What changed in this filing

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Item 1. Business

2023-09-21 compared with 2022-09-28 · 105 added, 87 removed, 276 unchanged (41% of the section changed)

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storage solutions for our customers.

largest sector of penetration thus far has been the material handling sector which we believe is a multi-billion dollar addressable market.

We believe the sector will provide us with an opportunity to grow our business as we enhance our product mix and service levels and grow

our sales to large fleets of forklifts and GSEs.

Applications of our modular packs for other industrial and commercial uses, such as

solar energy storage, are providing additional current growth and further opportunities.

We intend to continue to expand our supply chain

and customer partnerships and seek further partnerships and/or acquisitions that provide synergy to meeting our growth and “building

scale” objectives.

largest sector of penetration thus far has been the material handling sector which we believe is a multi-billion-dollar addressable

We believe the sector will provide us with an opportunity to grow our business as we enhance our product mix and service levels

and grow our sales to large fleets of forklifts and GSEs.

Applications of our modular packs for other industrial and commercial uses,

such as solar energy storage, are providing additional current growth and further opportunities.

We intend to continue to expand our

supply chain and customer partnerships and seek further partnerships and/or acquisitions that provide synergy to meeting our growth and

“building scale” objectives.

Chain Issues and Higher Procurement Costs

to COVID-19 pandemic, supply chain disruptions continue, notably with delivery delays at the ports of Los Angeles and Long Beach.

addition, the price of steel and certain other electrical components used in our products have seen dramatic increases, along with increased

shipping costs.

It is impossible to predict how long the current disruptions to the cost and availability of raw materials and component

parts will last.

We implemented price increases on certain new product orders in October 2021 and April 2022 to offset rising global

costs of raw materials and component parts.

In addition, we increased our inventory of raw materials and component parts to $16.3 million

as of June 30, 2022 to mitigate supply chain disruptions and support timely deliveries.

Disruptions from the COVID-19 pandemic over the past several years have largely abated.

We addressed supply chain

challenges with improved vendor selection, and improved supply chain internal practices.

However, we have experienced

shipment delays of battery packs for some forklift models that have experienced production delays.

We have seen recent improvements in

shipment timing.

However, there can be no assurance that our price

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of raw materials and component parts effectively.

address some of these negative consequences and to support the future growth of our business, we have implemented a number of new strategic

support our high growth business and strategy, our first priority over the coming quarters is achieving “profitability,”

specifically, cash flow breakeven.

Accordingly, we have strategic initiatives underway in two areas:

margin improvements

lower cost, more reliable, and secondary suppliers of key components including cells, steel, electronics, circuit boards and other

key components.

manage our suppliers to avoid supply chain disruptions and related risks.

new designs, including a simplified “platform” that reduces part count, lowers cost, improves manufacturability and serviceability.

on ensuring profitability of all product lines including managing mix of products.

more competitive carriers to reduce shipping costs.

Lean Manufacturing process to enhance capacity utilization, efficiency, quality.

comprehensive “cost of quality” initiative to ensure effective and robust processes.

“automated cell module assembly” to assemble purchased “individual” battery cells into a “module”

for the battery pack.

This will enable lower inventory from simplified SKU count and lower costs.

expansion to accelerate gross margin

support the continued growth of our business and long-term strategy, our highest priority in the coming quarters will be to achieve

“profitability,” specifically, cash flow breakeven.

Accordingly, we will continue to pursue supply chain improvements,

gross margin expansion initiatives, and cost reductions.

In addition, we are focusing on

business expansion to accelerate gross margins by:

current high-profile “proven customer relationships” to respond to growing demand

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can be no assurance that these initiatives and efforts will be successful.

July 28, 2023, we entered into a certain Loan and Security Agreement (the “Agreement”) with Gibraltar Business Capital, LLC,

a Delaware limited liability company (“GBC”).

The Agreement provides the Company with a senior secured revolving loan facility

(the “GBC Credit Facility”) for up to $15.0 million (the “Revolving Loan Commitment”).

The revolving amount available

under the GBC Credit Facility is equal to the lesser of the Revolving Loan Commitment and the borrowing base amount (as defined in the

The GBC Credit Facility is evidenced by a revolving note, which matures on July 28, 2025 (the “Maturity Date”),

unless extended, modified or renewed (the “Revolving Note”).

Provided that there is no event of default, the Maturity Date

can automatically be extended for one (1) year period upon payment of a renewal fee for each such extension in the amount of three-quarters

of one percent (0.75%) of the Revolving Loan Commitment, which fee will be due and payable on or before the applicable Maturity Date.

In addition, subject to conditions and terms set forth in the Agreement, the Company may request an increase in the Revolving Loan Commitment

from time to time upon not less than 30 days’ notice to GBC which increase may be made at the sole discretion of GBC, as long as:

(a) the requested increase is in a minimum amount of $1,000,000, and (b) the total increases do not exceed $5,000,000 and no more than

five (5) increases are made.

Outstanding principal under the GBC Credit Facility accrues interest at Secured Overnight Financing Rate (“SOFR”, as defined in the Agreement)

plus five and one half of one percent (5.50%) per annum with such interest payment is due monthly on the last day of the month.

event of default, the amounts due under the Agreement bears interest at a rate per annum equal to three percent (3.0%) above the rate

that is otherwise applicable to such amounts.

We paid GBC a non-refundable closing fee for the GBC Credit Facility of $112,500 upon the execution of the Agreement.

In addition, we are required to pay a monthly unused line fee equal to one-half of one percent

(0.50%) per annum on the difference between the Revolving Loan Commitment and the average outstanding principal balance of the revolving

loan(s) for such month.

The obligations under the GBC Credit Facility may be prepaid in whole or in part at any time upon an exit fee

of (a) two percent (2.00%) of the Revolving Loan Commitment if the obligations are paid in full during the first year after the closing

date, or (b) one percent (1.00%) of the Revolving Loan Commitment if the obligations are paid in full one year after the closing date, provided, that, the exit fee will be waived if such prepayment occurs in connection with the refinancing

of the obligations with Bank of America, N.A., as lender.

loans and other obligations of the Company under the GBC Credit Facility are secured by substantially all of the tangible and intangible

assets of the Company (including, without limitation, intellectual property) pursuant to the terms of the Agreement and the Intellectual

Property Security Agreement entered into by and among the Company and GBC on July 28, 2023.

connection with the entry into the Agreement and the repayment in full of the principal amount

outstanding under SVB Credit Facility together with total accrued and unpaid interest and related fees with a portion of the funds from

the GBC Credit Facility on July 28, 2023, we terminated the Loan and Security Agreement, dated as of November 9, 2020, as amended ,

by and among SVB and the Company.

OF OUR BUSINESS

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solutions that meet our customers’ needs currently and in the foreseeable future.

We launched our Class 3 Walkie Pallet Pack product line in 2014 and obtained UL Listing for all three different power

configurations.

We have also obtained UL Listing for our Class 1 Packs, our Class 2 Packs, and our Class 3 End Rider.

In addition, we

have completed the process for obtaining UL Listings for our newest source of battery cells.

We believe this UL Listing provides us a

significant competitive advantage and provides assurance to customers that our technology has been rigorously tested by an independent

third party and determined to be safe, durable and reliable.

Our goal is to obtain a UL Listing for all of our Packs, and we recently completed the process for our newest source of battery cells.

We believe this UL Listing provides us a significant competitive

advantage and provides assurance to customers that our technology has been rigorously tested by an independent third party and

determined to be safe, durable and reliable.

equipment manufacturer (OEM) approvals:

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design, develop, test and sell our energy storage packs for use in a broad range of lift trucks, industrial equipment including airport

GSE, energy storage for solar applications, and other commercial applications.

Within each of these product segments, we offer a range

of power and equipment solutions.

Our current product offering is summarized in the chart below.

GSE, and other commercial applications.

Within each of these product segments, we offer a range of power and equipment solutions.

battery pack system design is adaptable with three core design modules used in our entire family of small, medium, and large pack forklift

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power, reliability, safety and other specifications.

Our BMS works with a number of battery configurations providing the flexibility

Our BMS works with several battery configurations providing the flexibility

to use battery cells developed and manufactured by other suppliers.

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to develop and to introduce new product designs for margin enhancement, part commonality and improved serviceability.

March 2022, we introduced three (3) new products:

lithium-ion battery pack, a 36-volt option for 3-wheel forklifts;

L36 addresses the 3-wheel forklift market.

According to our OEM partners the 3-wheel forklift offerings are some of their best selling

We are now strategically placed to fully address this market.

lithium-ion battery pack for Automated Guided Vehicles (AGV) and Autonomous Mobile Robots (AMR);

improved robustness and environmental protections mean it is no longer just a solar battery, but is now being sold into tugs and

other types of industrial equipment, expanding our product offerings.

lithium-ion battery pack providing twice the capacity (210Ah) for Walkie Pallet Jacks for heavy duty

S24-210Ah is a new high-capacity variant of our ‘slim’ walkie battery and addresses some of the toughest walkie applications

in the market, giving exceptional runtime and fast recharge times when paired with an external high-powered charger.

In Fiscal 2023, we introduced

the next generation of Material Handling and GSE products, the G2 line.

These seven new products greatly extend the reach of Flux packs

in the Class 1 and 2 forklift market as well as enhancing our offerings for aircraft ground support equipment.

Ranging from 36 to 80 volts

and capacities between 210 and 840 amp-hours, the G2 systems deliver power and versatility.

Historically,

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500 companies.

the year ended June 30, 2022, we had four (4) major customers that each represented more than 10% of our revenues on an individual basis,

the year ended June 30, 2023, we had two (2) major customers that each represented more than 10% of our revenues on an individual basis,

and together represented approximately $38,035,000 or 57% of our total revenues.

During the year ended June 30, 2021, we had three (3)

During the year ended June 30, 2022, we had four (4)

major customers that each represented more than 10% of our revenues on an individual basis, and together represented approximately $29,254,000

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to lead acid.

sell our products through a number of different channels including OEMs, lift equipment dealers and battery distributors as well as directly

sell our products through several different channels including OEMs, lift equipment dealers and battery distributors as well as directly

to end users.

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Manufacturing

than manufacture our own battery cells and be limited to a single chemistry, our battery cells are sourced from a limited number of manufacturers

located in China.

than manufacture our own battery cells and be limited to a single chemistry, our battery cells are sourced from a limited number of

manufacturers located in China.

We source the remainder of the components primarily from vendors in the United States.

We developed our BMS to be agnostic

to a battery’s lithium-ion chemistry and cell manufacturer.

Despite such flexibility, we have experienced occasional supply interruptions

in the past, and more recently, we have been forced to navigate supply chain and transportation issues stemming from the global pandemic.

We are continuing to monitor and test potential new cell technologies on an ongoing basis to help mitigate our supply chain risks.

assembly, testing and shipping of our products is done from our ISO 9001 certified facility in Vista, California, which includes three

assembly lines.

our BMS to be agnostic to a battery’s lithium-ion chemistry and cell manufacturer.

Despite such flexibility, we have

experienced occasional supply interruptions in the past, and more recently, we have been forced to navigate supply chain and

transportation issues stemming from the global pandemic.

We have made great strides in sourcing alternate suppliers and parts to

minimize future global supply chain disruptions.

We are continuing to monitor and test potential new cell technologies on an ongoing

basis to help mitigate our supply chain risks.

Using Lean Manufacturing principles our final assembly, testing and shipping of our products are completed within our ISO 9001

certified facility in Vista, California, which includes six assembly lines.

buy chargers from several sources, including a U.S.

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improving performance, reliability and durability of our energy storage solutions for our customers and on lowering our costs of production.

competitors in the lift equipment market are primarily major lead acid battery manufacturers, including Stryten Energy, East Penn Manufacturing

Company, EnerSys Corporation, and Crown Battery Corporation.

Although these competitors have been introducing offerings of a lithium-ion

battery, we do not believe that these suppliers offer lithium-based products for lift equipment in any significant volume to end users,

equipment dealers, OEMs or battery distributors.

Several OEMs offer lithium-ion battery packs on Class 3 forklifts for sale only with

their own new forklifts.

Some OEMs also offer forklift models designed with an integrated lithium-ion battery.

As the demand for lithium-ion

battery packs has increased, small lithium battery pack providers have entered the market, most of whom we believe are suppliers of other

power products and have simply added a lithium product to their product lines.

competitors in the lift equipment market in years past have been primarily major lead acid battery manufacturers, including Stryten

Energy, East Penn Manufacturing Company, EnerSys Corporation, and Crown Battery Corporation.

However, more recently our potential

customer base has become increasingly aware of the performance, lifetime cost, and environmental advantages of lithium-ion

At the same time, our competitor base offering lithium-ion solutions has grown from a number of early-stage businesses to

now include several larger companies.

The increasing market activity reflects the double-digit growth of lithium-ion battery pack

adoption and sales.

The sales channel includes.

equipment dealers, OEMs and battery distributors.

key competitive factors in this market are performance, reliability, durability, safety and price.

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patent position is important to remain competitive.

of June 30, 2022, we have two issued patents and three trademark registrations protecting the Flux Power name and logo.

We have filed

three new patents on advanced technology related to lithium-ion battery packs.

The technology behind these pending patents are designed

As of June 30, 2023, we have two issued U.S.

We have filed three (3)

patent applications on advanced technology related to lithium-ion battery packs.

The technology behind these three (3) patents is

battery life by optimizing the charging cycle,

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Even if granted, there can be no assurance that these pending patent applications will provide us with protection.

We have obtained U.S.

federal trademark registrations for Flux, Flux Power, Flux Power logo.

We have pending

applications to register SkyBMS.

We also believe that we have common law trademark rights to certain marks in addition to those which

we have registered.

obtain a limited number of components and supplies included in our products from a small group of suppliers.

During the year ended June 30, 2023, we had one (1) supplier who accounted for more than 10% of our total purchases,

which represented approximately $17,022,000 or 31% of our total purchases.

During the year ended June

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or 28% of our total purchases.

the year ended June 30, 2021, we had two (2) suppliers who accounted for more than 10% of our total purchases, on an individual basis,

and together represented approximately $9,260,000 or 27% of our total purchases.

Safety Regulations .

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

What changed 10-K

Item 1. Business