What changed in this filing

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Item 9A. Controls and Procedures

2022-09-28 compared with 2021-09-27 · 1280 added, 1132 removed, 659 unchanged (79% of the section changed)

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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.

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

were not effective as of June 30, 2022 because of the material weaknesses identified in our internal controls over financial reporting.

Report on Internal Control over Financial Reporting

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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

As of June 30, 2022, management assessed the effectiveness of the Company’s

internal control over financial reporting based on the criteria for effective internal control over financial reporting established in

“Internal Control - Integrated Framework,”

issued by the Committee of Sponsoring Organizations of the Treadway Commission

(the “COSO criteria”).

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.

“Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission

(the “COSO criteria”).

A Material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight

Board (United States) Auditing Standard No.

2) or a combination of control deficiencies that result in more than a remote likelihood

that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Based on such assessment,

management concluded that as of June 30, 2022, our internal control over financial reporting was not effective.

Management has identified

the following material weakness:

● Ineffective oversight of the Company’s internal control over financial

reporting and lack of sufficient review and approval of the underlying data used in the calculation of warranty reserve.

are implementing measures designed to improve our internal control over financial reporting to remediate material weaknesses, including

the following:

● We are implementing additional control procedures to strengthen the oversight

of the Company’s internal control over financial reporting through review and sign off by the senior management of all significant

assumptions and estimates being used and the underlying the data used in producing financial schedules/estimates and financial reporting.

We are also adding a second level of review and approval for all manual journal entries for significant estimates and assumptions made

by management.

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 year ended June 30, 2021, that have

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

Except as discussed above, there

have been no changes in the Company’s internal controls over financial reporting during the fiscal quarter ended June 30, 2022, that have

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

9B - OTHER INFORMATION

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Financial Officer and Secretary

Operating Officer

Walters-Hoffert (1)(2)

Robinette (1)(3)

Cosentino, Jr.

Bo-Linn (1)(4)

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

Bo-Linn was appointed to the Board on January 14, 2022.

Bo-Linn is the Chairperson of the Nominating and Corporate Governance

Committee (“Governance Committee”) and a Member of the Audit Committee and Compensation Committee.

are no arrangements or understandings between our directors and executive officers and any other person pursuant to which any director

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officer since June 28, 2013.

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

Prior to Flux

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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.

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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

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Scheiwe also holds a CPA certificate.

Berry, Chief Operating Officer.

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

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.

Johnson, Director.

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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

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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.

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Walters-Hoffert was a co-founder

of Daré

Bioscience, Inc.

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

of Daré Bioscience, Inc.

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

in July of 2017, became Chief Financial

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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.

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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.

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Robinette is qualified to be on the Board.

Cosentino, Jr., Director .

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, 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.

Bo-Linn, Director.

Bo-Linn was appointed to our board January 14, 2022.

currently a director of Data I/O Corp (Nasdaq:

DAIO), a company in advanced security and data deployment, since

December 2021, as a director KORE Group Holdings, Inc.

KORE), an Internet of Things (“IoT”) solutions and connectivity-as-a-service

company since October 2021, and as a director of Blackline Safety Corp.

BLN), a Canadian public company specializing in

advanced security and data deployment, since November 2020.

In addition, Ms.

the Chief Executive Officer of Peritus Partners, Inc., a valuation accelerator and information technology operations and consulting company,

from 2013 to 2022.

Bo-Linn experience include 20+ years in multiple senior executive roles with International Business Machines Corporation

IBM), including leading global teams as IBM’s Vice-President, and has also held C-suite roles or board positions at small

to midcap public and private companies.

Bo-Linn holds a Doctorate in Education in “Computer-based Management Information Systems

and Organizational Change” from the University of Houston.

The Board believes that Dr.

Bo-Linn’s extensive executive management

and board experience in private and public companies qualifies her to serve on the Board of Directors.

in Certain Legal Proceedings

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Leadership Structure and Role in Risk Oversight

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.

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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.

September 10, 2021, the Board adopted the Lead Independent Director Guidelines (“Guidelines.).

The Guidelines provide that when

the positions of Chief Executive Officer and Chairman of the Board are combined or the Chairman is not an independent director, the independent

directors will appoint a lead independent director to serve with the authority and responsibility described in such Guidelines, and as

the Board and/or the independent directors may determine from time to time.

The Guidelines are available on our website at www.fluxpower.com.

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of the Company and has the ability to devote a substantial amount of time to serve in this capacity.

In addition, we believe having one leader serving

as both the Chairman and Chief Executive Officer provides decisive, consistent and effective leadership, as well as clear accountability

to our stockholders and customers.

This enhances our ability to communicate our message and strategy clearly and consistently to our

stockholders, employees, customers and suppliers.

The Board believes the appointment of a strong Lead Independent Director and the use

of regular executive sessions of the non-management directors, along with a majority the Board being composed of independent directors,

allow it to maintain effective oversight of management.

We believe that the combination of the Chairman and Chief Executive Officer roles

is appropriate in the current circumstances and, based on the relevant facts and circumstances, separation of these offices would not

serve our best interests and the best interests of our stockholders at this time.

In addition, 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.

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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.

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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

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Composition, Committees and Independence

the rules of NASDAQ, “independent”

directors must make up a majority of a listed company’s Board of Directors.

applicable NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation

the rules of NASDAQ, “independent” directors must make up a majority of a listed company’s Board of Directors.

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.

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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.

Walters-Hoffert, Ms.

Bo-Linn and Mr.

Robinette are independent directors as defined

in the listing standards of NASDAQ and SEC rules and regulations.

A majority of our directors are independent, as required under applicable

NASDAQ rules.

As required under applicable NASDAQ rules, our independent directors will meet in regularly scheduled executive sessions

at which only independent directors are present.

Board has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee.

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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 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.

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.

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 Ms.

Bo-Linn are the other directors who are members

of the Audit Committee.

The Audit Committee’s duties are to recommend to our Board of Directors the engagement of the independent

registered public accounting firm to audit our consolidated financial statements and to review our accounting and auditing principles.

The Audit Committee reviews the scope, timing and fees for the annual audit and the results of audit examinations performed by any internal

auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls.

The Audit Committee will at all times be composed exclusively of directors who are, in the opinion of our Board of Directors, free from

any relationship that would interfere with the exercise of independent judgment as a committee member and who possess an understanding

of consolidated financial statements and generally accepted accounting principles.

Our Audit Committee operates under a written charter,

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

Compensation Committee 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.

Robinette is the Chairperson

of the Compensation Committee, and Ms.

Walters-Hoffert and Ms.

Bo-Linn are members of the Compensation Committee.

Each of the members

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

executive officer often makes recommendations to the Compensation Committee and the Board concerning compensation of other executive

The Compensation Committee seeks input on certain compensation policies from the chief executive officer.

Our Compensation Committee operates under a written charter, which is available on our website at www.fluxpower.com .

and Governance Committee

Our Compensation

Committee operates under a written charter, which is available on our website at www.fluxpower.com .

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.

Walters-Hoffert and Mr.

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.

Bo-Linn is Chairperson of the Nominating and Governance Committee, and Ms.

Walters-Hoffert

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

The Nominating and Governance Committee operates under a written charter, which was amended on January 14, 2022.

Nominating and Corporate Governance Committee Charter 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

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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

Any waivers of any provision of this Code for our directors or officers may be granted only by the Board or a committee appointed

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Indemnification

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

officers (each, an “Indemnitee”).

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,

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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 year ended

June 30, 2021, were timely filed.

11 - EXECUTIVE COMPENSATION

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and Principal

Awards (1) ($)

Awards (2) ($)

Incentive Plan Compensation

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Dutt, Chief Executive

Officer, President, and Chairman

Chief Financial Officer and Corporate Secretary

Jonathan Berry, Chief Operating Officer

President, and Chairman

Financial Officer and Corporate Secretary

Chief Operating Officer (3)

the fair value of the RSUs granted on grant date.

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

Berry separated from the Company on August 12, 2022.

do not have any profit sharing plan or similar plans for the benefit of our officers, directors or employees.

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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.

in 2012, we assumed the 2010 Plan.

As of June 30, 2022, the number of options

outstanding to purchase common stock under the 2010 Plan was 21,944.

No additional options to purchase common stock may be granted under

the 2010 Plan.

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.

February 17, 2015, our shareholders approved our 2014 Equity Incentive Plan (“2014 Plan”), which was amended on July 23,

2018 and on November 5, 2020.

The 2014 Plan authorizes the issuance of awards for up to 1,000,000 shares of our common stock in the form

of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and

unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates.

options were granted during Fiscal 2022 and 2021.

We granted 250,786 and 153,177 restricted stock units under the 2014 Plan during Fiscal

2022 and 2021, respectively.

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.

awards were granted under the 2021 Plan during Fiscal 2022 and 2021.”

of June 30, 2022, we had 503,433 options outstanding and exercisable under the 2014 Plan and the 2010 Plan.

In addition, as of June 30,

2022, we had 304,221 RSUs outstanding under the 2014 Plan.

There were no options or RSUs issued or outstanding under the 2021 Plan as

of June 30, 2022.

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

awards outstanding as of June 30, 2022 for the named executive officers below:

Award Grant Date

Number of Securities Underlying Unexercised Options Exercisable

Number of Securities Underlying Unexercised Options Unexercisable

Equity Incentive Plan Awards:

of Securities Underlying Unexercised Options Exercisable

of Securities Underlying Unexercised Options Unexercisable

Incentive Plan Awards:

Number of Securities Underlying Unexercised Unearned Options

Option Exercise Price ($)

Option Expiration Date

Number of Shares or Units of Stock That Have Not Vested

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

Equity Incentive Plan Awards:

Exercise Price ($)

Expiration Date

of Shares or Units of Stock That Have Not Vested

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

Incentive Plan Awards:

Number of Unearned Shares, Units or Other Rights That Have Not Vested

Equity Incentive Plan:

Incentive Plan:

Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

Charles Scheiwe

Jonathan Berry

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.

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

The fair value of each restricted stock unit is

the fair value of the Company’s common stock on the grant date.

Berry separated from the Company on August 12, 2022.

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 Fiscal 2022.

incentive plans

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

Agreements with Executive Officers

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”).

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,

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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”).

Dutt’s current annual base salary is $275,000.

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,

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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.

current annual base salary is $205,200.

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;

Dutt and Scheiwe, among other things, are (i) eligible for annual target cash bonus and

awards of restricted stock units or other equity-based incentive compensation consistent with his position as determined by the Board

of Directors (the “Board”) and the Compensation Committee;

(ii) entitled to reimbursement for all reasonable business expenses

incurred in performing services;

and (iii) entitled to certain severance and change of control benefits contingent upon such employee’s

agreement to a general release of claims in favor of the Company following termination of employment.

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.

Dutt and Scheiwe and are

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

Dutt and Scheiwe have each agreed to observe the terms of a standard confidentiality and non-compete agreement for a restricted

period of two (2) years.

Each of Messrs.

Dutt, 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 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 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

Dutt and Scheiwe employment is “at-will” and may be terminated at any time for any

August 12, 2022, Jonathan Berry, the Company’s Chief Operating Officer, separated from the Company and entered into an Employee

Separation and Release dated August 24, 2022 (“Separation Agreement”).

Under the Separation Agreement, the Company agreed

to provide Mr.

Berry with certain payments and benefits comprising of:

(i) a separation payment of two hundred five thousand two hundred

dollars, less required withholdings, (ii) twenty-eight thousand nine hundred seven and 52/100 dollars, less require holdings, to defray

costs for COBRA coverage, and (iii) reimbursement for an amount equal to twelve months for life insurance continuation (collectively,

the “Separation Benefits”).

In exchange for the Separation Benefits, among other things as set forth in the Separation Agreement,

Berry agreed to a release of claims and waivers in favor of the Company and to certain restrictive covenant obligations, and also

reaffirmed his commitment to comply with his existing restrictive covenant obligations.

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”)

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

The Annual Bonus Plan was effective for Fiscal 2021 and

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

For each Plan Year, the Compensation Committee establishes an

aggregate amount of allocable Bonus under the Annual Bonus Plan and determines the performance goals applicable to a bonus during a Plan

Year (the “Participation Criteria”).

The Participation Criteria may differ from Participant to Participant and from bonus

The Participation Criteria for each Plan Year is based on the Company achieving certain performance targets based on annual

revenue, gross margin, operating expense and new business development.

All of the Company’s executive officers are eligible to

participate in the Annual Bonus Plan.

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:

Executive Officer

Financial Officer

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

payments based on Target Cash Bonus Amount

June 30, 2021, the Compensation Committee of the Company amended the performance goals for the 2021 plan year (from July 1, 2020 through

June 30, 2021) (the “2021 Plan Year”), under the Annual Cash Bonus Plan, which was previously approved by the Compensation

Committee on November 5, 2020.

The performance goals for the 2021 Plan Year were amended to the Company achieving certain performance

targets measured by annual revenue, gross margin and new business development.

The Compensation Committee made the equitable adjustment

to better align the objectives and activities of the Company’s executives and employees with the goals of the Company during a

very challenging 2021 Plan Year.

June 30, 2021, the Compensation Committee approved an addendum to the Performance Restricted Stock Unit Award under the 2014 Equity Incentive

Plan approved by the Compensation Committee on November 5, 2020 to provide clarification for the calculation of vesting

the Company’s fiscal year ending on June 30, 2022, or Fiscal 2022, the performance goals applicable to a bonus are based on the

Company achieving certain targets based on the Company’s annual revenue, gross margin, EBITDAS (earnings before interest expense

(excluding interest income), taxes, depreciation, amortization and stock compensation expense in accordance with U.S.

GAAP), new strategic

customers, demonstrated direct cost reduction and working capital and inventory turnover (the “Financial Targets”) and additional

bonus amounts if the Company’s financial results exceeds certain thresholds of the Financial Targets.

October 29, 2021, the Compensation Committee approved target cash bonuses under the Annual Cash Bonus Plan for Fiscal 2022 to the following

executive officers, which target bonus was calculated based on percentage of the executive’s current base salary:

Executive Officer

Financial Officer

Operating Officer

are no bonus caps for achieving above set revenue target and gross margin target.

If actual results exceed 100% of revenue target

and/or gross margin target, every 1% of revenue target and/or gross margin target would result in an increase in bonus equal to 0.2%

of the TCB for such executive officers.

November 5, 2020, the Board approved an amendment to the 2014 Plan as amended to include the right to grant Restricted Stock Units (“RSUs”).

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

Stock Unit Grants

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”).

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

In addition, the Compensation Committee approved the grant of one-time retention based RSUs pursuant to the form

of the Restricted Stock Unit Award Agreement (“Retention Awards”).

following named executive officers of the Company were granted RSUs under the 2014 Option Plan in the amounts and according to the vesting

schedule indicated below:

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

to align their interest to our business and financial success through the use of equity award and cash bonuses.

Executive Officer

Years from Award’s grant date

Financial Officer

Years from Award’s grant date

Operating Officer

Years from Award’s grant date

Based Awards:

Executive Officer

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

Financial Officer

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

Operating Officer

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

Executive Officer

Years from Award’s grant date

Financial Officer

Years from Award’s grant date

Operating Officer

Years from Award’s grant date

October 29, 2021, the Compensation Committee approved the grant of Restricted Stock Units (“RSUs”) under the Company’s

2014 Equity Incentive Plan (the “2014 Plan”) to certain employees of the Company or its subsidiary, Flux Power, Inc.

RSUs are subject to the terms and conditions provided in (i) the form of Restricted Stock Unit Award Agreement which is time based (“Time

Based Awards”), and (ii) the form of Performance Restricted Stock Unit Award Agreement which is performance based (“Performance

Based Awards”).

The following named executive officers of the Company were granted RSUs under the 2014 Plan in the amounts and

according to the vesting schedule indicated below:

Based Awards:

Executive Officer

annually over 3 years with the first vest date on October 27, 2022

Financial Officer

annually over 3 years with the first vest date on October 27, 2022

Operating Officer

annually over 3 years with the first vest date on October 27, 2022

Based Awards:

Executive Officer

years from grant upon meeting performance target*

Financial Officer

years from grant upon meeting performance target *

Operating Officer

years from grant upon meeting performance target *

The performance target for the RSU to be based on EBITDAS (earnings before interest expense (excluding interest income), taxes, depreciation,

amortization and stock compensation expense in accordance with U.S.

GAAP) for the second half of the Company’s fiscal year ending

June 30, 2022.

the Committee and the Board will continue to explore and evaluate different long-term and short-term incentives to help attract, retain

and motivate our employees to align their interest to our business and financial success through the use of equity award and cash bonuses.

of Non-Executive Directors

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

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 .(1)

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:

Former director

January 14, 2022, pursuant to the recommendation and advice of the Compensation Committee of the Board of the Company, the Board approved

the following annual compensation package for non-executive directors of the Company for calendar year 2022, as follows:

Non-Executive

1 unchanged sentence

Cosentino Jr .(1)

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

Cosentino resigned as our director on March 1, 2022.

As appreciation for Mr.

Cosentino’s board services, the Board approved

to (i) accelerate the vesting of the following securities the Board granted in connection with his board services:

435 unvested options

and 4,578 restricted stock awards, and (iii) pay his board fees for 3 rd quarter of Fiscal 2022.

Bo-Linn was appointed as Chairperson of the Governance Committee on March 3, 2022.

Bo-Linn’s services as Chairperson,

she is entitled to a Chair Fee of $5,000 for calendar year 2022.

Component of Non-Executive Director Compensation

addition, our directors are eligible to receive an annual equity grant of RSUs.

Pursuant to grants approved by our Board at the recommendation

of the Compensation Committee in April 2021 and 2022, our non-executive directors were granted RSUs under the 2014 Plan.

The number of

RSUs granted to each non-executive director was equal to the amount of $50,000 divided by the fair market value of the RSUs, with all

RSUs subject to vesting restrictions.

The fair market value of the RSUs was determined by applying a 10-day volume weighted average stock

price prior to the grant issuance date.

April 2021, each of our non-executive directors were granted 4,578 RSUs, of which 1/3 of the RSUs vested on April 29, 2022, and each

subsequent 1/3 to vest every twelve (12) months thereafter until fully vested.

In April 2022, each of our non-executive directors were

granted 17,793 RSUs which are subject to fully vest on April 28, 2023.

In addition, in August 2022, as compensation for board services

provided during the last quarter of Fiscal 2022, Ms.

Bo-Linn was granted 5,034 RSUs, of which 1/3 vested immediately, each of the remaining

1/3 of the RSUs will vest on April 29, 2023, and April 29, 2024.

Bo-Linn’s s grant was consistent with the standard equity

component of Non-Executive Director Compensation Package as approved by the Board.

Compensation Table

is summary of compensation accrued or paid to our non-executive directors during Fiscal 2022 and Fiscal 2021.

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) ($)

Option Awards (3)

All Other Compensation ($)

Lisa Walters-Hoffert

Dale Robinette

Dutt, our chief executive

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

The compensation Mr.

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

Awards (2) ($)

Other Compensation ($)

Walters-Hoffert

Cosentino Jr.

Michael Johnson

James Gevarges (1)

Gevarges resigned as our director on May 6, 2020.

Cosentino resigned as our director on March 1, 2022.

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”).

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

with Financial Accounting Standards Board (“FASB”).

Bo-Linn joined our board of director on January 14, 2022.

following table shows the aggregate number of vested stock options held by our non-employee directors as of June 30, 2022 and June 30,

Stock Options

Walters-Hoffert

Cosentino Jr.

Michael Johnson

James Gevarges (1)

Gevarges resigned as our director on May 6, 2020.

Bo-Linn joined our board of director on January 14, 2022.

Cosentino resigned as our director on March 1, 2022.

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

4 unchanged sentences

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.

As of September 12, 2022, we had a total of 15,998,336 shares of common

stock issued and outstanding.

following table sets forth, as of September 12, 2022, information concerning the beneficial ownership of shares of our common stock held

9 unchanged sentences

common stock, except as otherwise indicated.

Name and Address of Beneficial Owner (1)

Officers and Directors

Michael Johnson, Director

and Address of Beneficial Owner (1)

and Directors

Johnson, Director

4,478,703 (2)

Ronald Dutt, Chief Executive Officer, President, and Director

Charles A Scheiwe, Chief Financial Officer and Secretary

Berry, Chief Operating Officer

Cosentino, Director

Lisa Walters-Hoffert, Director

Dale Robinette, Director

All Officers and Directors as a group (7 people)

5% Stockholders

Cleveland Capital Management L.L.C.

Dutt, Chief Executive Officer, President, and Director

A Scheiwe, Chief Financial Officer and Secretary

Bo-Linn, Director

Walters-Hoffert, Director

Robinette, Director

Officers and Directors as a group (6 people)

Capital Management L.L.C.

1250 Linda Street, Suite 304

Rocky River, OH 44116

1555 Peachtree Street NE, Suite 1800

Atlanta, GA 30309

Represents less than 1% of shares outstanding.

2 unchanged sentences

4,465,755 shares of common stock held by Esenjay Investments, LLC, of which Mr.

Johnson is the sole director and beneficial

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

Johnson is the sole director and beneficial owner,

and (ii) 12,948 shares of common stock issuable to Mr.

Johnson upon exercise of stock options.

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.

26,360 shares of common stock and 224,048 shares of common stock issuable upon exercise of stock options and settlement of vested

8,018 shares of common stock and 32,100 shares of common stock issuable upon exercise of stock options and settlement of vested RSUs.

1,678 shares of common stock.

1,526 shares of common stock and 3,948 shares of common stock issuable upon exercise of stock options.

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

1,526 shares of common stock and 3,948 shares of common stock issuable upon exercise of stock options.

on Amendment No.

3 unchanged sentences

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.

1 unchanged sentence

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

following includes a summary of certain relationships and transactions, including transactions since July 1, 2020 to September 12, 2022

and any currently proposed transactions, to which we were or are to be a participant, in which (1) the amount involved exceeded or will

exceed the lesser of (i) $120,000 or (ii) one percent (1%) of the average of our total assets for the last two completed fiscal years,

and (2) any of our directors, executive officers or holders of more than five percent (5%) of our capital stock, or any affiliate or

member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest other than compensation

and other arrangements that are described under the section titled “Executive Compensation.”

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.

Line of Credit Facility

May 11, 2022, we entered into a Credit Facility Agreement (the “Subordinated LOC”) with Cleveland Capital, L.P.

(“Cleveland”),

Herndon Plant Oakley, Ltd., (“HPO”), and other lenders (together with Cleveland and HPO, the “Lenders”).

Subordinated LOC provides us with a short-term line of credit (the “LOC”) not less than $3,000,000 and not more than $5,000,000,

the proceeds of which shall be used by us for working capital purposes.

As of June 30, 2022, the Lenders committed an aggregate of $4,000,000.

connection with entry into the Subordinated LOC, we paid to each Lender a one-time committee fee in cash equal to 3.5% of such Lender’s

Commitment Amount.

In addition, in consideration of the Lenders’ commitment to provide the Advances to us, we issued the Lenders

five-year warrants to purchase an aggregate of 128,000 shares of common stock at an exercise price of $2.53 per share that are, subject

to certain ownership limitations, exercisable immediately.

to a selling agreement, dated as of May 11, 2022, the Company retained HPO as its placement agent in connection with the Subordinated

As compensation for services rendered in conjunction with the Subordinated LOC, the Company paid HPO a finder fee equal to 3% of

the commitment amount from each such Lender placed by HPO in cash.

Private Placement

4 unchanged sentences

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 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 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 .

Cosentino, a former director, also participated in the offering in the amount of $250,000.

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

On June 2, 2020, the Original Esenjay Note was amended and restated to (i) extend the maturity date from June 30, 2020

to September 30, 2020, and (ii) to increase the principal amount outstanding under the Original Esenjay Note to $1,400,000 (the “Esenjay

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

note balance was converted into shares of common stock at $4.00 per share, which was the cash price per share, and resulted in the issuance

of 225,000 shares of common stock.

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

further amended the Esenjay Note to, among other items, transfer all remaining principal and accrued interest outstanding of approximately

$564,000 into the amended Credit Facility Agreement.

(See “Credit Facility” below).

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

The Original Agreement was amended multiple times to allow for, among other things, an increase in the maximum principal

amount available under line of credit (“LOC”) to $12,000,000, the inclusion of additional lenders and extension of the maturity

date to September 30, 2021.

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

31, 2020, we entered into the Third Amended and Restated Credit Facility Agreement (“Third Amended and Restated Facility Agreement”)

pursuant to which we (i) extended the maturity date to September 30, 2021, and (ii) allowed for the transfer of outstanding obligations

under the Esenjay Note of approximately $564,000 into the LOC as noted above.

In November 2020, lenders holding an aggregate of approximately

$2,161,000 in principal and accrued interest elected to convert their notes into 540,347 shares of common stock at a price of $4.00 per

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

to convert their notes into 658,103 shares of common stock at a price of $4.00 per share of which approximately $1,045,000 was held by

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

June 10, 2021, we repaid all obligations in full and without additional fees or termination penalties, and the Third Amended and Restated

Credit Facility Agreement and the related Second Amended and Restated Security Agreement were terminated.

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

“Cleveland Loan”) and issued Cleveland an unsecured short-term promissory note in the amount of $1,000,000 (the “Unsecured

Promissory Note”).

The Unsecured Promissory Note had an interest rate of 15.0% per annum and was originally due on September 1,

2019, unless repaid earlier from a percentage of proceeds from certain identified accounts receivable.

In connection with the Cleveland

Loan, we issued Cleveland a three-year warrant (the “Cleveland Warrant”) to purchase the Company’s common stock in

a number equal to 0.5% of the number of shares of common stock outstanding after giving effect to the shares of common stock sold in

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

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

to December 1, 2019 (the “First Amendment”) and the Cleveland Warrant terms were amended (the “Amended Warrant”).

The Amended Warrant increased the warrant coverage from 0.5% to 1% of the number of shares of common stock outstanding after giving effect

to the shares of common stock sold in the next private or public offering and with an exercise price equal to the per share price of

common stock sold in such private or public offering, as the case may be.

July 9, 2020, we made a payment to Cleveland in the amount of $200,000 as a partial payment of the Cleveland Loan.

On July 27, 2020,

in connection with the outstanding loan from Cleveland to us in the principal amount of $957,000, we entered into the Eighth Amendment

to the Unsecured Promissory Note which extended the maturity date from July 31, 2020 to August 31, 2020, and capitalized all accrued

and unpaid interest as of July 27, 2020 to the principal amount.

On August 19, 2020, we paid Cleveland the entire remaining principal

balance due under the Cleveland Loan, together with all accrued interest payable as of August 19, 2020, in an aggregate amount of approximately

14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

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).

the fiscal years ended June 30, 2022 and 2021, the Company’s independent public accounting firm was Baker Tilly US, LLP (formerly

Squar Milner LLP, which, effective as of November 1, 2020, merged with Baker Tilly US, LLP).

Paid to Principal Independent Registered Public Accounting Firm

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)

Audit related fees(2)

All other fees(4)

aggregate fees billed by our Independent Registered Public Accounting Firm, for the fiscal years ended June 30, 2022 and 2021 are as

related fees(2)

other fees(4)

fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review

5 unchanged sentences

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.

financial statements and not reported above under “Audit Fees.”

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

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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

8 unchanged sentences

15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements and Financial Statement Schedules.

(1) Financial Statements

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 –

Baker Tilly US, LLP

Consolidated Balance Sheets as of June 30, 2021 and 2020

Consolidated Statements of Operations for the Years Ended June 30, 2021 and 2020

Consolidated Statements of Stockholders’

Deficit for the Years Ended June 30, 2021 and 2020

Consolidated Statements of Cash Flows for the Years Ended June 30, 2021 and 2020

Notes to the Consolidated Financial Statements

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.

following exhibits are filed as part of this Report

Securities Exchange Agreement dated May 18, 2012.

of Independent Registered Public Accounting Firm – (Baker Tilly US, LLP, San Diego, CA PCAOB Firm ID# 23 )

Balance Sheets as of June 30, 2022 and 2021

Statements of Operations for the Years Ended June 30, 2022 and 2021

Statements of Stockholders’ Equity (Deficit) for the Years Ended June 30, 2022 and 2021

Statements of Cash Flows for the Years Ended June 30, 2022 and 2021

to the Consolidated Financial Statements

Financial Statement Schedules:

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

or notes thereto or because they are not required.

exhibits required by Item 601 of Regulation S-K are listed in subparagraph (b) below.

The following exhibits are filed as part of this Report

Exchange Agreement dated May 18, 2012.

Incorporated by reference to Exhibit 2.1 on Form 8-K filed with the SEC on May 24, 2012.

Amendment No.

1 to the Securities Exchange Agreement dated June 13, 2012.

Incorporated by reference to Exhibit 2.2 on Form 8-K filed with the SEC on June 18, 2012.

Restated Articles of Incorporation.

Incorporated by reference to Exhibit 2.2 on Form 8-K filed with the

SEC on June 18, 2012.

Articles of Incorporation.

Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on February 19, 2015.

Amended and Restated Bylaws of Flux Power Holdings, Inc.

and Restated Bylaws of Flux Power Holdings, Inc.

Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on May 31,

Certificate of Amendment to Articles of Incorporation.

of Amendment to Articles of Incorporation.

Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on August 18,

Certificate of Change.

Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on July 12, 2019.

Description of Securities.

of Securities.

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.

of Warrant Certificate.

Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on May 13, 2022.

to Purchase Stock issued to Silicon Valley Bank, dated June 23, 2022.

Incorporated by reference to Exhibit 4.1 on Form 8-K filed

with the SEC on June 28, 2022.

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.

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.

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.

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.

Power Holdings, Inc.

2010 Stock Plan:

Form of Stock Option Agreement.

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

Incorporated by reference to Exhibit 10.6 on Form 8-K filed

with the SEC on June 18, 2012.

Equity Incentive Plan.

Incorporated by reference to Exhibit 10.23 on Form 10-Q filed with the SEC on May 15, 2015.

Amendment to the Flux Power Holdings Inc.

to the Flux Power Holdings Inc.

2014 Equity Incentive Plan.

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

Amendment No.

Incorporated by reference to Exhibit 10.20 on Form 10-K filed with the

SEC on September 27, 2018.

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.

2014 Equity Incentive Plan Incorporated by reference to Exhibit 10.1 on Form 8-K filed with

the SEC on November 9, 2020.

of Restricted Stock Unit Award Agreement.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on November 9,

Annual Cash Bonus Plan.

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.

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.

and Security Agreement with Silicon Valley Bank.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on November

Intellectual Property Security Agreement.

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 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.

Incorporated by reference to Exhibit

10.1 on Form 8-K filed with the SEC on February 17, 2021.

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.

Incorporated by reference to Exhibit 10.2 on Form 8-K

filed with the SEC on February 17, 2021.

Equity Incentive Plan.

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

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.

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.

of Securities Purchase Agreement.

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

Code of Business Conduct and Ethics.

of Performance Restricted Stock Unit Award.

Incorporated by reference to Exhibit 10.3 on Form 8-K filed with the SEC on November

Amendment to Loan and Security Agreement with Silicon Valley Bank.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with

the SEC on November 3, 2021

Facility Agreement dated May 11, 2022.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on May 13, 2022.

of Subordinated Unsecured Promissory Note.

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on May 13, 2022.

Amendment to Loan and Security Agreement with Silicon Valley Bank.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with

the SEC on June 28, 2022.

Separation and Release with Jonathan Berry dated August 24, 2022.

Incorporated by reference to Exhibit 10.1 on Form 8-K/A filed with

the SEC on August 26, 2022.

of Business Conduct and Ethics.

Incorporated by reference to Exhibit 99.4 on Form 8-K filed with the SEC on July 2, 2019.

1 unchanged sentence

Incorporated by reference to Exhibit 21.1 on Form 8-K filed with the SEC on June 18, 2012

Consent of Independent Registered Public Accounting Firm

of Independent Registered Public Accounting Firm

Certifications

12 unchanged sentences

Taxonomy Extension Presentation Linkbase

Filed herewith.

Indicates management contract or compensatory plan or arrangement.

management contract or compensatory plan or arrangement.

16 – FORM 10-K SUMMARY

14 unchanged sentences

Michael Johnson

September 27, 2021

Cosentino, Jr.

Cheemin Bo-Linn

Lisa Walters-Hoffert

2 unchanged sentences

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

the Shareholders and Board of Directors of Flux Power Holdings, Inc.

on the Financial Statements

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

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

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

(the “Company”) as of June 30, 2022

and 2021, 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 referred to as the “consolidated financial

statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of the Company as of June 30, 2022 and 2021, 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.

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

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

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.

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.

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

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

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.

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.

audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that:

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

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the

critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Concern Assessment

Audit Matter Description

described in Note 2 to the consolidated financial statements, the financial statements have been prepared assuming the Company will continue

as a going concern.

For the year ended June 30, 2022, the Company generated negative cash flows from operations of $23.9 million and

had an accumulated deficit of $81.8 million.

Historically the Company has not generated sufficient cash to fund its operations.

has concluded that management’s plans and forecasts illustrate their ability to meet the obligations through revenue growth and

cost reductions as well as available financing under existing debt agreements, which alleviates the substantial doubt about the entity’s

ability to continue as a going concern.

identified management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter due

to the high degree of auditor judgment and related to the reasonableness of the cash flow forecasts and assumptions used in the Company’s

going concern analysis.

We Addressed the Matter in Our Audit

primary procedures we performed to address this critical audit matter included:

and evaluating management’s plans for dealing with the adverse effects of the conditions

the completeness, accuracy, and relevance of underlying data used by management in the cash

flow forecast

the reasonableness of management’s significant assumptions and judgments used in the

preparation of the forecast

audit evidence supporting the reasonableness of management’s assumptions, including

consideration of contrary evidence impacting managements forecasts.

sensitivity analysis regarding the significant assumptions used by management including revenue

growth, operating expenses, and gross margin improvements.

● Corroborating

management assertions related to the significant assumptions to audit evidence obtained during

the course or our audit.

the availability of the sources of financing utilized in the forecast, including financing

in place as of the report date, and the related covenants.

the adequacy of the disclosure included in the notes to the financial statements.

TILLY US, LLP

BAKER TILLY US, LLP

have served as the Company’s auditor since 2012.

Diego, California

2 unchanged sentences

current assets

Accounts receivable

Other current assets

Total current assets

Right of use asset

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

current assets

plant and equipment, net

AND STOCKHOLDERS’ EQUITY

line of credit

lease payable, current portion

current liabilities

Accounts payable

Accrued expenses

Deferred revenue

Customer deposits

Due to factor

Short-term loans –

related party

Line of credit - related party

Financing lease payable, current portion

Office lease payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Paycheck Protection Program loan payable

Office lease payable, less current portion

Total liabilities

Stockholders’

equity (deficit):

Preferred stock, $0.001 par value;

500,000 shares authorized;

none issued and outstanding

Common stock, $0.001 par value;

30,000,000 shares authorized;

13,652,164 and 7,420,487 shares issued and outstanding at June 30, 2021 and June 30, 2020, respectively

Additional paid-in capital

Accumulated deficit

term liabilities:

lease payable, less current portion

Stockholders’

stock, $ 0.001 par

500,000 shares

and outstanding

stock, $ 0.001 par

30,000,000 shares

15,996,658 and

13,652,164 shares

issued and outstanding at June 30, 2022 and June 30, 2021, respectively

paid-in capital

( 81,814,000 )

( 66,205,000 )

Total stockholders’

equity (deficit)

Total liabilities and stockholders’

equity (deficit)

stockholders’ equity

liabilities and stockholders’ equity

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

1 unchanged sentence

STATEMENTS OF OPERATIONS

Cost of sales

and administrative

and development

operating expenses

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 15,357,000 )

( 13,478,000 )

Other income (expense):

Interest expense

income (expense):

$ ( 15,609,000 )

$ ( 12,793,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

loss per share - basic and diluted

average number of common shares outstanding - basic and diluted

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

POWER HOLDING, INC.

STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

Capital Stock Amount

Paid-in Capital

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

at June 30, 2021

$ ( 66,205,000 )

$ (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

of common stock and warrants - registered direct offering, net of costs

of common stock - public offering, net of costs

of common stock, exercised options and RSU settlement

Fair value of warrants

( 15,609,000 )

2 unchanged sentences

$ ( 81,814,000 )

Capital Stock Amount

Paid-in Capital

at June 30, 2020

1 unchanged sentence

$ ( 6,420,000 )

of common stock –

exercised options

of common stock - exercised options and warrants

Fair value of warrants

of common stock, net of costs

of common stock - private placement transactions, net

of Common Stock - Loan Conversion

based compensation

of Common Stock - Debt Conversion

( 12,793,000 )

2 unchanged sentences

$ ( 66,205,000 )

$ (6,420,000 )

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

1 unchanged sentence

STATEMENTS OF CASH FLOWS

Year ended June 30,

Cash flows from operating activities:

ended June 30,

flows from operating activities:

$ ( 15,609,000 )

$ ( 12,793,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Stock issuance for services

PPP Loan principal and accrued interest forgiveness

Fair value of warrants issued as debt discount cost

Noncash interest expense

Noncash rent expense

Allowance for inventory reserve

Amortization of prepaid offering costs

Changes in operating assets and liabilities:

Accounts receivable

Other current assets

Accounts payable

Accrued expenses

Due to factor

Deferred revenue

Accrued interest

Office lease payable

Customer deposits

Net cash used in operating activities

to reconcile net loss to net cash used in operating activities:

Loan principal and accrued interest forgiveness

( 1,307,000 )

Cash flows from investing activities

Purchases of equipment

Net cash used in investing activities

Cash flows from financing activities:

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

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

Borrowings from line of credit - related party debt

Principal payments of financing lease payable

Net cash provided by financing activities

Net change in cash

Cash, beginning of period

Cash, end of period

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

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

Accrued interest converted into principal

Interest paid

Common stock issued for conversion of related party debt

Stock issuance for services

value of warrants issued as debt discount cost

interest expense

for inventory reserve

of prepaid offering costs

in operating assets and liabilities:

( 2,512,000 )

( 3,028,000 )

( 5,810,000 )

( 5,062,000 )

current assets

lease payable

( 1,392,000 )

cash used in operating activities

( 23,893,000 )

( 18,358,000 )

flows from investing activities

( 1,102,000 )

cash used in investing activities

( 1,102,000 )

flows from financing activities:

from the issuance of common stock in registered direct offering, net of offering costs

from the issuance of common stock in public offering, net of offering costs

from the issuance of common stock in private placement

from revolving line of credit

of short-term loan - related party

( 1,178,000 )

of line of credit - related party

( 1,402,000 )

of revolving line of credit

( 3,561,000 )

payments of financing lease payable

cash provided by financing activities

change in cash

( 4,228,000 )

beginning of period

end of period

Disclosures of Non-Cash Investing and Financing Activities:

stock issued for conversion of related party debt

interest converted into principal

stock issued for vested RSUs

cash flow information:

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

4 unchanged sentences

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.

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

(“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,”

“us,”

“our,”

“Flux,”

and “Company”

(“Flux”) was incorporated in 2008 in the State of Nevada, and Flux’s operations are conducted

through its wholly owned subsidiary, Flux Power, Inc.

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

design, develop, manufacture, and sell a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of

industrial commercial sectors which include material handling, airport ground support equipment (“GSE”), and stationary energy

We 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

to provide the level of energy storage required and “state of the art” real time monitoring of pack performance.

that the increasing demand for lithium-ion battery packs and more environmentally friendly energy storage solutions in the material handling

sector should continue to drive our revenue growth.

used herein, the terms “we,” “us,” “our,” “Flux,” and “Company” mean Flux

Power Holdings, Inc., unless otherwise indicated.

2 unchanged sentences

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:

4 unchanged sentences

of all intercompany accounts and transactions.

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

Considerations

accompanying financial statements and notes have been prepared assuming the Company will continue as a going concern.

For the year ended

June 30, 2022, the Company generated negative cash flows from operations of $ 23.9

million and had an accumulated deficit of $ 81.8

Management has evaluated the Company’s expected

cash requirements over the next twelve (12) months, including investments in additional sales and marketing and research and development,

capital expenditures, and working capital requirements.

Management believes the Company’s existing cash and funding available under

the SVB Credit Facility and the Subordinated LOC, along with the forecasted gross margin will be sufficient to meet the Company’s

anticipated capital resources to fund planned operations for the next twelve (12) months.

the Company has not generated sufficient cash to fund its operations.

Based on the Company’s ability to recognize revenue from

its existing backlog, management anticipates increased revenues along with the planned improvements in its gross margin over the next

twelve (12) months.

The planned gross margin improvement tasks include, but is not limited to, a plan to drive bill of material costs

down while increasing price of our products for new orders.

The Company has received new orders in fiscal year ended June 30, 2022, of

approximately $ 65 million

and believes through conversations with customers that its anticipation of continued new order increases is probable.

of September 12, 2022, $ 3.2

million remained available under the SVB Credit Facility and $ 4.0

million was available for future draws under the Subordinated

As of September 12, 2022, $ 5.7

million remained available under the Company’s ATM agreement

that could be utilized if necessary.

In addition, to support our operations and anticipated growth, we intend to explore additional sources

of capital as needed.

We also continue to execute our cost reduction, sourcing, pricing recovery initiatives in efforts to increase our

gross margins and improve cash flow from operations.

Any, unforeseen factors in the general economy beyond management’s control

could potentially have negative impact on the planned gross margin improvement plan.

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,

4 unchanged sentences

and 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.

of June 30, 2022 and June 30, 2021, cash was approximately $ 485,000

and $ 4,713,000 ,

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, 2022 and 2021.

Values of Financial Instruments

5 unchanged sentences

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

7 unchanged sentences

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.

adjustments to inventory reserve related to obsolete and slow moving inventory in the amount of approximately $ 61,000

and $ 195,000

during the years ended June 30, 2022 and 2021,

respectively.

Plant and Equipment

1 unchanged sentence

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,

method over the estimated useful lives, of the related assets ranging from three

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

13 unchanged sentences

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.

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.

5 unchanged sentences

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

5 unchanged sentences

As of June 30, 2022 and 2021, 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.

liability of approximately $ 1,012,000 and

respectively, which is included in accrued expenses on the Company’s consolidated balance sheets.

of Long-lived Assets

5 unchanged sentences

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.

present, and accordingly no

impairment losses were recognized during the fiscal years ended

June 30, 2022 and 2021.

and Development

8 unchanged sentences

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

As a result, no unrecognized tax benefits have been identified

As a result, no

unrecognized tax benefits have been identified

as of June 30, 2022 or June 30, 2021, and accordingly, no additional tax liabilities have been recorded.

5 unchanged sentences

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.

the years ended June 30, 2022 and 2021, basic and diluted weighted-average common shares outstanding were 15,439,530

and 11,796,217 ,

respectively.

The Company incurred a net loss for the years ended June 30, 2022 and 2021, and therefore, basic and diluted loss per share

for each fiscal year were the same because potential common share equivalent would have been anti-dilutive.

The total potentially dilutive

common shares outstanding at June 30, 2022 and 2021 that were excluded from diluted weighted-average common shares outstanding represent

shares underlying outstanding convertible debt, stock options, RSUs, and warrants, and totaled 2,262,773

and 877,740 ,

respectively.

Accounting Standards

Adopted Accounting Pronouncements

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.

Company did not adopt any new accounting pronouncements for the year ended June 30, 2022 and 2021.

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

3 - INVENTORIES

consist of the following:

Raw materials

Work in process

Finished goods

Total Inventories

OF INVENTORIES

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

1 unchanged sentence

current assets consist of the following:

Prepaid insurance

Prepaid inventory

Prepaid offering costs

Prepaid expenses

Total Other current assets

OF OTHER CURRENT ASSETS

issuance costs

other current assets

5 – ACCRUED EXPENSES

expenses consist of the following:

Payroll and bonus accrual

Warranty liability

Total Accrued expenses

OF ACCRUED EXPENSES

and bonus accrual

accrued expenses

6 - PROPERTY, PLANT AND EQUIPMENT, NET

plant and equipment, net consist of the following:

Machinery and equipment

Office equipment

Furniture and Equipment

Leasehold improvements

OF PROPERTY PLANT AND EQUIPMENT NET

and equipment

and Equipment

plant and equipment, gross

Accumulated depreciation

Total property, plant and equipment, net

expense was approximately $274,000 and $141,000, for the years ended June 30, 2021 and 2020, respectively, and is included in selling

and administrative expenses in the accompanying consolidated statements of operations.

( 1,136,000 )

property, plant and equipment, net

expense was approximately $ 575,000 and

for the years ended June 30, 2022 and 2021, respectively, and is included in selling and administrative expenses in the accompanying

consolidated statements of operations.

7 – 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.

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

PPP Loan had a two-year

term and bore interest at a rate of 1.0 %

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.

The 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 $ 10,000 .

The Company 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, 2022, the outstanding balance of the PPP Loan was $ 0 .

5 unchanged sentences

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.

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

On October 29, 2021, the Company entered into a First Amendment to Loan and Security Agreement (“First Amendment”) with SVB

which amended certain terms of the Loan Agreement including, but not limited to, increasing the amount of the revolving line of credit

million to $ 6.0

million, and extending the maturity date to November

The First Amendment provided the Company

with a senior secured credit facility for up to $ 6.0

million available on a revolving basis (“Revolving

Outstanding principal under the Revolving LOC accrued interest at a floating rate per annum 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%).

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.

fee of $ 15,000

upon execution of the Loan Agreement and an additional non-refundable commitment fee of $22,500 in connection with the First Amendment On

June 23, 2022, the Company entered into a Second Amendment to Loan and Security Agreement (“Second Amendment” and together

with the Loan Agreement and First Amendment the “Amended Loan Agreement”) with Silicon Valley Bank (“SVB”), which

amended certain terms of the Loan and Security Agreement dated November 9, 2020, as amended on October 29, 2021, including but not limited

to, (i) to increase the amount of the revolving line of credit to $8.0 million, (ii) to change the financial covenants of the Company

from tangible net worth of the Company to adjusted EBITDA (as defined in the Second Amendment) on a trailing six (6) month basis and

liquidity ratio certified as of the end of each month pursuant to the calculations set forth therein, and (iii) to allow for the assignment

and transfer by SVB of all of its obligations, rights and benefits under the Agreement and Loan Documents (as defined in the Agreement

and except for the Warrants) .

addition, under the Second Amendment, the interest rate terms for the outstanding principal under the Revolving LOC was amended to accrue

interest at a floating per annum rate equal to the greater of either (A)

Prime Rate plus three and one-half of one percent (3.50%) or (B) seven and one-half of one percent (7.50%).

Interest payment is due monthly

on the last day of the month.

In addition, the Company is required to pay a quarterly unused facility fee equal to one-quarter of one

percent (0.25%) per annum of the average daily unused portion of the $6.0 million commitment under the Revolving LOC, depending upon

availability of borrowings under the Revolving LOC .

Pursuant to the Second Amendment, the Company agreed to pay SVB a non-refundable amendment fee of Five Thousand Dollars ($ 5,000.00 )

and SVB’s legal fees and expenses incurred in connection with the Second Amendment.

connection with the Second Amendment, the Company issued a twelve-year

warrant to SVB and its designee, SVB Financial

Group, to purchase up to 40,806

shares of common stock of the Company at an exercise

price of $ 2.23

per share pursuant to the terms set forth therein.

outstanding under the Revolving LOC 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 Amended Loan Agreement and the Intellectual Property Security

Agreement dated as of October 29, 2021.

As of June 30, 2022 the outstanding balance under the Revolving LOC was approximately $ 4,889,000 ,

with approximately $ 3,111,000

remained available for future draws through November

7, 2022, 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 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.

Line of Credit Facility

May 11, 2022, the Company entered into a Credit Facility Agreement (the “Subordinated LOC”) with Cleveland Capital, L.P.,

a Delaware limited partnership (“Cleveland”), Herndon Plant Oakley, Ltd., (“HPO”), and other lenders (together

with Cleveland and HPO, the “Lenders”).

The Subordinated LOC provides the Company with a short-term line of credit (the “LOC”)

not less than $ 3,000,000

and not more than $ 5,000,000 ,

the proceeds of which shall be used by the Company for working capital purposes.

In connection with the LOC, the Company issued a separate

subordinated unsecured promissory note in favor of each respective Lender (each promissory note, a “Note”) for each Lender’s

commitment amount (each such commitment amount, a “Commitment Amount”).

As of June 30, 2022, the Lenders committed an aggregate

of $ 4,000,000 .

to the terms of the Subordinated LOC, each Lender severally agrees to make loans (each such loan, an “Advance”) up to such

Lender’s Commitment Amount to the Company from time to time, until December 31, 2022 (the “Due Date”).

may, from time to time, prior to the Due Date, draw down, repay, and re-borrow on the Note, by giving notice to the Lenders of the amount

to be requested to be drawn down.

Note bears an interest rate of 15.0 %

per annum on each Advance from and after the date of disbursement of such Advance and is payable on (i) the Due Date in cash or shares

of common stock of the Company (the “Common Stock”) at the sole election of the Company, unless such Due Date extended pursuant

to the Note, or (ii) on occurrence of an event of Default (as defined in the Note).

The Due Date may be extended (i) at the sole election

of the Company for one (1) additional year period from the Due Date upon the payment of a commitment fee equal to two percent ( 2 %)

of the Commitment Amount to the Lender within thirty (30) days prior to the original Due Date, or (ii) by the Lender in writing.

each Lender signed a Subordination Agreement by and between the Lenders and Silicon Valley Bank, a California corporation (“SVB”),

dated as of May 11, 2022 (the “Subordination Agreement”) for the purposes of subordinating the right to payment under the

Note to SVB’s indebtedness by the Company now outstanding or hereinafter incurred.

Subordinated LOC includes customary representations, warranties and covenants by the Company and the Lenders.

The Company has also agreed

to pay the legal fees of Cleveland’s counsel in an amount up to $ 10,000 .

In addition, each Note also provides that, upon the occurrence of a Default, at the option of the Lender, the entire outstanding principal

balance, all accrued but unpaid interest and/or Late Charges (as defined in the Note) at once will become due and payable upon written

notice to the Company by the Lender.

connection with entry into the Subordinated LOC, the Company paid to each Lender a one-time committee fee in cash equal to 3.5 %

of such Lender’s Commitment Amount.

In addition, in consideration of the Lenders’ commitment to provide the Advances to the

Company, the Company issued the Lenders five-year warrants to purchase an aggregate of 128,000

shares of common stock at an exercise price of

per share that are, subject to certain ownership

limitations, exercisable immediately (the “Warrants”) ( the

number of warrants issued to each Lender is equal to the product of (i) 160,000 shares of common stock multiplied by (ii) the ratio represented

by each Lender’s Commitment Amount divided by the $5,000,000) .

to a selling agreement, dated as of May 11, 2022, the Company retained HPO as its placement agent in connection with the Subordinated

As compensation for services rendered in conjunction with the Subordinated LOC, the Company paid HPO a finder fee equal to 3 %

of the Commitment Amount from each such Lender placed by HPO in cash.

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”).

2020, the Original Esenjay Note was amended and restated to (i) extend the maturity date from June

30, 2020 to September

30, 2020 , and (ii) to increase the principal

amount outstanding under the Original Esenjay Note to $ 1,400,000

(the “Esenjay Note”).

June 26, 2020 and July 22, 2020, Esenjay assigned a total of $ 900,000

of the Esenjay Note to three (3) accredited investors

and the $ 900,000

note balance was converted into shares of common

stock at $ 4.00

per share, which was the cash price per share,

and resulted in the issuance of 225,000

shares of common stock.

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”

further amended the Esenjay Note to, among other items, transfer all remaining principal and accrued interest outstanding of approximately

into the amended Credit Facility Agreement.

“Credit Facility” below).

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.

(the “Cleveland Loan”) and issued

Cleveland an unsecured short-term promissory note in the amount of $ 1,000,000

(the “Unsecured Promissory Note”).

The Unsecured Promissory Note had an interest rate of 15.0 %

per annum and was originally due on September

1, 2019 , unless repaid earlier from a percentage

of proceeds from certain identified accounts receivable.

In connection with the Cleveland Loan, 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 shares of common stock sold in a contemplated public offering and with

an exercise price equal to the per share price of the common stock sold in the public offering.

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.

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’

EQUITY (DEFICIT)

was extended to December

1, 2019 (the “First Amendment”) and

the Cleveland Warrant terms were amended (the “Amended Warrant”).

The Amended Warrant increased the warrant coverage from

of the number of shares of common stock outstanding after giving effect to the shares of common stock sold in the next private or public

offering and with an exercise price equal to the per share price of common stock sold in such private or public offering, as the case

July 9, 2020, the Company made a payment to Cleveland in the amount of $ 200,000

as a partial payment of the Cleveland Loan.

July 27, 2020, in connection with the outstanding loan from Cleveland to the Company in the principal amount of $ 957,000 ,

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.

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

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”).

Agreement was amended multiple times to allow for, among other things, an increase in the maximum principal amount available under line

of credit (“LOC”) to $ 12,000,000 ,

the inclusion of additional lenders and extension of the maturity date to September

August 2020, the Company paid down an aggregate principal amount of approximately $ 1,402,000

of the outstanding balance under the LOC.

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

Facility Agreement”) pursuant to which the Company (i) extended the maturity date to September

30, 2021 , and (ii) allowed for the transfer of

outstanding obligations under the Esenjay Note of approximately $ 564,000

into the LOC as noted above.

In November 2020,

lenders holding an aggregate of approximately $ 2,161,000

in principal and accrued interest elected to

convert their notes into 540,347

shares of common stock at a price of $ 4.00

In January and March 2021, the lenders

holding an aggregate of approximately $ 2,632,000

in principal and accrued interest elected to

convert their notes into 658,103

shares of common stock at a price of $ 4.00

per share of which approximately $ 1,045,000

was held by Esenjay and converted to 261,133

shares of common stock.

June 10, 2021, the Company repaid all obligations in full and without additional fees or termination penalties, and the Third Amended

and Restated Credit Facility Agreement and the related Second Amended and Restated Security Agreement were terminated.

9 - STOCKHOLDERS’ EQUITY

At-The-Market

(“ATM”) Offering

December 21, 2020 the Company entered into a Sales Agreement (the “Sales Agreement”) with H.C.

(“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

(“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”).

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.

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.

Company has also agreed pursuant to the Sales Agreement to indemnify and provide contribution to HCW against certain liabilities, including

liabilities under the Securities Act.

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

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 the Company has 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 through June 30, 2022, the Company sold an aggregate of 1,169,564

shares of common stock at an average price of

per share for gross proceeds of approximately

million under the ATM Offering.

The Company received

net proceeds of approximately $ 13.7

million, net of 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

Shares was 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.

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

3 unchanged sentences

conditions set forth in the Sales Agreement.

Direct Offering

September 27, 2021, the Company closed a registered direct offering, priced at-the-market under Nasdaq rules (“RDO”) for

the sale of 2,142,860

shares of common stock and warrants to purchase

up to an aggregate of 1,071,430

shares of common stock, at an offering price

per share and associated warrant for gross proceeds

of approximately $ 15.0

million prior to deducting offering expenses

totaling approximately $ 1.0

The associated warrants have an exercise

price equal to $ 7.00

per share and are exercisable upon issuance and

expire in five years.

HCW acted as the exclusive placement agent for the registered direct offering.

securities sold in the RDO were sold pursuant to a “shelf” registration statement on Form S-3 (File No.

333-249521), including

a base prospectus, previously filed with the Securities and Exchange Commission (the “SEC”) on October 16, 2020 and declared

effective by the SEC on October 26, 2020.

The registered direct offering of the securities was made by means of a prospectus supplement

dated September 22, 2021 and filed with the SEC, that forms a part of the effective registration statement.

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.

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

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 totaling approximately $ 1.7

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.”

Concurrent 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

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, 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.

April 22, 2020, the Company sold an aggregate of 66,250

shares of common stock, at $ 4.00

per share, for an aggregate purchase price of

in cash to two (2) accredited investors.

30, 2020, the Company sold an additional 275,000

shares of common stock at $ 4.00

per share in its June closing of the offering,

for an aggregate purchase price of $ 1,100,000

to six (6) accredited investors (“June

Esenjay and Mr.

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

Dutt, the Company’s president and chief executive officer, participated in the June Closing in

the amount of $ 300,000

and $ 50,000 ,

respectively.

On July 24, 2020, the Company sold an aggregate of 800,000

shares under the 2020 Private Placement at $ 4.00

per share, for an aggregate purchase price of

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

Cosentino, a former director, who participated in the offering in the amount of $ 250,000 .

shares offered and sold in the private placement offerings 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.

1 unchanged sentence

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.

June 30, 2020, there was a partial conversion of $ 7,383,000

in principal and accrued interest outstanding

under the secured promissory notes at a conversion price of $ 4.00

per share that resulted in the issuance of 1,845,830

shares of common stock.

November 6, 2020, there was a partial conversion of $ 2,161,000

in principal and accrued interest outstanding

under the secured promissory notes at $ 4.00

per share that resulted in the issuance of 540,347

shares of common stock.

January and March 2021, there were conversions of the remaining balance of approximately $ 2,632,000

in principal and accrued interest outstanding

under the secured promissory notes that resulted in the issuance of 658,103

shares of common stock.

conversions were at the option of the lenders, and all outstanding secured promissory notes were converted into 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.

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.

June 30, 2020, two (2) accredited individuals, who had been assigned $ 500,000

of the Esenjay Note, converted all principal

shares of common stock at $ 4.00

On July 22, 2020, one accredited individual,

who had been assigned $ 400,000

of the Esenjay Note converted all principal into

shares of common stock at $ 4.00

July 3, 2019, the Company issued a three-year

warrant to Cleveland Capital, L.P.

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.

On September 1, 2019, the Cleveland Warrant was amended and

restated to change the warrant coverage from 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 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

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

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.

connection with the Company’s RDO, in September 2021 the Company issued five-year

warrants to the RDO investors to purchase up

shares of the Company’s common stock at

an exercise price of $ 7.00

per share and were estimated to have a fair value

of approximately $ 3,874,000 .

The warrants were exercisable immediately and are limited to beneficial ownership of 4.99 %

at any point in time in accordance with the warrant agreement.

May 2022 and in conjunction with entry into a credit facility with Cleveland Capital, L.P.

(“Cleveland”), Herndon Plant Oakley,

(“HPO”), and other lenders (together with Cleveland and HPO, the “Lenders”), the Company issued five-year

warrants to the Lenders to purchase up to 128,000

shares of the Company’s common stock at

an exercise price of $ 2.53

per share and had a fair value of approximately

June 2022 and in conjunction with the entry into the Second Amendment to Loan and Security Agreement with Silicon Valley Bank (“SVB”),

the Company issued twelve-year

warrants to SVB and its designee, SVB Financial

Group, to purchase up to 40,806

shares of the Company’s common stock at

an exercise price of $ 2.23

per share and had a fair value of approximately

detail for the year ended June 30, 2022 is reflected below:

Term (# years)

Warrants outstanding and exercisable at June 30, 2020

Warrants issued

Warrants exercised

Warrants forfeited

Warrants outstanding and exercisable at June 30, 2021

OF STOCK WARRANT ACTIVITY

outstanding and exercisable at June 30, 2021

outstanding and exercisable at June 30, 2022

detail for the year ended June 30, 2021 is reflected below:

Term (# years)

Warrants outstanding and exercisable at June 30, 2019

Warrants issued

Warrants forfeited

Warrants outstanding and exercisable at June 30, 2020

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.

outstanding and exercisable at June 30, 2020

outstanding and exercisable at June 30, 2021

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

As of June 30, 2022, there were

options to purchase common stock outstanding

under the 2010 Plan.

No additional options may be granted under the 2010 Plan.

February 17, 2015 the Company’s stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”).

The 2014 Plan

offers certain employees, directors, and consultants the opportunity to acquire the Company’s common stock subject to vesting requirements,

and serves to encourage such persons to remain employed by the Company and to attract new employees.

The 2014 Plan allows for the award

of the Company’s common stock and options, up to 1,000,000

shares of the Company’s common stock.

of June 30, 2022, 170,725

shares of the Company’s common stock were

available for future grants under the 2014 Plan.

April 29, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”).

The 2021 Plan

authorizes the issuance of awards for up to 2,000,000

shares of common stock in the form of incentive

stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and unrestricted

stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates.

As of June 30,

2022, no awards had been granted under the 2021 Plan.

in stock options during the year ended June 30, 2022 and related balances outstanding as of that date are reflected below:

Exercise Price

Term (# years)

Outstanding at June 30, 2020

Forfeited and cancelled

Outstanding at June 30, 2021

Exercisable at June 30, 2021

OF STOCK OPTIONS ACTIVITY

at June 30, 2021

and cancelled

and exercisable at June 30, 2022

in stock options during the year ended June 30, 2021 and related balances outstanding as of that date are reflected below:

Exercise Price

Term (# years)

Outstanding at June 30, 2019

Forfeited and cancelled

Outstanding at June 30, 2020

Exercisable at June 30, 2020

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”).

at June 30, 2020

and cancelled

at June 30, 2021

November 5, 2020, the Company’s Board of Directors approved an amendment to the 2014 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.

On November 5, 2020, the Board of Directors authorized the following RSUs to be granted under the amended 2014 Plan:

(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.

On April 29, 2021, an additional

time-based RSUs were authorized by the Company’s

Board of Directors to be granted under the amended 2014 Plan.

On October 29, 2021, the Board of Directors authorized the following RSUs

to be granted under the amended 2014 Plan:

(i) a total of 97,828

RSUs to certain executive officers of which 48,914

were performance-based RSUs and 48,914

were time-based RSUs, and (ii) a total of 81,786

time-based RSUs to certain other key employees.

The RSUs are subject to the terms and conditions provided in (i) the Restricted Stock Unit Award Agreement for time-based awards (“Time-based

Award Agreement”), and (ii) the Performance Restricted Stock Unit Award Agreement for performance-based awards (“Performance-based

Award Agreement”).

in RSUs during the year ended June 30, 2022 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

OF RESTRICTED STOCK UNITS ACTIVITY

Average Grant date Fair Value

Average Remaining Contract Term

at June 30, 2021

Vested/Settled

and cancelled

at June 30, 2022

in RSUs during the year ended June 30, 2021 and related balances outstanding as of that date are reflected below:

Average Grant date Fair Value

Average Remaining Contract Term

Outstanding at June

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:

Years ended June 30,

Research and development

Selling and administrative

Total stock-based compensation expense

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:

and cancelled

at June 30, 2021

compensation expense for the years ended June 30, 2022 and 2021 represents the estimated fair value of stock options and RSUs at the

time of grant amortized under the straight-line method over the expected vesting period and reduced for estimated forfeitures of options

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ

from original estimates.

At June 30, 2022, the aggregate intrinsic value of exercisable options was $ 0 .

following table summarizes stock-based compensation expense for employee and non-employee option and RSU grants:

OF STOCK-BASED COMPENSATION EXPENSES

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,

and development

and administrative

stock-based compensation expense

June 30, 2022, the unamortized stock-based compensation expense relating to outstanding stock options and RSUs was approximately $ 0

and $ 983,000 ,

respectively.

The unamortized amount related to RSUs is expected to be expensed over the weighted-average remaining recognition period

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

2 unchanged sentences

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.

A valuation allowance of approximately $ 22,951,000

and $ 18,839,000

has been established to offset the net deferred

tax assets as of June 30, 2022 and 2021, 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

2 unchanged sentences

Significant components

of the Company’s net deferred tax assets are shown in the table below.

Year Ended June 30,

of the Company’s net deferred tax assets are shown in the table below.

OF DEFERRED TAX ASSETS AND LIABILITIES

Ended June 30,

operating loss carryforwards

& development credit carryforward

deferred tax assets

Net operating loss carryforwards

Research & development credit carryforward

Stock compensation

Interest expense Sec.

Lease liability

Net deferred tax assets

Valuation allowance for deferred tax assets

allowance for deferred tax assets

( 22,951,000 )

( 18,839,000 )

Total deferred tax assets

deferred tax assets

Tax Liabilities:

$ ( 727,000 )

$ ( 849,000 )

deferred tax liabilities

Right of use asset

Total deferred tax liabilities

Net deferred tax liabilities

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.

deferred tax liabilities

June 30, 2022, the Company had unused net operating loss (“NOL”) carryovers of approximately $ 74,150,000

and $ 72,776,000

that are available to offset future federal and

state taxable income, respectively.

Federal NOL carryforwards arising after 2017 of approximately $ 51,742,000

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.

Federal NOL carryforwards arising

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, 2022 and 2021, due

to the following:

Year Ended June 30,

Federal income taxes at 21%

OF EFFECTIVE INCOME TAX RATE RECONCILIATION

Ended June 30,

income taxes at 21 %

$ ( 3,278,000 )

$ ( 2,686,000 )

State income taxes, net

Permanent differences and other

Other true ups, if any

Change in federal tax rate

Change in valuation allowance

Provision for income taxes

income taxes, net

( 1,090,000 )

differences and other

true ups, if any

in valuation allowance

( 4,112,000 )

( 3,665,000 )

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.

The Company has not yet completed a Section 382 net operating loss analysis.

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.

has not yet completed a Section 382 net operating loss analysis.

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, 2022 and 2021.

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

4 unchanged sentences

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

accordance with ASC 740, there are no

unrecognized tax benefits as of June 30, 2022 or June 30, 2021.

11 - CONCENTRATIONS

2 unchanged sentences

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.

Our cash balance at this institution

is secured by the Federal Deposit Insurance Corporation up to $ 250,000 .

As of June 30, 2022 and 2021, cash was approximately $ 485,000 ,

and $ 4,713,000 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

risk with respect to its cash.

Management believes that the Company is not exposed to any significant credit risk with respect to its cash.

Concentrations

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, 2022, the Company had four (4) major customers that each represented more than 10% of its revenues, on an individual

basis, and together represented approximately $ 29,254,000

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 $10,045,000 or 60% of its total revenues.

basis, and together represented approximately $ 16,004,000

of its total revenues.

Suppliers/Vendor

2 unchanged sentences

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.

ended June 30, 2022 the Company had one (1) supplier who accounted for more than 10 %

of its total purchases which represented approximately $ 13,884,000

of its total purchases.

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

of its total purchases.

12 - COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

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

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 was $42,400 for the first 12

months, escalating at 3% each year.

Melrose Drive, Vista,

Lease has an initial term of seven years and four months, commencing on or about June 28, 2019.

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 %

February 26, 2020, the Company entered into the First Amendment to Standard Industrial/Commercial Multi-Tenant Lease dated April 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).

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.

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

rentable square feet).

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

The base rent for the additional space is the same rate as the space rented under the terms of the original lease, $ 0.93

rentable square (subject to 3% annual increase).

during the year ended June 30, 2022 was approximately $ 62,000

In connection with the Amendment,

the Company purchased certain existing office furniture for a total purchase price of $ 8,300 .

rent expense was approximately $ 867,000 and

$ 841,000 for

the years ended June 30, 2022 and 2021, respectively.

Future Minimum Lease Payments are:

OF FUTURE MINIMUM LEASE PAYMENTS

Future Minimum Lease Payments

1 unchanged sentence

13 - SUBSEQUENT EVENTS

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.

August 12, 2022, Jonathan Berry, the Company’s Chief Operating Officer, separated from the Company and entered into an Employee

Separation and Release agreement dated August 24, 2022 (“Separation Agreement”).

Under the Separation Agreement, the Company

agreed to provide Mr.

Berry with certain payments and benefits comprising of:

(i) a separation payment of two hundred five thousand two

hundred dollars, less required payroll withholdings, (ii) twenty-eight thousand nine hundred seven and 52/100 dollars, less required

payroll withholdings, to defray costs for COBRA coverage, and (iii) reimbursement for an amount equal to twelve months for life insurance

continuation (collectively, the “Separation Benefits”).

In exchange for the Separation Benefits, among other things as set

forth in the Separation Agreement, Mr.

Berry agreed to a release of claims and waivers in favor of the Company and to certain restrictive

covenant obligations, and also reaffirmed his commitment to comply with his existing restrictive covenant obligations.

August 26, 2022, as compensation for board services provided during the last quarter of Fiscal 2022, Ms.

Bo-Linn, a director of the Company,

was granted 5,034

which 1/3 vested immediately, each of the remaining 1/3 of the RSUs will vest on April 29, 2023, and April 29, 2024 .

Bo-Linn’s grant was consistent with the standard equity component of Non-Executive Director Compensation Package as approved

by the Board.

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