Flux Power Holdings, Inc. 10-K

ITEM 9A - CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of the end of the period covered by this report, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Act of 1934. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, relating to the Company, including our consolidated subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2022 because of the material weaknesses identified in our internal controls over financial reporting. Management’s Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. As of June 30, 2022, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). A Material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight Board (United States) Auditing Standard No. 2) or a combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Based on such assessment, management concluded that as of June 30, 2022, our internal control over financial reporting was not effective. Management has identified the following material weakness: ● Ineffective oversight of the Company’s internal control over financial reporting and lack of sufficient review and approval of the underlying data used in the calculation of warranty reserve. Planned Remediation We are implementing measures designed to improve our internal control over financial reporting to remediate material weaknesses, including the following: ● We are implementing additional control procedures to strengthen the oversight of the Company’s internal control over financial reporting through review and sign off by the senior management of all significant assumptions and estimates being used and the underlying the data used in producing financial schedules/estimates and financial reporting. We are also adding a second level of review and approval for all manual journal entries for significant estimates and assumptions made by management. 33 This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding the effectiveness of the Company’s internal control over financial reporting, as such report is not required due to the Company’s status as a smaller reporting company. Change in Internal Control over Financial Reporting Except as discussed above, there have been no changes in the Company’s internal controls over financial reporting during the fiscal quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 9B - OTHER INFORMATION None. ITEM 9C - DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENTS INSPECTIONS Not Applicable. 34 PART III ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors, Executive Officers and Significant Employees The following table and text set forth the names and ages of our current directors, executive officers and significant employees as of September 12, 2022. Our Board of Directors is comprised of only one class. All of the directors will serve until the next annual meeting of stockholders or until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. There are no family relationships among any of the directors and executive officers. From time to time, our directors have received compensation in the form of cash and equity grant for their services on the Board. Name Age Position Ronald F. Dutt 75 Director, Chief Executive Officer and President Charles A. Scheiwe 56 Chief Financial Officer and Secretary Michael Johnson 74 Director Lisa Walters-Hoffert (1)(2) 64 Director Dale Robinette (1)(3) 58 Director Cheemin Bo-Linn (1)(4) 68 Director (1) Independent Director (2) Chairperson of the Audit Committee, Member of Compensation Committee and Governance Committee (3) Lead Independent Director, Chairperson of the Compensation Committee, Member of Audit Committee and Governance Committee (4) Ms. Bo-Linn was appointed to the Board on January 14, 2022. Ms. Bo-Linn is the Chairperson of the Nominating and Corporate Governance Committee (“Governance Committee”) and a Member of the Audit Committee and Compensation Committee. There are no arrangements or understandings between our directors and executive officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer. Business Experience Ronald F. Dutt . Chairman, Chief Executive Officer, President, and Director . Mr. Dutt has been our chief executive officer, former interim chief financial officer and director since March 19, 2014. He became our chairman on June 28, 2019. On September 19, 2017, he was also appointed as our president, chief financial officer and corporate secretary. He resigned as chief financial officer and corporate secretary as of December 16, 2018. Previously, he was our chief financial officer since December 7, 2012, and our interim chief executive officer since June 28, 2013. Mr. Dutt has served as the Company’s interim corporate secretary since June 28, 2013. Prior to Flux Power, Mr. Dutt provided chief financial officer and chief operating officer consulting services during 2008 through 2012. In this capacity Mr. Dutt provided financial consulting, including strategic business modeling and managed operations. Prior to 2008, Mr. Dutt served in several capacities as executive vice president, chief financial officer and treasurer for various public and private companies including SOLA International, Directed Electronics, Fritz Companies, DHL Americas, Aptera Motors, Inc., and Visa International. Mr. Dutt holds an MBA in Finance from University of Washington and an undergraduate degree in Chemistry from the University of North Carolina. Additionally, Mr. Dutt served in the United States Navy and received an honorable discharge as a Lieutenant. Charles A. Scheiwe, Chief Financial Officer and Secretary. Mr. Scheiwe joined the Company in July of 2018 and has been acting as the Company’s Controller since July 9, 2018. He was appointed as our chief financial officer and secretary on December 17, 2018. Prior to joining the Company, Mr. Scheiwe was the controller of Senstay, Inc. and provided financial and accounting consulting services to start-up companies from 2016 to 2018. From 2006 to 2016, Mr. Scheiwe was the vice president of finance and controller for GreatCall, Inc. Mr. Scheiwe’s experience in accounting, financial planning and analysis, business intelligence, cash management, and equity management has prepared and qualified him for the position of chief financial officer and secretary of the Company. Mr. Scheiwe has a Bachelor of Science degree in Business Management, with emphasis in Accounting, from the University of Colorado. Mr. Scheiwe also holds a CPA certificate. 35 Michael Johnson, Director. Mr. Johnson has been our director since July 12, 2012. Mr. Johnson has been a director of Flux Power since it was incorporated. Since 2002, Mr. Johnson has been a director and the chief executive officer of Esenjay Petroleum Corporation (Esenjay Petroleum), a Delaware company located in Corpus Christi, Texas, which is engaged in the business oil exploration and production. Mr. Johnson’s primary responsibility at Esenjay Petroleum is to manage the business and company as chief executive officer. Mr. Johnson is a director and beneficial owner of Esenjay Investments LLC, a Delaware limited liability company engaged in the business of investing in companies, and an affiliate of the Company owning approximately 28.0% of our outstanding shares, including common stock underlying options, and warrants that were exercisable or convertible or which would become exercisable or convertible within sixty (60) days. As a result of Mr. Johnson’s leadership and business experience, he is an industry expert in the natural gas exploration industry and brings a wealth of management and successful company building experience to the board. Mr. Johnson received a Bachelor of Science degree in mechanical engineering from the University of Southwestern Louisiana. Lisa Walters-Hoffert, Director. Ms. Walters-Hoffert was appointed to our Board on June 28, 2019. Ms. Walters-Hoffert was a co-founder of Daré Bioscience, Inc. and following the company’s merger with Cerulean Pharma, Inc. in July of 2017, became Chief Financial Officer of the surviving public company (NASDAQ: DARE). For over twenty-five (25) years, Ms. Walters-Hoffert was an investment banker focused on small-cap public companies in the technology and life science sectors. From 2003 to 2015, Ms. Walters-Hoffert worked at Roth Capital Partners as Managing Director in the Investment Banking Division. Ms. Walters-Hoffert has held various positions in the corporate finance and investment banking divisions of Citicorp Securities in San José, Costa Rica and Oppenheimer & Co, Inc. in New York City, New York. Ms. Walters-Hoffert has served as a member of the Board of Directors of the San Diego Venture Group, as Past Chair of the UCSD Librarian’s Advisory Board, and as Past Chair of the Board of Directors of Planned Parenthood of the Pacific Southwest. Ms. Walters-Hoffert currently serves as a member of the Board of Directors of The Elementary Institute of Science in San Diego. Ms. Walters-Hoffert graduated magna cum laude from Duke University with a B.S. in Management Sciences. As a senior financial executive with over twenty-five years of experience in investment banking and corporate finance and based on Ms. Walters-Hoffert’s expertise in audit, compliance, valuation, equity finance, mergers, and corporate strategy, the Company believes Ms. Walters-Hoffert is qualified to be on the Board. Dale T. Robinette, Director . Mr. Robinette was appointed to our Board on June 28, 2019 and our lead independent director on September 10, 2021. Mr. Robinette has been a CEO Coach and Master Chair since 2013 as an independent contractor to Vistage Worldwide, Inc., an executive coaching company. In addition, since 2013 Mr. Robinette has been providing business consulting related to top-line growth and bottom-line improvement through his company EPIQ Development. From 2013 to 2019, Mr. Robinette was the Founder and CEO of EPIQ Space, a marketing website for the satellite industry, a member-based community of suppliers promoting their offerings. Mr. Robinette was with Peregrine Semiconductor, Inc., a manufacturer of high-performance RF CMOS integrated circuits, from 2007 to 2013 in two roles as a Director of Worldwide Sales as well as the Director of the High Reliability Business Unit. Mr. Robinette started his career from 1991 to 2007 at Tyco Electronics Ltd. (known today as TE Connectivity Ltd.), a passive electronics manufacturer, in various sales, sales leadership and product development leadership roles. Mr. Robinette received a Bachelor of Science degree in Business Administration, Marketing from San Diego State University. Based on the above qualifications, the Company believes Mr. Robinette is qualified to be on the Board. Cheemin Bo-Linn, Director. Ms. Bo-Linn was appointed to our board January 14, 2022. Ms. Bo-Linn is currently a director of Data I/O Corp (Nasdaq: DAIO), a company in advanced security and data deployment, since December 2021, as a director KORE Group Holdings, Inc. (NYSE: KORE), an Internet of Things (“IoT”) solutions and connectivity-as-a-service company since October 2021, and as a director of Blackline Safety Corp. (TSX: BLN), a Canadian public company specializing in advanced security and data deployment, since November 2020. In addition, Ms. Bo-Linn was the Chief Executive Officer of Peritus Partners, Inc., a valuation accelerator and information technology operations and consulting company, from 2013 to 2022. Ms. Bo-Linn experience include 20+ years in multiple senior executive roles with International Business Machines Corporation (NYSE: IBM), including leading global teams as IBM’s Vice-President, and has also held C-suite roles or board positions at small to midcap public and private companies. Ms. Bo-Linn holds a Doctorate in Education in “Computer-based Management Information Systems and Organizational Change” from the University of Houston. The Board believes that Dr. Bo-Linn’s extensive executive management and board experience in private and public companies qualifies her to serve on the Board of Directors. 36 Involvement in Certain Legal Proceedings To the best of our knowledge, during the past ten years, none of our directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. Board Leadership Structure and Role in Risk Oversight Our Board of Directors (“Board”) recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure to provide independent oversight of management. Our Board is currently led by a Chairman of the Board who also serves as our Chief Executive Officer. The Board understands that the right Board leadership structure may vary depending on the circumstances, and our independent directors periodically assess these roles and the Board leadership to ensure the leadership structure best serves the interests of the Company and stockholders. On September 10, 2021, the Board adopted the Lead Independent Director Guidelines (“Guidelines.). The Guidelines provide that when the positions of Chief Executive Officer and Chairman of the Board are combined or the Chairman is not an independent director, the independent directors will appoint a lead independent director to serve with the authority and responsibility described in such Guidelines, and as the Board and/or the independent directors may determine from time to time. The Guidelines are available on our website at www.fluxpower.com. Mr. Dutt currently holds the Chairman and Chief Executive Officer roles. Mr. Robinette currently serves as the Lead Independent Director elected by the majority of the Board on September 10, 2021. The responsibilities of the Lead Independent Director include, among others: (i) serving as primary intermediary between non-employee directors and management; (ii) working with the Chairman of the Board to approve the agenda and meeting schedules for the Board; (iii) working with the Chairman of the Board as to the quality, quantity and timeliness of the information provided to directors; (iv) in consultation with the Nominating and Governance Committee, reviewing and reporting on the results of the Board and Committee performance self-evaluations; (v) calling additional meetings of independent directors; and (vi) serving as liaison for consultation and communication with stockholders. We believe the current leadership structure, with combined Chairman and Chief Executive Officer roles and a Lead Independent Director, best serves the Company and its stockholders at this time. Mr. Robinette possesses understanding and knowledge of the business and affairs of the Company and has the ability to devote a substantial amount of time to serve in this capacity. In addition, we believe having one leader serving as both the Chairman and Chief Executive Officer provides decisive, consistent and effective leadership, as well as clear accountability to our stockholders and customers. This enhances our ability to communicate our message and strategy clearly and consistently to our stockholders, employees, customers and suppliers. The Board believes the appointment of a strong Lead Independent Director and the use of regular executive sessions of the non-management directors, along with a majority the Board being composed of independent directors, allow it to maintain effective oversight of management. We believe that the combination of the Chairman and Chief Executive Officer roles is appropriate in the current circumstances and, based on the relevant facts and circumstances, separation of these offices would not serve our best interests and the best interests of our stockholders at this time. 37 In addition, our Board as a whole has responsibility for risk oversight. Our Board exercises this risk oversight responsibility directly and through its committees. The risk oversight responsibility of our Board and its committees is informed by reports from our management teams to provide visibility to our Board about the identification, assessment and management of key risks, and our management’s risk mitigation strategies. Our Board has primary responsibility for evaluating strategic and operational risk, including related to significant transactions. Our audit committee has primary responsibility for overseeing our major financial and accounting risk exposures, and, among other things, discusses guidelines and policies with respect to assessing and managing risk with management and our independent auditor. Our compensation committee has responsibility for evaluating risks arising from our compensation and people policies and practices. Our nominating and corporate governance committee has responsibility for evaluating risks relating to our corporate governance practices. Our committees and management provide reports to our Board on these matters. In its governance role, and particularly in exercising its duty of care and diligence, our Board is responsible for ensuring that appropriate risk management policies and procedures are in place to protect the Company’s assets and business. Our Board has broad and ultimate oversight responsibility for our risk management processes and programs and executive management is responsible for the day-to-day evaluation and management of risks to the Company. Board Composition, Committees and Independence Under the rules of NASDAQ, “independent” directors must make up a majority of a listed company’s Board of Directors. In addition, applicable NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable NASDAQ rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Our Board has undertaken a review of the independence of each director and considered whether any director has a material relationship with us that could compromise the director’s ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board determined that Ms. Walters-Hoffert, Ms. Bo-Linn and Mr. Robinette are independent directors as defined in the listing standards of NASDAQ and SEC rules and regulations. A majority of our directors are independent, as required under applicable NASDAQ rules. As required under applicable NASDAQ rules, our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present. Board Committees Our Board has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee. The composition and responsibilities of each of the committees is described below. Audit Committee The Audit Committee of the Board of Directors currently consists of three independent directors of which at least one, the Chairman of the Audit Committee, qualifies as a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Ms. Walters-Hoffert is the Chairperson of the Audit Committee and financial expert, and Mr. Robinette and Ms. Bo-Linn are the other directors who are members of the Audit Committee. The Audit Committee’s duties are to recommend to our Board of Directors the engagement of the independent registered public accounting firm to audit our consolidated financial statements and to review our accounting and auditing principles. The Audit Committee reviews the scope, timing and fees for the annual audit and the results of audit examinations performed by any internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls. The Audit Committee will at all times be composed exclusively of directors who are, in the opinion of our Board of Directors, free from any relationship that would interfere with the exercise of independent judgment as a committee member and who possess an understanding of consolidated financial statements and generally accepted accounting principles. Our Audit Committee operates under a written charter, which is available on our website at www.fluxpower.com . 38 Compensation Committee The Compensation Committee establishes our executive compensation policy, determines the salary and bonuses of our executive officers and recommends to the Board stock option grants or other incentive equity awards for our executive officers. Mr. Robinette is the Chairperson of the Compensation Committee, and Ms. Walters-Hoffert and Ms. Bo-Linn are members of the Compensation Committee. Each of the members of our Compensation Committee are independent under NASDAQ’s independence standards for compensation committee members. Our chief executive officer often makes recommendations to the Compensation Committee and the Board concerning compensation of other executive officers. The Compensation Committee seeks input on certain compensation policies from the chief executive officer. Our Compensation Committee operates under a written charter, which is available on our website at www.fluxpower.com . Nominating and Governance Committee The Nominating and Governance Committee is responsible for matters relating to the corporate governance of our Company and the nomination of members of the Board and committees of the Board. Ms. Bo-Linn is Chairperson of the Nominating and Governance Committee, and Ms. Walters-Hoffert and Mr. Robinette are members. Each of the members of our Nominating and Governance Committee is independent under NASDAQ’s independence standards. The Nominating and Governance Committee operates under a written charter, which was amended on January 14, 2022. The Amended Nominating and Corporate Governance Committee Charter is available on our website at www.fluxpower.com . We seek directors with established strong professional reputations and experience in areas relevant to the strategy and operations of our business. We seek directors who possess the qualities of integrity and candor, who have strong analytical skills and who are willing to engage management and each other in a constructive and collaborative fashion. We also seek directors who have the ability and commitment to devote significant time and energy to serve on the Board and its committees. We believe that all of our directors meet the foregoing qualifications. We do not have a formal policy with respect to diversity. Code of Business Conduct and Ethics Our Board has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all of our directors, officers, and employees. Any waivers of any provision of this Code for our directors or officers may be granted only by the Board or a committee appointed by the Board. Any waivers of any provisions of this Code for an employee or a representative may be granted only by our chief executive officer or principal accounting officer. We have filed a copy of the Code with the SEC and have made it available on our website at https://www.fluxpower.com/corporate-governance. In addition, we will provide any person, without charge, a copy of this Code. Requests for a copy of the Code may be made by writing to the Company at is c/o Flux Power Holdings, Inc., 2685 S. Melrose Drive, Vista, California 92081. Indemnification Agreements We executed a standard form of indemnification agreement (“Indemnification Agreement”) with each of our Board members and executive officers (each, an “Indemnitee”). Pursuant to and subject to the terms, conditions and limitations set forth in the Indemnification Agreement, we agreed to indemnify each Indemnitee, against any and all expenses incurred in connection with the Indemnitee’s service as our officer, director and or agent, or is or was serving at our request as a director, officer, employee, agent or advisor of another corporation, partnership, joint venture, trust, limited liability company, or other entity or enterprise but only if the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to our best interest, and in the case of a criminal proceeding, had no reasonable cause to believe that his conduct was unlawful. In addition, the indemnification provided in the indemnification agreement is applicable whether or not negligence or gross negligence of the Indemnitee is alleged or proven. Additionally, the Indemnification Agreement establishes processes and procedures for indemnification claims, advancement of expenses and costs and contribution obligations. 39 ITEM 11 - EXECUTIVE COMPENSATION Compensation for our Named Executive Officers The following table sets forth information concerning all forms of compensation earned by our named executive officers during Fiscal 2022 and Fiscal 2021 for services provided to the Company and its subsidiary. Name and Principal Position Year Salary ($) Bonus ($) Stock Awards (1) ($) Option Awards (2) ($) Non-Equity Incentive Plan Compensation ($) All Other Compensation ($) Total ($) Ronald F. Dutt, Chief Executive 2022 $ 275,000 $ 55,055 $ 138,702 $ - $ - $ - $ 468,757 Officer, President, and Chairman 2021 $ 242,288 $ 133,525 $ 234,681 $ - $ - $ - $ 610,494 Charles A. Scheiwe 2022 $ 205,200 $ 28,757 $ 72,450 $ - $ - $ - $ 306,407 Chief Financial Officer and Corporate Secretary 2021 $ 187,635 $ 77,055 $ 124,853 $ - $ - $ - $ 389,543 Jonathan A. Berry 2022 $ 205,200 $ - $ 72,450 $ - $ - $ - $ 277,650 Former Chief Operating Officer (3) 2021 $ 188,077 $ 77,055 $ 124,853 $ - $ - $ - $ 389,985 (1) Represent the fair value of the RSUs granted on grant date. (2) The grant date fair value was determined in accordance with the provisions of FASB ASC Topic No. 718 using the Black-Scholes valuation model with assumptions described in more detail in the notes to our audited financial statements included in this report. (3) Mr. Berry separated from the Company on August 12, 2022. Benefit Plans We do not have any profit sharing plan or similar plans for the benefit of our officers, directors or employees. However, we may establish such plan in the future. Equity Compensation Plan Information In connection with the reverse acquisition of Flux Power, Inc. in 2012, we assumed the 2010 Plan. As of June 30, 2022, the number of options outstanding to purchase common stock under the 2010 Plan was 21,944. No additional options to purchase common stock may be granted under the 2010 Plan. 40 On February 17, 2015, our shareholders approved our 2014 Equity Incentive Plan (“2014 Plan”), which was amended on July 23, 2018 and on November 5, 2020. The 2014 Plan authorizes the issuance of awards for up to 1,000,000 shares of our common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates. No options were granted during Fiscal 2022 and 2021. We granted 250,786 and 153,177 restricted stock units under the 2014 Plan during Fiscal 2022 and 2021, respectively. On April 29, 2021, at the Company’s annual stockholders meeting, the 2021 Equity Incentive Plan (the “2021 Plan”) was approved by our stockholders. The 2021 Plan authorizes the issuance of awards for up to 2,000,000 shares of our common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates. No awards were granted under the 2021 Plan during Fiscal 2022 and 2021.” As of June 30, 2022, we had 503,433 options outstanding and exercisable under the 2014 Plan and the 2010 Plan. In addition, as of June 30, 2022, we had 304,221 RSUs outstanding under the 2014 Plan. There were no options or RSUs issued or outstanding under the 2021 Plan as of June 30, 2022. The following table sets forth certain information concerning unexercised options, stock that has not vested, and equity compensation plan awards outstanding as of June 30, 2022 for the named executive officers below: Option Awards (1) Stock Awards Name Award Grant Date Number of Securities Underlying Unexercised Options Exercisable Number of Securities Underlying Unexercised Options Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested Market Value of Shares or Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested Equity Incentive Plan: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) Ronald Dutt 3/15/2019 50,000 - - $ 13.60 3/15/2029 - $ - - $ - 7/25/2018 33,527 - - 19.80 7/25/2028 - $ - - $ - 6/29/2018 50,000 - - 14.40 6/29/2028 - $ - - $ - 10/26/2017 50,000 - - 4.60 10/26/2027 - $ - - $ - 12/22/2015 19,000 - - 5.00 12/22/2025 - $ - - $ - 7/30/2013 17,500 - - 10.00 7/29/2023 - $ - - $ - 11/12/2020 - - - - 11/11/2030 6,607 $ 58,670 6,607 $ 58,670 11/12/2020 - - - - 11/11/2030 6,607 $ 58,670 6,607 $ 58,670 11/12/2020 - - - - 11/11/2030 13,214 $ 117,340 13,214 $ 117,340 10/29/2021 - - - - 10/29/2031 12,061 $ 69,350 12,061 $ 69,350 10/29/2021 - - - - 10/29/2031 12,061 $ 69,350 12,061 $ 69,350 Charles Scheiwe 3/15/2019 30,000 - - 13.60 3/15/2029 - $ - - $ - 11/12/2020 - - - - 11/11/2030 3,515 $ 31,213 3,515 $ 31,213 11/12/2020 - - - - 11/11/2030 3,515 $ 31,213 3,515 $ 31,213 11/12/2020 - - - - 11/11/2030 7,030 $ 62,426 7,030 $ 62,426 10/29/2021 - - - - 10/29/2031 6,300 $ 36,224 6,300 $ 36,224 10/29/2021 - - - - 10/29/2031 6,300 $ 36,224 6,300 $ 36,224 Jonathan Berry (2) 3/15/2019 24,375 5,625 5,625 13.60 3/15/2029 - $ - - $ - 6/29/2018 45,500 - - 14.40 6/29/2028 - $ - - $ - 10/26/2017 22,500 - - 4.60 10/26/2027 - $ - - $ - 11/12/2020 - - - - 11/11/2030 3,515 $ 31,213 3,515 $ 31,213 11/12/2020 - - - - 11/11/2030 3,515 $ 31,213 3,515 $ 31,213 11/12/2020 - - - - 11/11/2030 7,030 $ 62,426 7,030 $ 62,426 10/29/2021 - - - - 10/29/2031 6,300 $ 36,224 6,300 $ 36,224 10/29/2021 - - - - 10/29/2031 6,300 $ 36,224 6,300 $ 36,224 (1) The fair value of each option grant is estimated at the date of grant using the Black-Scholes option pricing model. Expected volatility is calculated based on the historical volatility of the Company’s stock. The risk free interest rate is based on the U.S. Treasury yield for a term equal to the expected life of the options at the time of grant. The fair value of each restricted stock unit is the fair value of the Company’s common stock on the grant date. (2) Mr. Berry separated from the Company on August 12, 2022. 41 Aggregated Option/Stock Appreciation Right (“SAR”) exercised and Fiscal year-end Option/SAR value table Neither our executive officers nor the other individuals listed in the tables above, exercised options or SARs during Fiscal 2022. Employment Agreements with Executive Officers On February 12, 2021, we entered into an Amended and Restated Employment Agreement with the Company’s president and chief executive officer, Ronald F. Dutt (the “Dutt Employment Agreement”), which amends and restates the Employment Agreement effective December 11, 2012, as amended (the “Prior Agreement”). In addition to the inclusion of terms relating to change in control, termination, severance, benefits and the acceleration of vesting of options and restricted stock units upon certain events, the Dutt Employment Agreement memorialized Mr. Dutt’s continued services as the president and chief executive officer of the Company and its wholly-owned subsidiary, Flux Power, Inc. (“Flux Power”), and the terms pursuant to which he would provide such services. Pursuant to the terms of the Dutt Employment Agreement, Mr. Dutt’s current annual base salary is $275,000. On February 12, 2021, we entered into an Employment Agreement with the Company’s chief financial officer, treasurer and secretary, Charles A. Scheiwe (the “Scheiwe Employment Agreement”). In addition to the inclusion of terms relating to change in control, termination, severance, benefits and the acceleration of vesting of options and restricted stock units upon certain events, the Employment Agreement memorialized Mr. Scheiwe’s continued services as the chief financial officer and secretary of the Company, and as chief financial officer/treasurer and secretary of Flux Power. Pursuant to the terms of the Scheiwe Employment Agreement, Mr. Scheiwe’s current annual base salary is $205,200. Under their respective employment agreement, Messrs. Dutt and Scheiwe, among other things, are (i) eligible for annual target cash bonus and awards of restricted stock units or other equity-based incentive compensation consistent with his position as determined by the Board of Directors (the “Board”) and the Compensation Committee; (ii) entitled to reimbursement for all reasonable business expenses incurred in performing services; and (iii) entitled to certain severance and change of control benefits contingent upon such employee’s agreement to a general release of claims in favor of the Company following termination of employment. Messrs. Dutt and Scheiwe and are also eligible to participate in all customary employee benefit plans or programs generally made available to the senior executive officers. Messrs. Dutt and Scheiwe have each agreed to observe the terms of a standard confidentiality and non-compete agreement for a restricted period of two (2) years. Each of Messrs. Dutt and Scheiwe employment is “at-will” and may be terminated at any time for any reason. Separation Agreement On August 12, 2022, Jonathan Berry, the Company’s Chief Operating Officer, separated from the Company and entered into an Employee Separation and Release dated August 24, 2022 (“Separation Agreement”). Under the Separation Agreement, the Company agreed to provide Mr. Berry with certain payments and benefits comprising of: (i) a separation payment of two hundred five thousand two hundred dollars, less required withholdings, (ii) twenty-eight thousand nine hundred seven and 52/100 dollars, less require holdings, to defray costs for COBRA coverage, and (iii) reimbursement for an amount equal to twelve months for life insurance continuation (collectively, the “Separation Benefits”). In exchange for the Separation Benefits, among other things as set forth in the Separation Agreement, Mr. Berry agreed to a release of claims and waivers in favor of the Company and to certain restrictive covenant obligations, and also reaffirmed his commitment to comply with his existing restrictive covenant obligations. 42 Annual Bonus Plan On November 5, 2020, the Board approved an annual cash bonus plan (the “Annual Bonus Plan”) which allows the Compensation Committee and/or the Board of the Company to set the amount of bonus each fiscal year and the performance criteria. Executive officers and all employees (other than part-time employees and temporary employees) are eligible to participate in the Annual Bonus Plan (“Participants”) as long as the Participant remains an active regular employee of the Company. The Annual Bonus Plan was effective for Fiscal 2021 and is effective each fiscal year thereafter (the “Plan Year”). For each Plan Year, the Compensation Committee establishes an aggregate amount of allocable Bonus under the Annual Bonus Plan and determines the performance goals applicable to a bonus during a Plan Year (the “Participation Criteria”). The Participation Criteria may differ from Participant to Participant and from bonus to bonus. The Participation Criteria for each Plan Year is based on the Company achieving certain performance targets based on annual revenue, gross margin, operating expense and new business development. All of the Company’s executive officers are eligible to participate in the Annual Bonus Plan. Fiscal 2021 On November 5, 2020, the Board approved target cash bonuses under the Annual Bonus Plan for Fiscal 2021 (“2021 Bonus Grant”) to the following executive officers, which target bonus was calculated based on percentage of the executive’s current base salary: Name Position Current Base Salary Percentage of Salary Target Cash Bonus Ronald F. Dutt Chief Executive Officer $ 250,000 50 % $ 125,000 Charles Scheiwe Chief Financial Officer $ 190,000 35 % $ 66,500 Jonathan Berry Chief Operating Officer $ 190,000 35 % $ 66,500 Under the 2021 Bonus Grant, the Company’s executives are eligible to receive cash incentive bonus payments based on the target cash bonus amount and on the achievement of financial targets and corporate objectives as follows: Achievements Minimum Target Maximum Bonus payments based on Target Cash Bonus Amount 70 % 100 % 150 % On June 30, 2021, the Compensation Committee of the Company amended the performance goals for the 2021 plan year (from July 1, 2020 through June 30, 2021) (the “2021 Plan Year”), under the Annual Cash Bonus Plan, which was previously approved by the Compensation Committee on November 5, 2020. The performance goals for the 2021 Plan Year were amended to the Company achieving certain performance targets measured by annual revenue, gross margin and new business development. The Compensation Committee made the equitable adjustment to better align the objectives and activities of the Company’s executives and employees with the goals of the Company during a very challenging 2021 Plan Year. On June 30, 2021, the Compensation Committee approved an addendum to the Performance Restricted Stock Unit Award under the 2014 Equity Incentive Plan approved by the Compensation Committee on November 5, 2020 to provide clarification for the calculation of vesting Fiscal 2022 For the Company’s fiscal year ending on June 30, 2022, or Fiscal 2022, the performance goals applicable to a bonus are based on the Company achieving certain targets based on the Company’s annual revenue, gross margin, EBITDAS (earnings before interest expense (excluding interest income), taxes, depreciation, amortization and stock compensation expense in accordance with U.S. GAAP), new strategic customers, demonstrated direct cost reduction and working capital and inventory turnover (the “Financial Targets”) and additional bonus amounts if the Company’s financial results exceeds certain thresholds of the Financial Targets. 43 On October 29, 2021, the Compensation Committee approved target cash bonuses under the Annual Cash Bonus Plan for Fiscal 2022 to the following executive officers, which target bonus was calculated based on percentage of the executive’s current base salary: Name Position Current Base Salary Percentage of Salary Target Cash Bonus (“TCB”) Maximum Payout(1) Ronald F. Dutt Chief Executive Officer $ 275,000 50 % $ 137,500 $ 165,000 Charles Scheiwe Chief Financial Officer $ 205,200 35 % $ 71,820 $ 86,184 Jonathan Berry Chief Operating Officer $ 205,200 35 % $ 71,820 $ 86,184 (1) There are no bonus caps for achieving above set revenue target and gross margin target. If actual results exceed 100% of revenue target and/or gross margin target, every 1% of revenue target and/or gross margin target would result in an increase in bonus equal to 0.2% of the TCB for such executive officers. Amendment to 2014 Plan On November 5, 2020, the Board approved an amendment to the 2014 Plan as amended to include the right to grant Restricted Stock Units (“RSUs”). All of the Company’s executive officers are eligible to participate in the 2014 Plan. Restricted Stock Unit Grants Fiscal 2021 Grants On November 5, 2020, the Board approved the grant of RSUs under the 2014 Option Plan to certain employees of the Company. The RSUs are subject to the terms and conditions provided in (i) the form of Restricted Stock Unit Award Agreement which is time based (“Time Based Awards”), and (ii) the form of Performance Restricted Stock Unit Award Agreement which is performance based (“Performance Based Awards”). In addition, the Compensation Committee approved the grant of one-time retention based RSUs pursuant to the form of the Restricted Stock Unit Award Agreement (“Retention Awards”). The following named executive officers of the Company were granted RSUs under the 2014 Option Plan in the amounts and according to the vesting schedule indicated below: Time Based Awards: Name Position No. of RSUs Vesting Schedule Ronald F. Dutt Chief Executive Officer 6,607 Three Years from Award’s grant date Charles Scheiwe Chief Financial Officer 3,515 Three Years from Award’s grant date Jonathan Berry Chief Operating Officer 3,515 Three Years from Award’s grant date Performance Based Awards: Name Position No. of RSUs Maximum Grant Vesting Schedule Ronald F. Dutt Chief Executive Officer 9,910 Vest in installments of up to one-third annually based on target performance goals Charles Scheiwe Chief Financial Officer 5,272 Vest in installments of up to one-third annually based on target performance goals Jonathan Berry Chief Operating Officer 5,272 Vest in installments of up to one-third annually based on target performance goals 44 Retention Awards: Name Position No. of RSUs Vesting Schedule Ronald F. Dutt Chief Executive Officer 13,214 Four Years from Award’s grant date Charles Scheiwe Chief Financial Officer 7,030 Four Years from Award’s grant date Jonathan Berry Chief Operating Officer 7,030 Four Years from Award’s grant date Fiscal 2022 Grants On October 29, 2021, the Compensation Committee approved the grant of Restricted Stock Units (“RSUs”) under the Company’s 2014 Equity Incentive Plan (the “2014 Plan”) to certain employees of the Company or its subsidiary, Flux Power, Inc. The RSUs are subject to the terms and conditions provided in (i) the form of Restricted Stock Unit Award Agreement which is time based (“Time Based Awards”), and (ii) the form of Performance Restricted Stock Unit Award Agreement which is performance based (“Performance Based Awards”). The following named executive officers of the Company were granted RSUs under the 2014 Plan in the amounts and according to the vesting schedule indicated below: Time Based Awards: Name Position No. of RSUs Vesting Schedule Ronald F. Dutt Chief Executive Officer 12,061 Vest annually over 3 years with the first vest date on October 27, 2022 Charles Scheiwe Chief Financial Officer 6,300 Vest annually over 3 years with the first vest date on October 27, 2022 Jonathan Berry Chief Operating Officer 6,300 Vest annually over 3 years with the first vest date on October 27, 2022 Performance Based Awards: Name Position No. of RSUs Maximum Grant Vesting Schedule Ronald F. Dutt Chief Executive Officer 18,092 Three years from grant upon meeting performance target* Charles Scheiwe Chief Financial Officer 9,450 Three years from grant upon meeting performance target * Jonathan Berry Chief Operating Officer 9,450 Three years from grant upon meeting performance target * * The performance target for the RSU to be based on EBITDAS (earnings before interest expense (excluding interest income), taxes, depreciation, amortization and stock compensation expense in accordance with U.S. GAAP) for the second half of the Company’s fiscal year ending June 30, 2022. 45 Incentive Plans Management, the Committee and the Board will continue to explore and evaluate different long-term and short-term incentives to help attract, retain and motivate our employees to align their interest to our business and financial success through the use of equity award and cash bonuses. Compensation of Non-Executive Directors In December 2020, pursuant to the recommendation and advice of the Committee, the Board approved the annual compensation package for non-executive directors of the Company for calendar year 2021 as follows: Independent Non-Executive Director Position Base Retainer Chair Fee Total Comp Lisa Walters-Hoffert X Audit Chair $ 50,000 $ 7,500 $ 57,500 Dale Robinette X Compensation Chair $ 50,000 $ 5,000 $ 55,000 John A. Cosentino Jr .(1) X Governance Chair $ 50,000 $ 5,000 $ 55,000 Michael Johnson Board Member $ 50,000 $ - $ 50,000 (1) Former director On January 14, 2022, pursuant to the recommendation and advice of the Compensation Committee of the Board of the Company, the Board approved the following annual compensation package for non-executive directors of the Company for calendar year 2022, as follows: Name Independent Non-Executive Director Position Base Retainer (cash) Chair Fee (cash) Lead Independent Director ( cash) Lisa Walters-Hoffert X Audit Chair $ 50,000 $ 7,500 $ - Dale Robinette X Compensation Chair $ 50,000 $ 5,000 $ 20,000 John A. Cosentino Jr .(1) X Governance Chair $ 50,000 $ 5,000 (1) $ - Cheemin Bo-Linn (2) X Board Member $ 50,000 $ - $ - Michael Johnson Board Member $ 50,000 $ - $ - (1) Mr. Cosentino resigned as our director on March 1, 2022. As appreciation for Mr. Cosentino’s board services, the Board approved to (i) accelerate the vesting of the following securities the Board granted in connection with his board services: 435 unvested options and 4,578 restricted stock awards, and (iii) pay his board fees for 3 rd quarter of Fiscal 2022. (2) Dr. Bo-Linn was appointed as Chairperson of the Governance Committee on March 3, 2022. For Dr. Bo-Linn’s services as Chairperson, she is entitled to a Chair Fee of $5,000 for calendar year 2022. 46 Equity Component of Non-Executive Director Compensation In addition, our directors are eligible to receive an annual equity grant of RSUs. Pursuant to grants approved by our Board at the recommendation of the Compensation Committee in April 2021 and 2022, our non-executive directors were granted RSUs under the 2014 Plan. The number of RSUs granted to each non-executive director was equal to the amount of $50,000 divided by the fair market value of the RSUs, with all RSUs subject to vesting restrictions. The fair market value of the RSUs was determined by applying a 10-day volume weighted average stock price prior to the grant issuance date. In April 2021, each of our non-executive directors were granted 4,578 RSUs, of which 1/3 of the RSUs vested on April 29, 2022, and each subsequent 1/3 to vest every twelve (12) months thereafter until fully vested. In April 2022, each of our non-executive directors were granted 17,793 RSUs which are subject to fully vest on April 28, 2023. In addition, in August 2022, as compensation for board services provided during the last quarter of Fiscal 2022, Ms. Bo-Linn was granted 5,034 RSUs, of which 1/3 vested immediately, each of the remaining 1/3 of the RSUs will vest on April 29, 2023, and April 29, 2024. Ms. Bo-Linn’s s grant was consistent with the standard equity component of Non-Executive Director Compensation Package as approved by the Board. Director Compensation Table Below is summary of compensation accrued or paid to our non-executive directors during Fiscal 2022 and Fiscal 2021. Mr. Dutt, our chief executive officer and president, received no compensation for his service as a director and is not included in the table. The compensation Mr. Dutt receives as an employee of the Company is included in the section titled “Executive Compensation.” Name Year Fees Earned or Paid in Cash ($) Stock Awards (2) ($) Option Awards (3) ($) All Other Compensation ($) Total ($) Lisa Walters-Hoffert 2022 $ 57,500 50,000 $ - - $ 107,500 2021 58,125 50,000 - - 108,125 Dale Robinette 2022 $ 65,000 50,000 $ - - $ 115,000 2021 55,625 50,000 - - 105,625 John A. Cosentino Jr. (1) 2022 $ 41,250 - $ - - $ 41,250 2021 55,000 50,000 - - 105,000 Michael Johnson 2022 $ 50,000 50,000 $ - - $ 100,000 2021 42,500 50,000 - - 92,500 Cheemin Bo-Linn (4) 2022 $ 26,667 50,000 $ - - $ 76,667 (1) Mr. Cosentino resigned as our director on March 1, 2022. (2) Represent the fair value of the RSUs granted using the volume weighted average price of the ten days of trading prior to grant date. (3) The amounts shown in this column represent the full grant date fair value of the award granted, excluding any as computed in accordance with Financial Accounting Standards Board (“FASB”). (4) Ms. Bo-Linn joined our board of director on January 14, 2022. The following table shows the aggregate number of vested stock options held by our non-employee directors as of June 30, 2022 and June 30, 2021: Name Year Vested Stock Options Lisa Walters-Hoffert 2022 3,948 2021 2,467 Dale Robinette 2022 3,948 2021 2,467 Cheemin Bo-Linn (1) 2022 - Michael Johnson 2022 12,948 2021 10,904 John A. Cosentino Jr. (2) 2022 - 2021 - (1) Ms. Bo-Linn joined our board of director on January 14, 2022. (2) Mr. Cosentino resigned as our director on March 1, 2022. 47 ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS BENEFICIAL OWNERSHIP Security Ownership of Principal Stockholders and Management As used in this section, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Exchange Act, as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose of or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, subject to community property laws where applicable. As of September 12, 2022, we had a total of 15,998,336 shares of common stock issued and outstanding. The following table sets forth, as of September 12, 2022, information concerning the beneficial ownership of shares of our common stock held by our directors, our named executive officers, our directors and executive officers as a group, and each person known by us to be a beneficial owner of more than five percent (5%) of our outstanding common stock. Unless otherwise indicated, the business address of each of our directors, executive officers and beneficial owners of more than five percent (5%) of our outstanding common stock is c/o Flux Power Holdings, Inc., 2685 S. Melrose Drive, Vista, California 92081. Each person has sole voting and investment power with respect to the shares of our common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. Name and Address of Beneficial Owner (1) Shares Beneficially Owned % of Ownership Officers and Directors Michael Johnson, Director 4,478,703 (2) 28.0 % Ronald Dutt, Chief Executive Officer, President, and Director 250,408 (3) 1.5 % Charles A Scheiwe, Chief Financial Officer and Secretary 40,118 (4) * Cheemin Bo-Linn, Director 1,678 (5) * Lisa Walters-Hoffert, Director 5,474 (6) * Dale Robinette, Director 5,474 (7) * All Officers and Directors as a group (6 people) 4,781,855 29.4 % 5% Stockholders Cleveland Capital Management L.L.C. 1250 Linda Street, Suite 304 Rocky River, OH 44116 811,419 (8) 5.1 % * Represents less than 1% of shares outstanding. (1) All addresses above are 2685 S. Melrose Drive, Vista, California 92081, unless otherwise stated. (2) Includes 4,465,755 shares of common stock held by Esenjay Investments, LLC, of which Mr. Johnson is the sole director and beneficial owner, and (ii) 12,948 shares of common stock issuable to Mr. Johnson upon exercise of stock options. (3) Includes 26,360 shares of common stock and 224,048 shares of common stock issuable upon exercise of stock options and settlement of vested RSUs. (4) Includes 8,018 shares of common stock and 32,100 shares of common stock issuable upon exercise of stock options and settlement of vested RSUs. (5) Includes 1,678 shares of common stock. (6) Includes 1,526 shares of common stock and 3,948 shares of common stock issuable upon exercise of stock options. (7) Includes 1,526 shares of common stock and 3,948 shares of common stock issuable upon exercise of stock options. (8) Based on Amendment No. 5 to Schedule 13G filed jointly by Cleveland, Wade Massad and Cleveland Capital Management, L.L.C. with the SEC on February 14, 2022. Reflects 811,419 shares of common stock beneficially owned by certain private funds managed by Cleveland Capital Management, L.L.C., or by its principals. * Represents less than 1% of shares outstanding. 48 ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The following includes a summary of certain relationships and transactions, including transactions since July 1, 2020 to September 12, 2022 and any currently proposed transactions, to which we were or are to be a participant, in which (1) the amount involved exceeded or will exceed the lesser of (i) $120,000 or (ii) one percent (1%) of the average of our total assets for the last two completed fiscal years, and (2) any of our directors, executive officers or holders of more than five percent (5%) of our capital stock, or any affiliate or member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest other than compensation and other arrangements that are described under the section titled “Executive Compensation.” Pursuant to the Audit Committee’s written charter, our Audit Committee has the responsibility to review, approve and oversee transactions between the Company and any related person (as defined in Item 404 of Regulation S-K) and any potential conflict of interest situations on an ongoing basis, in accordance with our policies and procedures, and to develop policies and procedures for the Audit Committee’s approval of related party transactions. Subordinated Line of Credit Facility On May 11, 2022, we entered into a Credit Facility Agreement (the “Subordinated LOC”) with Cleveland Capital, L.P. (“Cleveland”), Herndon Plant Oakley, Ltd., (“HPO”), and other lenders (together with Cleveland and HPO, the “Lenders”). The Subordinated LOC provides us with a short-term line of credit (the “LOC”) not less than $3,000,000 and not more than $5,000,000, the proceeds of which shall be used by us for working capital purposes. As of June 30, 2022, the Lenders committed an aggregate of $4,000,000. In connection with entry into the Subordinated LOC, we paid to each Lender a one-time committee fee in cash equal to 3.5% of such Lender’s Commitment Amount. In addition, in consideration of the Lenders’ commitment to provide the Advances to us, we issued the Lenders five-year warrants to purchase an aggregate of 128,000 shares of common stock at an exercise price of $2.53 per share that are, subject to certain ownership limitations, exercisable immediately. Pursuant to a selling agreement, dated as of May 11, 2022, the Company retained HPO as its placement agent in connection with the Subordinated LOC. As compensation for services rendered in conjunction with the Subordinated LOC, the Company paid HPO a finder fee equal to 3% of the commitment amount from each such Lender placed by HPO in cash. 2020 Private Placement From April 2020 to July 2020, pursuant to private placement offerings, we sold and issued an aggregate of 1,141,250 shares of common stock, at $4.00 per share, for an aggregate purchase price of $4,565,000 in cash to twenty-seven (27) accredited investors. Esenjay, our major stockholder and an entity controlled by our director, Mr. Johnson, participated in the offering in the amount of $300,000. In addition, Mr. Cosentino, a former director, also participated in the offering in the amount of $250,000. 49 Esenjay Loan On March 9, 2020, the Company and Esenjay Investments, LLC (“Esenjay”) entered into a certain convertible promissory note (“Original Esenjay Note”) pursuant to which Esenjay provided the Company with a loan in the principal amount of $750,000 (the “Esenjay Loan”). On June 2, 2020, the Original Esenjay Note was amended and restated to (i) extend the maturity date from June 30, 2020 to September 30, 2020, and (ii) to increase the principal amount outstanding under the Original Esenjay Note to $1,400,000 (the “Esenjay Note”). Between June 26, 2020 and July 22, 2020, Esenjay assigned a total of $900,000 of the Esenjay Note to three (3) accredited investors and the $900,000 note balance was converted into shares of common stock at $4.00 per share, which was the cash price per share, and resulted in the issuance of 225,000 shares of common stock. On August 31, 2020, the Company entered into the Third Amended and Restated Credit Facility Agreement and pursuant to which the Company further amended the Esenjay Note to, among other items, transfer all remaining principal and accrued interest outstanding of approximately $564,000 into the amended Credit Facility Agreement. (See “Credit Facility” below). Credit Facility On March 22, 2018, we entered into a credit facility agreement with Esenjay with a maximum borrowing amount of $5,000,000 (the “Original Agreement”). The Original Agreement was amended multiple times to allow for, among other things, an increase in the maximum principal amount available under line of credit (“LOC”) to $12,000,000, the inclusion of additional lenders and extension of the maturity date to September 30, 2021. In August 2020, we paid down an aggregate principal amount of approximately $1,402,000 of the outstanding balance under the LOC. On August 31, 2020, we entered into the Third Amended and Restated Credit Facility Agreement (“Third Amended and Restated Facility Agreement”) pursuant to which we (i) extended the maturity date to September 30, 2021, and (ii) allowed for the transfer of outstanding obligations under the Esenjay Note of approximately $564,000 into the LOC as noted above. In November 2020, lenders holding an aggregate of approximately $2,161,000 in principal and accrued interest elected to convert their notes into 540,347 shares of common stock at a price of $4.00 per share. In January and March 2021, the lenders holding an aggregate of approximately $2,632,000 in principal and accrued interest elected to convert their notes into 658,103 shares of common stock at a price of $4.00 per share of which approximately $1,045,000 was held by Esenjay and converted to 261,133 shares of common stock. On June 10, 2021, we repaid all obligations in full and without additional fees or termination penalties, and the Third Amended and Restated Credit Facility Agreement and the related Second Amended and Restated Security Agreement were terminated. Cleveland Loan On July 3, 2019, we entered into a loan agreement with Cleveland, pursuant to which Cleveland agreed to loan the Company $1,000,000 (the “Cleveland Loan”) and issued Cleveland an unsecured short-term promissory note in the amount of $1,000,000 (the “Unsecured Promissory Note”). The Unsecured Promissory Note had an interest rate of 15.0% per annum and was originally due on September 1, 2019, unless repaid earlier from a percentage of proceeds from certain identified accounts receivable. In connection with the Cleveland Loan, we issued Cleveland a three-year warrant (the “Cleveland Warrant”) to purchase the Company’s common stock in a number equal to 0.5% of the number of shares of common stock outstanding after giving effect to the shares of common stock sold in a contemplated public offering and with an exercise price equal to the per share price of the common stock sold in the public offering. On September 1, 2019, we entered into the First Amendment to the Unsecured Promissory Note pursuant to which the maturity date was extended to December 1, 2019 (the “First Amendment”) and the Cleveland Warrant terms were amended (the “Amended Warrant”). The Amended Warrant increased the warrant coverage from 0.5% to 1% of the number of shares of common stock outstanding after giving effect to the shares of common stock sold in the next private or public offering and with an exercise price equal to the per share price of common stock sold in such private or public offering, as the case may be. 50 On July 9, 2020, we made a payment to Cleveland in the amount of $200,000 as a partial payment of the Cleveland Loan. On July 27, 2020, in connection with the outstanding loan from Cleveland to us in the principal amount of $957,000, we entered into the Eighth Amendment to the Unsecured Promissory Note which extended the maturity date from July 31, 2020 to August 31, 2020, and capitalized all accrued and unpaid interest as of July 27, 2020 to the principal amount. On August 19, 2020, we paid Cleveland the entire remaining principal balance due under the Cleveland Loan, together with all accrued interest payable as of August 19, 2020, in an aggregate amount of approximately $978,000. ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES Independent Auditor For the fiscal years ended June 30, 2022 and 2021, the Company’s independent public accounting firm was Baker Tilly US, LLP (formerly Squar Milner LLP, which, effective as of November 1, 2020, merged with Baker Tilly US, LLP). Fees Paid to Principal Independent Registered Public Accounting Firm The aggregate fees billed by our Independent Registered Public Accounting Firm, for the fiscal years ended June 30, 2022 and 2021 are as follows: 2022 2021 Audit fees(1) $ 131,000 $ 107,000 Audit related fees(2) 22,000 103,000 Tax fees(3) - - All other fees(4) - - Total $ 153,000 $ 210,000 (1) Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review of our quarterly financial statements and those services normally provided in connection with statutory or regulatory filings or engagements including comfort letters, consents and other services related to SEC matters. This information is presented as of the latest practicable date for this annual report. (2) Audit-related fees represent fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and not reported above under “Audit Fees.” (3) Baker Tilly US, LLP did not provide us with tax compliance, tax advice or tax planning services. (4) All other fees include fees billed by our independent auditors for products or services other than as described in the immediately preceding three categories. No such fees were incurred during the fiscal years ended June 30, 2022 or 2021. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm Our audit committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm, the scope of services provided by our independent registered public accounting firm and the fees for the services to be performed. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Our independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by our independent registered public accounting firm in accordance with this preapproval, and the fees for the services performed to date. All of the services relating to the fees described in the table above were approved by our audit committee. 51 PART IV ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) Financial Statements The following financial statements of Flux Power Holdings, Inc., and Report of Baker Tilly US, LLP, independent registered public accounting firm, are included in this report: Page Report of Independent Registered Public Accounting Firm – (Baker Tilly US, LLP, San Diego, CA PCAOB Firm ID# 23 ) F-1 Consolidated Balance Sheets as of June 30, 2022 and 2021 F-2 Consolidated Statements of Operations for the Years Ended June 30, 2022 and 2021 F-3 Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended June 30, 2022 and 2021 F-4 Consolidated Statements of Cash Flows for the Years Ended June 30, 2022 and 2021 F-5 Notes to the Consolidated Financial Statements F-6 (2) Financial Statement Schedules: All schedules have been omitted because the required information is included in the financial statements or notes thereto or because they are not required. (3) Exhibits: The exhibits required by Item 601 of Regulation S-K are listed in subparagraph (b) below. (b) The following exhibits are filed as part of this Report Exhibit No. Description 2.1 Securities Exchange Agreement dated May 18, 2012. Incorporated by reference to Exhibit 2.1 on Form 8-K filed with the SEC on May 24, 2012. 2.2 Amendment No. 1 to the Securities Exchange Agreement dated June 13, 2012. Incorporated by reference to Exhibit 2.2 on Form 8-K filed with the SEC on June 18, 2012. 3.1 Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on February 19, 2015. 3.2 Amended and Restated Bylaws of Flux Power Holdings, Inc. Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on May 31, 2012. 3.3 Certificate of Amendment to Articles of Incorporation. Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on August 18, 2017. 3.4 Certificate of Change. Incorporated by reference to Exhibit 3.1 on Form 8-K filed with the SEC on July 12, 2019. 4(vi) Description of Securities. Incorporated by reference to Exhibit 4(vi) on Form 10-K filed with the SEC on September 28, 2020. 4.1 Form of Warrant. Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on September 23, 2021. 4.2 Form of Warrant Certificate. Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on May 13, 2022. 4.3 Warrant to Purchase Stock issued to Silicon Valley Bank, dated June 23, 2022. Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on June 28, 2022. 10.1# Form of Indemnification Agreement. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on April 9, 2019. 10.2 Lease Agreement dated April 25, 2019. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on April 30, 2019. 52 10.3 First Amendment to Standard Industrial/Commercial Multi Tenant Lease with Accutek dated March 1, 2020. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on March 5, 2020. 10.4 Form of Representative Warrant. Incorporated by reference to Exhibit 10.1 on Form 10-Q filed with the SEC on November 12, 2020. 10.5# Flux Power Holdings, Inc. 2010 Stock Plan: Form of Stock Option Agreement. Incorporated by reference to Exhibit 10.6 on Form 8-K filed with the SEC on June 18, 2012. 10.6# 2014 Equity Incentive Plan. Incorporated by reference to Exhibit 10.23 on Form 10-Q filed with the SEC on May 15, 2015. 10.7# Amendment to the Flux Power Holdings Inc. 2014 Equity Incentive Plan. Incorporated by reference to Exhibit 10.20 on Form 10-K filed with the SEC on September 27, 2018. 10.8# Amendment No. 2 to the Flux Power Holdings Inc. 2014 Equity Incentive Plan Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on November 9, 2020. 10.9# Form of Restricted Stock Unit Award Agreement. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on November 9, 2020. 10.10# Form of Performance Restricted Stock Unit Award Agreement. Incorporated by reference to Exhibit 10.3 on Form 8-K filed with the SEC on November 9, 2020. 10.11# Annual Cash Bonus Plan. Incorporated by reference to Exhibit 10.4 on Form 8-K filed with the SEC on November 9, 2020. 10.12 Loan and Security Agreement with Silicon Valley Bank. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on November 12, 2020. 10.13 Intellectual Property Security Agreement. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on November 12, 2020. 10.14# Amended and Restated Employment Agreement by and between Flux Power Holdings, Inc. and Ronald F. Dutt. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on February 17, 2021. 10.15# Employment Agreement by and between Flux Power Holdings, Inc. and Charles A. Scheiwe. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on February 17, 2021. 10.16# 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on May 4, 2021. 10.17# Form of Restricted Stock Unit Award Agreement – Non-Executive Director. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on May 4, 2021. 10.18 Form of Securities Purchase Agreement. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on September 23, 2021. 10.19# Form of Performance Restricted Stock Unit Award. Incorporated by reference to Exhibit 10.3 on Form 8-K filed with the SEC on November 2, 2021 10.20 First Amendment to Loan and Security Agreement with Silicon Valley Bank. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on November 3, 2021 10.21 Credit Facility Agreement dated May 11, 2022. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on May 13, 2022. 10.22 Form of Subordinated Unsecured Promissory Note. Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on May 13, 2022. 10.23 Second Amendment to Loan and Security Agreement with Silicon Valley Bank. Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on June 28, 2022. 10.24# Employee Separation and Release with Jonathan Berry dated August 24, 2022. Incorporated by reference to Exhibit 10.1 on Form 8-K/A filed with the SEC on August 26, 2022. 14.1 Code of Business Conduct and Ethics. Incorporated by reference to Exhibit 99.4 on Form 8-K filed with the SEC on July 2, 2019. 21.1 Subsidiaries. Incorporated by reference to Exhibit 21.1 on Form 8-K filed with the SEC on June 18, 2012 23.1* Consent of Independent Registered Public Accounting Firm 31.1* Certifications of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act. 31.2* Certifications of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act. 32.1* Certifications of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act. 32.2* Certifications of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act. 101.INS* XBRL Instance Document* 101.SCH* XBRL Taxonomy Extension Schema 101.CAL* XBRL Taxonomy Extension Calculation Linkbase 101.DEF* XBRL Taxonomy Extension Definition Linkbase 101.LAB* XBRL Taxonomy Extension Label Linkbase 101.PRE* XBRL Taxonomy Extension Presentation Linkbase * Filed herewith. # Indicates management contract or compensatory plan or arrangement. ITEM 16 – FORM 10-K SUMMARY None . 53 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Flux Power Holdings, Inc. Dated: September 27, 2022 By: /s/ Ronald F. Dutt Ronald F. Dutt Chief Executive Officer (Principal Executive Officer) By: /s/ Charles A. Scheiwe Charles A. Scheiwe Chief Financial Officer ( Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Ronald F. Dutt Director, Chief Executive Officer, September 27, 2022 Ronald F. Dutt President and Director (Principal Executive Officer) /s/ Charles A. Scheiwe Chief Financial Officer September 27, 2022 Charles A. Scheiwe (Principal Financial Officer) /s/ Michael Johnson Director September 27, 2022 Michael Johnson /s/ Cheemin Bo-Linn Director September 27, 2022 Cheemin Bo-Linn /s/ Lisa Walters-Hoffert Director September 27, 2022 Lisa Walters-Hoffert /s/ Dale Robinette Director September 27, 2022 Dale Robinette 54 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Flux Power Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Flux Power Holdings, Inc. (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. Basis for Opinion These 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. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our 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 The 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. Going Concern Assessment Critical Audit Matter Description As 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. The Company 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. We 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. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included: ● Reviewing and evaluating management’s plans for dealing with the adverse effects of the conditions and events. ● Testing the completeness, accuracy, and relevance of underlying data used by management in the cash flow forecast ● Evaluating the reasonableness of management’s significant assumptions and judgments used in the preparation of the forecast ● Obtaining audit evidence supporting the reasonableness of management’s assumptions, including consideration of contrary evidence impacting managements forecasts. ● Performing 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. ● Testing the availability of the sources of financing utilized in the forecast, including financing in place as of the report date, and the related covenants. ● Evaluating the adequacy of the disclosure included in the notes to the financial statements. BAKER TILLY US, LLP /s/ BAKER TILLY US, LLP We have served as the Company’s auditor since 2012. San Diego, California September 27, 2022 F- 1 FLUX POWER HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS June 30, 2022 June 30, 2021 ASSETS Current assets: Cash $ 485,000 $ 4,713,000 Accounts receivable 8,609,000 6,097,000 Inventories 16,262,000 10,513,000 Other current assets 1,261,000 417,000 Total current assets 26,617,000 21,740,000 Right of use asset 2,597,000 3,035,000 Property, plant and equipment, net 1,578,000 1,356,000 Other assets 89,000 131,000 Total assets $ 30,881,000 $ 26,262,000 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 6,645,000 $ 7,175,000 Accrued expenses 2,209,000 2,583,000 Revolving line of credit 4,889,000 - Deferred revenue 163,000 24,000 Customer deposits 175,000 171,000 Office lease payable, current portion 504,000 435,000 Accrued interest 1,000 2,000 Total current liabilities 14,586,000 10,390,000 Long term liabilities: Office lease payable, less current portion 2,361,000 2,866,000 Total liabilities 16,947,000 13,256,000 Stockholders’ equity: 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; 15,996,658 and 13,652,164 shares issued and outstanding at June 30, 2022 and June 30, 2021, respectively 16,000 14,000 Additional paid-in capital 95,732,000 79,197,000 Accumulated deficit ( 81,814,000 ) ( 66,205,000 ) Total stockholders’ equity 13,934,000 13,006,000 Total liabilities and stockholders’ equity $ 30,881,000 $ 26,262,000 The accompanying notes are an integral part of these consolidated financial statements. F- 2 FLUX POWER HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Years ended June 30, 2022 2021 Revenues $ 42,333,000 $ 26,257,000 Cost of sales 35,034,000 20,467,000 Gross profit 7,299,000 5,790,000 Operating expenses: Selling and administrative 15,515,000 12,599,000 Research and development 7,141,000 6,669,000 Total operating expenses 22,656,000 19,268,000 Operating loss ( 15,357,000 ) ( 13,478,000 ) Other income (expense): Other income - 1,307,000 Interest expense ( 252,000 ) ( 622,000 ) Net loss $ ( 15,609,000 ) $ ( 12,793,000 ) Net loss per share - basic and diluted $ ( 1.01 ) $ ( 1.08 ) Weighted average number of common shares outstanding - basic and diluted 15,439,530 11,796,217 The accompanying notes are an integral part of these consolidated financial statements. F- 3 FLUX POWER HOLDING, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) Shares Capital Stock Amount Paid-in Capital Accumulated Deficit Total Common Stock Additional Shares Capital Stock Amount Paid-in Capital Accumulated Deficit Total Balance at June 30, 2021 13,652,164 $ 14,000 $ 79,197,000 $ ( 66,205,000 ) $ 13,006,000 Issuance of common stock and warrants - registered direct offering, net of costs 2,142,860 2,000 13,969,000 - 13,971,000 Issuance of common stock - public offering, net of costs 190,782 - 1,602,000 - 1,602,000 Issuance of common stock, exercised options and RSU settlement 10,852 - - - - Fair value of warrants issued - - 253,000 - 253,000 Stock-based compensation - - 711,000 - 711,000 Net loss - - - ( 15,609,000 ) ( 15,609,000 ) Balance at June 30, 2022 15,996,658 $ 16,000 $ 95,732,000 $ ( 81,814,000 ) $ 13,934,000 Common Stock Additional Shares Capital Stock Amount Paid-in Capital Accumulated Deficit Total Balance at June 30, 2020 7,420,487 $ 7,000 $ 46,985,000 $ ( 53,412,000 ) $ ( 6,420,000 ) Issuance of common stock - exercised options and warrants 55,195 - 55,000 - 55,000 Fair value of warrants issued - - 174,000 - 174,000 Issuance of common stock, net of costs 4,078,032 4,000 22,796,000 - 22,800,000 Issuance of common stock - private placement transactions, net 800,000 1,000 3,199,000 - 3,200,000 Issuance of Common Stock - Debt Conversion 1,298,450 2,000 5,191,000 - 5,193,000 Stock-based compensation - - 797,000 - 797,000 Net loss - - - ( 12,793,000 ) ( 12,793,000 ) Balance at June 30, 2021 13,652,164 $ 14,000 $ 79,197,000 $ ( 66,205,000 ) $ 13,006,000 The accompanying notes are an integral part of these consolidated financial statements. F- 4 FLUX POWER HOLDING, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended June 30, 2021 2021 Cash flows from operating activities: Net loss $ ( 15,609,000 ) $ ( 12,793,000 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 575,000 274,000 Stock-based compensation 711,000 797,000 PPP Loan principal and accrued interest forgiveness - ( 1,307,000 ) Fair value of warrants issued as debt discount cost 253,000 174,000 Noncash interest expense - 426,000 Noncash rent expense 438,000 400,000 Allowance for inventory reserve 61,000 ( 195,000 ) Amortization of prepaid offering costs - 547,000 Changes in operating assets and liabilities: Accounts receivable ( 2,512,000 ) ( 3,028,000 ) Inventories ( 5,810,000 ) ( 5,062,000 ) Other current assets ( 802,000 ) ( 134,000 ) Accounts payable ( 530,000 ) 2,527,000 Accrued expenses ( 374,000 ) 1,183,000 Due to factor - ( 469,000 ) Deferred revenue 139,000 20,000 Accrued interest ( 1,000 ) ( 38,000 Office lease payable ( 436,000 ) ( 288,000 ) Customer deposits 4,000 ( 1,392,000 ) Net cash used in operating activities ( 23,893,000 ) ( 18,358,000 ) Cash flows from investing activities Purchases of equipment ( 797,000 ) ( 1,102,000 ) Net cash used in investing activities ( 797,000 ) ( 1,102,000 ) Cash flows from financing activities: Proceeds from the issuance of common stock in registered direct offering, net of offering costs 13,971,000 - Proceeds from the issuance of common stock in public offering, net of offering costs 1,602,000 22,855,000 Proceeds from the issuance of common stock in private placement - 3,200,000 Proceeds from revolving line of credit 8,450,000 700,000 Payment of short-term loan - related party - ( 1,178,000 ) Payment of line of credit - related party - ( 1,402,000 ) Payment of revolving line of credit ( 3,561,000 ) ( 700,000 ) Principal payments of financing lease payable - ( 28,000 ) Net cash provided by financing activities 20,462,000 23,447,000 Net change in cash ( 4,228,000 ) 3,987,000 Cash, beginning of period 4,713,000 726,000 Cash, end of period $ 485,000 $ 4,713,000 Supplemental Disclosures of Non-Cash Investing and Financing Activities: Common stock issued for conversion of related party debt $ - $ 5,193,000 Accrued interest converted into principal $ - $ 358,000 Common stock issued for vested RSUs $ 21,000 $ - Supplemental cash flow information: Interest paid $ 151,000 $ 59,000 The accompanying notes are an integral part of these consolidated financial statements. F- 5 FLUX POWER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2022 and 2021 NOTE 1 - NATURE OF BUSINESS Nature of Business Flux Power Holdings, Inc. (“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”). We design, develop, manufacture, and sell a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of industrial commercial sectors which include material handling, airport ground support equipment (“GSE”), and stationary energy storage. 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. We believe that the increasing demand for lithium-ion battery packs and more environmentally friendly energy storage solutions in the material handling sector should continue to drive our revenue growth. As used herein, the terms “we,” “us,” “our,” “Flux,” and “Company” mean Flux Power Holdings, Inc., unless otherwise indicated. All dollar amounts herein are in U.S. dollars unless otherwise stated. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the Company’s significant accounting policies which have been consistently applied in the preparation of the accompanying consolidated financial statements follows: Principles of Consolidation The consolidated financial statements include Flux Power Holdings, Inc. and its wholly-owned subsidiary Flux Power, Inc. after elimination of all intercompany accounts and transactions. Liquidity Considerations The 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 million. 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. Historically 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. As of September 12, 2022, $ 3.2 million remained available under the SVB Credit Facility and $ 4.0 million was available for future draws under the Subordinated LOC. 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. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as certain financial statement disclosures. Significant estimates include valuation allowances relating to inventory and deferred tax assets. While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates. Cash and Cash Equivalents As 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. Fair Values of Financial Instruments The carrying amount of our cash, accounts payable, accounts receivable, and accrued liabilities approximates their estimated fair values due to the short-term maturities of those financial instruments. The carrying amount of the line of credit agreement approximates its fair values as interest approximates current market interest rates for similar instruments. Management has concluded that it is not practical to determine the estimated fair value of amounts due to related parties because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs. F- 6 The Company does not have any other assets or liabilities that are measured at fair value on a recurring or non-recurring basis. Accounts Receivable Accounts receivable are carried at their estimated collectible amounts. The Company has not experienced collection issues related to its accounts receivable and has not recorded an allowance for doubtful accounts during the years ended June 30, 2022 and 2021. Inventories Inventories consist primarily of battery management systems and the related subcomponents and are stated at the lower of cost or net realizable value. The Company evaluates inventories to determine if write-downs are necessary due to obsolescence or if the inventory levels are in excess of anticipated demand at market value based on consideration of historical sales and product development plans. The Company recorded adjustments to inventory reserve related to obsolete and slow moving inventory in the amount of approximately $ 61,000 and $ 195,000 during the years ended June 30, 2022 and 2021, respectively. Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation and amortization are provided using the straight-line method over the estimated useful lives, of the related assets ranging from three to ten years , or, in the case of leasehold improvements, over the lesser of the useful life of the related asset or the lease term. Stock-based Compensation Pursuant to the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 718-10, Compensation-Stock Compensation , which establishes accounting for equity instruments exchanged for employee service, we utilize the Black-Scholes option pricing model to estimate the fair value of employee stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances. Common stock or equity instruments such as warrants issued for services to non-employees are valued at their estimated fair value at the measurement date (the date when a firm commitment for performance of the services is reached, typically the date of issuance, or when performance is complete). If the total value exceeds the par value of the stock issued, the value in excess of the par value is added to the additional paid-in-capital. Revenue Recognition The Company recognizes revenue in accordance to the Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) for all contracts. The Company derives its revenue from the sale of products to customers. The Company sells its products primarily through a distribution network of equipment dealers, OEMs and battery distributors in primarily North America. The Company recognizes revenue for the products when all significant risks and rewards have been transferred to the customer, there is no continuing managerial involvement associated with ownership of the goods sold is retained, no effective control over the goods sold is retained, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transactions will flow to the Company and the costs incurred or to be incurred with respect to the transaction can be measured reliably. F- 7 Product revenue is recognized as a distinct single performance obligation which for the Company’s three major customers represents the point in time that they receive delivery of the products, and for all other customers represents the point in time that the Company ships the products. Our customers do have a right to return product but our returns have historically been minimal. Product Warranties The Company evaluates its exposure to product warranty obligations based on historical experience. Our products, primarily lift equipment packs, are warrantied for five years unless modified by a separate agreement. As of June 30, 2022 and 2021, the Company carried warranty liability of approximately $ 1,012,000 and $ 895,000 , respectively, which is included in accrued expenses on the Company’s consolidated balance sheets. Impairment of Long-lived Assets In accordance with authoritative guidance for the impairment or disposal of long-lived assets, if indicators of impairment exist, the Company assesses the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through the undiscounted future operating cash flows. If impairment is indicated, the Company measures the amount of such impairment by comparing the carrying value of the asset to the present value of the expected future cash flows associated with the use of the asset. The Company believes that no impairment indicators were present, and accordingly no impairment losses were recognized during the fiscal years ended June 30, 2022 and 2021. Research and Development The Company is actively engaged in new product development efforts. Research and development cost relating to possible future products are expensed as incurred. Income Taxes Pursuant to FASB ASC Topic No. 740, Income Taxes, deferred tax assets or liabilities are recorded to reflect the future tax consequences of temporary differences between the financial reporting basis of assets and liabilities and their tax basis at each year-end. These amounts are adjusted, as appropriate, to reflect enacted changes in tax rates expected to be in effect when the temporary differences reverse. The Company has analyzed filing positions in all of the federal and state jurisdictions where the Company is required to file income tax returns, as well as all open tax years in these jurisdictions. As a result, no unrecognized tax benefits have been identified as of June 30, 2022 or June 30, 2021, and accordingly, no additional tax liabilities have been recorded. The Company records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities and on operating loss carry forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Net Loss Per Common Share The Company calculates basic loss per common share by dividing net loss by the weighted average number of common shares outstanding during the periods. Diluted loss per common share includes the impact from all dilutive potential common shares relating to outstanding convertible securities. For 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. F- 8 New Accounting Standards Recently Adopted Accounting Pronouncements The Company did not adopt any new accounting pronouncements for the year ended June 30, 2022 and 2021. Management has considered all recent accounting pronouncements issued since the last audit of the Company’s consolidated financial statements. NOTE 3 - INVENTORIES Inventories consist of the following: SCHEDULE OF INVENTORIES June 30, 2022 June 30, 2021 Raw materials $ 12,989,000 $ 8,185,000 Work in process 927,000 918,000 Finished goods 2,346,000 1,410,000 Total Inventories $ 16,262,000 $ 10,513,000 Inventories consist primarily of our energy storage systems and the related subcomponents, and are stated at the lower of cost or net realizable value. NOTE 4 – OTHER CURRENT ASSETS Other current assets consist of the following: SCHEDULE OF OTHER CURRENT ASSETS June 30, 2022 June 30, 2021 Prepaid insurance $ 478,000 $ 249,000 Prepaid inventory 14,000 73,000 Debt issuance costs 426,000 - Prepaid expenses 343,000 95,000 Total other current assets $ 1,261,000 $ 417,000 NOTE 5 – ACCRUED EXPENSES Accrued expenses consist of the following: SCHEDULE OF ACCRUED EXPENSES June 30, 2022 June 30, 2021 Payroll and bonus accrual $ 767,000 $ 1,271,000 PTO accrual 430,000 417,000 Warranty liability 1,012,000 895,000 Total accrued expenses $ 2,209,000 $ 2,583,000 F- 9 NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consist of the following: SCHEDULE OF PROPERTY PLANT AND EQUIPMENT NET June 30, 2022 June 30, 2021 Vehicles $ 20,000 $ 20,000 Machinery and equipment 808,000 593,000 Office equipment 1,574,000 1,027,000 Furniture and Equipment 256,000 220,000 Leasehold improvements 56,000 56,000 Property, plant and equipment, gross 2,714,000 1,916,000 Less: Accumulated depreciation ( 1,136,000 ) ( 560,000 ) Total property, plant and equipment, net $ 1,578,000 $ 1,356,000 Depreciation expense was approximately $ 575,000 and $ 274,000 , 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. NOTE 7 – Notes Payable Paycheck Protection Program Loan On May 1, 2020, the Company applied for and received a loan from the Bank of America, NA (the “BOA”) in the aggregate principal amount of approximately $ 1,297,000 (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan was 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 bore interest at a rate of 1.0 % per annum. Monthly principal and interest payments were deferred for six months after the date of disbursement. 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 . The SBA reserves the right to audit any PPP loan, regardless of size. These audits may occur after forgiveness has been granted. In accordance with the CARES Act, all borrowers are required to maintain their PPP loan documentation for six years after the PPP loan was forgiven or repaid in full and to provide that documentation to the SBA upon request. Revolving Line of Credit On 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 from $ 4.0 million to $ 6.0 million, and extending the maturity date to November 7, 2022 . The First Amendment provided the Company with a senior secured credit facility for up to $ 6.0 million available on a revolving basis (“Revolving LOC”). 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 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) . F- 10 In 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. In 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. Amounts 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. NOTE 8 - RELATED PARTY DEBT AGREEMENTS Subordinated Line of Credit Facility On 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 . Pursuant 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”). The Company 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. Each 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. In addition, 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. F- 11 The 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. In 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 $ 2.53 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) . Pursuant to a selling agreement, dated as of May 11, 2022, the Company retained HPO as its placement agent in connection with the Subordinated LOC. As compensation for services rendered in conjunction with the Subordinated LOC, the Company paid HPO a finder fee equal to 3 % of the Commitment Amount from each such Lender placed by HPO in cash. Esenjay Loan On March 9, 2020, the Company and Esenjay Investments, LLC (“Esenjay”) entered into a certain convertible promissory note (“Original Esenjay Note”) pursuant to which Esenjay provided the Company with a loan in the principal amount of $ 750,000 (the “Esenjay Loan”). On June 2, 2020, the Original Esenjay Note was amended and restated to (i) extend the maturity date from June 30, 2020 to September 30, 2020 , and (ii) to increase the principal amount outstanding under the Original Esenjay Note to $ 1,400,000 (the “Esenjay Note”). Between June 26, 2020 and July 22, 2020, Esenjay assigned a total of $ 900,000 of the Esenjay Note to three (3) accredited investors and the $ 900,000 note balance was converted into shares of common stock at $ 4.00 per share, which was the cash price per share, and resulted in the issuance of 225,000 shares of common stock. On August 31, 2020, the Company entered into the Third Amended and Restated Credit Facility Agreement and pursuant to which the Company further amended the Esenjay Note to, among other items, transfer all remaining principal and accrued interest outstanding of approximately $ 564,000 into the amended Credit Facility Agreement. (See “Credit Facility” below). Cleveland Loan On 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”) 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. On September 1, 2019, the Company entered into the First Amendment to the Unsecured Promissory Note pursuant to which the maturity date was extended to December 1, 2019 (the “First Amendment”) and the Cleveland Warrant terms were amended (the “Amended Warrant”). The Amended Warrant increased the warrant coverage from 0.5 % to 1 % of the number of shares of common stock outstanding after giving effect to the shares of common stock sold in the next private or public offering and with an exercise price equal to the per share price of common stock sold in such private or public offering, as the case may be. On July 9, 2020, the Company 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 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 $ 978,000 . F- 12 Credit Facility On 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 , the inclusion of additional lenders and extension of the maturity date to September 30, 2021 . In 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”) 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 per share. In January and March 2021, the lenders holding an aggregate of approximately $ 2,632,000 in principal and accrued interest elected to convert their notes into 658,103 shares of common stock at a price of $ 4.00 per share of which approximately $ 1,045,000 was held by Esenjay and converted to 261,133 shares of common stock. On June 10, 2021, 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. NOTE 9 - STOCKHOLDERS’ EQUITY At-The-Market (“ATM”) Offering On 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”). The 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 Act. On 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 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”). From 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 $ 12.24 per share for gross proceeds of approximately $ 14.3 million under the ATM Offering. The Company received net proceeds of approximately $ 13.7 million, net of commissions and other offering related expenses. The 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. The Company or the HCW may, upon written notice to the other party in accordance with the terms of the Sales Agreement, suspend offers and sales of the Shares. The Company and HCW each have the right, in its sole discretion, to terminate the Sales Agreement at any time upon prior written notice pursuant to the terms and subject to the conditions set forth in the Sales Agreement. F- 13 Public Offering Registered Direct Offering On 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 of $ 7.00 per share and associated warrant for gross proceeds of approximately $ 15.0 million prior to deducting offering expenses totaling approximately $ 1.0 million. 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. The 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. 2020 Public Offering and NASDAQ Capital Market Uplisting In 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 totaling approximately $ 1.7 million. 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. 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 “FLUX.” Private Placements 2020 Private Placement On 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 $ 265,000 in cash to two (2) accredited investors. On June 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 Closing:”). Esenjay and Mr. 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 $ 3,200,000 in cash to accredited investors, including Mr. Cosentino, a former director, who participated in the offering in the amount of $ 250,000 . The 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. Pursuant to a registration statement on Form S-3 filed with the SEC on October 16, 2020, which became effective on October 26, 2020, such shares were registered. F- 14 Debt Conversion LOC Conversion On 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. On 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. In 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. All conversions were at the option of the lenders, and all outstanding secured promissory notes were converted into shares of common stock. Esenjay Note Conversion On June 30, 2020, two (2) accredited individuals, who had been assigned $ 500,000 of the Esenjay Note, converted all principal into 125,000 shares of common stock at $ 4.00 per share. On July 22, 2020, one accredited individual, who had been assigned $ 400,000 of the Esenjay Note converted all principal into 100,000 shares of common stock at $ 4.00 per share. Warrants On 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. On September 1, 2019, the Cleveland Warrant was amended and restated to change the warrant coverage from 0.5 % to 1 % of the number of shares of common stock outstanding after giving effect to the total number of shares of common stock sold in the next private or public offering (“Offering”) 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. In 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 $ 513,000 . The underwriters’ warrants became exercisable on February 8, 2021. In connection with the Company’s RDO, in September 2021 the Company issued five-year warrants to the RDO investors to purchase up to 1,071,430 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. In May 2022 and in conjunction with entry into a credit facility with Cleveland Capital, L.P. (“Cleveland”), Herndon Plant Oakley, Ltd. (“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 $ 173,000 . F- 15 In 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 $ 80,000 . Warrant detail for the year ended June 30, 2022 is reflected below: SCHEDULE OF STOCK WARRANT ACTIVITY Number of Warrants Weighted Average Exercise Price Per Warrant Remaining Contract Term (# years) Warrants outstanding and exercisable at June 30, 2021 214,883 $ 4.49 Warrants issued 1,240,236 $ 6.38 Warrants outstanding and exercisable at June 30, 2022 1,455,119 $ 6.10 4.17 Warrant detail for the year ended June 30, 2021 is reflected below: Number of Warrants Weighted Average Exercise Price Per Warrant Remaining Contract Term (# years) Warrants outstanding and exercisable at June 30, 2020 83,205 $ 4.00 Warrants issued 185,955 $ 4.80 Warrants exercised ( 40,993 ) $ 4.80 Warrants forfeited ( 13,284 ) $ 4.80 Warrants outstanding and exercisable at June 30, 2021 214,883 $ 4.49 2.92 Stock Options In connection with the reverse acquisition of Flux Power, Inc in 2012, the Company assumed the 2010 Plan. As of June 30, 2022, there were 21,944 options to purchase common stock outstanding under the 2010 Plan. No additional options may be granted under the 2010 Plan. On 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. As of June 30, 2022, 170,725 shares of the Company’s common stock were available for future grants under the 2014 Plan. On 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. F- 16 Activity in stock options during the year ended June 30, 2022 and related balances outstanding as of that date are reflected below: SCHEDULE OF STOCK OPTIONS ACTIVITY Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Term (# years) Outstanding at June 30, 2021 531,205 $ 11.02 Exercised ( 3,400 ) $ 4.65 Forfeited and cancelled ( 24,372 ) $ 11.65 Outstanding and exercisable at June 30, 2022 503,433 $ 11.03 5.66 Activity in stock options during the year ended June 30, 2021 and related balances outstanding as of that date are reflected below: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Term (# years) Outstanding at June 30, 2020 579,584 $ 11.00 Exercised ( 22,760 ) $ 6.16 Forfeited and cancelled ( 25,619 ) $ 14.62 Outstanding at June 30, 2021 531,205 $ 11.02 6.73 Exercisable at June 30, 2021 490,323 $ 10.87 6.64 Restricted Stock Units On 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 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 18,312 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”). F- 17 Activity in RSUs during the year ended June 30, 2022 and related balances outstanding as of that date are reflected below: SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY Number of Shares Weighted Average Grant date Fair Value Weighted Average Remaining Contract Term (# years) Outstanding at June 30, 2021 131,652 $ 9.25 Granted 250,786 $ 4.82 Vested/Settled ( 9,156 ) $ 11.56 Forfeited and cancelled ( 69,061 ) $ 6.93 Outstanding at June 30, 2022 304,221 $ 6.06 1.82 Activity in RSUs during the year ended June 30, 2021 and related balances outstanding as of that date are reflected below: Number of Shares Weighted Average Grant date Fair Value Weighted Average Remaining Contract Term (# years) Outstanding at June 30, 2020 - $ - Granted 153,177 $ 9.20 Forfeited and cancelled ( 21,525 ) $ 8.88 Outstanding at June 30, 2021 131,652 $ 9.25 2.72 Stock-based Compensation Stock-based 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 and RSUs. 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 . The following table summarizes stock-based compensation expense for employee and non-employee option and RSU grants: SCHEDULE OF STOCK-BASED COMPENSATION EXPENSES Years ended June 30, 2022 2021 Research and development $ 144,000 $ 178,000 Selling and administrative 567,000 619,000 Total stock-based compensation expense $ 711,000 $ 797,000 At 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 of 1.82 years. NOTE 10 - INCOME TAXES Pursuant to the provisions of FASB ASC Topic No. 740 Income Taxes (“ASC 740”), deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. No net provision for refundable Federal income taxes has been made in the accompanying statement of operations because no recoverable taxes were paid previously. 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. The Company is subject to taxation in the United States and California. The Company’s tax years for 2010 and forward are subject to examination by the United States and California tax authorities due to the carry forward of unutilized net operating losses and research and development credits (if any). F- 18 The Company has incurred losses since inception, so no current income tax provision or benefit has been recorded. Significant components of the Company’s net deferred tax assets are shown in the table below. SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES Year Ended June 30, 2022 2021 Deferred Tax Assets: Net operating loss carryforwards $ 20,654,000 $ 16,111,000 Research & development credit carryforward 27,000 27,000 Stock compensation 1,636,000 1,696,000 Interest expense Sec. 163 - 366,000 Lease liability 802,000 924,000 Other, net 559,000 564,000 Gross deferred tax assets 23,678,000 19,688,000 Valuation allowance for deferred tax assets ( 22,951,000 ) ( 18,839,000 ) Total deferred tax assets $ 727,000 $ 849,000 Deferred Tax Liabilities: Right of use asset $ ( 727,000 ) $ ( 849,000 ) Total deferred tax liabilities ( 727,000 ) ( 849,000 ) Net deferred tax liabilities $ - $ - At 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 arising before 2018 of approximately $ 22,408,000 and all of the state NOL carryforward begin to expire in 2030 . The 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: SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION Year Ended June 30, 2022 2021 Federal income taxes at 21 % $ ( 3,278,000 ) $ ( 2,686,000 ) State income taxes, net ( 1,090,000 ) ( 894,000 ) Permanent differences and other 102,000 ( 58,000 ) Other true ups, if any 154,000 ( 27,000 ) Change in valuation allowance ( 4,112,000 ) ( 3,665,000 ) Provision for income taxes $ - $ - Internal 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, 2022 and 2021. Under ASC 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. In accordance with ASC 740, there are no unrecognized tax benefits as of June 30, 2022 or June 30, 2021. F- 19 NOTE 11 - CONCENTRATIONS Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and unsecured trade accounts receivable. The Company maintains cash balances at a California commercial bank. 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. Customer Concentrations During 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 or 69 % of its total revenues. During 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. Suppliers/Vendor Concentrations The Company obtains a limited number of components and supplies included in its products from a small group of suppliers. During the year 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 or 28 % of its total purchases. 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. NOTE 12 - COMMITMENTS AND CONTINGENCIES From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. To the best knowledge of management, there are no material legal proceedings pending against the Company. Operating Leases On April 25, 2019 the Company signed a Standard Industrial/Commercial Multi-Tenant Lease (“Lease”) with Accutek to rent approximately 45,600 square feet of industrial space at 2685 S. Melrose Drive, Vista, California. The Lease has an initial term of seven years and four months, commencing on or about June 28, 2019. The lease contains an option to extend the term for two periods of 24 months, and the right of first refusal to lease an additional approximate 15,300 square feet. The monthly rental rate was $ 42,400 for the first 12 months, escalating at 3 % each year. On 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). Rent during the year ended June 30, 2022 was approximately $ 62,000 per month. In connection with the Amendment, the Company purchased certain existing office furniture for a total purchase price of $ 8,300 . Total rent expense was approximately $ 867,000 and $ 841,000 for the years ended June 30, 2022 and 2021, respectively. F- 20 The Future Minimum Lease Payments are: SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS 2023 $ 768,000 2024 791,000 2025 815,000 2026 840,000 Thereafter 359,000 Total Future Minimum Lease Payments 3,573,000 Less: discount ( 708,000 ) Total lease liability $ 2,865,000 NOTE 13 - SUBSEQUENT EVENTS Separation Agreement On August 12, 2022, Jonathan Berry, the Company’s Chief Operating Officer, separated from the Company and entered into an Employee Separation and Release 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. RSU Grants On 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 RSUs, of which 1/3 vested immediately, each of the remaining 1/3 of the RSUs will vest on April 29, 2023, and April 29, 2024 . Ms. Bo-Linn’s grant was consistent with the standard equity component of Non-Executive Director Compensation Package as approved by the Board. F- 21