What changed in this filing

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Item 9A. Controls and Procedures

2021-09-27 compared with 2020-09-28 · 1294 added, 1279 removed, 497 unchanged (84% of the section changed)

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of Disclosure Controls and Procedures

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 subsidiary, and was made known to them by others within those entities, particularly

during the period when this report was being prepared.

Based on the management’s assessment and review of our financial

statements and results for the fiscal year ended June 30, 2020, we have concluded that our disclosure controls and procedures

were effective for purposes stated above.

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 effective as of June 30, 2021.

management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.

The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s

principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial

reporting and the preparation of the Company’s financial statements for external purposes in accordance with generally accepted

accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect

misstatements.

All internal control systems, no matter how well designed, have inherent limitations.

Therefore, even those systems

determined to be effective can provide only reasonable assurances with respect to financial statement preparation and presentation.

Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s

internal control over financial reporting is a process designed under the supervision of the Company’s principal executive officer

and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

All internal control

systems, no matter how well designed, have inherent limitations.

Therefore, even those systems determined to be effective can provide

only reasonable assurances with respect to financial statement preparation and presentation.

Additionally, projections of any evaluation

of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that

the degree of compliance with the policies or procedures may deteriorate.

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, 2020 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”).

Based on the assessment, management determined that the Company

maintained effective internal control over financial reporting as of June 30, 2020 based on the COSO criteria.

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.

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, 2021, 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”).

Based on such assessment, management determined that the Company maintained effective internal control

over financial reporting as of June 30, 2021, based on the COSO criteria.

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.

in Internal Control over Financial Reporting

have been no changes in the Company’s internal controls over financial reporting during the fiscal year ended June 30, 2020

that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial

have been no changes in the Company’s internal controls over financial reporting during the year ended June 30, 2021, that have

materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

9B - OTHER INFORMATION

9C - DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENTS INSPECTIONS

10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers and Significant Employees

Identification

of Directors, Executive Officers and Significant Employees

following table and text set forth the names and ages of our current directors, executive officers and significant employees as

of September 15, 2020.

following table and text set forth the names and ages of our current directors, executive officers and significant employees as of September

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

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 stock grant for their services on the Board.

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.

Chief Executive Officer and President

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Cosentino, Jr.

Dutt resigned as our chief financial officer and secretary on December 16, 2018, and upon his resignation, Mr.

appointed as our chief financial officer and secretary on December 17, 2018.

Dutt was appointed as Chairman

of the Board of Directors on June 28, 2019 upon the resignation of Christopher Anthony.

of the Audit Committee

of the Compensation Committee

James Gevarges resigned as our director on May 6, 2020, and upon his resignation Mr.

Cosentino was appointed to the Board

on May 7, 2020.

Cosentino is the chairperson of the Nominating and Corporate Governance Committee.

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.

of the Audit Committee, Member of Compensation Committee and Governance Committee

Independent Director, Chairperson of the Compensation Committee, Member of Audit Committee and Governance Committee

Cosentino was appointed to the Board on May 7, 2020 to fill a vacancy.

Cosentino is the chairperson of the Nominating and

Corporate Governance Committee (“Governance Committee”) and a member of the Audit Committee and Compensation

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.

Chairman, Chief Executive Officer, President, and Director .

Dutt has been our chief executive officer,

former interim chief financial officer and director since March 19, 2014.

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.

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.

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

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.

Dutt has served as the Company’s interim corporate secretary since June 28, 2013.

Prior to Flux

Dutt provided chief financial officer and chief operating officer consulting services during 2008 through 2012.

In this capacity

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.

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.

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.

an MBA in Finance from University of Washington and an undergraduate degree in Chemistry from the University of North Carolina.

Additionally,

Dutt served in the United States Navy and received an honorable discharge as a Lieutenant.

Scheiwe, Chief Financial Officer and Secretary.

Scheiwe joined the Company in July of 2018 and has been acting as the

Company’s Controller since July 9, 2018.

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.

Prior to joining the

Scheiwe was the controller of Senstay, Inc.

and provided financial and accounting consulting

services to start-up companies from 2016 to 2018.

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.

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

Scheiwe has a Bachelor of Science degree in Business Management, with emphasis in Accounting, from the University

Scheiwe was the vice president of finance and controller for GreatCall, Inc.

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.

Scheiwe has a Bachelor of Science degree

in Business Management, with emphasis in Accounting, from the University of Colorado.

Scheiwe also holds a CPA certificate.

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Berry joined the Company in 2016 and has been our director of operations since 2016.

On June 29, 2018, he was appointed as our chief operating officer.

29, 2018, he was appointed as our chief operating officer.

Prior to joining the Company in 2016, Mr.

Berry was Clean Air

Power, Inc.’s group operations director and general manager of the USA operations from 2014 to 2016, and operations director

of the UK, Australia, and USA market from 2012 to 2014.

Berry’s experience in the development, implementation, and management

of all aspects of supply chain, production, and sales has prepared and qualified him for the position of chief operating officer.

Berry attended the Senior Executive Program at Hult Ashridge Business School in London, England, and has an undergraduate

degree in Electrical Engineering from the University of Leeds.

Berry was Clean Air Power, Inc.’s

group operations director and general manager of the USA operations from 2014 to 2016, and operations director of the UK, Australia,

and USA market from 2012 to 2014.

Berry’s experience in the development, implementation, and management of all aspects of supply

chain, production, and sales has prepared and qualified him for the position of chief operating officer.

Berry attended the Senior

Executive Program at Hult Ashridge Business School in London, England, and has an undergraduate degree in Electrical Engineering from

the University of Leeds.

Johnson, Director.

Johnson has been our director since July 12, 2012.

Johnson has been a director of Flux Power since

it was incorporated.

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

Johnson’s primary responsibility at Esenjay Petroleum is to manage the business and company as chief executive

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 40.2% of our outstanding

shares, including common stock underlying options, warrants and convertible debt that were exercisable or convertible or which

would become exercisable or convertible within 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.

Johnson received a Bachelor of Science degree in mechanical engineering from the University of Southwestern

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.

Johnson’s primary responsibility at Esenjay Petroleum is to manage the business and company as chief executive officer.

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 32.5% 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.

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.

Johnson received a Bachelor of Science

degree in mechanical engineering from the University of Southwestern Louisiana.

Walters-Hoffert, Director.

Walters-Hoffert was appointed to our Board on June 28, 2019.

Walters-Hoffert co-founded

Bioscience Operations, Inc.

(“Daré”) in 2015 and served as Daré’s Chief Business Officer.

Following Daré’s business combination with Cerulean Pharma Inc.

on July 19, 2017, she became the Chief Financial

Officer of the renamed company, Daré

Walters-Hoffert was a co-founder

of Daré

Bioscience, Inc.

During the 25 years prior to joining the team, Ms.

Walters-Hoffert

was an investment banker focused primarily on raising equity capital for, and providing advisory services to, small-cap public

and following the company’s merger with Cerulean Pharma, Inc.

in July of 2017, became Chief Financial

Officer of the surviving public company (NASDAQ:

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, serving as Managing Director in the Investment

Banking Division.

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.

Walters-Hoffert worked at Roth

Capital Partners as Managing Director in the Investment Banking Division.

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.

York City, New York.

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.

Walters-Hoffert currently serves as a member of the Board of Directors of The Elementary Institute of Science in San Diego.

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 Planned Parenthood of the Pacific Southwest.

Walters-Hoffert graduated magna cum

laude from Duke University with a B.S.

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.

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

Walters-Hoffert is qualified to be on the Board.

Robinette, Director .

Robinette was appointed to our Board on June 28, 2019.

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

Robinette has been providing business consulting related to top-line growth and bottom line improvement through his company

EPIQ Development.

Since 2016, Mr.

Robinette has been a director of Lenslock, Inc., a mobile technology company that provides mobile

video solutions to law enforcement agencies.

Robinette was appointed to our Board on June 28, 2019 and our lead independent director on September

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.

Robinette was with Peregrine

Semiconductor, Inc., a manufacturer of high-performance RF CMOS integrated circuits, from 2013 to 2019 in two roles as a Director

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.

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.

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at Tyco Electronics Ltd.

(known today as TE Connectivity Ltd.), a passive electronics manufacturer, in various sales, sales

leadership and product development leadership roles.

Robinette received a Bachelor of Science degree in Business Administration,

Marketing from San Diego State University.

(known today as TE Connectivity Ltd.), a passive electronics manufacturer, in various sales, sales leadership

and product development leadership roles.

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.

Robinette is qualified to be on the Board.

Cosentino, Jr., Director .

Cosentino has been a director of Sturm, Ruger & Company, Inc.

RGR), a firearm

manufacturing company listed on the NYSE, since 2005 to the present.

Cosentino has been a partner of Ironwood Manufacturing

Fund, LP, a private equity fund, since 2002, a director of Simonds International, Inc., a cutting tools manufacturer, since 2001,

Cosentino was appointed to our Board on May 7, 2020.

Cosentino has been a director of Sturm,

Ruger & Company, Inc.

RGR), a firearm manufacturing company listed on the NYSE, since 2005 to the present, a partner of Ironwood

Manufacturing Fund, LP, a private equity fund, since 2002, a director of Simonds International, Inc., a cutting tools manufacturer, since

2001, the Chairman of the Board of Habco Industries LLC, an aerospace equipment and services supplier, since 2012, and Senior Advisor

of Ironwood Capital Holdings LLC, a private equity firm, since 2012.

He was a director of Addaero LLC, a metal alloy manufacturer,

from 2014 to 2019, a director of Whitcraft LLC, a manufacturer of engine and other aerospace components, from 2011 to 2017, a

director of the Bilco Company, a manufacturer of building products for commercial and residential construction, from 2007 to 2016,

Chairman of North American Specialty Glass LLC, a specialty glass provider, from 2005 to 2012, Vice-Chairman of Primary Steel

LLC, a national distribution and fabricator of steel products, from 2005 to 2007, and a director of the Wiremold Company, a manufacturer

of wire management and power conditioning systems, from 1991 to 2000.

Cosentino was a partner of Capital Resource Partners,

LP, a private capital firm, from 1999 to 2000, and served as a director in a number of its portfolio companies.

received an undergraduate degree from Harvard University and an MBA from the University of Pennsylvania.

Based on the above qualifications,

the Company believes Mr.

Cosentino is qualified to be on the Board.

He was a director of Addaero LLC, Whitcraft LLC, Bilco Company,

Chairman of North American Specialty Glass LLC, Vice-Chairman of Primary Steel LLC, and a director of the Wiremold Company.

was a partner of Capital Resource Partners, LP, a private capital firm, from 1999 to 2000, and served as a director in a number of its

portfolio companies.

Cosentino was the Vice President-Operations of the Stanley Works (NYSE:SWK), President and Co-owner of PCI Group,

Inc., CEO and Co-owner of Rau Fastener, LLC, President of the Otis Elevator-North America division of United Technologies Corporation

(NYSE:UTX), and Group Executive of the Danaher Corporation (NYSE:DHR).

Cosentino received an undergraduate degree from Harvard University

and an MBA from the University of Pennsylvania.

The Board believes that Mr.

Cosentino’s extensive executive management, investment

management and board experience qualify him to serve on the Board of Directors.

in Certain Legal Proceedings

the best of our knowledge, during the past ten years, none of our directors or executive officers were involved in any of the

(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 involvement in any type of business, securities or banking

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.

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.

Leadership Structure and Role in Risk Oversight

Board does not have a policy as to whether the roles of our chairman and chief executive officer should be separate.

the Board makes this determination based on what best serves our Company’s needs at any given time.

its governance role, and particularly in exercising its duty of care and diligence, the Board is responsible for ensuring that

appropriate risk management policies and procedures are in place to protect the Company’s assets and business.

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 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.

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 these

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.

Dutt currently holds the Chairman and Chief Executive Officer roles.

Robinette currently serves as the Lead Independent Director

elected by the majority of the Board on September 10, 2021.

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.

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.

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.

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

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.

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.

Composition, Committees and Independence

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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.

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.

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.

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.

a result of this review, our Board determined that Ms.

Walters-Hoffert, Mr.

Cosentino 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.

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 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.

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.

The composition and responsibilities

of each of the committees is described below.

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.

Walters-Hoffert is the Chairperson of the Audit Committee and financial expert, and Mr.

Robinette and Mr.

Cosentino 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 .

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 for our executive officers.

Robinette is the Chairperson

of the Compensation Committee, and Ms.

Cosentino 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 .

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.

is the Chairperson of the Compensation Committee, and Ms.

Walters-Hoffert and Mr.

Cosentino are members of the Compensation Committee.

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.

Each of the members of our Compensation Committee are independent under NASDAQ’s independence standards for compensation committee

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.

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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.

Cosentino is Chairperson

of the Nominating and Governance Committee, and Ms.

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.

Cosentino 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 is available on our website at www.fluxpower.com .

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 is available on our website at www.fluxpower.com .

seek directors with established strong professional reputations and experience in areas relevant to the strategy and operations of our

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.

of Business Conduct and Ethics

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 www.fluxpower.com.

Board has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all of our directors, officers, and

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.

a copy of the Code may be made by writing to the Company at is c/o Flux Power Holdings, Inc., 2685 S.

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

executed a standard form of indemnification agreement (“Indemnification Agreement”) with each of our Board members

and executive officers (each, an “Indemnitee”).

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.

executed a standard form of indemnification agreement (“Indemnification Agreement”) with each of our Board members and executive

officers (each, an “Indemnitee”).

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.

Section 16(a) Reports

16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more

than 10% of a registered class of our equity securities, to file with the SEC initial statements of beneficial ownership, reports

of changes in ownership and Annual Reports concerning their ownership, of Common Stock and other of our equity securities on Forms

3, 4, and 5, respectively.

Executive officers, directors and greater than 10% stockholders are required by SEC regulations to

furnish us with copies of all Section 16(a) reports they file.

Based solely on our review of Forms 3, 4 and 5 and amendments thereto

filed electronically with the SEC during the most recent fiscal year, we believe that all reports required by Section 16(a) for

transactions in the fiscal year ended June 30, 2020, were timely filed except for a late filing of a Form 4 by Michael Johnson

for a transaction dated June 2, 2020.

16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than

10% of a registered class of our equity securities, to file with the SEC initial statements of beneficial ownership, reports of changes

in ownership and Annual Reports concerning their ownership, of Common Stock and other of our equity securities on Forms 3, 4, and 5,

respectively.

Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies

of all Section 16(a) reports they file.

Based solely on our review of Forms 3, 4 and 5 and amendments thereto filed electronically with

the SEC during the most recent fiscal year, we believe that all reports required by Section 16(a) for transactions in the year ended

June 30, 2021, were timely filed.

11 - EXECUTIVE COMPENSATION

for our Named Executive Officers

following table sets forth information concerning all forms of compensation earned by our named executive officers during the

fiscal years ended June 30, 2020 and 2019 for services provided to the Company and its subsidiary.

Name and Principal Position

Option Awards

Non-Equity Incentive Plan Compensation

All Other Compensation

Dutt, Chief Executive Officer

following table sets forth information concerning all forms of compensation earned by our named executive officers during Fiscal

2021 and Fiscal 2020 for services provided to the Company and its subsidiary.

and Principal

Awards (1) ($)

Awards (2) ($)

Incentive Plan Compensation ($)

Other Compensation ($)

Dutt, Chief Executive

Officer, President, and Chairman

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Jonathan Berry, Chief Operating Officer

the fair value of the RSUs granted on grant date.

grant date fair value was determined in accordance with the provisions of FASB ASC Topic No.

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model with assumptions described in more detail in the notes to our audited financial statements included in this report.

Scheiwe became our chief financial officer and secretary on December 17, 2018.

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.

However, we may establish

such plan in the future.

Compensation Plan Information

connection with the reverse acquisition of Flux Power, Inc in 2012, we assumed the 2010 Option Plan.

As of June 30, 2020, the

number of options outstanding to purchase common stock under the 2010 Option Plan was 29,482.

No additional options to purchase

common stock may be granted under the 2010 Option Plan.

November 26, 2014, our board of directors approved our 2014 Equity Incentive Plan (“2014 Option Plan”), which was

approved by our stockholders on February 17, 2015.

The 2014 Option Plan was amended by our board of directors on October 26, 2017

and approved by our stockholders on July 23, 2018.

The 2014 Option Plan offers selected employees, directors, and consultants

the opportunity to acquire our common stock, and serves to encourage such persons to remain employed by us and to attract new

The 2014 Option Plan allows for the award of stock and options, up to 1,000,000 shares of our common stock.

43,850 incentive stock options under the 2014 Option Plan during Fiscal 2016, of which 31,650 remain outstanding at June 30, 2019.

No options were granted during Fiscal 2017.

We granted 211,800 incentive stock options and 80,700 non-qualified stock options

under the 2014 Option Plan during Fiscal 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.

of June 30, 2020, we had 454,156 and 579,584 options, exercisable and outstanding, respectively, which were granted from the 2014

Option Plan and 2010 Option Plan.

following table sets forth certain information concerning unexercised options, stock that has not vested, and equity compensation

plan awards outstanding as of June 30, 2020 for the named executive officers below:

Option Awards (1)

connection with the reverse acquisition of Flux Power, Inc.

in 2012, we assumed the 2010 Option Plan.

As of June 30, 2021, the number

of options outstanding to purchase common stock under the 2010 Option Plan was 22,536.

No additional options to purchase common

stock may be granted under the 2010 Option Plan.

On February 17, 2015, our shareholders

approved our 2014 Equity Incentive Plan (“2014 Option Plan”), which was amended on July 23, 2018 and on November 5, 2020.

The 2014 Option 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

We granted 153,177 restricted stock units under the 2014 Option Plan during Fiscal 2020.

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

As of June 30, 2021, we had 490,323

options exercisable and 531,205 options outstanding, under the 2014 Option Plan and the 2010 Option Plan.

There were no options outstanding

under the 2021 Plan as of June 30, 2021.

following table sets forth certain information concerning unexercised options, stock that has not vested, and equity compensation plan

awards outstanding as of June 30, 2021 for the named executive officers below:

Award Grant Date

6 unchanged sentences

Number of Shares or Units of Stock That Have Not Vested

Units of Stock That Have Not Vested

Market Value of Shares or Units of Stock That Have Not Vested ($)

Equity Incentive Plan Awards:

5 unchanged sentences

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

Treasury yield for a term equal to the expected life of the options at the time of grant.

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.

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.

Option/Stock Appreciation Right (“SAR”) exercised and Fiscal year-end Option/SAR value table

our executive officers nor the other individuals listed in the tables above, exercised options or SARs during the fiscal year

ended June 30, 2020.

our executive officers nor the other individuals listed in the tables above, exercised options or SARs during Fiscal

incentive plans

long term incentive awards were granted by us in the fiscal year ended June 30, 2020.

long term incentive awards were granted by us in Fiscal 2021.

Agreements with Executive Officers

entered into an Employment Agreement with our chief executive officer, Ronald F.

Dutt, effective December 11, 2012.

an “at-will”

The Employment Agreement provided for an annual salary of $170,000.

On February 15, 2019, Flux

Power Holdings, Inc.

entered into an amendment to the Employment Agreement (“Amendment”) with the Company’s

president and chief executive officer, Ronald F.

Dutt, dated December 7, 2012.

The Amendment confirmed Mr.

Dutt’s continued

services as the president and chief executive officer of the Company and its wholly-owned subsidiary, Flux Power, Inc., and setting

Dutt’s new annual base salary to $195,000.

Effective August 30, 2020, our compensation committee approved a new annual

base salary of $250,000.

December 17, 2018, the Board of Directors of the Company appointed Charles A.

Scheiwe to serve as our chief financial officer

and secretary.

In connection with his appointment as the Company’s chief financial officer and secretary, Mr.

Scheiwe received

an annual base salary of $145,000.

Scheiwe currently receives an annual base salary of $190,000.

Scheiwe is an “at-will”

June 29, 2018, the Board of Directors of the Company appointed Jonathan Berry to serve as our chief operating officer.

In connection

with his appointment as the Company’s chief operating officer, Mr.

Berry received an annual base salary of $145,000.

Berry currently receives an annual base salary of $190,000.

Berry is an “at-will”

were no performance based bonuses paid in the fiscal years ended June 30, 2020 and 2019.

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 annual base salary is $250,000.

February 12, 2021, we entered into an Employment Agreement with the Company’s chief financial officer, treasurer and secretary,

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

annual base salary is $190,000.

February 12, 2021, we entered into an Employment Agreement with its chief operating officer, Jonathan Berry (the “Berry

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 Berry Employment Agreement memorialized Mr.

Berry’s continued services as the chief operating officer of Flux Power.

Pursuant to the terms of the Berry Employment Agreement,

Berry’s annual base salary is $190,000.

their respective employment agreement, Messrs.

Dutt, Scheiwe and Berry, 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.

Dutt, Scheiwe and Berry

are also eligible to participate in all customary employee benefit plans or programs generally made available to the senior executive

Dutt, Scheiwe and Berry 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, Scheiwe and Berry employment is “at-will”

and may be terminated

at any time for any reason.

Gross Margin Bonus Plan

December 4, 2019, the Board adopted a 2020 Gross Margin Plan (“GM Plan”) which provided its executives and key senior

employees (“Key Executives”) with a cash bonus equal to 2% of base pay for every additional 1% profit margin

achieved based on the increase gross profits for calendar year 2020 and to be paid in the first quarter of calendar year 2021.

On August 4, 2020, the compensation committee amended the 2020 GM Plan to allow for the early payment of cash bonuses to Key Executives

equal to 2% of base pay for every additional 1% profit margin achieved based on (1) the increase in profit margin first half of

calendar year 2020, and (2) an adjustment to the bonuses to be paid in the first quarter of calendar year 2021 based on the profit

margin achieved during the second half of calendar year 2020 (“Amended GM Plan”).

December 4, 2019, the Board of Directors adopted a 2020 Gross Margin Plan (“GM Plan”) which provided its executives and key

senior employees (“Key Executives”) with a cash bonus equal to 2% of base pay for every additional 1% profit margin achieved

based on the increase gross profits for calendar year 2020 and to be paid in the first quarter of calendar year 2021.

On August 4, 2020,

the Company made cash bonus payments in the aggregate amount of $225,710 to certain Key Executives (the “Awards”)

pursuant to the Amended GM Plan, which included payments of $34,047 to Ronald Dutt, Chief Executive Officer, $27,063 to Chuck

Scheiwe, Chief Financial Officer, and $27,936 to Jonathan Berry, Chief Operating Officer.

The aggregate amount of such bonus

payments was included in the accrued expenses in the accompanying balance sheet as of June 30, 2020.

(See Note 5) The Awards were

calculated on the basis of increase in profit margins achieved during the first six months of the calendar year 2020.

the compensation committee amended the 2020 GM Plan to allow for the early payment of cash bonuses to Key Executives equal to 2% of base

pay for every additional 1% profit margin achieved based on (1) the increase in profit margin first half of calendar year 2020, and (2)

an adjustment to the bonuses to be paid in the first quarter of calendar year 2021 based on the profit margin achieved during the second

half of calendar year 2020 (“Amended GM Plan”).

August 7, 2020, the Company made cash bonus payments in the aggregate amount of $225,710 to certain Key Executives (the “Awards”)

pursuant to the Amended GM Plan, which included payments of $34,047 to Mr.

Dutt, $27,063 to Mr.

Scheiwe, and $27,936 to Mr.

aggregate amount of such bonus payments was included in the accrued expenses in the accompanying balance sheet as of June 30, 2020.

Awards were calculated on the basis of increase in profit margins achieved during the first six (6) months of the calendar year 2020.

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 is effective for Fiscal 2021

and each fiscal year thereafter (the “Plan Year”).

For each Plan Year, the compensation committee will establish an aggregate

amount of allocable Bonus under the Annual Bonus Plan and determine 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 Fiscal 2021 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.

addition, 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 is effective for fiscal year 2021

and each fiscal year thereafter (the “Plan Year”).

For each Plan Year, the compensation committee will establish an aggregate

amount of allocable Bonus under the Annual Bonus Plan and determine 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 fiscal year 2021 is based on the Company achieving certain performance targets based on annual revenue,

gross margin, operation expense and new business development.

All of the Company’s executive officers are eligible to participate

in the Annual Bonus Plan.

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:

Chief Executive Officer

Charles Scheiwe

Chief Financial Officer

Jonathan Berry

Chief Operating Officer

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:

Bonus payments based on Target Cash Bonus Amount

On June 30, 2021, the Compensation

Committee (the “Committee”) of the Board of Directors (the “Board”) 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 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 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 Committee

approved an addendum to the Performance Restricted Stock Unit Award under the 2014 Equity Incentive Plan approved by the Committee on

November 5, 2020 to provide clarification for the calculation of vesting

to 2014 Equity Incentive Plan

On November 5, 2020, the Board

approved an amendment to the 2014 Option Plan as amended to include the right to grant Restricted Stock Units (“RSUs”).

of the Company’s executive officers are eligible to participate in the 2014 Option Plan.

Restricted Stock Unit 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”).

the 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 executive officers

and key employees of the Company were granted RSUs under the 2014 Option Plan in the amounts and according to the vesting schedule indicated

Based Awards:

Vesting Schedule

Chief Executive Officer

Three Years from Award’s grant date

Charles Scheiwe

Chief Financial Officer

Three Years from Award’s grant date

Jonathan Berry

Chief Operating Officer

Three Years from Award’s grant date

Based Awards:

Vesting Schedule

Chief Executive Officer

Vest in installments of up to one-third annually based on target performance goals

Charles Scheiwe

Chief Financial Officer

Vest in installments of up to one-third annually based on target performance goals

Jonathan Berry

Chief Operating Officer

Vest in installments of up to one-third annually based on target performance goals

Vesting Schedule

Chief Executive Officer

Four Years from Award’s grant date

Charles Scheiwe

Chief Financial Officer

Four Years from Award’s grant date

Jonathan Berry

Chief Operating Officer

Four Years from Award’s grant date

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

1 unchanged sentence

of Non-Executive Directors

December 2019, our Board approved non-executive director compensation packages as recommended by the Compensation Committee.

is the compensation packages for non-executive directors approved by the Board for each fiscal year:

Board Member Compensation

Baseline Compensation

Additional Chairperson Compensation

Nominating/Governance

Additional Committee Member Compensation

Nominating/Governance

is summary of compensation accrued or paid to our non-executive directors during fiscal years ended June 30, 2020 and 2019.

Fees Earned or Paid in Cash ($)

December 2019, our Board approved non-executive director compensation packages as recommended by the Committee.

the compensation packages for non-executive directors approved by the Board for 2020 calendar year:

Non-Executive Director

Base Retainer

Lisa Walters-Hoffert

Dale Robinette

Compensation Chair

Cosentino Jr.

Governance Chair

Michael Johnson

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:

Non-Executive

Walters-Hoffert

Cosentino Jr.

addition, our directors are eligible to receive an annual equity grant of RSUs, which terms are determined at the time

Compensation Table

is summary of compensation accrued or paid to our non-executive directors during Fiscal 2021 and Fiscal 2020.

our chief executive officer and president, received no compensation for his service as a director and is not included in the table.

compensation Mr.

Dutt receives as an employee of the Company is included in the section titled “Executive Compensation.”

Fees Earned or

Stock Awards (2) ($)

1 unchanged sentence

All Other Compensation ($)

Christopher Anthony (1)

James Gevarges (2)

Lisa Walters-Hoffert

Dale Robinette

John Cosentino

Cosentino Jr.

Michael Johnson

Anthony resigned as our director on June 28, 2019.

James Gevarges (1)

Gevarges resigned as our director on May 6, 2020.

the fair value of the RSUs granted using the volume weighted average price of the ten days of trading prior to grant date.

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”).The following table shows the aggregate number of stock options

held by non-employee directors as of June 30, 2020 and June 30, 2019:

Vested Stock Option

Christopher Anthony (1)

James Gevarges (2)

Michael Johnson

with Financial Accounting Standards Board (“FASB”).

following table shows the aggregate number of stock options held by non-employee directors as of June 30, 2021 and June 30, 2020:

Vested Stock Options

Lisa Walters-Hoffert

Dale Robinette

Anthony resigned as our director on June 28, 2019.

Cosentino Jr.

Michael Johnson

James Gevarges (1)

Gevarges resigned as our director on May 6, 2020.

12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

used in this section, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange

Act of 1934, as amended, 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 25, 2020, we had a total of 11,419,737 shares of common stock issued and outstanding.

following table sets forth, as of September 25, 2020, 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 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 5% of our outstanding common stock is c/o Flux

Power Holdings, Inc., 2685 S.

Ownership of Principal Stockholders and Management

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 10 , 2021, we had a total of 13,844,642 shares

of common stock issued and outstanding.

following table sets forth, as of September 10, 2021, 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.

1 unchanged sentence

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.

Beneficial ownership consists of a direct interest in the shares of

common stock, except as otherwise indicated.

Name and Address of Beneficial Owner (1)

Beneficially Owned

% of Ownership

Officers and Directors

9 unchanged sentences

5% Stockholders

Cleveland Capital, L.P.

Cleveland Capital Management L.L.C.

1250 Linda Street, Suite 304

Rocky River, OH 44116

1,187,260 (9)

1555 Peachtree Street NE, Suite 1800

Atlanta, GA 30309

* Represents less than 1% of shares outstanding.

3 unchanged sentences

Johnson is the sole director and beneficial

owner, (ii) 12,310 shares of common stock issuable to Mr.

Johnson upon exercise of stock options, and (iii) 220,937 shares

of common stock issuable to Esenjay upon conversion of outstanding principal under the LOC.

21,660 shares of common stock and 201,278 shares of common stock issuable upon exercise of stock options.

5,000 shares of common stock and 18,750 shares of common stock issuable upon exercise

of stock options.

1,875 shares of common stock and 86,761 shares of common stock issuable

upon exercise of stock options.

owner, and (ii) 12,079 shares of common stock issuable to Mr.

Johnson upon exercise of stock options.

Includes 21,660 shares of common stock and 215,980 shares of common stock

issuable upon exercise of stock options and settlement of vested RSUs.

Includes 5,000 shares of common stock and 27,422 shares of common stock

issuable upon exercise of stock options and settlement of vested RSUs.

Includes 1,875 shares of common stock and 95,433 shares of common stock

issuable upon exercise of stock options and settlement of vested RSUs.

62,670 shares of common stock and 2,610 shares of common stock issuable upon exercise of stock options.

1 unchanged sentence

3,454 shares of common stock issuable upon exercise of stock options.

17,500 shares of common stock held by Wade Massad, 710,855 shares of common stock held by Cleveland and up to approximately

375,700 shares of common stock issuable to Cleveland upon partial conversion of outstanding principal under the LOC (the Cleveland

convertible note under the LOC limits the conversion to beneficial ownership of 9.99%), and 83,205 shares of common stock

underlying warrant issued to Cleveland, which number became fixed upon closing of the private placement on July 24, 2020 pursuant

to the terms of the warrant.

Wade Massad is the Co-Managing Member at Cleveland Capital Management LLC, which is the general

partner of Cleveland.

The convertible notes and warrant limit the conversion such that the beneficial ownership does not exceed

on Amendment No.

4 to Schedule 13G filed jointly by Cleveland, Wade Massad and Cleveland Capital Management, L.L.C.

on February 16, 2021.

Reflects 842,529 shares of common stock beneficially owned by certain private funds managed by Cleveland Capital

Management, L.L.C., or by its principals.

on Schedule 13G filed by Invesco Ltd.

on February 16, 2021, Invesco Capital Management LLC is a subsidiary of Invesco Ltd.

advises the Invesco WilderHill Clean Energy ETF which owns the common stock.

However, no one individual has greater than 5% economic

The stockholders of the fund have the right to receive or the power to direct the receipt of dividends and proceeds from

the sale of securities.

* Represents less than 1% of shares outstanding.

13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

RELATIONSHIPS AND RELATED TRANSACTIONS

following includes a summary of certain relationships and transactions, including transactions since July 1, 2019 to June 30, 2021 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.”

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.

Private Placement

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.

Dutt, our president and chief executive officer, participated in the offering in the amount of $300,000 and $50,000, respectively.

In addition, Mr.

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.

Cosentino, one of our directors, also participated in the offering in the amount of $250,000.

Facility Agreement

March 28, 2019, Flux Power, entered into an Amended and Restated Credit Facility Agreement with Esenjay, Cleveland and other lenders

(Cleveland and Esenjay, together with additional parties that joined and may join as additional lenders, collectively the “Lenders”)

relating to a line of credit (“LOC”) to amend and restate the terms of the Credit Facility Agreement dated March 22,

2018 between Flux Power and Esenjay (the Original Credit Facility Agreement) in its entirety to (i) increase the maximum principal

amount available under the LOC from $5,000,000 to $7,000,000, (ii) add Cleveland as an additional lender to the LOC pursuant to

which each lender has a right to advance a pro rata amount of the principal amount available under the LOC, (iii) extend the maturity

date from March 31, 2019 to December 31, 2019, and (iv) to provide for additional parties to become a Lender under the LOC.

Michael Johnson, a member of our board of directors and a major stockholder, is the beneficial owner and director of Esenjay.

secure the obligations under the secured notes issued under the LOC (LOC Notes), Flux Power entered into an Amended and Restated

Security Agreement dated March 28, 2019 with the Lenders (the “Amended Security Agreement”).

The Amended Security

Agreement amended and restated the Guaranty and Security Agreement dated March 22, 2018, by and between Flux Power and Esenjay,

to among other things, amend such agreement to include Cleveland and the other Lender as additional secured parties to the Amended

Security Agreement and appoint Esenjay as collateral agent.

In connection with the LOC, on March 28, 2019, we issued a secured

promissory note to Cleveland (the “Original Cleveland Note”), and an amended and restated secured promissory note

to Esenjay, which amended and superseded the secured promissory note dated March 22, 2018 (the “Original Esenjay Note”

and together with the Original Cleveland Note, the “Original Notes”).

The Original Notes were issued for the aggregate

principal amount of $7,000,000 or such lesser principal amount advanced by the respective Lender under the LOC.

Original Credit Facility Agreement was amended and restated on October 10, 2019 (the “Second Restated Credit Facility Agreement”)

to amend and restate the terms of the LOC to increase the line of credit under the LOC from $7,000,000 to $10,000,000 (the “LOC

Increase”).

In addition, Flux Power and the Lenders amended the Amended Security Agreement to reflect the Second Restated

Credit Facility.

In connection therewith, each Lender and Flux also entered into an amendment to amend their Original Notes to

reflect the LOC Increase (the “Amended Notes”).

December 31, 2019, the Amended Notes were further amended to (i) increase the LOC from $10,000,000 to $12,000,000, (ii) extend

the maturity date of their respective secured promissory note under the Credit Facility from December 31, 2019 to June 30, 2020,

and (iii) capitalize all accrued and unpaid interest to the principal amount as of December 31, 2019 (the “Second Amended

Notes”).

As an inducement to the Lenders for entering into the Second Amended Notes, we granted the Lenders the right to

convert, in whole or in parts, all of the outstanding principal amount and accrued and unpaid interest under the Second Amended

Notes for shares of common stock, $0.001 par value, at the conversion price equal to the purchase price at the next financing

of at least $1,000,000 on or after December 31, 2019.

June 30, 2020, Flux Power and the Lenders executed the Third Amendment to the Amended and Restated Secured Promissory Note which

(i) extended the maturity date of the Secured Notes from June 30, 2020 to December 31, 2020, and (ii) capitalized all accrued

and unpaid interest to the principal amount as of June 30, 2020 (the Third Amendment and with the Amended Notes, the Notes.

addition, in connection with our private placement of up to 2,000,000 shares of our common stock, par value $0.001 to accredited

investors for an aggregate amount of up to approximately $8,000,000, or $4.00 per share of Common Stock (the “Offering”),

we completed an initial closing of the Offering on June 30, 2020 pursuant to which an aggregate of 275,000 shares were issued

for $1,100,000 of shares of common stock for cash.

As a result of the initial closing of the Offering, each of the Lenders has

a right to convert the principal and accrued interest outstanding under their respective Notes into shares of common stock at

$4.00 per share, which was the price per share of common stock sold under the Offering.

the initial closing of the Offering, Esenjay converted $4,400,000 of its Esenjay LOC Note, which consisted of principal plus accrued

interest, into shares of common stock at $4.00 per share, for an aggregate of 1,100,000 shares of common stock (“Conversion”).

In addition, on June 26, 2020, Esenjay partially assigned $1,350,000 of its Esenjay LOC Note to certain creditors of Esenjay as

settlement of obligations owed by Esenjay to such creditors.

As of June 30, 2020, and following the Conversion, Esenjay had approximately

$984,000 outstanding under its Note, and Cleveland and the other Lenders had approximately $4,306,000 outstanding under their

respective Notes, for a combined total of approximately $5,290,000 outstanding under the LOC.

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.

As of August 31, 2020, Esenjay had approximately $884,000 outstanding under its Note, which includes the

consolidation of the amount previously due under the Esenjay Note, and Cleveland and the other Lenders had approximately $3,512,000

outstanding under their respective Notes, for a combined total of approximately $4,396,000 outstanding under the LOC.

LOC Notes bear an interest rate of 15% per annum and have a maturity date of September 30, 2021.

July 3, 2019, Flux Power entered into a loan agreement with Cleveland, pursuant to which Cleveland agreed to provide a loan for

$1,000,000 (the “Cleveland Loan”).

In connection with the Cleveland Loan, on July 3, 2019, Flux Power issued Cleveland

an unsecured short-term promissory note in the amount of $1,000,000 (the “Unsecured Promissory Note”).

The Unsecured

Promissory Note bears 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 common stock in a number equal to 0.5% of the number of

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

public offering and with an exercise price equal to the per share public offering price.

September 1, 2019, Flux Power entered into the First Amendment to the Unsecured Promissory Note pursuant to which the maturity

date of the Unsecured Promissory Note was modified from September 1, 2019 to December 1, 2019 (the “First Amendment”).

In connection with the First Amendment, we replaced the Cleveland Warrant with the Amended and Restated Warrant Certificate (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 total number of shares of common stock sold in the next private or public

In addition, the exercise price was also changed to equal the per share price of common stock sold in such offering.

December 3, 2019, Flux Power entered into the Second Amendment to the Unsecured Promissory Note pursuant to which the maturity

date was modified from December 1, 2019 to December 31, 2019 and waived any Event of Default (as defined in the Unsecured Promissory

Note) arising from the failure of Flux Power to make the requirement payment due on December 1, 2019 under the First Amendment

(the “Second Amendment”).

On December 31, 2019, Flux Power entered into the Third Amendment to the Unsecured Promissory

Note pursuant to which the maturity date was modified from December 31, 2019 to March 31, 2020, and all accrued and unpaid interest

as of December 31, 2019 was capitalized to the principal amount (the “Third Amendment”).

On March 31, 2020, Flux Power

entered into the Fourth Amendment to the Unsecured Promissory Note pursuant to which the maturity date was modified from March

31, 2020 to April 30, 2020, and all accrued and unpaid interest as of March 31, 2020 was capitalized to the principal amount (the

“Fourth Amendment”).

On April 30, 2020 Flux Power entered into the Fifth Amendment to the Unsecured Promissory Note

pursuant to which extended the maturity date from April 30, 2020 to May 31, 2020, and capitalized all accrued and unpaid interest

to the principal amount as of April 30, 2020 (the “Fifth Amendment”).

On May 29, 2020, Flux Power entered into the

Sixth Amendment to the Unsecured Promissory Note pursuant to which extended the maturity date from May 31, 2020 to June 30, 2020,

and capitalized all accrued and unpaid interest to the principal amount (the “Sixth Amendment”).

On June 30, 2020,

Flux Power entered into the Seventh Amendment to the Unsecured Promissory Note which extended the maturity date from June 30,

2020 to July 31, 2020, and capitalized all accrued and unpaid interest to the principal amount (the “Seventh Amendment”).

March 22, 2018, we entered into a credit facility agreement with Esenjay with a maximum borrowing amount of $5,000,000 (the “Original

Credit Facility Agreement”).

The Original Credit Facility Agreement and secured notes issued (the “LOC Notes”) to the

lenders (the “Lenders”) in connection with the credit facility was subsequently amended and restated 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,

additional lenders (including Cleveland Capital, L.P., or Cleveland) and extensions of the maturity date to September 30, 2021.

Advances and obligations under the LOC were secured by a security interest

in collateral of the Company.

inducement to the Lenders for entering into amended notes, on December 31, 2019, we granted the Lenders the right to convert, in whole

or in parts, all of the outstanding principal amount and accrued and unpaid interest into shares of common stock, $0.001 par value, at

the conversion price equal to the purchase price at the next financing of at least $1,000,000 on or after December 31, 2019.

30, 2019, there was $6,405,00 outstanding under the LOC consisting of advances of $2,405,000 by Esenjay, $2,000,000 by Cleveland, and

the balance of $2,000,000 by other Lenders.

connection with our private placement of up to 2,000,000 shares of our common stock, par value $0.001 to accredited investors for an

aggregate amount of up to approximately $8,000,000, or $4.00 per share of common stock (the “Offering”), we completed an

initial closing of the Offering on June 30, 2020.

As a result of the initial closing of the Offering, the conversion price under their

respective LOC Notes became fixed at $4.00 per share, which was the price per share of common stock sold under the Offering.

30, 2020, Esenjay converted $4,400,000 of its LOC Note, which consisted of principal plus accrued interest, into 1,100,000 shares of

common stock at $4.00 per share (“Conversion”).

On June 26, 2020, Esenjay partially assigned $1,350,000 of its LOC Note to

certain creditors of Esenjay as settlement of obligations owed by Esenjay to such creditors.

As of June 30, 2020, there was approximately

$5,290,000 in principal outstanding under the LOC, consisting of advances of $984,000 by Esenjay, $1,720,000 by Cleveland, and $2,586,000

by other Lenders.

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 LOC Notes.

August 31, 2020, we entered into a certain Third Amended and Restated Credit Facility Agreement (“Third Amended and Restated Credit

Facility Agreement”) 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 (“Notes Consolidation”).

As of August 31, 2020, after the Notes Consolidation

there was approximately $4,396,000 in principal outstanding.

November 2020 and January 2021, six (6) note holders holding an aggregate of approximately $3,749,000 in principal and accrued interest

outstanding under the LOC elected to convert their Notes into 937,317 shares of common stock, which included conversion of approximately

$1,824,000 into 456,074 shares of common stock by Cleveland.

As of March 1, 2021, there was approximately $884,000 in principal outstanding

under Esenjay’s LOC Note, and $11,116,000 available for draw under the LOC.

The Esenjay’s LOC Note had an interest rate of

15% per annum and a maturity date of September 30, 2021.

secure the obligations under the LOC Notes, we entered into an Amended and Restated Security Agreement dated March 28, 2019 with the

Lenders (the “Amended Security Agreement”).

The Amended Security Agreement amended and restated the Guaranty and Security

Agreement dated March 22, 2018, by and between the Company and Esenjay, to among other things, amend such agreement to include Cleveland

and the other Lenders as additional secured parties to the Amended Security Agreement and appoint Esenjay as collateral agent.

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.

July 3, 2019, we entered into a loan agreement with Cleveland for $1,000,000 (the “Cleveland Loan”).

In connection with the

Cleveland Loan, on July 3, 2019, we issued Cleveland an unsecured short-term promissory note in the amount of $1,000,000, bearing an

interest rate of 15% (the “Unsecured Promissory Note”).

In connection with the Cleveland Loan, we issued Cleveland a three-year

warrant (the “Cleveland Warrant”) to purchase common stock in a number equal to 0.5% of the number of shares of common stock

outstanding after giving effect to the total number of shares of common stock to be sold in a contemplated public offering and with an

exercise price equal to the per share public offering price.

September 1, 2019, we entered into the First Amendment to the Unsecured Promissory Note pursuant to which the maturity date of the Unsecured

Promissory Note was modified from September 1, 2019 to December 1, 2019 (the “First Amendment”).

In connection with the First

Amendment, we replaced the Cleveland Warrant with the Amended and Restated Warrant Certificate (the “Amended Warrant”).

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 total number of shares of common stock sold in the next private or public offering.

In addition, the exercise price was also changed

to equal the per share price of common stock sold in such offering.

to December 2019, we entered into seven (7) amendments pursuant to which the maturity date was extended from time to time (with the final

amendment reflecting a maturity date of August 31, 2020), and all accrued and unpaid interest as of the time of the respective amendment

was capitalized to the principal amount.

As of June 30, 2020, there was $1,157,000 in principal outstanding under the Cleveland Note.

On July 27, 2020, in connection with

the outstanding loan from Cleveland to the Company in the principal amount of $1,157,000, the Company 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 (the “Eighth Amendment”

and together with

the Original Note, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment,

the Sixth Amendment and the Seventh Amendment, the “Cleveland Note”).

On August 19, 2020, the Company 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.

March 9, 2020, we entered into a convertible promissory note with Esenjay (“Original Esenjay Note”) pursuant to which

Esenjay provided us with a loan in the principal amount of $750,000 (the “Esenjay Loan”).

The Original Esenjay Note

bears an interest rate of 15% per annum and was originally due on the earlier of:

(i) June 30, 2020, unless extended pursuant

to the terms thereunder, or (ii) an occurrence of an event of default.

The outstanding obligations under the Original Esenjay

Note are convertible into shares of common stock at the cash price per share of the equity securities paid by purchasers in the

offering at any time upon consummation of an offering of equity securities of at least $1,000,000 before the maturity date.

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 Esenjay Note from $750,000 to $1,400,000 (the “Esenjay

Note”).

June 26, 2020, Esenjay assigned $500,000 of the Esenjay Note to two (2) accredited investors.

On June 30, 2020, in connection

with the completion of our initial closing of the Offering, the principal amount outstanding under the Esenjay Note became convertible

into shares of common stock at $4.00 per share, which was the cash price per share of the Offering (“Esenjay Initial Conversion”).

The two note holders converted their notes into shares of common stock at $4.00 per share.

In addition, on July 22, 2020, one

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 the 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.

and Esenjay Note Consolidation

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

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.

Loan Agreements With Esenjay

October 2011 and September 2012, we entered into three debt agreements with Esenjay.

The three debt agreements consisted of a

Bridge Loan Promissory Note (“Bridge Note”), a Secondary Revolving Promissory Note (“Revolving Note”)

and an Unrestricted Line of Credit (“Unrestricted LOC”).

On December 31, 2015, the Bridge Note and the Revolving Note

expired, leaving the Unrestricted LOC available for future draws.

The Unrestricted LOC had a maximum borrowing amount of $10,000,000,

was convertible at a rate of $6.00 per share, bore interest at 8% per annum and was to mature on January 31, 2019.

31, 2018, we entered into an Early Note Conversion Agreement pursuant to which Esenjay converted the outstanding principal amount

of $7,975,000 plus accrued and unpaid interest of $1,041,280 under the Bridge Note, Revolving Note and the Unrestricted LOC into

1,502,714 shares of our common stock.

In connection with the Early Note Conversion Agreement, we issued an additional 26,802 shares

of common stock to Esenjay and recorded the issuance as interest expense at the stock’s fair value of approximately $466,000.

March 22, 2018, Flux Power entered into a Credit Facility Agreement with Esenjay with a maximum borrowing amount of $5,000,000.

Proceeds from the Original Credit Facility Agreement were to be used to purchase inventory and related operational expenses and

accrued interest at a rate of 15% per annum.

The outstanding balance of the Original Credit Facility and accrued interest was

due and payable on March 31, 2019.

Funds received from Esenjay since December 5, 2017 and prior to the Original Credit Facility

Agreement were consolidated under the Original Credit Facility.

As disclosed above, the Original Credit Facility was subsequently

amended and restated.

Short Term Lines of Credit

October 26, 2018, we entered into a credit facility agreement with a related party, pursuant to which Cleveland agreed to make

available to Flux a line of credit (“2018 Cleveland LOC”) in a maximum principal amount at any time outstanding of

up to $2,000,000 with a maturity date of December 31, 2018.

The 2018 Cleveland LOC has an origination fee in the amount of $20,000,

which represents 1% of the 2018 Cleveland LOC, and carries a simple interest of 12% per annum.

Interest is calculated on the basis

of the actual daily balances outstanding under the 2018 Cleveland LOC.

The 2018 Cleveland LOC was repaid on December 27, 2018.

with Epic Boats

Company subleased office and manufacturing space to Epic Boats (an entity founded and controlled by Chris Anthony, our former

board member and former Chief Executive Officer) in our facility in Vista, California pursuant to a month-to-month sublease agreement.

Pursuant to this agreement, Epic Boats paid Flux Power 10% of facility costs through the end of our lease agreement which was

June 30, 2019.

Company received $18,000 for the year ended June 30, 2019 from Epic Boats under the sublease rental agreement which is recorded

as a reduction to rent expense and the customer deposits discussed below.

of June 30, 2019, the customer deposit totaling approximately $84,000 was recognized as Other Income since Epic Boats has released

that deposit liability.

There were no customer deposits related to such products as of June 30, 2019 and there were no receivables

outstanding from Epic Boats as of June 30, 2019.

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.

March 9, 2020, we entered into a convertible promissory note with Esenjay (“Original Esenjay Note”) pursuant to which Esenjay

provided a loan in the principal amount of $750,000, bearing an interest rate of 15% per annum (the “Esenjay Loan”).

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 Esenjay Note from $750,000 to $1,400,000 (the “Esenjay Note”).

The outstanding obligations under the Esenjay Note were convertible into shares of common stock at the cash price per share of the equity

securities paid by purchasers in the offering at any time upon consummation of an offering of equity securities of at least $1,000,000

before the maturity date.

June 30, 2020, in connection with the completion of our initial closing of the Offering, the principal amount outstanding under the Esenjay

Note became convertible into shares of common stock at $4.00 per share, which was the cash price per share of the Offering.

2020 and July 22, 2020, Esenjay assigned an aggregate of $900,000 of the Esenjay Note (“Esenjay Assignment”) to three (3)

accredited investors, which were converted into an aggregate of 225,000 shares of common stock at $4.00 per share.

On August 31, 2020,

the outstanding obligations under the Esenjay Note of approximately $564,000, consisting of $500,000 in principal and approximately $64,000

in accrued interest, was consolidated into the LOC.

See Credit Facility Agreement above .

14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

the years ended June 30, 2020 and 2019, the Company’s independent public accounting firm was Squar Milner LLP.

the years ended June 30, 2021 and 2020, 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).

Paid to Principal Independent Registered Public Accounting Firm

aggregate fees billed by our Independent Registered Public Accounting Firm, for the years ended June 30, 2020 and 2019 are as

aggregate fees billed by our Independent Registered Public Accounting Firm, for the years ended June 30, 2021 and 2020 are as follows:

Audit fees(1)

1 unchanged sentence

All other fees(4)

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.

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.

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.”

No such fees were incurred during the fiscal

years ended June 30, 2020 or 2019.

Milner LLP does not provide us with tax compliance, tax advice or tax planning services.

other fees include fees billed by our independent auditors for products or services other than as described in the immediately

preceding three categories.

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.”

No such fees were incurred during the fiscal years ended

June 30, 2021 or 2020.

Tilly US, LLP did not provide us with tax compliance, tax advice or tax planning services.

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, 2021 or 2020.

on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

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.

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.

of the services relating to the fees described in the table above were approved by our audit committee.

15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements and Financial Statement Schedules.

following financial statements of Flux Power Holdings, Inc., and Report of Squar Milner LLP, independent registered public accounting

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:

Report of Independent Registered Public Accounting Firm - Squar Milner LLP

Report of Independent Registered Public Accounting Firm –

Baker Tilly US, LLP

Consolidated Balance Sheets as of June 30, 2021 and 2020

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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.

All schedules have been omitted because the required information is included in the financial statements or notes

thereto or because they are not required.

following exhibits are filed as part of this Report

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Description of Securities.

Flux Power Holdings, Inc.

2010 Stock Plan.

Incorporated by reference to Exhibit 10.5 on Form 8-K filed with the SEC on June 18, 2012.

Incorporated by reference to Exhibit 4(vi) on Form 10-K filed with the SEC on September 28, 2020.

Form of Warrant.

Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on September 23, 2021.

Form of Indemnification Agreement.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on April 9, 2019.

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.

Amended and Restated Warrant Certificate (Cleveland) dated July 3, 2019.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on September 6, 2019.

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.

Form of Representative Warrant.

Incorporated by reference to Exhibit 10.1 on Form 10-Q filed with the SEC on November 12, 2020.

Flux Power Holdings, Inc.

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Incorporated by reference to Exhibit 10.6 on Form 8-K filed with the SEC on June 18, 2012.

Form of Indemnification Agreement.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on April 9, 2019.

Terms of Employment with Ronald F.

Incorporated by reference to Exhibit 10.16 on Form 8-K filed with the SEC on December 13, 2012.

Amendment to the Employment Agreement, dated February 15, 2019 by and between Flux Power Holdings, Inc.

and Ronald F.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on February 19, 2019.

2014 Equity Incentive Plan.

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Incorporated by reference to Exhibit 10.20 on Form 10-K filed with the SEC on September 27, 2018.

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.

Amended and Restated Warrant Certificate (Cleveland) dated July 3, 2019.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on September 6, 2019.

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.

Promissory Note with Bank of America, NA dated May 1, 2020.

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.

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.

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.

Annual Cash Bonus Plan.

Incorporated by reference to Exhibit 10.4 on Form 8-K filed with the SEC on November 9, 2020.

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.

Intellectual Property Security Agreement.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on November 12, 2020.

Sales Agreement with H.C.

Wainwright & Co., LLC.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on December 21, 2020.

Amended and Restated Employment Agreement by and between Flux Power Holdings, Inc.

and Ronald F.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on February 17, 2021.

Employment Agreement by and between Flux Power Holdings, Inc.

and Charles A.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on February 17, 2021.

Employment Agreement by and between Flux Power, Inc.

and Jonathan Berry.

Incorporated by reference to Exhibit 10.3 on Form 8-K filed with the SEC on February 17, 2021.

2021 Equity Incentive Plan.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on May 4, 2021.

Third Amended and Restated Credit Facility Agreement.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on September 4, 2020.

Second Amended and Restated Security Agreement.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on September 4, 2020.

Form of Amended and Restated Promissory Note (LOC Lenders) Incorporated by reference to Exhibit 10.4 on Form 8-K filed with the SEC on September 4, 2020.

Second Amended and Restated Convertible Promissory Note (Esenjay).

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.

Form of Securities Purchase Agreement.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on September 23, 2021.

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Consent of Independent Registered Public Accounting Firm

Certifications of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act.*

Certifications of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act.*

Certifications of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act.*

Certifications of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act.*

Certifications

of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act.

Certifications

of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act.

Certifications

of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act.

Certifications

of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act.

Instance Document*

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Filed herewith.

Indicates management contract or compensatory plan or arrangement.

FORM 10-K SUMMARY

to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized.

to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to

be signed on its behalf by the undersigned, thereunto duly authorized.

Power Holdings, Inc.

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Financial Officer)

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf

of the registrant and in the capacities and on the dates indicated.

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

Chief Executive Officer,

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Michael Johnson

September 27, 2021

Cosentino, Jr.

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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders

the Board of Directors and Stockholders of Flux Powe Holdings, Inc.

on the Financial Statements

We have audited the

accompanying consolidated balance sheets of Flux Power Holdings, Inc.

and its subsidiary (the Company) as of June 30, 2020 and

2019, the related consolidated statements of operations, changes in stockholders’

deficit, and cash flows for the years

then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion,

the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and

2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

Basis for Opinion

These financial statements

are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial

statements based on our audits.

have audited the accompanying consolidated balance sheets of Flux Power Holdings, Inc.

and its subsidiary (the Company) as of June 30,

2021 and 2020, the related consolidated statements of operations, changes in stockholders’

equity, and cash flows for the years then

ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results

of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United

States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

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laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits

in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of

expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express

no such opinion.

Our audits included

performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,

and performing procedures that respond to those risks.

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and

significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

that our audits provide a reasonable basis for our opinion.

SQUAR MILNER LLP

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and

(2) involved our especially challenging, subjective, or complex judgements.

We determined that there are no critical audit matters.

TILLY US, LLP

BAKER TILLY US, LLP

have served as the Company’s auditor since 2012.

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LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

Current liabilities:

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Long term liabilities:

Financing lease payable, less current portion

Paycheck Protection Program loan payable

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Stockholders’

equity (deficit):

Preferred stock, $0.001 par value;

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Total stockholders’

equity (deficit)

Total liabilities and stockholders’

equity (deficit)

accompanying notes are an integral part of these consolidated financial statements.

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Operating expenses:

Selling and administrative expenses

Selling and administrative

Research and development

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(12,548,000 )

Other income (expense):

Interest expense

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STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance at June 30, 2019

$ (39,076,000 )

Paid-in Capital

at June 30, 2020

$ (53,412,000 )

Issuance of common stock –

exercised options

Issuance of common stock - services

Issuance of common stock - private placement transactions, net

Issuance of Common Stock - Debt Conversion

Stock-based compensation

$ (6,420,000 )

of common stock –

exercised options and warrants

value of warrants issued

of common stock, net of costs

of common stock - private placement transactions, net

of Common Stock - Debt Conversion

(12,793,000 )

Balance at June 30, 2020

(12,793,000 )

at June 30, 2021

$ (66,205,000 )

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance at June 30, 2018

Paid-in Capital

at June 30, 2019

$ (39,076,000 )

$ (3,169,000 )

Issuance of common stock –

Warrant exchange for common stock

Issuance of common stock - private placement transactions, net

Issuance of Common Stock - Loan Conversion

Stock based compensation

of common stock –

exercised options

of common stock - private placement transactions, net

of Common Stock - Loan Conversion

based compensation

(14,336,000 )

Balance at June 30, 2019

at June 30, 2020

$ (53,412,000 )

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Stock issuance for services

Interest expense on conversion

PPP Loan principal and accrued interest forgiveness

Fair value of warrants issued as debt discount cost

Noncash interest expense

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Allowance for inventory reserve

Amortization of prepaid offering costs

Changes in operating assets and liabilities:

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Cash flows from financing activities:

Proceeds from the sale of common stock

Proceeds from the issuance of common stock, net of costs

Proceeds from the issuance of common stock in private placement

Proceeds from Payment Protection Program

Repayment of line of credit - related party debt

Borrowings from revolving line of credit

Payment of short-term loan - related party

Payment of line of credit - related party

Payment of revolving line of credit

Borrowings from short-term loan - related party debt

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Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Initial recognition of right-of-use lease asset

and lease liability

Initial recognition of right-of-use lease asset and lease liability

Accrued interest converted into principal

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Common stock issued for conversion of related party debt

Common stock issued for conversion of accrued interest

Stock issuance for services

Equipment purchase through capital lease

accompanying notes are an integral part of these consolidated financial statements.

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30, 2021 and 2020

1 - NATURE OF BUSINESS AND REVERSE STOCK SPLIT

1 - NATURE OF BUSINESS

Power Holdings, Inc.

(“Flux”) was incorporated in 1998 in the State of Nevada.

On June 14, 2012, we changed our name

to Flux Power Holdings, Inc.

On June 14, 2012, we changed our name to Flux

Power Holdings, Inc.

Flux’s operations are conducted through its wholly owned subsidiary, Flux Power, Inc.

Power”), a California corporation (collectively, the “Company”).

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

support equipment (“GSE”) and other industrial motive applications.

Our “LiFT”

battery packs, including

our proprietary battery management system (“BMS”), provide our customers with a better performing, cheaper 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 (“Class 3 Walkie”)

LiFT pack product line in 2016 and expect to finalize UL listing during calendar 2020 for our other product lines, which include

Class 1 Counterbalance/Sit down/Ride-on (“Class 1 Ride-on”) LiFT packs, Class 2 Narrow Aisle LiFT packs, and Class

3 End Rider LiFT packs.

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.

Our Class 3 Walkie LiFT packs have been approved

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

and Raymond Corporation.

(“Flux Power”),

a California corporation (collectively, the “Company”).

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.

used herein, the terms “we,”

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and “Company”

Flux Power Holdings, Inc., unless otherwise indicated.

Power Holdings, Inc., unless otherwise indicated.

All dollar amounts herein are in U.S.

dollars unless otherwise stated.

The Company effected a

1-for-10 reverse split of its 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 as of June 30, 2019.

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 the Company’s stock remained unchanged at $0.001.

In addition, by reducing

the number of the Company’s outstanding shares, the Company’s loss per share in all periods presented was increased

by a factor of ten.

the par value per share of the Company’s common stock remained unchanged at $0.001 per share, a total of $46,000 was reclassified

from common stock to additional paid-in capital.

In connection with the Reverse Stock Split, proportionate adjustments have been

made to the per share exercise price and the number of shares issuable upon the exercise or conversion of all outstanding options,

warrants, convertible or exchangeable securities entitling the holders to purchase, exchange for, or convert into, shares of common

All references to shares of common stock and per share data for all periods presented in the accompanying consolidated

financial statements and notes thereto have been adjusted to reflect the Reverse Stock Split on a retroactive basis.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

summary of the Company’s significant accounting policies which have been consistently applied in the preparation of the

accompanying consolidated financial statements follows:

summary of the Company’s significant accounting policies which have been consistently applied in the preparation of the accompanying

consolidated financial statements follows:

of Consolidation

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of all intercompany accounts and transactions.

Reclassifications

prior year amounts have been reclassified to conform to the current year presentation for comparative purposes.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America

(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,

revenues, and expenses, as well as certain financial statement disclosures.

Significant estimates include valuation allowances

relating to inventory and deferred tax assets.

While management believes that the estimates and assumptions used in the preparation

of the financial statements are appropriate, actual results could differ from these estimates.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”)

requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses,

as well as certain financial statement disclosures.

Significant estimates include valuation allowances relating to inventory and deferred

While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate,

actual results could differ from these estimates.

and Cash Equivalents

of June 30, 2020, cash totaled approximately $726,000 and consists of funds held in a non-interest bearing bank deposit account.

The Company considers all liquid short-term investments with maturities of less than three months when acquired to be cash equivalents.

of June 30, 2021 and June 30, 2020, cash was approximately $4,713,000 and $726,000, respectively.

Cash consisted of funds held in a non-interest

bearing bank deposit account.

The Company considers all liquid short-term investments with maturities of less than three months when

acquired to be cash equivalents.

The Company had no cash equivalents at June 30, 2021 and 2020.

Values of Financial Instruments

carrying amount of our cash, accounts payable, accounts receivable, and accrued liabilities approximates their estimated fair

values due to the short-term maturities of those financial instruments.

The carrying amount of the line of credit agreement approximates

its fair values as interest approximates current market interest rates for similar instruments.

Management has concluded that

it is not practical to determine the estimated fair value of amounts due to related parties because the transactions cannot be

assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values

available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar

instruments, if any, and the associated potential costs.

carrying amount of our cash, accounts payable, accounts receivable, and accrued liabilities approximates their estimated fair values

due to the short-term maturities of those financial instruments.

The carrying amount of the line of credit agreement approximates its

fair values as interest approximates current market interest rates for similar instruments.

Management has concluded that it is not practical

to determine the estimated fair value of amounts due to related parties because the transactions cannot be assumed to have been consummated

at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an

independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential

Company does not have any other assets or liabilities that are measured at fair value on a recurring or non-recurring basis.

receivable are carried at their estimated collectible amounts.

The Company has not experienced collection issues related to its

accounts receivable and has not recorded an allowance for doubtful accounts during the fiscal year ended June 30, 2020 and 2019.

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

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 to inventory reserve related to obsolete and slow moving inventory in the amount

of approximately $317,000 during the year ended June 30, 2020.

The Company has not experienced collection 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 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

adjustments to inventory reserve related to obsolete and slow moving inventory in the amount of approximately $195,000 and $317,000

during the years ended June 30, 2021 and 2020, respectively.

Plant and Equipment

plant and equipment are stated at cost, net of accumulated depreciation.

Depreciation and amortization are provided using the

straight-line method over the estimated useful lives, of the related assets ranging from three to ten years, or, in the case of

leasehold improvements, over the lesser of the useful life of the related asset or the lease term.

Depreciation and amortization are provided using the straight-line

method over the estimated useful lives, of the related assets ranging from three to ten years, or, in the case of leasehold improvements,

over the lesser of the useful life of the related asset or the lease term.

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.

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.

Product revenue is recognized

as a distinct single performance obligation which for the Company’s three major customers represents the point in

time that they receive delivery of the products, and for all other customers represents the point in time that the Company

ships the products.

Our customers do have a right to return product but our returns have historically been insignificant.

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.

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 for the Company’s three major customers represents the

point in time that they receive delivery of the products, and for all other customers represents the point in time that the Company ships

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.

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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.

of Long-lived Assets

accordance with authoritative guidance for the impairment or disposal of long-lived assets, if indicators of impairment exist,

the Company assesses the recoverability of the affected long-lived assets by determining whether the carrying value of such assets

can be recovered through the undiscounted future operating cash flows.

impairment is indicated, the Company measures the amount of such impairment by comparing the carrying value of the asset to the

present value of the expected future cash flows associated with the use of the asset.

The Company believes that no impairment

indicators were present, and accordingly no impairment losses were recognized during the fiscal years ended June 30, 2020 and

accordance with authoritative guidance for the impairment or disposal of long-lived assets, if indicators of impairment exist, the Company

assesses the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered

through the undiscounted future operating cash flows.

impairment is indicated, the Company measures the amount of such impairment by comparing the carrying value of the asset to the present

value of the expected future cash flows associated with the use of the asset.

The Company believes that no impairment indicators were

present, and accordingly no impairment losses were recognized during the fiscal years ended June 30, 2021 and 2020.

and Development

Company is actively engaged in new product development efforts.

Research and development cost relating to possible future products

are expensed as incurred.

Research and development cost relating to possible future products are

expensed as incurred.

to FASB ASC Topic No.

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of temporary differences between the financial reporting basis of assets and liabilities and their tax basis at each year-end.

These amounts are adjusted, as appropriate, to reflect enacted changes in tax rates expected to be in effect when the temporary

differences reverse.

The Company has analyzed filing positions in all of the federal and state jurisdictions where the Company

is required to file income tax returns, as well as all open tax years in these jurisdictions.

As a result, no unrecognized tax

benefits have been identified as of June 30, 2020 or June 30, 2019, and accordingly, no additional tax liabilities have been recorded.

Company records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of

assets and liabilities and on operating loss carry forwards using enacted tax rates in effect for the year in which the differences

are expected to reverse.

A valuation allowance is provided when it is more likely than not that some portion or all of a deferred

tax asset will not be realized.

amounts are adjusted, as appropriate, to reflect enacted changes in tax rates expected to be in effect when the temporary differences

The Company has analyzed filing positions in all of the federal and state jurisdictions where the Company is required to file

income tax returns, as well as all open tax years in these jurisdictions.

As a result, no unrecognized tax benefits have been identified

as of June 30, 2021 or June 30, 2020, and accordingly, no additional tax liabilities have been recorded.

Company records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets

and liabilities and on operating loss carry forwards using enacted tax rates in effect for the year in which the differences are expected

A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not

Loss Per Common Share

Company calculates basic loss per common share by dividing net loss by the weighted average number of common shares outstanding

during the periods.

Diluted loss per common share includes the impact from all dilutive potential common shares relating to outstanding

convertible securities.

the years ended June 30, 2020 and 2019, basic and diluted weighted-average common shares outstanding were 5,118,713 and 4,364,271,

respectively.

The Company incurred a net loss for the years ended June 30, 2020 and 2019, and therefore, basic and diluted loss

per share for each fiscal year are the same because the inclusion of potential common equivalent shares were excluded from diluted

weighted-average common shares outstanding during the period, as the inclusion of such shares would be anti-dilutive.

potentially dilutive common shares outstanding at June 30, 2020 and 2019, excluded from diluted weighted-average common shares

outstanding, which include common shares underlying outstanding convertible debt, stock options and warrants, were 2,210,216

and 588,504, respectively.

Company calculates basic loss per common share by dividing net loss by the weighted average number of common shares outstanding during

Diluted loss per common share includes the impact from all dilutive potential common shares relating to outstanding convertible

the years ended June 30, 2021 and 2020, basic and diluted weighted-average common shares outstanding were 11,796,217 and 5,118,713, respectively.

The Company incurred a net loss for the years ended June 30, 2021 and 2020, and therefore, basic and diluted loss per share for each

fiscal year are the same because the inclusion of potential common equivalent shares were excluded from diluted weighted-average common

shares outstanding during the period, as the inclusion of such shares would be anti-dilutive.

The total potentially dilutive common shares

outstanding at June 30, 2021 and 2020, excluded from diluted weighted-average common shares outstanding, which include common shares

underlying outstanding convertible debt, stock options, RSUs, and warrants, were 891,659 and 2,210,216, respectively.

Accounting Standards

Adopted Accounting Pronouncements

In 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.

The Company adopted ASU 2016-02 on July 1, 2019,

utilizing the alternative transition method allowed under ASU 2018-11.

As a result, 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.

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 Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718):

to Nonemployee Share-Based Payment Accounting.

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.

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.

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

During the year ended June 30, 2020, the

Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (“ASU 2016-02”) and ASU

2018-07, Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting (“ASU

2018-07”) effective July 1, 2019, neither of which had a material impact on the Company’s consolidated financial statements.

has considered all recent accounting pronouncements issued since the last audit of the Company’s consolidated financial statements.

3 - INVENTORIES

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consist primarily of our energy storage systems and the related subcomponents, and are stated at the lower of cost or net realizable

Inventory held at consignment locations is included in our finished goods inventory and totaled $0 and $19,000 as of June

30, 2020 and 2019, respectively.

OTHER CURRENT ASSETS

9 unchanged sentences

Warranty liability

Sales tax payable

Total Accrued expenses

9 unchanged sentences

and administrative expenses in the accompanying consolidated statements of operations.

Paycheck Protection Program Loan

On May 1, 2020, the Company

applied for and received a loan from the Bank of America, NA (the “BOA”) in the aggregate principal amount of approximately

$1,297,000 (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 Company received the funds on or around May 4, 2020.

The PPP Note may be prepaid by the Company at any time prior to maturity

with no prepayment penalties.

Proceeds from the PPP Loan are available to the Company 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,

subject to specific limitations, 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 the PPP.

The Company 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 the Company

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 June 30, 2020, the outstanding balance

of the PPP Loan was approximately $1,297,000.

Notes Payable

Protection Program Loan

May 1, 2020, the Company applied for and received a loan from the Bank of America, NA (the “BOA”) in the aggregate principal

amount of approximately $1,297,000 (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 had a two-year term and bears interest

at a rate of 1.0% per annum.

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

Company received the funds on May 4, 2020.

On February 9, 2021, the Company was notified that the Small Business Administration (“SBA”)

had forgiven repayment of the entire PPP Loan of approximately $1,297,000 in principal, together with all accrued interest of approximately

The Company has recorded the entire forgiven principal and accrued interest amount of approximately $1,307,000 as other income

in its statement of operations on February 9, 2021.

As of June 30, 2021, the outstanding balance of the PPP Loan was $0.

SBA reserves the right to audit any PPP loan, regardless of size.

These audits may occur after forgiveness has been granted.

In accordance

with the CARES Act, all borrowers are required to maintain their PPP loan documentation for six years after the PPP loan was forgiven

or repaid in full and to provide that documentation to the SBA upon request.

Line of Credit

November 9, 2020, the Company entered into a certain Loan and Security Agreement (“Agreement”) with Silicon Valley Bank (“SVB”).

The Agreement provides the Company with a senior secured revolving credit facility for up to $4.0 million available on a revolving basis

(“Credit Facility”).

Outstanding principal under the Credit Facility accrues interest at a floating per annum rate equal

to the greater of (i) prime rate plus two and a half percent (2.50%) or (ii) five and three-quarters percent (5.75%).

Interest is due

monthly on the last day of the month.

In the event of default, the amounts due under the Agreement will bear interest at a rate per annum

equal to five percent (5.0%) above the rate that is otherwise applicable to such amounts.

The Company paid a non-refundable commitment

fee of $15,000 upon execution of the Loan Agreement.

In addition, the Company is required to pay a quarterly unused facility fee equal

to one-quarter percent (0.25%) per annum of the average daily unused portion of the commitments under the Credit Facility, depending

upon availability of borrowings under the Credit Facility.

The loans and other obligations of the Company under the Credit Facility are

secured by substantially all of the tangible and intangible assets of the Company (including, without limitation, intellectual property)

pursuant to the terms of the Agreement and the Intellectual Property Security Agreement dated as of November 9, 2020.

The Company has

utilized the line of credit 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 was available for future draws through November 8, 2021, unless the credit facility is renewed and its term is extended prior to its expiration.

8 - RELATED PARTY DEBT AGREEMENTS

March 9, 2020, the Company and 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”).

The Original Esenjay Note bears an interest rate of 15% per annum and was originally due on the earlier of:

(i) June 30, 2020,

unless extended pursuant to the terms thereunder, or (ii) an occurrence of an event of default.

The outstanding obligations under

the Original Esenjay Note are convertible into shares of common stock of the Company at the cash price per share of the equity

securities paid by purchasers in the offering at any time upon consummation of an offering of equity securities of at least $1,000,000

before the maturity date.

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 from $750,000 to $1,400,000 (the

“Esenjay Note”).

June 26, 2020, Esenjay assigned $500,000 of the Esenjay Note to two (2) accredited investors.

On June 30, 2020, in connection

with the completion of the Company’s initial closing of its 2020 Private Placement offering, the principal amount

outstanding under the Esenjay Note became convertible into shares of common stock at $4.00 per share, which was the cash price

per share of the Offering (“Esenjay Initial Conversion”).

The two note holders converted their notes into shares of

common stock at $4.00 per share.

As June 30, 2020, the outstanding principal balance of the Esenjay Loan was $900,000.

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 from $750,000 to $1,400,000

(the “Esenjay Note”).

June 26, 2020 and July 22, 2020, Esenjay assigned a total of $900,000 of the Esenjay Note to three (3) accredited investors.

30, 2020, in connection with the completion of the Company’s initial closing of its private placement offering, the principal amount

outstanding under the Esenjay Note became convertible into shares of common stock at $4.00 per share, which was the cash price per share

of such offering.

The three note holders converted their notes into an aggregate 225,000 shares of common stock at $4.00 per share.

August 31, 2020, the Company entered into the Third Amended and Restated Credit Facility Agreement and pursuant to which the Company

further amended the Notes to, among other amended items, 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 Credit Facility Agreement.

(See “Credit Facility”

July 3, 2019, the Company entered into a loan agreement with Cleveland, pursuant to which Cleveland agreed to loan the Company $1,000,000

(the “Cleveland Loan”).

In connection with the Cleveland Loan, on July 3, 2019, the Company issued Cleveland

an unsecured short-term promissory note in the amount of $1,000,000 (the “Unsecured Promissory Note”).

The Unsecured

Promissory Note bears 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, the Company 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 total number of shares of common

stock to be sold in a contemplated public offering and with an exercise price equal to the per share public offering price.

September 1, 2019, the Company entered into the First Amendment to the Unsecured Promissory Note pursuant to which the maturity

date of the Unsecured Promissory Note was modified from September 1, 2019 to December 1, 2019 (the “First Amendment”).

In connection with the First Amendment, the Company replaced the Cleveland Warrant with the Amended and Restated Warrant Certificate

(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 total number of shares of common stock sold in the next private or public

In addition, the exercise price was also changed to equal the per share price of common stock sold in such offering.

In connection with the Cleveland Loan, on July 3, 2019, the Company issued Cleveland an unsecured

short-term promissory note in the amount of $1,000,000 (the “Unsecured Promissory Note”).

The Unsecured Promissory Note bears

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, the Company 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 total number of shares of common stock to be sold in a contemplated public offering

and with an exercise price equal to the per share public offering price.

September 1, 2019, the Company entered into the First Amendment to the Unsecured Promissory Note pursuant to which the maturity date

of the Unsecured Promissory Note was modified from September 1, 2019 to December 1, 2019 (the “First Amendment”).

In connection

with the First Amendment, the Company replaced the Cleveland Warrant with the Amended and Restated Warrant Certificate (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 total number of shares of common stock sold in the next private or public offering.

In addition, the exercise

price was also changed to equal the per share price of common stock sold in such offering.

The fair value of such warrants was not significant.

December 3, 2019, the Company entered into the Second Amendment to the Unsecured Promissory Note pursuant to which the maturity

date was modified from December 1, 2019 to December 31, 2019 and waived any Event of Default (as defined in the Unsecured Promissory

Note) arising from the failure of the Company to make the requirement payment due on December 1, 2019 under the First Amendment

(the “Second Amendment”).

On December 31, 2019, the Company entered into the Third Amendment to the Unsecured Promissory

Note pursuant to which the maturity date was modified from December 31, 2019 to March 31, 2020, and all accrued and unpaid interest

as of December 31, 2019 was capitalized to the principal amount (the Third Amendment).

On March 31, 2020, the Company entered

into the Fourth Amendment to the Unsecured Promissory Note pursuant to which the maturity date was modified from March 31, 2020

to April 30, 2020, and all accrued and unpaid interest as of March 31, 2020 was capitalized to the principal amount (the Fourth

On April 30, 2020 the Company entered into the Fifth Amendment to the Unsecured Promissory Note pursuant to which

extended the maturity date from April 30, 2020 to May 31, 2020, and capitalized all accrued and unpaid interest as of April 30,

2020 to the principal amount (the Fifth Amendment).

On May 29, 2020, the Company entered into the Sixth Amendment to the Unsecured

Promissory Note pursuant to which extended the maturity date from May 31, 2020 to June 30, 2020, and capitalized all accrued and

unpaid interest as of May 31, 2020 to the principal amount (the Sixth Amendment).

On June 30, 2020, the Company entered into the

Seventh Amendment to the Unsecured Promissory Note which extended the maturity date from June 30, 2020 to July 31, 2020, and capitalized

all accrued and unpaid interest as of June 30, 2020 to the principal amount (the Seventh Amendment).

The outstanding principal

balance of the Cleveland Loan as of June 30, 2020 was approximately $1,157,000 .

19, 2020, the Company paid Cleveland the entire remaining principal balance, together with all accrued interest payable

due under the Cleveland Loan.

(See Note 14)

March 22, 2018, Flux Power entered into a credit facility agreement with Esenjay with a maximum borrowing amount of $5,000,000.

Proceeds from the credit facility were to be used to purchase inventory and related operational expenses and accrue interest at

a rate of 15% per annum (the “Original Agreement”).

The outstanding balance of the Original Agreement and all accrued

interest was due and payable on March 31, 2019.

March 28, 2019, Flux Power entered into an amended and restated credit facility agreement (“Amended and Restated Credit

Facility Agreement”) with Esenjay and Cleveland (Cleveland and Esenjay, together with additional parties that may join as

a lender, the Lenders) to amend and restate the terms of the Original Agreement in its entirety.

To secure the obligations under

the Notes, Flux Power entered into an Amended and Restated Security Agreement dated March 28, 2019 with the Lenders (as amended,

the “Amended Security Agreement”).

The Amended Security Agreement amends and restates the Guaranty and Security Agreement

dated March 22, 2018 by and between Esenjay and the Company, and added Cleveland and other Lenders as additional secured parties

to the Amended Security Agreement and appointing Esenjay as collateral agent.

Original Agreement was amended, among other things, to (i) increase the maximum principal amount available under line of credit

from $5,000,000 to $7,000,000 (“LOC”), (ii) add Cleveland as additional lender to the LOC pursuant to which each lender

has a right to advance a pro rata amount of the principal amount available under the LOC, (iii) extend the maturity date from

March 31, 2019 to December 31, 2019, and (iv) to provide for additional parties to become a “Lender”

under the Amended

and Restated Credit Facility Agreement.

In connection with the LOC, on March 28, 2019 the Company issued a secured promissory

note to Cleveland (the “Cleveland Note”), and an amended and restated secured promissory note to Esenjay which amended

and superseded the secured promissory note dated March 22, 2018 (“Esenjay Note”

and together with the Cleveland Note

and other secured promissory notes to Lenders (the “Notes”).

The Notes were issued for the principal amount of $7,000,000

or such lesser principal amount advanced by the respective Lender under the Amended and Restated Credit Facility Agreement.

Notes bear an interest of fifteen percent (15%) per annum and a maturity date of December 31, 2019.

On October 10, 2019, the Company

entered into a Second Amended and Restated Credit Facility Agreement and pursuant to which the Company further amended its line

of credit and Notes to increase the maximum principal amount available under line of credit from $7,000,000 to $10,000,000.

December 31, 2019, the Company further amended the Notes to (i) increase the maximum principal amount available under line of

credit from $10,000,000 to $12,000,000, (ii) capitalize all accrued and unpaid interest to the principal amount as of December

31, 2019, and (iii) extend the maturity date from December 31, 2019 to June 30, 2020.

In addition, on December 31, 2019, the Company

granted a right to each of the Lenders to convert their respective Note under the LOC into shares of the Company’s common

stock at any time after the close of the next financing of the Company of at least $1,000,000 on or after December 31, 2019, and

on or before the maturity date.

June 30, 2020, Flux Power and the Lenders executed the Third Amendment to the Amended and Restated Secured Promissory Note which

(i) extended the maturity date of the Secured Notes from June 30, 2020 to December 31, 2020, and (ii) capitalized all accrued

and unpaid interest to the principal amount as of June 30, 2020 (the Third Amendment and with the Amended Notes, the “Notes”).

In addition, in connection with our private placement of up to 2,000,000 shares of our common stock, par value $0.001 to accredited

investors for an aggregate amount of up to approximately $8,000,000, or $4.00 per share of Common Stock (the “Offering”),

we completed an initial closing of the Offering on June 30, 2020 pursuant to which an aggregate of 275,000 shares were issued

for $1,100,000 of shares of common stock for cash.

As a result of the initial closing of the Offering, each of the Lenders has

a right to convert the principal and accrued interest outstanding under their respective Notes into shares of common stock at

$4.00 per share, which was the price per share of common stock sold under the Offering.

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.

The outstanding principal balance as of June 30,

2020 was approximately $5,290,000 of which Esenjay has $984,000 outstanding, Cleveland has $1,720,000 outstanding, and other lenders

have an aggregate of $2,586,000 outstanding.

As of June 30, 2020, there was approximately $6,710,000 available for draw under

July 9, 2020, the Company made a payment to Cleveland in the amount of $200,000 as a partial payment of the outstanding principal balance

of the Cleveland Loan.

Subsequently, the Company entered into seven (7) additional amendments pursuant to which the maturity date was

extended from time to time (with the final amendment reflecting a maturity date of August 31, 2020), and all accrued and unpaid interest

as of the time of the respective amendment was capitalized to the principal amount.

As of June 30, 2020, there was $1,157,000 in principal

outstanding under the Cleveland Note.

On August 19, 2020, the Company 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.

March 22, 2018, Flux Power 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, additional lenders and extensions of the maturity date to September

August 2020, the Company paid down an aggregate principal amount of approximately $1,402,000 of the outstanding balance under the LOC.

On August 31, 2020, the Company entered into the Third Amended and Restated Credit Facility Agreement (“Third Amended and Restated

Facility Agreement”) and pursuant to which the Company further amended the Notes to (i) extend the maturity date from December

31, 2020 to September 30, 2021, and (ii) include outstanding obligations under the Esenjay Note of approximately $564,000, consisting

of $500,000 in principal and approximately $64,000 in accrued interest, into the LOC.

In November 2020, the Lenders holding an aggregate

of approximately $2,161,000 in principal and accrued interest outstanding under the LOC elected to convert their Notes into 540,347 shares

of common stock.

In January and March 2021, the Lenders holding an aggregate of approximately $2,632,000 in principal and accrued interest

outstanding under the LOC elected to convert their Notes into 658,103 shares of common stock of which approximately $1,045,000 was held

by Esenjay and was converted to 261,133 shares of common stock.

June 10, 2021, the Third Amended and Restated Credit Facility Agreement by and among Flux Power, Inc.

Esenjay, Cleveland Capital, L.P.,

Otto Candies, Jr., Paul Candies, Brett Candies, Winn Interest, Ltd., Tabone Family Partnership (as assignee to the interests, rights

and obligations of Helen M.

Tabone) and additional lenders who became a party to such agreement pursuant to Section 15 thereof (collectively,

the “Lenders”);

and the related Second Amended and Restated Security Agreement (“Security Agreement”) were terminated.

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.

9 - STOCKHOLDERS’

Private Placement

December 2018, our Board of Directors approved the private placement of up to 454,546 shares of common stock to select accredited

investors for a total amount of $5,000,000, or $11.00 per share of common stock with the right of the Board to increase the offering

amount to $7,000,000 (the “Offering”).

On December 26, 2018, the Company completed an initial closing of the Offering,

pursuant to which it sold an aggregate of 335,910 shares of common stock, at $11.00 per share, for an aggregate purchase price

of approximately $3,695,000 in cash.

A portion of the proceeds from the Offering was used to repay in full approximately $2.6

million in borrowings and accrued interest under two short-term credit facilities provided by Cleveland Capital, L.P.

and a stockholder.

January 29, 2019, the Company conducted its final closing (the “Final Closing”) to its round of private placement

to accredited investors that initially closed on December 26, 2018 (“Initial Closing”).

Following the Initial Closing

to the Final Closing, the Company sold an additional 63,347 shares of its Common Stock (“Shares”), at $11.00 per share,

for an aggregate purchase price of approximately $697,000 to two accredited investors.

The shares offered and sold in the Offering

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

The shares were offered and sold to the accredited investors in reliance upon exemptions from registration pursuant to Rule

506(c) of Regulation D promulgated under Section 4(a)(2) under the Securities Act.

In the aggregate, the

Company issued 399,257 shares of its common stock for an aggregate gross proceeds of approximately $4,392,000 during

The Shares were issued on identical terms to those previously reported for the Initial Closing on the Company’s

Form 8-K filed with the Securities and Exchange Commission (“SEC”) on December 28, 2018.

The Company relied on the

exemption from registration pursuant to Rule 506(c) of Regulation D promulgated under Section 4(a)(2) under the Securities Act

of 1933, as amended.

EQUITY (DEFICIT)

At-The-Market

(“ATM”) Offering

December 21, 2020 the Company entered into a Sales Agreement (the “Sales Agreement”) with H.C.

Wainwright & Co., LLC

(“HCW”) to sell shares of its common stock, par value $0.001 (the “Common Stock”) from time to time, through

an “at-the-market offering”

program (the “ATM Offering”) under which HCW will act as sales agent.

Company agreed to pay HCW a commission in an amount equal to 3.0% of the gross sales proceeds of the shares sold under the Sales Agreement.

In addition, the Company agreed to reimburse HCW for certain legal and other expenses incurred up to a maximum of $50,000 to establish

the ATM Offering, and $2,500 per quarter thereafter to maintain such program under the Sales Agreement.

The Company has also agreed pursuant

to the Sales Agreement to indemnify and provide contribution to HCW against certain liabilities, including liabilities under the Securities

May 27, 2021, the Company filed Amendment No.

1 (the “Amendment”) to the prospectus supplement dated December 21, 2020 (the

“Prospectus Supplement”) to increase the size of the ATM Offering from an aggregate offering price of up to $10 million in

the Prospectus Supplement to an amended maximum aggregate offering price of up to $20 million of shares of the Company’s common

stock (the “Shares”) (which amount includes the value of shares we have already sold prior to the date of the Amendment)

pursuant to the base prospectus dated October 26, 2020, the Prospectus Supplement, and the Amendment (collectively, the “Prospectus”).

December 21, 2020 to June 30, 2021, the Company 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.

Shares have been registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s

Registration Statement on Form S-3 (File No.

333-249521), declared effective by the Securities and Exchange Commission (the “Commission”)

on October 26, 2020, and the Prospectus.

Sales of the Shares, if any, may be made by any method permitted by law deemed to be an “at-the-market

offering”

as defined in Rule 415(a)(4) of the Securities Act.

The Company or the HCW may, upon written notice to the other party

in accordance with the terms of the Sales Agreement, suspend offers and sales of the Shares.

The Company and HCW each have the right,

in its sole discretion, to terminate the Sales Agreement at any time upon prior written notice pursuant to the terms and subject to the

conditions set forth in the Sales Agreement.

Public Offering and NASDAQ Capital Market Uplisting

August 2020, the Company closed an underwritten public offering of its common stock at a public offering price of $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.

A total of 3,099,250 shares of common

stock were issued by the Company in the offering, including the full exercise of the over-allotment option.

The securities were offered

pursuant to a registration statement on Form S-1 (File No.

333-231766), which was declared effective by the SEC on August 12, 2020.

with the announcement of the public offering, on August 14, 2020, the Company’s common stock commenced trading on The NASDAQ Capital

Market under the symbol “FLUX.”

Private Placement

April 22, 2020, the Company 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 (the “2020 Private Placement”).

On June 30, 2020,

we completed an initial closing of the 2020 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.

April 22, 2020, the Company 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 (the “2020 Private Placement”).

On June 30, 2020, the Company completed

an initial closing of the 2020 Private Placement offering of up to 2,000,000 shares of common stock, pursuant to which the Company sold

an aggregate of 275,000 shares of common stock at $4.00 per share, for an aggregate purchase price of $1,100,000 to six (6) accredited

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

Esenjay and Mr.

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

shares offered and sold in the 2020 Private Placement offering described above 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.

The shares were offered and sold to the accredited

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

under the Securities Act

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”).

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.

Dutt, the Company’s president

and chief executive officer, participated in the initial closing in the amount of $300,000 and $50,000, respectively.

On July 24, 2020,

the Company sold and issued an aggregate of 800,000 shares of common stock, at $4.00 per share, for an aggregate purchase price of $3,200,000

in cash to accredited investors, including Mr.

Cosentino, one of our directors, who participated in the offering in the amount of $250,000.

shares offered and sold in the 2020 Private Placement described above were sold to accredited investors in reliance upon exemptions from

registration pursuant to Rule 506(b) of Regulation D promulgated under Section 4(a)(2) under the Securities Act.

Such shares were not

registered under the Securities Act of 1933, as amended (“Securities Act”), and could not be offered or sold in the United

States absent registration or an applicable exemption from the registration requirements of the Securities Act.

Pursuant to a registration

statement on Form S-3 filed with the SEC on October 16, 2020 which became effective on October 26, 2020, such shares were registered.

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”).

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.

November 6, 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 “November 2020 Conversion”).

At the option of the lenders, on November 6, 2020,

an aggregate of approximately $2,161,000 in principal and accrued interest outstanding under the LOC was converted into 540,347 shares

of common stock.

January and March 2021, there was a conversion of the remaining debt underlying the secured promissory notes issued to lenders under

the LOC at a conversion price of $4.00 per share.

At the option of the lenders, an aggregate of approximately $2,632,000 in principal

and accrued interest outstanding under the LOC was converted into 658,103 shares of common stock.

Note Conversion

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.

Effective April 1, 2018, the Company entered into a renewal contract (the “2018 Renewal”) with

Catalyst Global LLC to provide investor relations services for 12 months in exchange for monthly fees of $4,500 per month and

3,484 shares of restricted common stock to be issued over the course of the 12-month term.

The initial tranche of 871 shares was

valued at $15.50 or $13,500 when issued on June 21, 2018, the second tranche of 871 shares was valued at $20.10 or $17,507 when

issued September 28, 2018, the third tranche of 871 shares was valued at $17.50 per share or $15,243 when issued on December 31,

2018, and the fourth tranche of 871 shares was valued at $13.10 per share or $11,410 when issued on March 27, 2019.

Reach Investment Development Co.

(“SRID”).

On March 14, 2018, the Company entered into a consulting agreement

with SRID to assist us with identifying strategic partners, suppliers and manufacturers in China for a term of 12 months.

with the services is a two-week trip to China to meet with potential manufacturers, which took place in April 2018.

In consideration

for the services, we agreed to issue to SRID, up to 17,468 shares of restricted common stock over the course of the 12-month term.

As of June 30, 2019, 17,468 shares have been issued.

The initial tranche of 5,765 shares was valued at $5.20 or $29,978 when issued

on April 26, 2018, the second tranche of 2,926 shares was valued at $17.00 or $49,742 when issued June 21, 2018, the third tranche

of 2,926 shares was valued at $20.10 or $58,813 when issued September 28, 2018, the fourth tranche of 2,926 shares was valued

at $13.90 per share or $40,671 when issued on January 4, 2019 and the fifth tranche of 2,926 shares was valued at $13.60 per share

or $39,794 when issued on March 22, 2019.

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.

July 22, 2020, one accredited individual, who became note holder to the Esenjay Note pursuant to the assignment of such note by Esenjay

to the note holder, converted $400,000 in principal into 100,000 shares of common stock at $4.00 per share.

July 3, 2019, the Company issued a three-year warrant to Cleveland Capital, L.P.

(“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 at an exercise price equal to the per share public offering price.

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”)

at an exercise price 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 number and the exercise price of the Cleveland Warrant became determinable,

and represented as a right to purchase up to 83,205 shares of common stock at $4.00 per share and had a fair value of approximately $174,000.

As of June 30, 2021, all 83,205 warrants remained outstanding and exercisable.

August 2020 and in conjunction with the Company’s public offering, the Company issued five-year warrants to the underwriters to

purchase up to 185,955 shares of the Company’s common stock at an exercise price of $4.80 per share and had a fair value of approximately

The underwriters’

warrants became exercisable on February 8, 2021.

detail for the year ended June 30, 2021 is reflected below:

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Warrants issued

Warrants exchanged

Warrants exercised

Warrants forfeited

4 unchanged sentences

Warrants issued

Warrants exchanged

Warrants forfeited

Warrants outstanding and exercisable at June 30, 2020

July 3, 2019, we issued Cleveland a three-year warrant (the Cleveland Warrant) to purchase the Company’s 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 price.

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).

November 26, 2014, the board of directors approved the 2014 Equity Incentive Plan (the “2014 Plan”), which was approved

by the Company’s stockholders on February 17, 2015.

The 2014 Plan offers selected employees, directors, and consultants

the opportunity to acquire our common stock, and serves to encourage such persons to remain employed by us and to attract new

The 2014 Plan allows for the award of stock and options, up to 1,000,000 shares of our common stock.

In connection with the reverse

acquisition of Flux Power, Inc in 2012, we assumed the 2010 Option Plan.

As of June 30, 2021, the number of options outstanding to purchase

common stock under the 2010 Option Plan was 22,536.

No additional options to purchase common stock may be granted under the 2010 Option

On November 26, 2014, the Board

of Directors approved the 2014 Equity Incentive Plan (the “2014 Option Plan”), which was approved by the Company’s stockholders

on February 17, 2015.

The 2014 Option Plan offers selected employees, directors, and consultants the opportunity to acquire our common

stock subject to vesting requirements and serves to encourage such persons to remain employed by us and to attract new employees.

2014 Option Plan allows for the award of stock and options, up to 1,000,000 shares of our common stock.

in stock options during the year ended June 30, 2021 and related balances outstanding as of that date are reflected below:

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Exercisable at June 30, 2020

compensation expense recognized in the consolidated statements of operations for the year ended June 30, 2020 and 2019, includes

compensation expense for stock-based options and awards granted based on the grant date fair value.

For options and awards granted,

expenses are amortized under the straight-line method over the expected vesting period.

Stock-based compensation expense recognized

in the consolidated statements of operations has been reduced for estimated forfeitures of options that are subject to vesting.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from

those estimates.

5, 2020, the Company’s Board of Directors approved an amendment to the Company’s 2014 Option Plan, to allow grants of Restricted

Stock Units (“RSUs”).

Subject to vesting requirements set forth in the RSU Award Agreement, one share of common stock is issuable

for one vested RSU.

On November 5, 2020, the Board of Directors authorized the following RSUs to be granted under the amended 2014 Option

(i) a total of 43,527 RSUs to certain executive officers as one-time retention incentive awards, and (ii) a total of 91,338 RSUs

to certain key employees as annual equity compensation of which 45,652 were performance-based RSUs and 45,686 were time-based RSUs.

April 29, 2021, an additional 18,312 time-based RSUs were authorized by the Company’s Board of Directors to be granted under the

amended 2014 Option Plan.

in RSUs during the year ended June 30, 2021 and related balances outstanding as of that date are reflected below:

Number of Shares

Weighted Average Grant date Fair Value

Weighted Average Remaining Contract Term

Outstanding at June 30, 2020

Forfeited and cancelled

Outstanding at June 30, 2021

were no RSUs granted or outstanding during the year ended June 30, 2020.

compensation expense recognized in the consolidated statements of operations for the year ended June 30, 2021 and 2020, includes compensation

expense for stock-based options and awards granted based on the grant date fair value.

For options and awards granted, expenses are amortized

under the straight-line method over the expected vesting period.

Stock-based compensation expense recognized in the consolidated statements

of operations has been reduced for estimated forfeitures of options that are subject to vesting.

Forfeitures are estimated at the time

of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

June 30, 2021, the aggregate intrinsic value of exercisable options was approximately $1,278,000.

allocated stock-based compensation expense included in the consolidated statements of operations for employee option grants and

non-employee option grants as follows:

allocated stock-based compensation expense included in the consolidated statements of operations for employee option grants and non-employee

option grants as follows:

Years ended June 30,

3 unchanged sentences

Company uses the Black-Scholes valuation model to calculate the fair value of stock options.

The fair value of stock options was

measured at the grant date using the assumptions (annualized percentages) in the table below:

Years ended June 30,

Expected volatility

100.6% - 119.6 %

Risk free interest rate

0.35% - 2.00 %

2.43% - 2.45 %

Forfeiture rate

Dividend yield

Expected term (years)

remaining amount of unrecognized stock-based compensation expense at June 30, 2020 relating to outstanding stock options, is approximately

$933,000, which is expected to be recognized over the weighted average period of 1.39 years.

The fair value of stock options was measured

at the grant date using the assumptions (annualized percentages) in the table below:

ended June 30,

free interest rate

At June 30, 2021, the unamortized

stock-based compensation expense relating to outstanding stock options and RSUs was approximately $361,000 and $687,000, respectively,

and these amounts are expected to be expensed over the weighted-average remaining recognition period of 0.69 years and 2.69years,

respectively.

10 - INCOME TAXES

to the provisions of FASB ASC Topic No.

740 Income Taxes (“ASC 740”), deferred income taxes reflect the net effect

of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for

income tax reporting purposes, and (b) net operating loss carryforwards.

No net provision for refundable Federal income taxes

has been made in the accompanying statement of operations because no recoverable taxes were paid previously.

Significant components

of the Company’s net deferred tax assets at June 30, 2020 and 2019 are shown below.

A valuation allowance of approximately

$15,174,000 and $11,636,000 has been established to offset the net deferred tax assets as of June 30, 2020 and 2019, respectively,

due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets.

740 Income Taxes (“ASC 740”), deferred income taxes reflect the net effect of (a)

temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting

purposes, and (b) net operating loss carryforwards.

No net provision for refundable Federal income taxes has been made in the accompanying

statement of operations because no recoverable taxes were paid previously.

Significant components of the Company’s net deferred

tax assets at June 30, 2021 and 2020 are shown below.

A valuation allowance of approximately $18,839,000 and $15,174,000 has been

established to offset the net deferred tax assets as of June 30, 2021 and 2020, respectively, due to uncertainties surrounding the

Company’s ability to generate future taxable income to realize these assets.

Company is subject to taxation in the United States and California.

The Company’s tax years for 2010 and forward are subject

to examination by the United States and California tax authorities due to the carry forward of unutilized net operating losses

and research and development credits (if any).

The Company’s tax years for 2010 and forward are subject to

examination by the United States and California tax authorities due to the carry forward of unutilized net operating losses and research

and development credits (if any).

Company has incurred losses since inception, so no current income tax provision or benefit has been recorded.

4 unchanged sentences

Net operating loss carryforwards

Research & development credit carryforward

Stock compensation

10 unchanged sentences

Net deferred tax liabilities

June 30, 2020, the Company had unused net operating loss carryovers of approximately $45,675,000 and $46,873,000 that are

available to offset future federal and state taxable income, respectively.

These operating losses begin to expire in 2030.

provision for income taxes on earnings subject to income taxes differs from the statutory federal rate at June 30, 2020 and 2019,

due to the following:

June 30, 2021, the Company had unused net operating loss (“NOL”) carryovers of approximately $57,472,000 and $57,871,000

that are available to offset future federal and state taxable income, respectively.

Federal NOL carryforwards arising after 2017 of approximately

$35,064,000 do not expire.

Federal NOL carryforwards arrising before 2018 of approximately $22,408,000 and all of the state NOL carryforward

begin to expire in 2030.

provision for income taxes on earnings subject to income taxes differs from the statutory federal rate at June 30, 2021 and 2020, due

to the following:

Year Ended June 30,

8 unchanged sentences

Provision for income taxes

Revenue Code Sections 382 limits the use of our net operating loss carryforwards if there has been a cumulative change in ownership

of more than 50% within a three-year period.

Revenue Code Sections 382 limits the use of our net operating loss carryforwards if there has been a cumulative change in ownership of

more than 50% within a three-year period.

The Company has not yet completed a Section 382 net operating loss analysis.

event that such analysis determines there is a limitation on the use on net operating loss carryforwards to offset future taxable

income, the recorded deferred tax asset relating to such net operating loss carryforwards will be reduced.

However, as the Company

has recorded a full valuation allowance against its net deferred tax assets, there is no impact on the Company’s consolidated

financial statements as of June 30, 2020 and 2019.

ASC 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that

is more-likely-than-not to be sustained upon audit by the relevant taxing authority.

An uncertain income tax position will not

be recognized if it has less than a 50% likelihood of being sustained.

Additionally, ASC 740 provides guidance on de-recognition,

classification, interest and penalties, accounting in interim periods, disclosure and transition.

In the event that

such analysis determines there is a limitation on the use on net operating loss carryforwards to offset future taxable income, the recorded

deferred tax asset relating to such net operating loss carryforwards will be reduced.

However, as the Company has recorded a full valuation

allowance against its net deferred tax assets, there is no impact on the Company’s consolidated financial statements as of June

30, 2021 and 2020.

ASC 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not

to be sustained upon audit by the relevant taxing authority.

An uncertain income tax position will not be recognized if it has less than

a 50% likelihood of being sustained.

Additionally, ASC 740 provides guidance on de-recognition, classification, interest and penalties,

accounting in interim periods, disclosure and transition.

accordance with ASC 740, there are no unrecognized tax benefits as of June 30, 2021 or June 30, 2020

11 - OTHER RELATED PARTY TRANSACTIONS

Company subleased office and manufacturing space to Epic Boats (an entity founded and controlled by Chris Anthony, our board member

and former Chief Executive Officer) in our facility in Vista, California pursuant to a month-to-month sublease agreement.

to this agreement, Epic Boats paid Flux Power 10% of facility costs through the end of our lease agreement which was June 30,

Company received $18,000 for the year ended June 30, 2019 from Epic Boats under the sublease rental agreement which is recorded

as a reduction to rent expense and the customer deposits discussed below.

of June 30, 2019 the customer deposit totaling approximately $84,000 was recognized as Other Income since Epic Boats has released

that deposit liability.

There were no customer deposits related to such products as of June 30, 2019 and there were no receivables

outstanding from Epic Boats as of June 30, 2019.

11 - CONCENTRATIONS

instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments

and unsecured trade accounts receivable.

The Company maintains cash balances at a financial institution in San Diego, California.

Our cash balance at this institution is secured by the Federal Deposit Insurance Corporation up to $250,000.

As of June 30, 2020,

cash totaled approximately $726,000, which consists of funds held in a non-interest bearing bank deposit account.

has not experienced any losses in such accounts.

instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and

unsecured trade accounts receivable.

The Company maintains cash balances at a California commercial bank.

balance at this institution is secured by the Federal Deposit Insurance Corporation up to $250,000.

As of June 30, 2021 and 2020, cash

was approximately $4,713,000, and $726,000 respectively, which consisted of funds held in a non-interest bearing bank deposit account.

The Company has not experienced any losses in such accounts.

Management believes that the Company is not exposed to any significant credit

1 unchanged sentence

Concentrations

the year ended June 30, 2020, the Company had three (3) major customers that each represented more than 10% of its revenues, on

an individual basis, and together represented approximately $10,045,000 or 60% of its total revenues.

the year ended June 30, 2019, the Company had four (4) major customers that each represented more than 10% of its revenues, on

an individual basis, and together represented approximately $8,072,000 or 87% of its total revenues.

the year ended June 30, 2021, the Company had three (3) major customers that each represented more than 10% of its revenues, on an individual

basis, and together represented approximately $16,004,000 or 61% of its total revenues.

the year ended June 30, 2020, the Company had three (3) major customers that each represented more than 10% of its revenues, on an individual

basis, and together represented approximately $10,045,000 or 60% of its total revenues.

Suppliers/Vendor

1 unchanged sentence

Company obtains a limited number of components and supplies included in its products from a small group of suppliers.

year ended June 30, 2020 the Company had two (2) suppliers who accounted for more than 10% of its total purchases, on an individual

During the year

ended June 30, 2021 the Company had two (2) suppliers who accounted for more than 10% of its total purchases, on an individual basis,

and together represented approximately $9,260,000 or 27% of its total purchases.

the year ended June 30, 2020, the Company had two (2) suppliers who accounted for more than 10% of its total purchases, on an individual

basis, and together represented approximately $6,598,000 or 35% of its total purchases.

the year ended June 30, 2019 the Company had three (3) suppliers who accounted for more than 10% of its total purchases, on an

individual basis, and together represented approximately $6,855,000 or 62% of its total purchases.

12 - COMMITMENTS AND CONTINGENCIES

time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of

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 the Company.

April 25, 2019 the Company signed a Standard Industrial/Commercial Multi-Tenant Lease (“Lease”) with Accutek to rent

approximately 45,600 square feet of industrial space at 2685 S.

time to time, the Company 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 the Company.

April 25, 2019 the Company signed a Standard Industrial/Commercial Multi-Tenant Lease (“Lease”) with Accutek to rent approximately

45,600 square feet of industrial space at 2685 S.

Melrose Drive, Vista, California.

The Lease has an initial term

of seven years and four months, commencing on or about June 28, 2019.

The lease contains an option to extend the term for two

periods of 24 months, and the right of first refusal to lease an additional approximate 15,300 square feet.

The monthly rental

rate is $42,400 for the first 12 months, escalating at 3% each year.

The Lease has an initial term of seven years and

four months, commencing on or about June 28, 2019.

The lease contains an option to extend the term for two periods of 24 months, and

the right of first refusal to lease an additional approximate 15,300 square feet.

The monthly rental rate was $42,400 for the first 12

months, escalating at 3% each year.

February 26, 2020, the Company entered into the First Amendment to Standard Industrial/Commercial Multi-Tenant Lease dated April 25,

25, 2019 (the “Amendment”) with Accutek to rent an additional 16,309 rentable square feet of space plus a residential

unit of approximately 1,230 rentable square feet (for a total of approximately 17,539 rentable square feet).

The lease for the

additional space commenced 30 days following the occupancy date of the additional space, and terminates concurrently with the

term for the lease of the original lease, which expires on November 20, 2026.

The base rent for the additional space is the same

rate as the space rented under the terms of the original lease, $0.93 per rentable square (subject to 3% annual increase).

connection with the Amendment, the Company purchased certain existing office furniture for a total purchase price of $8,300.

rent expense was approximately $673,000 and $168,000 for the years ended June 30, 2020 and 2019, respectively, net of sublease

2019 (the “Amendment”) with Accutek to rent an additional 16,309 rentable square feet of space plus a residential unit of

approximately 1,230 rentable square feet (for a total of approximately 17,539 rentable square feet).

The lease for the additional space

commenced 30 days following the occupancy date of the additional space, and terminates concurrently with the term for the lease of the

original lease, which expires on November 20, 2026.

The base rent for the additional space is the same rate as the space rented under

the terms of the original lease, $0.93 per rentable square (subject to 3% annual increase).

In connection with the Amendment, the Company

purchased certain existing office furniture for a total purchase price of $8,300.

rent expense was approximately $841,000 and $673,000 for the years ended June 30, 2021 and 2020, respectively, net of sublease income.

Future Minimum Lease Payments are:

Total Future Minimum Lease Payments

Total lease liability

Future Minimum Lease Payments

lease liability

13 - SUBSEQUENT EVENTS

July 9, 2020, the Company made a payment to Cleveland in the amount of $200,000 as a partial payment of the outstanding principal

balance of the Cleveland Loan.

July 27, 2020, in connection with the outstanding loan from Cleveland to the Company in the principal amount of $1,157,000, the

Company 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 (the Eighth Amendment

and together with the Original Note, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the

Fifth Amendment, the Sixth Amendment and the Seventh Amendment, the “Cleveland Note”).

All accrued and unpaid interest

as of July 27, 2020 was capitalized to the principal amount.

August 19, 2020, the Company 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.

July 22, 2020, one 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.

July 24, 2020, the Company sold and issued an aggregate of 800,000 shares of common stock, at $4.00 per share, for an aggregate

purchase price of $3,200,000 in cash to accredited investors (the “Offering”).

The shares offered and sold in the

Offering 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.

The shares were offered and sold to the accredited investors in reliance upon exemptions from registration pursuant

to Rule 506(b) of Regulation D promulgated under Section 4(a)(2) under the Securities Act.

Gross Margin Bonus Plan

December 4, 2019, the Board adopted a 2020 Gross Margin Plan (“GM Plan”) which provided its executives and key senior

employees (“Key Executives”) with a cash bonus equal to 2% of base pay for every additional 1% profit margin

achieved based on the increase gross profits for calendar year 2020 and to be paid in the first quarter of calendar year 2021.

On August 4, 2020, the compensation committee amended the 2020 GM Plan to allow for the early payment of cash bonuses to Key Executives

equal to 2% of base pay for every additional 1% profit margin achieved based on (1) the increase in profit margin first half of

calendar year 2020, and (2) an adjustment to the bonuses to be paid in the first quarter of calendar year 2021 based on the profit

margin achieved during the second half of calendar year 2020 (“Amended GM Plan”).

On August 7, 2020,

the Company made cash bonus payments in the aggregate amount of $225,710 to certain Key Executives (the “Awards”)

pursuant to the Amended GM Plan, which included payments of $34,047 to Ronald Dutt, Chief Executive Officer, $27,063 to Chuck

Scheiwe, Chief Financial Officer, and $27,936 to Jonathan Berry, Chief Operating Officer.

The aggregate amount of such

bonus payments was included in the accrued expenses in the accompanying balance sheet as of June 30, 2020.

(See Note 5) The Awards

were calculated on the basis of increase in profit margins achieved during the first six months of the calendar year 2020.

on the NASDAQ Capital Market

August 14, 2020, our common stock commenced trading on The NASDAQ Capital Market under the symbol “FLUX.”

the listing on The NASDAQ Capital Market, our common stock was quoted on the OTCQB.

Repayment of LOC

August 2020, the Company paid down an aggregate principal amount of $1,000,000 of the outstanding balance under the LOC.

August 18, 2020, the Company closed an underwritten public offering of its common stock priced at a public offering price of $4.00

per share for gross proceeds of approximately $12.4 million, which included the full exercise of the underwriter’s over-allotment

option to purchase additional shares, prior to deducting underwriting discounts and commissions and offering expenses payable

by Flux Power.

The offering was comprised of shares of common stock priced at a public offering price of $4.00 per share.

of 3,099,250 shares of common stock were issued in the offering, including the full exercise of the over-allotment option.

securities 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 12, 2020.

Consolidation

August 31, 2020, the Company 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,

there was approximately $4,396,000 in principal outstanding under the LOC and approximately $7,604,000 available for future draws.

September 22, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with several institutional

and accredited investors (the “Purchasers”), pursuant to which the Company agreed to sell in a registered direct offering

an aggregate of 2,142,860 shares of Common Stock of the Company (the “Shares”) and warrants to purchase up to 1,071,430 shares

of its common stock (the “Warrants”), at a combined purchase price of $7.00 per share and related Warrant, for aggregate

gross proceeds to the Company of approximately $15 million, before deducting placement agent fees and offering expenses payable by the

Company (the “Registered Offering”).

to certain ownership limitations, the Warrants will be exercisable immediately from the date of issuance, will expire on the five (5)

year anniversary of the date of issuance and will have an exercise price of $7.00 per share.

The exercise price of the Warrants is subject

to certain adjustments, including stock dividends, stock splits, combinations and reclassifications of the Company’s common stock.

Registered Offering is anticipated to close on or about September 27, 2021.

to an engagement letter, dated as of September 22, 2021, we have engaged H.C.

Wainwright & Co., LLC (“HCW”

or the “Placement

Agent”) to act as our exclusive Placement Agent in connection with the Registered Offering.

As compensation in connection with

the Registered Offering, the Company paid HCW a cash fee equal to 6.0% of the gross proceeds of the Registered Offering.

net proceeds from the Registered Offering, after deducting placement agent fees and offering expenses, are approximately $14 million.

Shares and the Warrants and the shares issuable upon exercise of the Warrants were offered and are being sold by the Company pursuant

to an effective shelf registration statements on Form S-3 (File No.

333-249521), which was originally filed with the SEC on October 16,

2020 and declared effective on October 26, 2020.

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 9A. Controls and Procedures