recently filed three new patents on advanced

technology related to lithium-ion battery packs.

The technology behind these pending patents are designed to:

battery life by optimizing the charging cycle,

users a better understanding of the health of their battery in use, and

artificial intelligence (“AI”) to predictively balance the cells for optimal performance.

currently focus on 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

Applications of our modular packs for other industrial and commercial uses, such as solar energy storage, provide further growth

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”

Our recent business growth reflects our expanded

product line, additional OEM relationships and supply contracts, production capacity increases, and an expanded nation-wide service footprint.

Our strategy for sales growth places a high priority on growing relationships with the national account sales forces of the equipment

OEMs, expanding relationships with major equipment dealers and distributors, and leveraging our brand reputation of trust and reliability.

achieve our long-term strategy, we will need to manage our growth in a thoughtful manner, improve the profitability of our business and

continue to take steps to enhance our financial strength.

During fiscal 2021, we directed

our efforts to reduce our outstanding debt through a combination of debt service and debt conversion to equity.

During the quarter ended

March 31, 2021, the remaining outstanding balance of approximately $2,632,000 in principal and accrued interest under the Credit Facility

was converted into 658,103 shares of common stock, which resulted in elimination of the entire outstanding debt by end of Fiscal 2021.Accordingly,

on June 10, 2021, the Third Amended and Restated Credit Facility Agreement and the related Second Amended and Restated Security Agreement

dated August 31, 2020 by and among the Company and the Lenders (the “Security Agreement”) were terminated.

Under the Credit

Facility, the Company could borrow up to $12 million under a revolving line of credit, with such advance subject to discretion of the

Pursuant to the Security Agreement, advances and obligations under the Credit Facility were secured by a security interest in

collateral of the Company.

As of the termination date, all payments due under the related notes have been made in full and all obligations

under such notes and the Credit Facility have been paid or discharged in full.

In addition, the Company did not incur any early termination

penalties in connection with the termination of the Third Amended and Restated Credit Agreement or Security Agreement.

August 18, 2020, we closed an underwritten public offering of our common stock at a public offering and issued 3,099,250 shares of our

common stock at $4.00 per share for gross proceeds of approximately $12.4 million, which included the full exercise of the underwriters’

over-allotment option to purchase additional shares, prior to deducting underwriting discounts and commissions and offering expenses.

Concurrent with the announcement of our public offering, on August 14, 2020, our common stock commenced trading on The NASDAQ Capital

Market under the symbol “FLUX.”

At-The-Market

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 “At-The-Market”

offerings 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”).

From December 2020 to June 30, 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.

under the Revolving Line of Credit

We also put in place a revolving

line of credit for up to $4 million with Silicon Valley Bank (“SVB”).

On November 9, 2020, we entered into a certain Loan

and Security Agreement (“Agreement”) with SVB for a senior secured revolving credit facility for up to $4.0 million available

on a revolving basis (“SVB Credit Facility”).

The Company has utilized the SVB Credit Facility from-time-to-time, however

as of June 30, 2021, the outstanding balance of the line of credit was $0 and the entire $4.0 million of the facility is available for

future draws through November 8, 2021, unless the credit facility is renewed and its term is extended prior to its expiration.

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.

Accounting Policies and Estimates

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

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

Actual results may differ from these estimates under different assumptions or conditions.

believe the following critical accounting policies and estimates affect the preparation of our financial statements:

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 fiscal years ended June 30, 2020 and 2019.

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 recorded an adjustment related to obsolete inventory in the amount of approximately $15,000

and $90,000 during the years ended June 30, 2020 and 2019, respectively.

July 1, 2018, the Company adopted the new accounting standard FASB Accounting Standards Codification (“ASC”) Topic

606, Revenue from Contracts with Customers (“ASC 606”) for all contracts using the modified retrospective method.

Based on the Company’s analysis of contracts with customers in prior periods, there was no cumulative effect adjustment

to the opening balance of the Company’s accumulated deficit as a result of the adoption of this new standard.

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 North America.

The Company recognizes revenue for products when

all the significant risks and rewards have been transferred to the customer, no continuing managerial involvement usually associated

with ownership of the goods 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 in respect of the transaction can be measured reliably.

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 insignificant.

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, 2021 and 2020.

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 recorded an adjustment related to obsolete inventory in the amount of approximately $15,000 during the year ended June 30,

The Company has no adjustment related to obsolete inventory during the year ended June 30, 2021.

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.

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.

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.

Company evaluates its exposure to product warranty obligations based on historical experience.

1 unchanged sentence

packs, are warrantied for five years unless modified by a separate agreement.

As of June 30, 2020 and 2019, the Company carried

warranty liability of approximately $726,000 and $361,000, respectively, which is included in accrued expenses on the Company’s

consolidated balance sheets.

As of June 30, 2021 and 2020, the Company carried warranty

liability of approximately $895,000 and $726,000, respectively, which is included in accrued expenses on the Company’s consolidated

balance sheets.

to the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

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.

in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation.

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.

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.

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.

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.

and Related Information

1 unchanged sentence

of Results of Operations of the Years ended June 30, 2021 and 2020

following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in

this Annual Report.

following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this

Annual Report.

following table represents our statement of operations for the years ended June 30, 2021 (“Fiscal 2021”) and June 30, 2020

(“Fiscal 2020”).

Year Ended June 30,

% of Revenues

Cost of goods sold

Gross profit (loss)

Cost of sales

Operating expenses:

Selling and administrative expenses

Selling and administrative

Research and development

4 unchanged sentences

Other income (expense):

Interest expense, net

Interest expense

$ (12,793,000 )

$ (14,336,000 )

product focus is primarily on lift equipment, reflecting our current products for walkie pallet jacks, and higher capacity packs

for Class 1, 2, and 3 forklifts.

We are also expanding on an opportunistic basis to adjacent applications, including airport ground

support equipment (“GSE”).

We feel that we are well positioned to address these markets, which would utilize our modular

and scalable battery pack design and technology.

currently sell most of our products through a distribution network of equipment dealers, OEMs and battery distributors in North

This distribution network mostly sells to large company, national accounts.

However, we do sell certain battery packs

directly to other accounts including industrial equipment manufacturers and the ultimate end-user.

for Fiscal 2020 increased $7,525,000 or 81%, to $16,842,000, compared to $9,317,000 for Fiscal 2019.

This increase in revenues

during Fiscal 2020 was primarily attributable to expansion into larger equipment that is part of the fleets of existing customers.

Revenue increases also came from selling packs for narrow aisle forklifts and natural business extensions like stationary energy

The increase in revenue was also attributable to the increase in battery pack sales across several of the different series

of batteries as we continue to add new product lines.

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

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.

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 “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 2021 increased

$9,415,000 or 56%, to $26,257,000, compared to $16,842,000 for Fiscal 2020.

The increase in revenues was due to an increase in our average

selling price and a higher number of energy solutions sold.

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.

The increase in revenues included both higher sales

to existing customers as well as sales to new customers.

of sales for Fiscal 2021 increased $5,811,000 or 40%, to $20,467,000, compared to $14,656,000 for Fiscal 2020.

The increase in cost

of sales was directly attributable to the substantial increase in sales as discussed above.

Cost of sales as a percentage of revenue

for Fiscal 2020 was 87%, a decrease of 7%, compared to 94% for Fiscal 2019.

The material cost per LiFT Pack in Fiscal 2020 decreased

compared to Fiscal 2019 as new design innovation and volume discounts resulted in lower costs of materials per pack.

The improvement

in lower costs per pack and the higher mix of larger pack sales provided a gross profit during Fiscal 2020 as compared to Fiscal

Warranty expense for Fiscal 2020 increased as a result of the higher sales volume.

As of June 30, 2020, we had approximately

$726,000 accrued for product warranty liability.

The decrease in cost of sales as a percent of revenue is directly related the

Company’s gross margin improvement initiative that has resulted in reductions in material costs, simplified component design,

decrease in labor expense, and decreased warranty expense per pack.

We expect continued improvements to the gross margin as a

result of the initiative.

and Administrative Expenses

The increase in cost of

sales was due to higher sales of energy solutions, partially offset by improved cost of sales efficiencies.

Cost of sales as a percentage

of revenues for Fiscal 2021 was 78%, an improvement of 9% over 87% for the Fiscal 2020.

The principal drivers of improved cost of sales

efficiencies were simplified component designs, reduced material costs, reduced warranty related expenses, and lower personnel related

profit for Fiscal 2021 increased $3,604,000 or 165%, to $5,790,000, compared to $2,186,000 for the Fiscal 2020.

Gross profit as a percentage

of revenues increased to 22% for Fiscal 2021 as compared to 13% for Fiscal 2020.

Improvement in the gross profit margin was primarily

attributable to higher sales to both new and existing customers, and cost of sales efficiencies.

and Administrative

and administrative expenses for Fiscal 2021 increased $2,838,000 or 29%, to $12,599,000, compared to $9,761,000 for Fiscal 2020.

Such expenses consist primarily of salaries and personnel related expenses, stock-based compensation expense, public company costs,

consulting costs, professional fees and other expenses.

The increase is primarily attributable to increases in stock-based compensation,

payroll costs related to additional new hires, and rent expenses associated with our new facility.

increase was primarily attributable to increases in personnel expenses of $1,911,000 related to new hires and temporary labor, an increase

in insurance premiums of $498,000, and higher accounting and legal expenses of $489,000 due in part to our financing activities, partially

offset primarily by a decrease in stock-based compensation of $969,000.

and Development

and development expenses for Fiscal 2021 increased $1,696,000 or 34%, to $6,669,000, compared to $4,973,000 for Fiscal 2020.

expenses consist primarily of materials, supplies, salaries and personnel related expenses, testing costs, consulting costs, and

other expenses associated with the continued development of our packs, as well as, research into new product opportunities.

increase in expenses was primarily due to the UL listing expenses and additional headcount.

We anticipate research and development

expenses will remain a significant portion of our expenses as we continue to develop, expand and add new and improved products

to our product line-up.

income during Fiscal 2019 was $84,000 and was related to the liability release of a related party customer deposit.

expense for Fiscal 2020 increased $541,000 or 43%, to $1,788,000 compared to $1,247,000 for Fiscal 2019.

Interest expense consist

primarily of interest expense related to our outstanding lines of credit and promissory notes.

Interest expense for the year ended

June 30, 2019 included additional interest expense of approximately $466,000 agreed to be paid under the Early Conversion Agreement

with Esenjay as well as origination fees of $25,000 for the shareholder lines of credit.

loss during Fiscal 2020 increased $1,922,000 or 15%, to $14,336,000 compared to $12,414,000 for Fiscal 2019.

The increase is primarily

attributable to increased research and development costs, selling and administrative expenses, and interest expense, partially

offset by improved gross profit.

and Capital Resources

of June 30, 2020, we had a cash balance of $726,000 and an accumulated deficit of $53,412,000.

We believe our current cash balance,

combined with the net proceeds from our recent private placement financing and public offering, will provide sufficient liquidity

and capital resources to fund planned operations for at least the twelve months following the filing date of this Annual Report.

The Company continues to work on securing additional capital from a variety of current and new sources including, but not limited

to, working capital line of credit facilities, private placements of convertible debt and/or equity securities and public offerings

of our equity.

See “Future Liquidity Needs”

operating activities resulted in net cash used in operations of $8,344,000 for Fiscal 2020, compared to net cash used in operations

of $10,712,000 for Fiscal 2019.

The primary reason for the decrease in net cash used in operations was a lower increases in inventory

on hand and accounts receivable, as well as higher increases in accounts payable, accrued liabilities, due to factor, and significant

customer deposits, partially offset by increase in net loss as adjusted for noncash operating activities and a decrease in accrued

net cash used in operating activities for Fiscal 2020 reflects the net loss of $14,336,000 for the period offset primarily by

non-cash items in aggregate amount of approximately $4,213,000, including stock-based compensation, non-cash interest expense,

non-cash facility lease expense, allowance for inventory reserve, depreciation, and stock issued for services.

net cash used in operating activities for Fiscal 2019 reflects the net loss of $12,414,000 for the period offset primarily by

non-cash items in aggregate amount of approximately $2,985,000, including depreciation, stock-based compensation, stock issued

for services, and non-cash interest expense on conversion.

cash used in investing activities for Fiscal 2020 and Fiscal 2019 totaled $323,000 and $275,000, respectively, which consisted

primarily of office and warehouse equipment purchases and the cost of internally developed software.

cash provided by financing activities during Fiscals 2020 and 2019 was $9,291,000 and $8,383,000, respectively.

The increase in

cash provided by financing activities primarily results from the increase in net borrowings from our lines of credit and short-term

promissory notes, and proceeds from the Paycheck Protection Program loan, partially offset by a decrease in proceeds from private

placement sale of our common stock.

Such expenses

consisted primarily of materials, supplies, salaries and personnel related expenses, product testing, consulting, and other expenses

associated with product development.

The increase in research and development expenses was primarily due to new product development activities

including expenses related to UL certifications of $1,113,000, staff/labor related expenses including temporary labor of $506,000, and

facility costs including equipment rental of $110,000.

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.

expense for Fiscal 2021 decreased $1,166,000 or 65%, to $622,000, compared to $1,788,000 for Fiscal 2020.

During Fiscal 2021, interest

expense was primarily related to our outstanding lines of credit and convertible promissory note and also included approximately $174,000

related to the amortization of a debt discount related to a promissory note that was paid in full in August 2020.

Interest expense

decreased in Fiscal 2021 due to a lower average outstanding debt balance during the year, partially offset by $174,000 of debt discount

amortization.

loss during Fiscal 2021 decreased $1,543,000 or 11%, to $12,793,000 compared to $14,336,000 for Fiscal 2020.

The decrease was primarily

attributable to an increase in gross profit and other income, and lower interest expense, partially offset by an increase in operating

or loss before interest, income taxes, depreciation and amortization (“EBITDA”) as adjusted to remove the effect of stock-based

compensation expense is referred to as Adjusted EBITDA.

For the years ended June 30, 2021 and 2020, Adjusted EBITDA was a loss of

approximately $11,100,000 and $10,604,000, respectively.

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 an additional metric to assess the performance of our business.

EBITDA is a non-GAAP financial measure.

We calculate adjusted EBITDA by taking net income, and adding back the expenses related to interest,

income taxes, depreciation, amortization, and stock-based compensation expense, and as each of those elements are calculated in accordance

Adjusted EBITDA 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, as Adjusted EBITDA is not defined by GAAP.

reconciliation of our adjusted EBITDA to net loss is included in the table below:

Years Ended June 30,

$ (12,793,000 )

$ (14,336,000 )

Interest, net

Income tax provision

Depreciation and amortization

(11,897,000 )

(12,407,000 )

Stock-based compensation

Adjusted EBITDA

$ (11,100,000 )

$ (10,604,000 )

Liquidity and Capital Resources

Overview / Going Concern

As of June 30, 2021, we had a

cash balance of $4,713,000 and an accumulated deficit of $66,205,000.

Our business has not generated sufficient cash to fund our planned

operations, and we will need to raise additional cash and capital resources.

We believe our existing cash, additional funding available

under our revolving line of credit for up to $4.0 million with Silicon Valley Bank, net proceeds of approximately $14.0 million

raised during September 2021 through a registered direct offering, and potential sales of our common stock under our ATM Offering,

will be sufficient to meet our anticipated capital resources to fund planned operations for the next twelve months.

See “Future

Liquidity Needs”

Year Ended June 30,

Net cash used in operating activities

$ (18,358,000 )

$ (8,344,000 )

Net cash used in investing activities

Net cash provided by financing activities

Net change in cash

cash used in operating activities was $18,358,000 for Fiscal 2021, compared to net cash used in operating activities of $8,344,000

for Fiscal 2020.

The net cash used in operating activities for Fiscal 2021 reflects the net loss of $12,793,000 for the period

offset primarily by non-cash items including depreciation, stock-based compensation, PPP loan forgiveness, non-cash interest

expense, non-cash facility lease expense, amortization of prepaid offering costs, as well as, increases in accounts payable, accrued

expenses, and deferred revenue, partially offset by increases in accounts receivable, inventory, other current assets, and decreases

in customer deposits, drawdowns from factoring facility, accrued interest, office lease payable.

We intend to improve our working

capital efficiency by improving vendor terms, reducing inventory levels, implementing additional cost saving initiatives, and

decreasing our receivables days outstanding.

cash used in operating activities for Fiscal 2020 reflects the net loss of $14,336,000 for the period offset primarily by non-cash items

including depreciation, stock-based compensation, non-cash interest expense, non-cash facility lease expense, allowance for inventory

reserve, and stock issued for services, as well as increases in accounts payable and accrued expense, customer deposits, and drawdowns

from factoring facility, partially offset by increases in accounts receivable, inventory, other current assets, and office lease payable.

cash used in investing activities for Fiscal 2021 was $1,102,000 and consisted primarily of the costs of internally developed software

and purchase of furniture and equipment and warehouse equipment.

cash used in investing activities for Fiscal 2020 was $323,000 and consisted primarily of the purchase of leasehold improvements and

warehouse equipment.

Net cash provided by financing

activities was $23,447,000 for Fiscal 2021, which primarily consisted of $26,000,000 in net proceeds from the issuance of common stock

in a public offering, a private placement of common stock, sales of common stock under our ATM Offering, and $55,000 from stock and warrant

exercises, which were partially offset by $2,580,000 used to repay outstanding debt, and $28,000 in payment of financing lease payable.

We occasionally used our bank revolving line of credit during the Fiscal 2021, but the balance was zero at June 30, 2021.

Net cash provided by financing

activities was $9,291,000 for Fiscal 2020, which primarily consisted of proceeds from the issuance of common stock in a private placement

of common stock, borrowings under the Company’s Amended and Restated Credit Facility Agreement, proceeds from the Paycheck Protection

Program loan, and short-term loans.

of June 30, 2021, approximately $7.3 million remained available under our $20.0 million ATM Offering for future sales of our common stock

for financing activities.

Liquidity Needs

have evaluated our expected cash requirements over the next twelve months, which include, but are not limited to, investments

in additional sales and marketing and product development resources, capital expenditures, and working capital requirements and

have determined that our existing cash, combined with the net proceeds from our recent private placement financing and public

offering, will be sufficient to meet our anticipated capital resources to fund planned operations for the next twelve months.

To provide capital for anticipated growth, we intend to seek a revolving line of credit from a bank.

In addition, to support

our operations and execute on our business plan, we intend to continue to work on securing additional capital from a variety of

current and new sources including, but not limited to, working capital line of credit facilities, private placements of convertible

debt and/or equity securities and public offerings of our equity.

In addition to raising additional capital, the Company has a

gross margin improvement initiative in place to improve cash flow from operations.

The initiative includes design optimization,

improved vendor pricing, lower cost electronic boards for the battery management system, a total redesign of the end rider battery

pack, and labor cost reductions.

the extent that we raise additional funds by issuing equity or convertible debt securities, our shareholders may experience additional

significant dilution and such financing may involve restrictive covenants.

We have evaluated our expected

cash requirements over the next twelve 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 our existing cash, additional funding available

under our revolving line of credit for up to $4.0 million with Silicon Valley Bank, net proceeds of approximately $14.0 million

raised during September 2021 through a registered direct offering, and potential sales of our common stock under our ATM Offering,

will be sufficient to meet our anticipated capital resources to fund planned operations for the next twelve months..

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, a working capital line of credit facility, and sales of our equity securities.

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.

In the event the Company required to obtain additional funds, there is

no guarantee that the Company will be able to raise or obtain the additional funds or that the funds will be available on favorable terms

to the Company.

Sheet Arrangements

of June 30, 2020, we did not have any other relationships with unconsolidated entities or financial partners, such as entities

often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating

off-balance sheet arrangements or other contractually narrow or limited purposes.

As such, we are not exposed to any financing,

liquidity, market or credit risk that could arise if we had engaged in such relationships.

Accounting Pronouncements

of June 30, 2021, we had no off-balance sheet arrangements.

Accounting Standards

Adopted Accounting Pronouncements

February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016-02, Leases (“ASU 2016-02”).

ASU 2016-02 requires a lessee to recognize a lease asset representing its

right to use the underlying asset for the lease term, and a lease liability for the payments to be made to lessor, on its balance

sheet for all operating leases with a term greater than 12 months.

ASU 2016-02 is effective for fiscal years, and

interim periods within those fiscal years, beginning after December 15, 2018.

Although ASU 2016-02 is required to be adopted

at the earliest period presented using a modified retrospective approach, the FASB issued ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements (“ASU 2018- 11”), which allows for an alternative transition method of adoption by recognizing

a cumulative-effect adjustment, if any, to the opening balance of retained earnings in the period of adoption.

adopted ASU 2016-02 on July 1, 2019, utilizing the alternative transition method allowed under ASU 2018-11.

the Company recorded right-of-use assets and the lease liability of approximately $2.7 million and $2.7 million, respectively,

on its balance sheet as of July 1, 2019.

The lease liability represents the present value of the remaining lease payments of the

Company’s facility lease (see Note 10), discounted using the Company’s incremental borrowing rate as of July 1, 2019.

The corresponding right-of-use lease asset is recorded based on the lease liability, adjusted for the unamortized lease incentives

received and the cumulative difference between rent expense and amounts paid under the facility lease.

The adoption of this guidance

by the Company, effective July 1, 2019, did not have a material impact on the Company’s consolidated financial statements.

June 20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee

Share-Based Payment Accounting (“ASU 2018-07”).

ASU 2018-07 is intended to reduce the cost and complexity and

to improve financial reporting for share-based payments to nonemployees for goods and services.

The amendments in ASU 2018-07

are effective for fiscal years beginning after December 15, 2018, including interim periods therein.

The adoption of this guidance

by the Company, effective July 1, 2019, did not have a material impact on the Company’s consolidated financial statements.

Company did not adopt any new accounting pronouncements for the year ended June 30, 2021.

7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

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.

8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

financial statements required by this item begin on page F-1 with the index to financial statements followed by the financial

financial statements required by this item begin on page F-1 with the index to financial statements followed by the financial statements.

9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity