What changed in this filing

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Item 9A. Controls and Procedures

2025-01-29 compared with 2023-09-21 · 2881 added, 758 removed, 1119 unchanged (76% of the section changed)

This section is long enough that the comparison stopped early. What follows is partial, and the remainder is not necessarily unchanged.

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Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures

were not effective as of June 30, 2023 because of the material weakness identified in our internal controls over financial reporting.

were not effective as of June 30, 2024 because of the material weaknesses identified in our internal controls over financial reporting.

Report on Internal Control over Financial Reporting

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

Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting.

The Company’s

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

the supervision of management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the

effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued

by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and subsequent guidance prepared by the Commission

specifically for smaller public companies as of June 30, 2023.

Based on that evaluation, our management concluded that our internal control

over financial reporting was not effective as of June 30,2023 due to an identified material weakness as a

result of not having sufficient personnel resources with technical accounting expertise related to certain aspects of the financial reporting

Until such time as we could have additional resources with such level of technical accounting expertise, management intends

to implement measures designed to improve our internal control over financial reporting to remediate material weaknesses, including the

use of third-party consultants and accounting experts.

the supervision of management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of

the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and subsequent guidance prepared by

the Commission specifically for smaller public companies as of June 30, 2024.

Based on that evaluation, our management concluded

that our internal control over financial reporting was not effective as of June 30, 2024 due to previously identified material

weaknesses resulting from having insufficient personnel resources with technical accounting expertise related to certain aspects of

the financial reporting process.

In early March of 2024, the Company strengthened its internal financial expertise by hiring a new

Chief Financial Officer with over 20 years of experience with publicly traded companies and finance and accounting and who also

served as an auditor for 10 years with Ernst & Young LLP, where he became a certified public accountant.

As part of its ongoing remedial efforts to strengthen controls and procedures, in May 2024 the Company engaged an

external financial consulting firm with extensive technical accounting expertise during the quarter ended March 31, 2024.

In August 2024, the Company engaged an external financial consulting firm to assist the Company with accounting advisory services.

After re-evaluation, the

Company’s management has concluded that in connection with restatement and due to a lack of sufficiently designed controls that support an effective assessment of our internal controls

relating to the prevention of fraud and possible management override of controls, this represents an additional material weakness in

the Company’s disclosure controls and procedures and the Company’s internal control over financial reporting.

this material weakness, management plans to continue to devote significant effort and resources to the remediation and improvement

of the Company’s internal control over financial reporting.

While the Company has processes to account for its inventory,

under the leadership of the Company’s new Chief Financial Officer, the Company intends to strengthen its internal processes

and procedures over inventory management and reporting.

The Company has begun updating its processes and controls around inventory

obsolescence, the timing of its internal inventory audits and implementation of other measures.

In addition, in August 2024, the

Company has also engaged an external financial consulting firm with extensive technical accounting expertise to assist with the

analysis of prior periods, along with an independent law firm to conduct an internal review of the events and activities leading to

errors in the financial statements.

The Company ’ s

management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance

that the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource

constraints, and the benefits of controls must be considered relative to their costs.

Additionally, controls can be circumvented by collusion

or improper management override of the controls.

The design of any system of controls is based in part on certain assumptions about the

likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential

future conditions.

Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies

or procedures may deteriorate.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute

assurance that all control issues and instances of fraud or error, if any, have been detected, and there is a risk that material misstatements

may not be prevented or detected on a timely basis by internal control over financial reporting.

Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm

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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, 2023, that have

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

as discussed above, there have been no changes in the Company’s internal controls over financial reporting during the fiscal quarter

ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control

over financial reporting.

9B - OTHER INFORMATION

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10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers and Significant Employees

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

following table and text set forth the names and ages of our current directors, executive officers and significant employees as of January 3, 2025.

Our Board of Directors is comprised of only one class.

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Robinette (1) (3)

Bo-Linn (1)(4)

Independent Director

Chairperson of the Audit Committee, Member of the Compensation

Committee and the Nominating and Governance Committee

Lead Independent Director, Chairperson of the Compensation Committee,

Member of the Audit Committee and the Nominating and Governance Committee

Chairperson of the Nominating and Governance Committee, Member of the

Audit Committee and the Compensation Committee.

On November 7, 2022, Mr.

Leposky (1) (4)

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

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

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

Leposky was elected to the Board on April 18, 2024.

November 7, 2022, Mr.

Mason’s position was expanded to include additional Company authority and delegation.

Royal was appointed as Chief Financial Officer and Secretary effective March 4, 2024.

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

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

Scheiwe, Chief Financial Officer and Secretary.

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

Controller since July 9, 2018.

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

Prior to joining the

Scheiwe was the controller of Senstay, Inc.

and provided financial and accounting consulting services to start-up companies

from 2016 to 2018.

From 2006 to 2016, Mr.

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

experience in accounting, financial planning and analysis, business intelligence, cash management, and equity management has prepared

and qualified him for the position of chief financial officer and secretary of the Company.

Scheiwe has a Bachelor of Science degree

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

Scheiwe also holds a CPA certificate.

Dutt’s past experience

as executive vice president, chief financial officer and treasurer for various public and private companies, the Company believes Mr.

Dutt is qualified to be on the Board.

Royal, Chief Financial Officer and Secretary.

Royal was appointed as our Chief Financial Officer and Secretary effective March

Royal has over 20 years of experience with publicly traded companies, leading Finance, Accounting, IT, HR, Legal, Investor

Relations, and M&A.

Since 2023, Mr.

Royal has served as a consultant for MCA Financial group.

Prior to joining the Company, Mr.

served as Executive Vice President and Chief Financial Officer of Zovio Inc.

(f/k/a Bridgepoint Education, Inc.) from October 2015 until

September 2022.

Royal also previously served as Senior Vice President, Chief Financial Officer, Treasurer and Secretary of Maxwell

Technologies, Inc., a developer, manufacturer and marketer of energy storage and power delivery solutions from April 2009 to May 2015.

Royal has held a series of senior finance positions, including appointments as senior vice president and chief financial officer

within the semiconductor industry.

Royal has also served as an auditor for 10 years with Ernst & Young LLP, where he became a

certified public accountant.

Royal received his Bachelor of Business Administration in Accounting from Harding University and is

a Certified Public Accountant in the State of California (inactive).

Mason, Vice President of Operations.

as the Director of Manufacturing of the Company from January 2021 to December 2021, and Vice President of Operations since December 2021.

Mason served as the Director of Manufacturing of the Company from January 2021 to December

2021, and Vice President of Operations since December 2021.

On November 7, 2022, Mr.

Mason’s position was expanded to include additional Company authority and delegation.

Prior to joining

the Company, Mr.

Mason was the plant manager at NEO Tech from March 2017 to January 2021 after being promoted from Director of Operations

from December 2013 to March 2017.

Mason has also worked for Sumitomo Electric Interconnect Products, Inc., Radio Design Labs, Inc.,

and Motorola Inc.

Mason’s position was expanded to include additional

Company authority and delegation.

Prior to joining the Company, Mr.

Mason was the plant manager at NEO Tech from March 2017 to January

2021 after being promoted from Director of Operations from December 2013 to March 2017.

Mason has also worked for Sumitomo Electric

Interconnect Products, Inc., Radio Design Labs, Inc., and Motorola Inc.

during his career.

Mason received his Master of Business Administration in International Business in 2015 and his

Bachelor of Business Administration/Management in 2013 from North Central University.

Mason is also Total Productive Maintenance

(TPM) Instructor Certified by the Japan Institute of Plant Maintenance, Tokyo, Japan.

Mason received his Master of Business

Administration in International Business in 2015 and his Bachelor of Business Administration/Management in 2013 from North Central University.

Mason is also Total Productive Maintenance (TPM) Instructor Certified by the Japan Institute of Plant Maintenance, Tokyo, Japan.

Johnson, Director.

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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 27.5% of our outstanding shares, including common stock underlying

options, and warrants that were exercisable or convertible or which would become exercisable or convertible within sixty (60) days.

a result of Mr.

Johnson’s leadership and business experience, he is an industry expert in the natural gas exploration industry

and brings a wealth of management and successful company building experience to the board.

Johnson received a Bachelor of Science

degree in mechanical engineering from the University of Southwestern Louisiana.

in companies, and an affiliate of the Company beneficially owning approximately 26% 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)

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

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.

Based on the foregoing, the Company believes Mr.

Johnson is qualified to be on the Board.

Walters-Hoffert, Director.

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Officer of the surviving public company (Nasdaq:

For over twenty-five (25) years, Ms.

Walters-Hoffert was an investment banker

focused on small-cap public companies in the technology and life science sectors.

From 2003 to 2015, Ms.

Walters-Hoffert worked at Roth

Capital Partners as Managing Director in the Investment Banking Division.

Walters-Hoffert has held various positions in the corporate

finance and investment banking divisions of Citicorp Securities in San José, Costa Rica and Oppenheimer & Co, Inc.

York City, New York.

Walters-Hoffert has served as a member of the Board of Directors of the San Diego Venture Group, as Past Chair

of the UCSD Librarian’s Advisory Board, and as Past Chair of the Board of Directors of Planned Parenthood of the Pacific Southwest.

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

DARE) and served in this role until January of 2024.

For over twenty-five (25) years,

Walters-Hoffert was an investment banker focused on small-cap public companies in the technology and life science sectors.

Walters-Hoffert worked at Roth Capital Partners as Managing Director in the Investment Banking Division.

Walters-Hoffert

graduated magna cum laude from Duke University with a B.S.

has held various positions in the corporate finance and investment banking divisions of Citicorp Securities in San José, Costa

Rica and Oppenheimer & Co, Inc.

in New York City, New York.

Walters-Hoffert has served as a member of the Board of Directors

of the San Diego Venture Group, as Past Chair of the UCSD Librarian’s Advisory Board, and as Past Chair of the Board of Directors

of Planned Parenthood of the Pacific Southwest.

Walters-Hoffert currently serves as a member of the Board of Directors of The Elementary

Institute of Science in San Diego.

Walters-Hoffert 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.

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

Walters-Hoffert is qualified to be on the Board.

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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.

Robinette has been providing business consulting related to top-line growth and

bottom-line improvement through his company EPIQ Development.

From 2013 to 2019, Mr.

Robinette was the Founder and CEO of EPIQ

Space, a marketing website for the satellite industry, a member-based community of suppliers promoting their offerings.

Robinette was with Peregrine Semiconductor, Inc., (known today as PSEMI, a division of Murata Manufacturing Co Ltd.), 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.

Robinette started his career from 1991 to 2007 at Tyco Electronics Ltd.

today as TE Connectivity Ltd.), a passive electronics manufacturer, in various sales, sales leadership and product development

leadership roles.

Robinette received a Bachelor of Science degree in Business Administration, Marketing from San Diego State

Robinette was the Founder and CEO of EPIQ Space,

a marketing website for the satellite industry, a member-based community of suppliers promoting their offerings.

Robinette was with

Peregrine Semiconductor, Inc., a manufacturer of high-performance RF CMOS integrated circuits, from 2007 to 2013 in two roles as a Director

of Worldwide Sales as well as the Director of the High Reliability Business Unit.

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.

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.

Bo-Linn, Director.

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

She was the CEO of Peritus Partners,

a global valuation accelerator and information technology operations and consulting company from 2013 through 1Q2023.

Director experience spans Canada, the United States, and Australia, with Board leadership positions from Lead Independent Director

to Committee Chair of every major committee (Audit, Compensation, Nomination/Governance) and Chair of Technology, Cybersecurity, and

Sustainability, across eight prior public companies and multiple privates.

She held various executive and President roles in

multiple companies including Vice-President of IBM Corporation.

Her C-suite and Board roles include the lithium, ecommerce,

manufacturing and distribution, technology, healthcare, construction, software, and marketing sectors.

Bo-Linn was named The

Financial Times 2021 “Top 100 Diverse Directors”, NACD’s (National Association of Corporate Directors’)

“Top 50 Directors,” and inducted into the “Hall of Fame for Women in Technology.” Thru 2019, she was

Visiting Professor on digital tech (AI, data analytics, cybersecurity) and marketing at the joint Columbia University, London School

of Business and University of Hong Kong EMBA/MBA program.

She has been invited to speak at the United Nations, Dow Jones, and

British Chamber.

She earned her Doctorate Degree (EdD) in Computer based Information Systems and Organizational Change from the

University of Houston.

The Board believes that Dr.

Bo-Linn’s extensive senior executive management and board experience in

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

Leposky, Director.

Leposky was elected to our Board on April 18, 2024.

Leposky has over 30 years of executive experience

in operations, engineering, supply chain, product and commercial roles.

Leposky is currently the Executive Vice President and Chief

Supply Chain Officer at Topgolf Callaway Brands and has led the company’s supply chain, engineering, and operations organization

among other responsibilities since 2012.

From 2018 to 2022, he also served as the EVP of Global Operations, Accessories and Licensing,

and previously served as Senior Vice Present of Global Operations, Accessories and Licensing from 2012 and 2018 for Topgolf Callaway

Prior to joining Topgolf Callaway Brands, Mr.

Leposky was the Co-Founder, President and Chief Executive Officer of Gathering

Storm dba Tmax Gear from 2005 to 2011, Chief Supply Chain Officer at Fisher Scientific International from 2004 to 2005 and Chief Operations

Officer at TaylorMade Adidas Golf from 2002 to 2004, and has held executive roles at The Coca-Cola Company and United Parcel Service.

Leposky holds a Bachelor of Sciences degree in Industrial Technology from Southern Illinois University, and an MBA from the Keller

Graduate School of Management.

In addition, Mr.

Leposky is also a 16-year infantry veteran of the US Army and Army National Guard, and

an avid golfer.

Based on the above qualifications, the Board believes the Mr.

Leposky’s extensive executive experience within the

consumer product and service industry qualifies Mr.

Leposky to serve on the Board.

Management Transition

On November 20, 2024, Ronald Dutt, our chairman and Chief Executive Officer, notified the Company’s Board of

Directors of his intention to retire from his positions upon the appointment of a new Chief Executive Officer.

The Board has commenced a search for a new

Chief Executive Officer and Mr.

Dutt will remain with the Company through the search and transition period.

in Certain Legal Proceedings

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interests of the Company and stockholders.

On November 20, 2024, Ronald F.

Dutt, our chairman and Chief Executive Officer, notified the Company’s Board

that he intends to retire from his positions upon the appointment of a successor.

The Board has commenced a search for a new Chief Executive

Officer and Mr.

Dutt will remain with the Company through the search and transition period.

Following Mr.

Dutt’s retirement,

the Nominating and Governance Committee of the Board has determined that the position of Chairman of the Board shall be held by a non-executive

member of the Board

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

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and (vi) serving as liaison for consultation and communication with stockholders.

believe the current leadership structure, with combined Chairman and Chief Executive Officer roles and a Lead Independent Director, best

serves the Company and its stockholders at this time.

Robinette possesses understanding and knowledge of the business and affairs

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

In addition, we believe having one

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

accountability to our stockholders and customers.

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

to our stockholders, employees, customers and suppliers.

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

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

directors, allow it to maintain effective oversight of management.

We believe that the combination of the Chairman and Chief Executive

Officer roles is appropriate in the current circumstances and, based on the relevant facts and circumstances, separation of these offices

would not serve our best interests and the best interests of our stockholders at this time.

believe that the current leadership structure, with combined Chairman and Chief Executive Officer roles and a Lead Independent

Director, has served the Company and its stockholders historically.

However, the Nominating and Corporate Governance Committee of

the Board has determined that following Mr.

Dutt’s retirement as Chairman and Chief Executive Officer, the position of

Chairman of the Board shall be held by a non-executive member of the Board.

The Board believes that the new proposed leadership

structure of a non-executive Chairman in conjunction with a Lead Independent Director will be in the Company’s and its

stockholders best interest following the transition of management.

Robinette, Lead Independent Director, 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

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.

addition, our Board as a whole has responsibility for risk oversight.

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and management of risks to the Company.

of Directors Diversity

Board of Directors is committed to fostering a diversity of backgrounds and perspectives so that our Board of Directors positions our

company for the future.

The members of our Board of Directors represent a mix of ages, genders, races, ethnicities, geographies, cultures,

and other perspectives that we believe expand our Board of Directors’ understanding of the needs and viewpoints of our partners,

employees, stockholders, and other stakeholders.

The matrix below provides certain information regarding the composition of our Board

of Directors as of the date of this report.

Each of the categories listed in the below table has the meaning as it is used in Nasdaq

Stock Market Rule 5605(f).

Diversity Matrix (as of September 8, 2023)

Number of Directors

Gender Identity

Demographic Background

Composition, Committees and Independence

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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.

Walters-Hoffert, and Messrs.

Robinette and Leposky are independent directors as

defined in the listing standards of Nasdaq and SEC rules and regulations.

A majority of our directors are independent, as required under

applicable Nasdaq rules.

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

sessions at which only independent directors are present.

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

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of each of the committees is described below.

The Audit Committee of

the Board of Directors currently consists of three independent directors of which at least one, the Chairperson of the Audit Committee,

qualifies as a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.

Walters-Hoffert is the Chairperson

of the Audit Committee and financial expert.

Bo-Linn and Mr.

Robinette are the other directors who are members of the Audit Committee.

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

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

The Audit Committee reviews

the scope, timing and fees for the annual audit and the results of audit examinations performed by any internal auditors and independent

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

The Audit Committee will

at all times be composed exclusively of directors who are, in the opinion of our Board of Directors, free from any relationship that

would interfere with the exercise of independent judgment as a committee member and who possess an understanding of consolidated financial

statements and generally accepted accounting principles.

Our Audit Committee operates under a written charter, which is available on

our website at www.fluxpower.com .

The Compensation Committee

currently consists of three independent directors.

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.

Audit Committee of the Board of Directors currently consists of three independent directors of which at least one, the Chairperson of

the Audit Committee, qualifies as a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.

Walters-Hoffert

is the Chairperson of the Audit Committee and financial expert.

Robinette and Leposky are the other directors who are members

of the Audit Committee.

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

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

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

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

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

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

of consolidated financial statements and generally accepted accounting principles.

Our Audit Committee operates under a written charter,

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

Compensation Committee currently consists of three independent directors.

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.

Robinette is the Chairperson of the Compensation Committee, and Ms.

Walters-Hoffert and Dr.

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 .

Walters-Hoffert and

Leposky 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 .

and Governance Committee

The Nominating and Governance Committee currently consists of three independent directors.

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.

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

Nominating and Governance Committee currently consists of three independent directors.

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.

Leposky is the Chairperson of the Nominating and Governance Committee.

Walters-Hoffert and Mr.

are members of the Nominating and Governance Committee.

Each of the members of our Nominating and Governance Committee is independent

under NASDAQ’s independence standards.

The Nominating and Governance Committee operates under a written charter, which is available

on our website at www.fluxpower.com .

Robinette are members of the Nominating

and Governance Committee.

Each of the members of our Nominating and Governance Committee is independent under Nasdaq’s independence

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

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

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for indemnification claims, advancement of expenses and costs and contribution obligations.

Delinquent Section 16(a)

Section 16(a) of the

Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a

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

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

Insider Trading Policy and Rule 10b5-1 Trading

We have adopted an Insider Trading

Policy which prohibits directors, officers and all other employees, or consultants or contractors, as well as family members of such persons

(or any other person subject to the policy) from engaging in any transaction involving a purchase or sale of the our securities,

including any offer to purchase or offer to sell, based on material nonpublic information regarding the Company (“Material Nonpublic

Information”).

Under our Insider Trading Policy

and pursuant to SEC Rule 10b5-1, directors, officers and employees may establish written programs which permit (i) automatic trading of

the Company’s stock through a third-party broker or (ii) trading of the Company’s stock by an independent person (such as

an investment bank) who is not aware of Material Nonpublic Information at the time of a trade.

Under a Rule 10b5-1 plan, a broker

executes trades pursuant to parameters established by the director, executive officer, or other employee when entering into the plan,

without further direction from such insider.

Section 16(a) Reports

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

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

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

respectively.

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

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

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

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

transactions in the fiscal year ended June 30, 2023, were timely filed except for one late filing of a Form 4 by Michael Johnson relating to a sale of 4,000 shares of common stock pursuant to a Rule 10b5-1 trading plan previously

adopted by Esenjay Investments, LLC on June 13,

2023, which was inadvertently filed one day late on June 16, 2023.

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

of all Section 16(a) reports they file.

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

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

ended June 30, 2024 were timely filed.

11 - EXECUTIVE COMPENSATION

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All Other Compensation

Dutt, Chief Executive

Officer, President, and Chairman

Chief Financial Officer and Corporate Secretary

Chief Executive Officer, President, and Chairman

former Chief Financial Officer and Corporate Secretary (4)

Vice President of Operations

Chief Financial Officer and Corporate Secretary (5)

the fair value of the RSUs granted on grant date.

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

On November 7, 2022, Mr.

November 7, 2022, Mr.

Mason’s position was expanded to include additional Company authority and delegation.

March 1, 2024, Mr.

Scheiwe stepped down as the Company’s Chief Financial Officer and Corporate Secretary.

Royal was appointed as the Company’s Chief Financial Officer and Corporate Secretary effective March 4, 2024.

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

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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.

granted 0 and 175,265 stock options under the 2014 Plan during Fiscal 2022 and 2023, respectively.

We granted 72,566 and 250,786 restricted

stock units under the 2014 Plan during Fiscal 2023 and 2022, respectively.

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

We granted 100,192 and 175,265 stock options under the 2014 Plan during Fiscal 2024 and Fiscal 2023,

respectively.

We granted 51,171 and 72,566 restricted stock units under the 2014 Plan during Fiscal 2024 and Fiscal 2023,

respectively.

April 29, 2021, at the Company’s annual stockholders meeting, the 2021 Equity Incentive Plan (the “2021 Plan”) was

approved by our stockholders.

The 2021 Plan authorizes the issuance of awards for up to 2,000,000 shares of our common stock in the form

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

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

awards were granted under the 2021 Plan during Fiscal 2022.

We granted 449,176 stock options under the 2021 Plan during Fiscal 2023.

of June 30, 2023, we had 398,922 options outstanding and exercisable under the 2021 Plan, the 2014 Plan and the 2010 Plan.

as of June 30, 2023, we had 193,749 RSUs outstanding under the 2014 Plan.

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

We granted 934,012 and 449,176 stock options under the 2021 Plan during Fiscal 2024 and Fiscal 2023, respectively.

We granted 17,057 restricted stock units under the 2014 Plan during Fiscal 2024.

did not grant any restricted stock units under the 2021 Plan during Fiscal 2023.

of June 30, 2024, we had 426,363 options outstanding and exercisable and 114,666 RSUs outstanding under the 2021 Plan, the 2014 Plan

and the 2010 Plan.

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

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Award Grant Date

Award Expiration Date

Number of Securities Underlying Unexercised Options Exercisable

Number of Securities Underlying Unexercised Options Uexercisable

Number of Securities Underlying Unexercised Options Unexercisable

Equity Incentive Plan Awards:

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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 ($)

Grant Date Market Value of Shares or Units of Stock That Have Not Vested

Equity Incentive Plan Awards:

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Equity Incentive Plan:

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

Charles Scheiwe

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.

Grant Date Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

Ronald F.Dutt

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 or, when the expected term exceeds how long the Company’s stock has been publicly traded, based on historical

volatility of a comparable peer group of publicly traded companies.

The risk-free interest rate is based on the U.S.

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

The fair value of each restricted stock unit is

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

November 7, 2022, Mr.

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

On November 7, 2022, Mr.

Mason’s position was expanded to include additional Company authority and delegation.

Royal was appointed as the Company’s Chief Financial Officer and Corporate Secretary effective March 4, 2024.

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

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stockholders, unless otherwise earlier terminated.

was no stock purchased under the 2023 ESPP during Fiscal 2023.

There were 37,543 and zero shares of stock purchased under the ESPP during Fiscal 2024 and Fiscal 2023, respectfully.

Agreements with Executive Officers

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Dutt’s current annual base salary is $375,000.

On November 20, 2024, Mr.

Dutt notified the Company’s Board of Directors that he intends to retire from his position upon the appointment

of a successor.

The Board has commenced a search for a new chief executive officer and Mr.

Dutt will remain with Flux Power through the

search and transition period.

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

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Pursuant to the terms of the Scheiwe Employment Agreement, Mr.

current annual base salary is $205,200.

annual base salary was $205,200.

On February 16, 2024, the Company and Mr.

Charles Scheiwe agreed to the stepping down of Mr.

as the Company’s Chief Financial Officer and Secretary, including all positions with the Company and Flux Power, Inc., a wholly-owned

subsidiary of the Company (“Flux”) and transitioning to a consultant for the Company (“the “Transition”),

effective March 1, 2024 (the “Separation Date”).Through the Separation Date, Mr.

Scheiwe will be entitled to continue

to receive his current salary.

In addition, in connection with the Transition, the Board approved the accelerated vesting of unvested

portions of outstanding awards previously granted to Mr.

Scheiwe under the Company’s 2014 Equity Incentive Plan and 2021 Equity

Incentive Plan (the “2021 Plan”).

February 22, 2024, we entered into an Employment Agreement with Mr.

Royal, in connection with Mr.

Royal’s appointment

as Chief Financial Officer and Corporate Secretary, which provides for an annual base salary of $330,000, effective March 4, 2024 (the

“Employment Agreement”).

The Employment Agreement includes terms relating to change in control, termination, severance, benefits

and the acceleration of vesting of options and restricted stock units upon certain events.

In addition, Mr.

Royal will be eligible for

a 60% cash bonus, as a percentage of base salary, and incentive stock options to purchase up to 55,000 shares of the Company’s

common stock (the “Options”) under the 2021 Plan.

The Options will be subject to the terms and conditions provided in the

form of Incentive Stock Option Agreement under the 2021 Plan, will have an exercise price based on the Company’s 10-day volume

weighted average price on the grant date, and will expire ten (10) years from the grant date and vest in four (4) equal annual instalments

commencing one year after the grant date.

their respective employment agreement, Messrs.

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

Dutt and Royal, 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

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

Dutt and Scheiwe and are

Dutt and Royal and are

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

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

Dutt and Royal 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

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

Separation Agreements

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

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

March 1, 2024 and in connection with the Transition, the Company and Mr.

Scheiwe entered into a Separation and Release Agreement (the

“Scheiwe Separation Agreement”).

Under the Scheiwe Separation Agreement, Mr.

Scheiwe will be entitled to:

(i) cash severance

of $205,200, which is an amount equal to 12 months of Mr.

Scheiwe’s base salary in effect as of the Separation Date, (ii) a one-time

payment of $22,840.68, less required withholdings, to cover the COBRA premiums for COBRA continuation coverage for a period of twelve

(12) months following the Separation Date, and (iii) provided that Mr.

Scheiwe timely elects and enrolls in the life insurance continuation

coverage, reimbursement for an amount equal to twelve (12) months of such life insurance continuation coverage.

The Separation Agreement

additionally includes a customary general release of claims by Mr.

Scheiwe in favor of the Company and certain related parties.

November 5, 2020, the Board approved an annual cash bonus plan (the “Annual Bonus Plan”) which allows the Compensation Committee

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participate in the Annual Bonus Plan.

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

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

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

GAAP), new strategic

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

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

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

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

Target Cash Bonus

Maximum Payout(1)

Chief Executive Officer

Charles Scheiwe

Chief Financial Officer

Vice President of Operations

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.

October 31, 2022, the Compensation Committee and the Board approved the following cash bonuses to the following executive officers, whereby

the final cash bonus payout was determined based on a payout percentage of the executive’s previous target cash bonus for fiscal

Chief Executive Officer

Charles Scheiwe

Chief Financial Officer

Vice President of Operations

October 20, 2023, the Board approved an amended and restated annual cash bonus plan (the “Amended 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 Amended

Annual Bonus Plan (“Participants”) as long as the Participant remains an active regular employee of the Company.

Annual Bonus Plan is effective for fiscal year 2024 and each fiscal year thereafter (the “Plan Year”).

For each Plan Year,

the Compensation Committee will establish an aggregate amount of allocable Bonus under the Amended Annual Bonus Plan and determine the

performance goals applicable to a bonus during a Plan Year (the “Participation Criteria”).

The Participation Criteria may

differ from Participant to Participant and from bonus to bonus.

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

in the Amended Annual Bonus Plan.

Amended Annual Bonus Plan was approved by the Board in anticipation of the Company adopting its “clawback” policy applicable

to its executive officers as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

Clawback Policy

To comply with Section 10D of the Securities Exchange Act of 1934, as amended, Rule 10D-1 promulgated under the Securities Exchange Act

of 1934, as amended, and Nasdaq Listing Rule 5608 applicable to incentive-based compensation for executive officers of listed companies,

in November 2023, the Board adopted a Policy for the Recovery of Erroneously Awarded Compensation (the “Clawback Policy”)

with an effective date of October 2, 2023.

Current executive officers of the Company have agreed in writing to the terms and conditions

of the Clawback Policy.

Under the Clawback Policy, if the Company is required to restate its financial results due to material noncompliance

with financial reporting requirements under the federal securities laws, the Company will recoup any erroneously awarded incentive-based

compensation from the Company’s current and former executive officers.

Administration of the Clawback Policy will be by the Compensation

Committee of the Company.

Restatement of Prior Financial

In connection with the restatements of the Prior Financial Statements undertaken

by the Company, the Compensation Committee, as the administrator, completed a recovery analysis under the Company’s Clawback Policy.

The Compensation Committee concluded that although bonus amounts were paid to executive officers for fiscal periods ended before the effective

date of the Clawback Policy, October 2, 2023, the bonuses will be deemed to be “Received” (as defined in the Clawback Policy)

during those fiscal periods before the Clawback Policy became effective.

As a result, such amounts would not fall under the definition

of “Clawback Eligible Incentive Compensation” (as defined in the Clawback Policy”) and would therefore not be subject

to further recovery analysis or actions for recovery.

The analysis and conclusion does not include any analysis or recoverable amounts

under 304 of the Sarbanes-Oxley Act pursuant to action by SEC.

October 31, 2022, the Compensation Committee also approved the bonus pool and performance criteria for the Annual Bonus Plan for the

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Percentage of

Chief Executive Officer

Chief Executive

$ 300,000 (2)

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Chief Financial Officer

Vice President of Operations

to a bonus cap for achieving above set revenue target and a payout cap for achieving 10% positive Adjusted EBITDA.

be effective during the second fiscal quarter of 2023.

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

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

Stock Unit Grants

did not grant any Restricted Stock Units (“RSUs”) to any of our executive officers in Fiscal 2023.

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

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

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

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

Based Awards”).

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

according to the vesting schedule indicated below:

Based Awards:

Vesting Schedule

Chief Executive Officer

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

President of Operations

Subject to a bonus cap for achieving above set revenue target and a payout cap for achieving 10% positive Adjusted EBITDA.

To be effective during the second fiscal quarter of 2023.

October 20, 2023, pursuant to the recommendation of the Compensation Committee of the Board (the “Compensation Committee”),

the Board approved the following salary increases (the “Fiscal 2024 Annual Salary”) to the following executive officers, effective

for the fiscal year 2024 (“Fiscal 2024”):

Chief Executive

Charles Scheiwe*

Chief Financial Officer

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

Jeffrey Mason

Vice President of Operations

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

Based Awards:

Vesting Schedule

Chief Executive Officer

Three years from grant upon meeting performance target*

Plus an additional supplemental payment of $4,000 per month

March 1, 2024, pursuant to the recommendation of the Compensation Committee, the Board approved an adjustment to the base salary for

the following named executive officer:

Jeff Mason, Vice President of Operations.

The adjustment reflects a change in base salary to $275,000,

effective March 1, 2024.

Bonuses Under the Amended Bonus Plan

October 20, 2023, pursuant to the recommendation of the Compensation Committee, the Board also approved the bonus pool and performance

criteria for the Amended Annual Bonus Plan for Fiscal 2024 (the “2024 Bonus”).

For Fiscal 2024, the performance goals applicable to

a bonus are based on the Company achieving certain targets based on the Company’s full year revenue, Adjusted EBITDA (earnings

before interest, income taxes, depreciation, amortization, and stock-based compensation) for Fiscal 2024, and functional goals (the “Financial

Targets”), in addition to individual performance objectives and goals (the “2024 Performance Matrix”).

Board approved the following cash bonuses under the 2024 Bonus for the following executive officers:

Bonus Maximum Payout (2)

Chief Executive

Charles Scheiwe

Chief Financial Officer

Three years from grant upon meeting performance target *

Jeffrey Mason

Vice President of Operations

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.

Full maximum payout assuming targets reached as set forth in the 2024 Performance Matrix.

Full maximum payout for achieving certain additional gross margin targets

Stock Unit Grants

did not grant any Restricted Stock Units to any of our executive officers in Fiscal 2024 and Fiscal 2023.

Option Grants

October 31, 2022 (the Grant Date”), the Compensation Committee approved the grant of incentive stock options (the “Options”)

under the Company’s 2014 Equity Incentive Plan (the “2014 Plan”) and the Company’s 2021 Equity Incentive Plan

(the “2021 Plan”) to certain employees of the Company or its subsidiary, Flux Power, Inc.

The Options are subject to the

terms and conditions provided in the form of Incentive Stock Option Agreement under the 2014 Plan (the “2014 Option Agreement”)

or the form of Incentive Stock Option Agreement under the 2021 Plan (the “2021 Option Agreement”).

The following named executive

officers of the Company were granted Stock Options under the 2021 Plan in such number and vesting schedule set forth as follows:

Vesting Schedule

Chief Executive Officer

Four (4) equal annual installments commencing one year after the Grant Date

Charles Scheiwe

Chief Financial Officer

Four (4) equal annual installments commencing one year after the Grant Date

Vice President of Operations

Four (4) equal annual installments commencing one year after the Grant Date

October 20, 2023 (the “Fiscal 2024 Grant Date”), pursuant to the recommendation of the Compensation Committee, the Board approved

the grant of stock options (the “Fiscal 2024 Options”) under the Company’s 2014 Equity Incentive Plan (the “2014 Plan”)

and the Company’s 2021 Equity Incentive Plan (the “2021 Plan” and together with 2014 Plan, the “Plan”)

to certain employees of the Company or its subsidiary, Flux Power, Inc.

The Fiscal 2024 Options are subject to the terms and conditions provided

in the form of the related Incentive Stock Option Agreement under the 2014 Plan (the “2014 Option Agreement”) or the form

of Incentive Stock Option Agreement under the 2021 Plan (the “2021 Option Agreement”).

Additionally, as previously discussed, Mr.

Royal was granted options as part of his chief financial officer employment agreement.

following executive officers of the Company were granted Options in such number, with such vesting schedule, and under the respective

Plan, set forth as follows:

Executive Officer

over 3 years from the date of grant

Financial Officer

over 3 years from the date of grant

President of Operations

over 3 years from the date of grant

Financial Officer

over 3 years from the date of grant

to $100,000 ISO limitation under the 2021 Plan.

Excess, if any, issued as non-qualified stock options.

October 31, 2022 (the “Fiscal 2023 Grant Date”), the Compensation Committee approved the grant of incentive stock options (the

“Fiscal 2023 Options”) under the Company’s 2014 Plan and the Company’s 2021 Plan to certain employees of the Company

or its subsidiary, Flux Power, Inc.

The Options are subject to the terms and conditions provided in the form of the 2014 Option Agreement

or the “2021 Option Agreement.

The following named executive officers of the Company were granted Stock Options under the 2021

Plan in such number and vesting schedule set forth as follows:

Executive Officer

Annually over 4 years from the date of grant

Financial Officer

Annually over 4 years from the date of grant

President of Operations

Annually over 4 years from the date of grant

Subject to $100,000 ISO limitation under the 2021 Plan.

Excess, if any, issued as non-qualified stock options.

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

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

Non-Executive

Independent Director

Independent Non-Executive Director

Base Retainer (cash)

Chair Fee (cash)

Lead Independent Director

Lisa Walters-Hoffert

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Michael Johnson

Cosentino resigned as our director on March 1, 2022.

Cosentino resigned as

our director on March 1, 2022.

As appreciation for Mr.

Cosentino’s board services, the Board approved

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

435 unvested options

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

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

Bo-Linn’s services as Chairperson,

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

was no change to the cash compensation package for non-executive director of the Company during Fiscal 2023.

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 3rd quarter of Fiscal 2022.

Bo-Linn was appointed

as Chairperson of the Governance Committee on March 3, 2022.

Bo-Linn’s services as Chairperson, she is entitled to a

Chair Fee of $5,000 for calendar year 2022.

was no change to the cash compensation package for non-executive directors of the Company during Fiscal 2023.

March 8, 2023, 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 fiscal year ending June 30, 2024, as follows:

Non-Executive Director

Member Fee (1)

Independent Non-Executive Director

Base Retainer (cash)

Chair Fee (cash)

Committee Member Fee (1)

Lead Independent Director ( cash)

Lisa Walters-Hoffert

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Michael Johnson

Mark Leposky (3)

$3,750 for non-chair committee members of the Audit Committee, and $2,500 for non-chair committee members of the Compensation

Committee and the Nominating and Governance Committee.

Bo-Linn stepped down as our director on April 18, 2024.

As appreciation for Dr.

Bo-Linn’s services as a director to the Company,

the Board approved to accelerate the vesting of 18,561 unvested restricted stock units, effective as of April 18, 2024.

Leposky was elected as our director on April 18, 2024 and appointed as Chairperson of the Governance Committee on April 18, 2024.

Leposky’s services, he is entitled to a prorated Chair Fee and Committee Member Fee for the fiscal year ended June 30, 2024.

April 18, 2024, 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 the fiscal year ending June 30, 2025, as follows:

Independent Non-Executive Director

Base Retainer (cash)

Chair Fee (cash)

Committee Member Fee (1)

Lead Independent Director (cash)

Lisa Walters-Hoffert

Dale Robinette

Compensation Chair

Nominating and Governance Chair

Michael Johnson

Committee Member Fees:

$3,750 for non-chair committee members of the Audit Committee, and $2,500 for non-chair committee members of

the Compensation Committee and the Nominating and Governance Committee.

$3,750 for non-chair committee members

of the Audit Committee, and $2,500 for non-chair committee members of the Compensation, Nominating and Governance Committees.

Component of Non-Executive Director Compensation

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price prior to the grant issuance date.

April 2022, each of our non-executive directors were granted 17,793 RSUs which are subject to fully vest on April 28, 2023.

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.

s grant was consistent with the standard equity component of Non-Executive Director Compensation Package as approved by the Board.

April 2023, each of our non-executive directors were granted 16,883 RSUs which are subject to fully vest on April 20, 2024.

April 2022, each of our non-executive directors were granted 17,793 RSUs which fully vested on April 28, 2023.

In addition, in August

2022, as compensation for board services provided during the last quarter of Fiscal 2022, Dr.

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.

grant was consistent with the standard equity component of Non-Executive Director Compensation Package as approved by the Board.

April 2023, each of our non-executive directors were granted 16,883 RSUs which are scheduled to fully vest on April 20, 2024.

April 2024, each of our non-executive directors were granted 17,057 RSUs under the 2014 Plan or the 2021 Plan, which are scheduled to

fully vest on April 18, 2025.

Compensation Table

is summary of compensation accrued or paid to our non-executive directors during Fiscal 2023 and Fiscal 2022.

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.”

Fees Earned or

is a summary of compensation accrued or paid to our non-executive directors during Fiscal 2024 and Fiscal 2023.

Dutt, our chief

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

compensation Mr.

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

Compensation.”

Fees Earned or Paid In Cash

Stock Awards (1) ($)

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Dale Robinette

Cosentino Jr.

Michael Johnson

Cheemin Bo-Linn (2)

Cosentino resigned as our director on March 1, 2022.

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

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

Bo-Linn stepped down as our director on April 18, 2024.

Leposky was elected as our director on April 18 , 2024.

following table shows the aggregate number of vested stock options held by our non-employee directors as of June 30, 2024 and June 30,

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Michael Johnson

Cosentino Jr.

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

Cosentino resigned as our director on March 1, 2022.

Bo-Linn stepped down as our director on April 18, 2024.

Leposky was elected as our director on April 18, 2024.

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

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or otherwise, subject to community property laws where applicable.

As of September 8, 2023, we had a total of 16,478,238 shares of common

stock issued and outstanding.

following table sets forth, as of September 8, 2023, 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.

As of January 3, 2025, we had a total of 16,842,465 shares

of common stock issued and outstanding.

following table sets forth, as of January 3, 2025, 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.

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)

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4,197,882 (2)

Ronald Dutt, Chief Executive Officer, President, and Director

Charles A Scheiwe, Chief Financial Officer and Secretary

Dutt, Chief Executive Officer, President, and Director

Royal, Chief Financial Officer and Secretary

Mason, Vice President of Operations

Cheemin Bo-Linn, Director

Leposky, Director

Lisa Walters-Hoffert, Director

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Cleveland Capital Management L.L.C.

1,174,032 (9)

1250 Linda Street, Suite 304

Rocky River, OH 44116

Formindable Asset Management, LLC

Formidable Asset Management, LLC

3,274,325 (10)

221 E Fourth Street, Suite 2700

Cincinnati OH 45202

1,598,228 (10)

Represents less than 1% of shares outstanding.

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of stock options.

33,030 shares of common stock and 213,155 shares of common stock issuable upon exercise of stock options and settlement of vested

10,118 shares of common stock and 35,615 shares of common stock issuable upon exercise of stock options and settlement of vested

1,376 shares of common stock and 1,280 shares of common stock issuable upon settlement of vested RSUs.

22,618 shares of common stock.

21,845 shares of common stock and 3,948 shares of common stock issuable upon exercise of stock options.

20,845 shares of common stock and 3,948 shares of common stock issuable upon exercise of stock options.

on Amendment No.

5 to Schedule 13G filed jointly by Cleveland, Rocky River Specific Opportunities Fund LLC, Wade Massad and Cleveland

Includes 41,930 shares

of common stock, 317,012 shares of common stock issuable upon exercise of stock options and 17,235 shares of common stock issuable

upon vesting of restricted stock units within 60 days.

Royal was appointed

as Chief Financial Officer and Secretary effective March 4, 2024.

Includes 3,552 shares of

common stock, 35,802 shares of common stock issuable upon exercise of stock options and 1,280 shares of common stock issuable up

vesting of restricted stock units within 60 days.

Leposky was elected

as a director on April 18, 2024.

Includes 27,050 shares

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

Includes 39,254 shares

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

Based on Amendment No.

7 to Schedule 13G filed jointly by Cleveland, Rocky River Specific Opportunities Fund LLC, Wade Massad, John Shiry and Cleveland

Capital Management, L.L.C.

with the SEC on February 13, 2023.

Reflects 945,214 shares of common stock beneficially owned by certain

private funds managed by Cleveland Capital Management, L.L.C., or by its principals.

on Amendment No.

1 to Schedule 13G filed by Formidable Asset Management, LLC with the SEC on May 4, 2023.

Represents less than 1% of shares outstanding.

with the SEC on February 7, 2024, reporting information as of December 31, 2023.

Reflects 1,174,032 shares

of common stock held by certain private funds managed by Cleveland Capital Management, L.L.C., or by its principals, and hold shared

voting and dispositive power with respect to such shares.

Excludes (i) 18,700 shares of common stock individually held by Mr.

and (ii) 50,000 shares of common stock individually held by Mr.

Based on Schedule 13D filed

by Formidable Asset Management, LLC with the SEC on October 31, 2023.

Reflects (i) 548,226 shares of common stock held by Formidable

Asset Management, LLC, and (ii) 2,726,099 shares of common stock held by certain accounts managed by Formidable Asset Management,

LLC, and hold shared voting and dispositive power with respect to such shares.

13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

RELATIONSHIPS AND RELATED TRANSACTIONS

following includes a summary of certain relationships and transactions, including transactions since July 1, 2021 to September 8, 2023

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

following includes a summary of certain relationships and transactions, including transactions since July 1, 2022 to January 3,

2025 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.”

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approval of related party transactions.

Line of Credit Facility

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

(“Cleveland”),

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

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

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

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

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

Commitment Amount.

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

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

to certain ownership limitations, exercisable immediately.

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

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

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

On December 15, 2022, the Board of Directors of the Company elected

to extend the Due Date to December 31, 2023 and the Company paid the Lenders an extension fee in the aggregate amount of $80,000.

of Credit Facility and Subordinated Unsecured Promissory Note

November 2, 2023, we entered into a Credit Facility Agreement (the “Credit Facility”) with Cleveland (the “Lender”).

The Credit Facility provides the Company with a line of credit of up to $2,000,000 for working capital purposes (“LOC”).

In connection with the LOC, the Company issued a subordinated unsecured promissory note for $2,000,000 (the “Commitment Amount”)

in favor of the Lender (the “Note”).

to the terms of the Credit Facility, the Lender agreed to make loans (each such loan, an “Advance”) up to such Lender’s

Commitment Amount to the Company from time to time, until August 15, 2025 (the “Due Date”).

The Note accrues interest at

Secured Overnight Financing Rate plus nine percent (9%) per annum on each Advance from and after the date of disbursement of such Advance.

All indebtedness, obligations and liabilities of the Company to the Lender is subject to the rights of Gibraltar Business Capital, LLC,

a Delaware limited liability company (together with its successors and assigns, “GBC”), pursuant to a Subordination Agreement

dated on or about November 2, 2023, by and between the Lender and GBC (the “Subordination Agreement”).

Subject to the Subordination

Agreement, 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.

Subject to the Subordination Agreement, the Note is payable upon the earlier

of (i) the Due Date or (ii) on occurrence of an event of Default (as defined in the Note).

As consideration of the Lender’s commitment

to provide the Advances, we agreed to issue the Lender warrants to purchase 41,196 shares of common stock (the “Warrants”)

which are exercisable immediately from the date of issuance, expire on the five (5) year anniversary of the date of issuance and have

an exercise price of $3.24 per share.

DIRECTOR INDEPENDENCE

A majority of our Board of Directors are independent directors, see discussion above under “Item 10.

Executives and Corporate Governance – Board Composition, Committees and Independence.”

14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

33 unchanged sentences

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

Consolidated Balance Sheets as of June 30, 2023 and 2022

Consolidated Statements of Operations for the Years Ended June 30, 2023 and 2022

Consolidated Statements of Stockholders’ Equity for the Years Ended June 30, 2023 and 2022

Consolidated Statements of Cash Flows for the Years Ended June 30, 2023 and 2022

Consolidated Balance Sheets as of June 30, 2024, 202 3

(restated) and 2022 (restated)

Statements of Operations for the Years Ended June 30, 2024, 2023 (restated) and 202 2 (restated)

Statements of Stockholders’ Equity for the Years Ended June 30, 2024, 2023 (restated) and 2022 (restated)

Statements of Cash Flows for the Years Ended June 30, 2024, 2023 (restated) and 2022 (restated)

Notes to the Consolidated Financial Statements

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Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on June 28, 2022.

Form of Warrant.

Incorporated by reference to Exhibit 4.1 on Form 8-K filed with the SEC on November 3, 2023.

Form of Indemnification Agreement.

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Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on May 4, 2021.

Form of Securities Purchase Agreement.

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

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.

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.

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.

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.

Flux Power Holdings, Inc.

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Incorporated by reference to Exhibit 10.3 on Form 8-K filed with the SEC on August 3, 2023.

Amended and Restated Annual Bonus Plan.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on October 24, 2023.

Credit Facility Agreement dated November 2, 2023.

Incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on November 3, 2023.

Form of Subordinated Unsecured Promissory Note (Cleveland).

Incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on November 3, 2023.

Amendment No.

2 to Loan and Security Agreement (GBC).

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on February 1, 2024.

Form of Separation and Release Agreement (Charles Scheiwe).

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on February 23, 2024.

Form of Consulting Agreement (Charles Scheiwe).

Incorporated by reference to Exhibit 10.2 on Form 8-K filed on February 23, 2024.

Employment Agreement (Kevin S.

Incorporated by reference to Exhibit 10.3 on Form 8-K filed on February 23, 2024.

Waiver Agreement dated May 8, 2024.

Incorporated by reference to Exhibit 10.5 on Form 10-Q filed on May 13, 2024.

Amendment No.

3 to Loan and Security Agreement (GBC).

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on August 14, 2024.

Waiver to Loan and Security Agreement dated August 30, 2024.

Waiver to Loan and Security Agreement dated January 17, 2025.

Amendment No.

4 to Loan and Security Agreement (GBC).

Incorporated by reference to Exhibit 10.1 on Form 8-K filed on January 28, 2025.

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.

Insider Trading Compliance Program Policy.

Subsidiaries.

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

Instance Document*

Taxonomy Extension Schema

Taxonomy Extension Calculation Linkbase

Taxonomy Extension Definition Linkbase

Taxonomy Extension Label Linkbase

Taxonomy Extension Presentation Linkbase

Cover Page Interactive Data File, formatted in Inline XBRL (included as Exhibit 101)

Policy for the Recovery of Erroneously Awarded Compensation

XBRL Instance Document.

XBRL Taxonomy Extension Schema.

XBRL Taxonomy Extension Calculation Linkbase.

XBRL Taxonomy Extension Definition Linkbase.

XBRL Taxonomy Extension Label Linkbase.

XBRL Taxonomy Extension Presentation Linkbase.

Page Interactive Data File, formatted in Inline XBRL (included as Exhibit 101).

management contract or compensatory plan or arrangement.

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Power Holdings, Inc.

September 21, 2023

January 29, 2025

Executive Officer

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Michael Johnson

Cheemin Bo-Linn

Lisa Walters-Hoffert

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(the “Company”) as of June 30, 2024, 2023

and 2022, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows, for each of the two

and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows, for each of the three

years in the period ended June 30, 2024, and the related notes (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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended June

as of June 30, 2024, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended June

30, 2024, in conformity with accounting principles generally accepted in the United States of America.

of Previously Issued Financial Statements

discussed in Note 2 to the consolidated financial statements, the Company has restated prior year consolidated financial statements to

correct misstatements.

Concern Uncertainty

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

in Note 3 to the consolidated financial statements, the Company’s current liquidity position and projected cash needs raise substantial

doubt about its ability to continue as a going concern.

Management’s plans regarding these matters are also described in Note 3.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty

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

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

Critical audit matters are matters arising from the current period audit

of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts

or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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

communicated to the audit committee and that:

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

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

We determined that there are no critical audit matters.

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Current assets:

Accounts receivable

Accounts receivable, net of allowance for credit losses of $ 55,000 , $ 0 and $ 0

at June 30, 2024, 2023 and 2022, respectively

Inventories, net

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Accrued expenses

Revolving line of credit

Line of credit

Deferred revenue

Customer deposits

Finance lease payable, current portion

Office lease payable, current portion

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

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Long term liabilities:

Finance lease payable, less current portion

Office lease payable, less current portion

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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none issued and outstanding

Common stock, $ 0.001 par value;

Common stock, $ 0.001

shares authorized;

16,462,215 and 15,996,658 shares issued and outstanding at June 30, 2023 and June 30, 2022, respectively

16,682,465 , 16,462,215

and 15,996,658

shares issued and outstanding at June 30, 2024, 2023 and 2022, respectively

Additional paid-in capital

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( 91,379,000 )

( 83,636,000 )

Total stockholders’ equity

3 unchanged sentences

STATEMENTS OF OPERATIONS

Year ended June 30,

Cost of sales

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( 6,412,000 )

( 16,221,000 )

Other income (expense):

Interest expense

Interest income (expense), net

( 1,718,000 )

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$ ( 8,333,000 )

$ ( 7,743,000 )

$ ( 16,473,000 )

Net loss per share - basic and diluted

Net loss per share - basic

Weighted average number of common shares outstanding - basic and diluted

Weighted average number of common shares outstanding - basic

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

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STATEMENTS OF STOCKHOLDERS’ EQUITY

Capital Stock

Balance, as restated, at June 30, 2023

$ ( 91,379,000 )

Issuance of common stock — exercised options and RSU settlements

Issuance of common stock – ESPP

Fair value of warrants issued

Stock-based compensation

( 8,333,000 )

Balance at June 30, 2024

$ ( 99,712,000 )

Balance, as restated, at June 30, 2022

$ ( 83,636,000 )

Issuance of common stock — public offering, net of costs

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( 7,743,000 )

Balance at June 30, 2023

Balance as restated, at June 30, 2023

$ ( 91,379,000 )

Capital Stock

Balance at June 30, 2021

Balance, as restated, at June 30, 2021 *

$ ( 67,163,000 )

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( 16,473,000 )

Balance at June 30, 2022

Balance, as restated, at June 30, 2022

$ ( 83,636,000 )

$ ( 83,636,000

* June 30, 2021 total shareholders’ equity, as restated, reflects the impact of restatement adjustments related to periods prior to the year ended June 30, 2022.

The impact of restatement is a decrease of $ 958,000 to accumulated deficit at June 30, 2021.

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

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$ ( 7,743,000 )

$ ( 16,473,000 )

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

Stock-based compensation

Fair value of warrants issued as debt discount cost

Amortization of debt issuance costs

Noncash lease expense

Allowance for inventory reserve

Non-cash lease expense

Inventory write downs

Changes in operating assets and liabilities:

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( 2,408,000 )

Other current assets

( 5,550,000 )

Accounts payable

Accrued expenses

Deferred revenue

Accrued interest

Office lease payable

Office leases payable

Deferred revenue

Customer deposits

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( 3,574,000 )

( 23,893,000 )

Cash flows from investing activities:

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

Proceeds from stock option exercises and employee stock purchase plan exercises

Proceeds from revolving line of credit

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( 58,377,000 )

Payment of financed leases

( 3,561,000 )

Payment of finance leases

Net cash provided by financing activities

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( 1,736,000 )

( 4,228,000 )

Cash, beginning of period

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Common stock issued for vested RSUs

Warrants issued in connection with borrowing agreements, recorded as debt issuance cost

Supplemental cash flow information:

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

Company designs, develops, manufactures, and sells 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.

The Company believes its 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.

The Company’s 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.

The Company believes 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 revenue growth.

Company designs, develops, manufactures, and sells 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.

The Company believes its 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.

The Company’s

modular and scalable design allows different configurations of lithium-ion energy storage solutions 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.

The Company believes that the increasing demand for lithium-ion energy storage solutions and more environmentally

friendly energy storage solutions in the material handling sector should continue to drive revenue growth.

2 – Restatement of Previously Issued Financial Statements

connection with the preparation of its consolidated financial statements as of and for the year ended June 30, 2024, the Company identified

multiple prior-period misstatements.

In accordance with Staff Accounting Bulletins No.

99”) Topic 1.M, “Materiality”

99 Topic 1.N “Considering the Effects of Misstatements when Quantifying Misstatements in the Current Year Financial

Statements,” the Company assessed the materiality of these misstatements to its previously issued consolidated financial statements.

Based upon the Company’s evaluation of both quantitative and qualitative factors, the Company concluded the misstatements were

material to the Company’s previously issued consolidated financial statements for the fiscal years ended June 30, 2023 and 2022.

Accordingly, the Company is restating its previously issued audited consolidated financial statements and related notes as of and for

the fiscal years ended June 30, 2023 and 2022.

See Note 15 – Restatement of Previously Issued Financial Statements for the effects

of the restatement as of and for the fiscal years ended June 30, 2023 and 2022 and the restated amounts reflected within Note 4 –

Inventories, Note 11 – Income Taxes and Note 12 – Concentrations.

See Note 16 – Quarterly Financial Summary (Unaudited)

for the effects of the restatement on the interim periods within the fiscal years ended June 30, 2024, 2023 and 2022

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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of all intercompany accounts and transactions.

Considerations

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

For the year ended

June 30, 2023, the Company generated negative cash flows from operations of $ 3.6 million and had an accumulated deficit of $ 88.6 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 Gibraltar Business Capital Revolving Line of Credit and the Subordinated LOC, along with

the forecasted gross margin will be sufficient to meet the Company’s anticipated capital resources to fund planned operations for

the next twelve (12) months.

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

Based on the Company’s existing backlog and customer

orders, management anticipates increased revenues, together with the improvements in its gross margin will move it closer to

profitability.

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 2023, of approximately

million and believes through conversations with its customers that its anticipation of continued increase of new orders is

of September 8, 2023, $ 4.0

million remained available under the GBC Credit Facility and $ 4.0

million was available for future draws under the Subordinated LOC.

As of September 8, 2023, $ 4.1

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, and pricing recovery initiatives in efforts to increase our gross margins and improve cash flow from

Unforeseen factors in the general economy beyond management’s control could potentially have negative impact

on the planned gross margin improvement plan.

Liquidity and Financial Condition

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction

of liabilities in the normal course of business.

However, substantial doubt about the Company’s ability to continue as a going concern exists.

Historically,

the Company’s revenues and operating cash flows

have not been sufficient to sustain its operations and the Company has relied on debt and equity financing for additional funds.

Company has incurred an accumulated deficit of $ 99.7 million through June 30, 2024, and for the year ended June 30, 2024 generated negative

cash flows from operations of $ 4.8 million and incurred a net loss of $ 8.3 million.

As of December 31, 2024, the Company had a cash balance

million, $ 6.3 million available funding under the Gibraltar Business Capital (“GBC”) Credit Facility, and $ 1.0 million

available for future draws under the Subordinated LOC.

In addition, the Company’s

operations have been impacted by delays in new orders of its energy storage solutions due to corresponding deferrals of new forklift purchases

mainly caused by lower capital spending in the market sector that the Company serves and interest rate variability affecting selected large customer

fleets which have impacted the Company’s ability to meet projected revenue targets and generate cash from operations.

Management has evaluated the Company’s expected cash requirements, including investments in additional sales and marketing

and research and development, capital expenditures and working capital requirements, and believes the Company’s existing cash and

funding available under the GBC Credit Facility and the Subordinated LOC, along with the forecasted gross margin, will not be sufficient

to meet the Company’s anticipated capital resources to fund planned operations for the next twelve months following the filing date

of this Annual Report on Form 10-K.

is evaluating strategies to improve profitability of operations and to obtain additional

These steps include actual and planned price increases for our energy storage solutions, a number of cost saving

initiatives including product cost efficiencies and planned operating cost savings.

Based on the Company’s existing backlog and customer orders, management anticipates increased revenues, together

with the improvements in its gross margin will move it closer to profitability.

The planned gross margin improvement tasks include, but

are not limited to, a plan to drive bill of material costs down while increasing price of our products for new orders.

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

our gross margins and improve cash flow from operations.

Unforeseen factors in the general economy beyond management’s control could

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

Management is continuing to evaluate other sources of capital

to fund its operations and growth.

However, there can be no assurance that the Company will be able to realize the plans for improved

operations or access necessary additional financing when needed to provide sufficient liquidity to continue its operations over the next

twelve months.

If such liquidity is not available when required, management will be required to curtail investments in new product development,

which may have a material adverse effect on future cash flows and results of operations and the Company’s ability to continue operating

as a going concern.

The accompanying consolidated financial statements

do not include any adjustments that would be necessary should the Company be unable to continue as a going concern and, therefore, be

required to liquidate its assets and discharge its liabilities in other than the normal course of business and at amounts that may differ

from those reflected in the accompanying consolidated financial statements.

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

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and Cash Equivalents

of June 30, 2023 and June 30, 2022, cash was approximately $ 2.4 million and $ 485,000 , 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.

of June 30, 2024, 2023 and 2022, cash was approximately $ 0.6 million, $ 2.4 million and $ 0.5 million, 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, 2024, 2023 and 2022.

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

receivable are carried at their estimated collectible amounts.

The Company has not experienced collection issues related to its accounts

receivable and has not recorded an allowance for doubtful accounts during the fiscal years ended June 30, 2023 and 2022.

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 related to obsolete inventory in the amount of approximately $ 354,000 and

$ 111,000 during the fiscal years ended June 30, 2023 and 2022, respectively.

Accounts receivable are carried at their estimated collectible amounts.

The Company has not experienced significant issues related to the collection of its accounts receivable.

As of June 30, 2024, the company

has an allowance for credit losses of $ 55,000 .

The company did not record an allowance for credit losses during the years ended

June 30, 2023 and 2022.

Inventories consist primarily of battery management systems and the related

subcomponents and are stated at the lower of cost (first-in, first-out) or net realizable value.

The Company evaluates inventories to

determine if write-downs are necessary due to obsolescence or if the inventory levels are in excess of anticipated demand at market value

based on consideration of historical sales and product development plans.

The Company recorded an adjustment related to obsolete inventory

in the amount of approximately $ 490,000 , $ 690,000 and $ 665,000 during the years ended June 30, 2024, 2023 (as restated) and 2022 (as restated),

respectively.

Plant and Equipment

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paid-in-capital.

Company recognizes revenue in accordance to the Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts

with Customers (“ASC 606”) for all contracts.

Company recognizes revenue in accordance to the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) for

all contracts.

The Company derives its revenue from the sale of products to customers.

Company sells its products primarily through a distribution network of equipment dealers, OEMs and battery distributors in primarily

North America.

The Company recognizes revenue for the products when all significant risks and rewards have been transferred to the customer,

there is no continuing managerial involvement associated with ownership of the goods sold is retained, no effective control over the

goods sold is retained, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the

transactions will flow to the Company and the costs incurred or to be incurred with respect to the transaction can be measured reliably.

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.

revenue is recognized as a distinct single performance obligation which for the Company’s three major customers represents the

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

As of June 30, 2023 and 2022, the Company carried warranty

liability of approximately $ 1,600,000 and $ 1,012,000 , respectively, which is included in accrued expenses on the Company’s consolidated

balance sheets.

As of June 30, 2024, 2023 and 2022, the Company carried

warranty liability of approximately $ 3,018,000 , $ 1,600,000 and $ 1,012,000 , respectively, which is included in accrued expenses on the

Company’s consolidated balance sheets.

of Long-lived Assets

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Company is actively engaged in new product development efforts.

Research and development cost relating to possible future products are

Research and development costs relating to possible future products are

expensed as incurred.

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As a result, no unrecognized tax benefits have been identified

as of June 30, 2023 or June 30, 2022, and accordingly, no additional tax liabilities have been recorded.

as of June 30, 2024, 2023 or 2022 and, accordingly, no additional tax liabilities have been recorded.

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

5 unchanged sentences

the fiscal years ended June 30, 2024, 2023 and 2022, basic and diluted weighted-average common shares outstanding were 16,548,533 , 16,055,256

and 15,439,530 ,

respectively.

The Company incurred a net loss for the fiscal years ended June 30, 2023 and 2022, and therefore, basic and diluted

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

total potentially dilutive common shares outstanding at June 30, 2023 and 2022 that were excluded from diluted weighted-average

common shares outstanding represent shares underlying outstanding stock options, RSUs, and warrants, and totaled 2,622,268

and 2,262,773 ,

respectively.

June 30, 2023 and 2022 potentially dilutive common shares outstanding that were excluded from diluted weighted-average common shares

outstanding were as follows:

and 15,439,530 , respectively.

The Company incurred a net loss for the fiscal years ended June 30, 2024, 2023 and 2022, and therefore, basic

and diluted loss per share for each fiscal year were the same because potential common share equivalents would have been anti-dilutive.

The potentially dilutive common shares outstanding at June 30, 2024, 2023 and 2022 that were excluded from diluted weighted-average common

shares outstanding represent shares underlying outstanding stock options, RSUs and warrants, as follows:

SCHEDULE OF DILUTIVE COMMON SHARES OUTSTANDING EXCLUDED FROM DILUTIVE WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Year ended June 30,

Stock options

Antidilutive securities

Accounting Standards

Adopted Accounting Pronouncements

Company did not adopt any new accounting pronouncements for the year ended June 30, 2023 and 2022.

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

Accounting Pronouncements

Company did not adopt any new accounting pronouncements during the year ended June 30, 2024.

Issued Accounting Pronouncements

December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to

Income Tax Disclosures , which requires more detailed income tax disclosures.

The guidance requires entities to disclose

disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by

jurisdiction.

The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively.

standard is effective for our fiscal year ending June 30, 2026, with early adoption permitted.

The Company is evaluating the

disclosure requirements related to the new standard.

In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280):

Improvements to Reportable

Segment Disclosures ”, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced

disclosures about significant segment expenses.

The standard is effective annually for our fiscal year ending June 30, 2025 and interim

periods thereafter.

Early adoption is permitted.

The Company is evaluating the disclosure requirements related to the new standard.

4 – INVENTORIES

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( 1,930,000 )

Total property, plant and equipment, net

expense was approximately $ 899,000

and $ 575,000 , for the

fiscal years ended June 30, 2023 and 2022, respectively, and is included in selling and administrative expenses in the accompanying

consolidated statements of operations.

( 1,136,000 )

property, plant and equipment, net

expense was approximately $ 1,045,000 , $ 899,000 and $ 575,000 , for the fiscal years ended June 30, 2024, 2023 and 2022, respectively, and

is included in selling and administrative expenses in the accompanying consolidated statements of operations.

8 – NOTES PAYABLE

Line of Credit

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

Business Capital Credit Facility

July 28, 2023, the Company entered into a Loan and Security Agreement (the “Agreement”) with GBC.

The Agreement provides

the Company with a senior secured revolving loan facility for up to $ 15.0 million (the “Revolving Loan Commitment”).

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 Agreement).

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.

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

due monthly on the last day of the month.

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

equal to three percent ( 3.0 %) above the rate that is otherwise applicable to such amounts.

The Company paid GBC a non-refundable closing

fee for the GBC Credit Facility of $ 112,500 upon the execution of the Agreement.

In addition, the Company is 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.

November 2, 2023, the Company entered into the First Amendment to Loan and Security Agreement (the “First Amendment”) with

Gibraltar Business Capital, LLC (“GBC”), which amended certain definition of the Subordinated Debt referenced in the Loan

and Security Agreement dated July 28, 2023 as Subordinated Debt owed by Borrower to Cleveland Capital L.P.

pursuant to that certain Subordinated

Unsecured Promissory Note, dated as of November 1, 2023, in the aggregate principal amount of $ 2,000,000 .

January 30, 2024, the Company entered into the Second Amendment to Loan and Security Agreement (the “Second Amendment”) with

GBC, which amended certain terms of the Loan and Security Agreement dated July 28, 2023, including but not limited to, (i) increasing

the commitment amount from $ 15.0 million to $ 16.0 million, (ii) adding an additional non-refundable closing fee in the amount of $ 7,500 in

cash for the increase in the commitment amount to $ 16 million, (iii) amending the definition of “Eligible Accounts;” and

(iv) amending the EBITDA Minimum financial covenant of the Company.

In consideration for the Second Amendment, the Company agreed to

pay GBC a non-refundable amendment fee of $ 10,000 in cash, in addition to the $ 7,500 non-refundable closing fee paid.

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.

During the year ended June 30, 2024, the

Company had multiple drawdowns under the GBC Credit Facility totaling $ 65.8 million, inclusive of the full repayment of the SVB Credit

Facility, and made multiple repayments totaling $ 52.0 million.

As of June 30, 2024, the outstanding balance under the GBC Credit Facility

was approximately $ 13.8 million, with up to $ 2.2 million available for future borrowings, subject to borrowing base limitations.

April 2024, the Company notified GBC of a certain event of default with respect to the Company’s anticipated failure to maintain

the EBITDA covenant for the trailing three (3) month period ended April 30, 2024, or Default.

On May 8, 2024, the Company received a

Waiver, which waived the Default, subject to satisfaction of the following conditions:

(i) receipt of a counterpart of the Waiver duly

executed by the Company;

(ii) receipt of the waiver fee of $20,000;

(iii) receipt of the representations and warranties from the Company

that after giving effect to the Waiver, the representations and warranties contained in the Agreement, the Waiver and the other Loan

Documents shall be true and correct;

and (iv) after giving effect to the Waiver, no additional event of default shall have occurred and

be continuing on and as of the effective date of the Waiver.

May 31, 2024, the Company entered into the Third Amendment to Loan and Security Agreement (the “Third Amendment”) with GBC

which amended certain terms of the Loan and Security Agreement dated July 28, 2023, including but not limited to amending the EBITDA

Minimum financial covenant of the Company.

In consideration for the Third Amendment, the Company agreed to pay GBC a non-refundable amendment

fee of $ 50,000 in cash.

Valley Bank Credit Facility

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

Bank (“SVB”).

October 29, 2021, the Company entered into a First Amendment to Loan and Security Agreement (“First Amendment” and together

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

with the Loan Agreement, the “Second Amended Loan Agreement”) with SVB, which amended certain terms of the Loan Agreement, including but not limited to, (i) increasing the amount of the revolving line of credit to $8.0 million, (ii) changing the financial

with the Loan Agreement, the “Second Amended Loan Agreement”) with SVB, which amended certain terms of the Loan Agreement,

including but not limited to, (i) increasing the amount of the revolving line of credit to $ 8.0 million, (ii) changing the financial

covenants of the Company from one based on tangible net worth to another based on adjusted EBITDA (as defined in the Second Amendment)

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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.

November 7, 2022, we entered into a Third Amendment to Loan and Security Agreement (“Third Amendment”) with SVB, which amended

certain terms of the Second Amended Loan Agreement (together with the Second Amended Loan Agreement, the “Third Amended Loan Agreement”),

November 7, 2022, the Company entered into a Third Amendment to Loan and Security Agreement (“Third Amendment”) with SVB,

which amended certain terms of the Second Amended Loan Agreement (together with the Third Amendment, the “Third Amended Loan Agreement”),

including but not limited to, (i) extending the maturity date from November 7, 2022 to May 7, 2023 (the “Extension Period”),

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April 27, 2023, the Company entered into a Fifth Amendment to Loan and Security Agreement (the “Fifth Amendment”) with SVB

which further amended certain terms of the credit facility (together with the Fourth Amended Loan Agreement, the “Fifth Amended

Loan Agreement Agreement”), including but not limited to, (i) extending the maturity date from May 7, 2023 to December 31, 2023

(the “2023 Extension Period”), (ii) amending the EBITDA financial covenant of the Company to cover the 2023 Extension Period,

and (iii) amending the definition of EBITDA (as defined in the Fifth Amendment).

Pursuant to the Fifth Amendment, the Company agreed

to pay SVB a non-refundable amendment fee of $ 30,000 and SVB’s legal fees and expenses incurred in connection with the Fifth Amendment.

In addition, SVB also agreed to waive compliance by the Company of the former EBIDTA financial covenant as of the month ended March 31,

Company has used the SVB Credit Facility to fund its operations and working capital requirements.

Amounts outstanding under the Revolving

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

pursuant to the terms of the Fifth Amended Loan Agreement, and the Intellectual Property Security Agreement dated as of October 29, 2021.

During the year ended June 30, 2023, the Company had multiple Revolving LOC drawdowns totaling $ 63.4 million and multiple Revolving LOC

payments totaling $ 58.4 million.

As of June 30, 2023, the outstanding balance under the Revolving LOC was approximately $ 9.9 million.

July 28, 2023, the Company terminated the Loan and Security Agreement, dated as of November 9, 2020, as amended, by and among SVB and

the Company, and concurrent with the entry into the Loan and Security Agreement, by and among Gibraltar Business Capital and the Company.

The Company repaid the entire outstanding principal balance of the SVB Credit Facility plus all accrued and unpaid interest and related

fees through the date of termination with a portion of the funds from the GBC Credit Facility on July 28, 2023.

(See Note 13 –

Subsequent Events)

which further amended certain terms of the credit facility (together with the Fifth Amendment, the “Agreement”), including

but not limited to, (i) extending the maturity date from May 7, 2023 to December 31, 2023 (the “2023 Extension Period”),

(ii) amending the EBITDA financial covenant of the Company to cover the 2023 Extension Period, and (iii) amending the definition of EBITDA

(as defined in the Fifth Amendment).

Pursuant to the Fifth Amendment, the Company agreed to pay SVB a non-refundable amendment fee of

Thirty Thousand Dollars ($ 30,000 ) and SVB’s legal fees and expenses incurred in connection with the Fifth Amendment.

SVB also agreed to waive compliance by the Company of the former EBITDA financial covenant as of the month ended March 31, 2023.

July 28, 2023, the Company repaid in full all principal outstanding under the SVB Credit Facility, together with all accrued and unpaid

interest and related fees, with a portion of the funds from the GBC Credit Facility and terminated the Loan and Security Agreement with

SVB, as amended.

the year ended June 30, 2024, the Company had multiple Revolving LOC drawdowns totaling $ 1.4 million and multiple Revolving LOC payments

totaling $ 11.3 million inclusive of the final repayment of the LOC in full.

9 – RELATED PARTY DEBT AGREEMENTS

of June 30, 2023 and June 30, 2022, the Company had no related party debt balance outstanding.

June 30, 2024,2023 and 2022, the Company had no related party debt balance outstanding.

Below are the activities for the Company’s

related party debt agreements that existed during the periods ended June 30, 2023 and 2022.

Line of Credit Facility

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

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

with Cleveland and HPO, the “Lenders”).

The Subordinated LOC provides the Company with a short-term line of credit 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 Subordinated 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, 2023, the Lenders committed to an aggregate commitment of $ 4,000,000 .

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

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

related party debt agreements that existed during the years ended June 30, 2024, 2023 and 2022.

Line of Credit Facilities

Capital, L.P.

Credit Facility

November 2, 2023, the Company entered into a Credit Facility Agreement (the “Credit Facility”) with Cleveland Capital, L.P.,

(the “Lender”).

The Credit Facility provides the Company with a line of credit of up to $ 2,000,000 for working capital purposes

(“2023 Subordinated LOC”).

In connection with the LOC, the Company issued a subordinated unsecured promissory note for $ 2,000,000

(the “Commitment Amount”) in favor of the Lender (the “Note”).

to the terms of the Credit Facility, the Lender agreed to make loans (each such loan, an “Advance”) up to such Lender’s

Commitment Amount to the Company from time to time, until August 15, 2025 (the “Due Date”).

The Note accrues interest at

Secured Overnight Financing Rate plus nine percent ( 9 %) per annum on each Advance from and after the date of disbursement of such Advance.

All indebtedness, obligations and liabilities of the Company to the Lender are subject to the rights of Gibraltar Business Capital, LLC

(together with its successors and assigns, “GBC”), pursuant to a Subordination Agreement dated on or about November 2, 2023,

by and between the Lender and GBC (the “Subordination Agreement”).

Subject to the Subordination Agreement, 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.

Subject to the Subordination Agreement, the Note is payable upon the earlier of (i) the Due Date or

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

consideration of the Lender’s commitment to provide the Advances to the Company, the Company issued the Lender warrants to purchase

41,196 shares of common stock (the “Warrants”) which rights are represented by a warrant certificate (“Warrant Certificate”).

Subject to certain ownership limitations, the Warrants are exercisable immediately from the date of issuance, expire on the five ( 5 )

year anniversary of the date of issuance and have an exercise price of $ 3.24 per share.

The exercise price of the Warrants is subject

to certain adjustments, including stock dividends, stock splits, combinations and reclassifications of the common stock.

of a Triggering Event (as defined in the Warrant Certificate), the holder of the Warrants will be entitled to exercise the Warrants and

receive the same amount and kind of securities, cash or property as such holder would have been entitled to receive upon the occurrence

of such Triggering Event if such holder had exercised the rights represented by the Warrant Certificate immediately prior to the Triggering

Additionally, upon the holder’s request, the continuing or surviving corporation as a result of such Triggering Event will

issue to such holder a new warrant of like tenor evidencing the right to purchase the adjusted amount of securities, cash or property

and the adjusted warrant price.

(See Note 10 – Stockholders’ Equity).

Subordinated LOC

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

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

The 2022 Subordinated

LOC provided the Company with a short-term line of credit not less than $ 3,000,000 and not more than $ 5,000,000 , to be used by the Company

for working capital purposes.

In connection with the 2022 Subordinated 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”).

to the terms of the 2022 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”).

15, 2022, the Board of Directors of the Company elected to extend the Due Date to December 31, 2023.

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be drawn down.

Note bears an interest rate of 15.0 %

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

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

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.

addition, each Lender signed a Subordination Agreement by and between the Lenders and 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.

On December 15, 2022, the Board of Directors of the Company

elected to extend the Due Date to December 31, 2023 and the Company paid the Lenders an extension fee in the aggregate amount of

On July 28, 2023, in conjunction with the concurrent termination of the SVB Revolving LOC and the entry into a new credit facility

with Gibraltar Business Capital (“GBC”), each Lender signed a Subordination Agreement by and between the Lenders and GBC

dated as of July 28, 2023 (the “GBC Subordination Agreement”) for the purposes of subordinating the right to payment

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

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 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.

On December 15, 2022, the Board of Directors of the

Company elected to extend the Due Date to December 31, 2023 and the Company paid the Lenders an extension fee in the aggregate amount

of $ 80,000 .

On July 28, 2023, in conjunction with the concurrent termination of the SVB Revolving LOC and the entry into a new credit

facility with Gibraltar Business Capital (“GBC”), each Lender signed a Subordination Agreement by and between the Lenders

and GBC dated as of July 28, 2023 (the “GBC Subordination Agreement”) for the purposes of subordinating the right to payment

under the Note to GBC’s indebtedness by the Company then incurred and outstanding or thereinafter incurred.

– Subsequent Events)

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

The Company has also agreed

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

In addition, each Note also provides that, upon the occurrence

of a Default, at the option of the Lender, the entire outstanding principal balance, all accrued but unpaid interest and/or Late Charges

(as defined in the Note) at once will become due and payable upon written notice to the Company by the Lender.

connection with entry into the Subordinated LOC, the Company paid to each Lender a one-time commitment 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

2022 Subordinated LOC included customary representations, warranties and covenants by the Company and the Lenders.

The Company has also

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

In addition, each Note also provides that, upon

the occurrence of a Default, at the option of the Lender, the entire outstanding principal balance, all accrued but unpaid interest and/or

Late Charges (as defined in the Note) at once will become due and payable upon written notice to the Company by the Lender.

connection with entry into the 2022 Subordinated LOC, the Company paid to each Lender a one-time commitment 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).

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

November 2, 2023, the 2022 Subordinated LOC was terminated.

10 – STOCKHOLDERS’ EQUITY

5 unchanged sentences

an “at-the-market offering” program (the “ATM Offering”).

Company agreed to pay HCW a commission in an amount equal to 3.0 % of the gross sales proceeds of the shares sold under the Sales Agreement.

In addition, the Company agreed to reimburse HCW for certain legal and other expenses incurred up to a maximum of $50,000 to establish

the ATM Offering, and $2,500 per quarter thereafter to maintain such program under the Sales Agreement.

The Company has also agreed pursuant

to the Sales Agreement to indemnify and provide contribution to HCW against certain liabilities, including liabilities under the Securities

May 27, 2021, the Company filed Amendment No.

1 (the “Amendment”) to the prospectus supplement dated December 21, 2020 (the

“Prospectus Supplement”) to increase the size of the ATM Offering from an aggregate offering price of up to $ 10 million in

the Prospectus Supplement to an amended maximum aggregate offering price of up to $ 20 million of shares of the Company’s common

stock (the “Shares”) (which amount includes the value of shares the Company has already sold prior to the date of the Amendment)

pursuant to the base prospectus dated October 26, 2020, the Prospectus Supplement, and the Amendment (collectively, the “Prospectus”).

December 21, 2020 through June 30, 2023, the Company sold an aggregate of 1,524,873 shares of common stock at an average price of $ 10.45

per share for gross proceeds of approximately $ 15.9 million under the ATM Offering.

The Company received net proceeds of approximately

$ 15.3 million, net of commissions and other offering related expenses.

Shares were 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 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.

October 5, 2023, the Company terminated the Sales Agreement with HCW pursuant to the terms of the Sales Agreement.

From December 21,

2020 through October 5, 2023, the Company sold an aggregate of 1,524,873 shares of common stock at an average price of $ 10.45 per share

for gross proceeds of approximately $ 15.9 million under the ATM Offering.

The Company received net proceeds of approximately $ 15.3 million,

net of commissions and other offering related expenses.

Direct Offering

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The “shelf” registration

statement will expire on October 26, 2023.

statement expired on October 26, 2023.

connection with the Company’s RDO, in September 2021 the Company issued five-year warrants to the RDO investors to purchase up

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price of $ 2.23 per share and had a fair value of approximately $ 80,000 .

November 2023 and in conjunction with the entry into the 2023 Subordinated LOC, the Company issued five -year warrants to Cleveland Capital,

to purchase up to 41,196 shares of the Company’s common stock at an exercise price of $ 3.24 per share with a fair value of

approximately $ 92,000 .

detail for the year ended June 30, 2024 is reflected below:

OF STOCK WARRANT ACTIVITY

SCHEDULE OF STOCK WARRANT ACTIVITY

Weighted Average

Exercise Price

Weighted Average

Contract Term

Warrants outstanding and exercisable at June 30, 2023

Warrants issued

Warrants exercised

Warrants forfeited and cancelled

Warrants outstanding and exercisable at June 30, 2024

detail for the year ended June 30, 2023 is reflected below:

Weighted Average

Exercise Price

Weighted Average

Contract Term

Warrants outstanding and exercisable at June 30, 2022

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Warrants outstanding and exercisable at June 30, 2023

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

Weighted Average

Exercise Price

Weighted Average

Contract Term

Warrants outstanding and exercisable at June 30, 2021

Warrants issued

Warrants outstanding and exercisable at June 30, 2022

Company uses the Black-Scholes valuation model to calculate the fair value of warrants.

The fair value of warrants was measured at the

issuance date using the assumptions in the table below:

OF FAIR VALUE ASSUMPTIONS OF WARRANTS

Year ended June 30,

Expected volatility

Risk free interest rate

Dividend yield

Expected term (years)

No warrants were issued during the year ended June 30, 2023.

connection with the reverse acquisition of Flux Power, Inc.

in 2012, the Company assumed the 2010 Plan.

As of June 30, 2023, there were

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

As of June 30, 2024, there weren’t

any options to purchase common stock outstanding under the 2010 Plan.

No additional options may be granted under the 2010 Plan.

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in stock options during the year ended June 30, 2024 and related balances outstanding as of that date are reflected below:

OF STOCK OPTIONS ACTIVITY

SCHEDULE OF STOCK OPTIONS ACTIVITY

Weighted Average

Exercise Price

Weighted Average

Contract Term

Aggregate intrinsic Value

Weighted Average Grant Date Fair Value

Outstanding at June 30, 2023

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in stock options during the year ended June 30, 2023 and related balances outstanding as of that date are reflected below:

Weighted Average

Exercise Price

Weighted Average

Contract Term

Aggregate intrinsic Value

Weighted Average Grant Date Fair Value

Outstanding at June 30, 2022

Forfeited and cancelled

Outstanding at June 30, 2023

Exercisable at June 30, 2023

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

Weighted Average

Exercise Price

Weighted Average

Contract Term

Aggregate intrinsic Value

Outstanding at June 30, 2021

Forfeited and cancelled

Outstanding and exercisable at June 30, 2022

Company uses the Black-Scholes valuation model to calculate the fair value of stock options.

The fair value of stock options was measured

at the grant date using the assumptions (annualized percentages) in the table below:

OF FAIR VALUE ASSUMPTIONS OF STOCK OPTIONS

Year ended June 30,

Expected volatility

Risk free interest rate

Forfeiture rate

Dividend yield

Expected term (years)

stock options were granted during the year ended June 30, 2022.

November 5, 2020, the Company’s Board of Directors approved an amendment to the 2014 Plan, to allow for grants of Restricted Stock

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

On April 20, 2023, a total of 67,532 time-based RSUs were authorized by the Company’s Board of Directors to be granted to the Company’s

four non-executive directors under the amended 2014 Option Plan.

Under the amended 2014 Option Plan and 2021 Plan, a total of 68,228 and 57,532 of time-based RSUs were authorized on April 18, 2024 and

April 20, 2023, respectively, by the Company’s Board of Directors to be granted to the Company’s four non-executive directors.

in RSUs during the year ended June 30, 2024 and related balances outstanding as of that date are reflected below:

OF RESTRICTED STOCK UNITS ACTIVITY

Number of Shares

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Weighted Average

Exercise Price

Weighted Average

Contract Term

Outstanding at June 30, 2023

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in RSUs during the year ended June 30, 2023 and related balances outstanding as of that date are reflected below:

Number of Shares

Weighted Average Grant date Fair Value

Average Remaining Contract Term

Weighted Average

Exercise Price

Weighted Average

Contract Term

Outstanding at June 30, 2022

Vested/Settled

Vested and settled

Forfeited and cancelled

Outstanding at June 30, 2023

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

Weighted Average

Exercise Price

Weighted Average

Contract Term

Outstanding at June 30, 2021

Vested and settled

Forfeited and cancelled

Outstanding at June 30, 2022

Stock Purchase Plan

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earlier terminated.

was no stock purchased under the 2023 ESPP during Fiscal 2023.

compensation expense for the fiscal years ended June 30, 2023 and 2022 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.

March 28, 2024, participants in the 2023 ESPP purchased an aggregate total of 37,543 shares of common stock at a price equal to 85 % of

$ 3.30 , which was the closing price of the Company’s common stock on the offering date pursuant to the provisions of the 2023 ESPP.

June 30, 2024, 312,457 shares of the Company’s common stock were available for future grants under the 2023 ESPP.

compensation expense for the fiscal years ended June 30, 2024 and 2023 represents the estimated fair value of stock options, RSUs and

ESPP offerings 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, 2023, the aggregate intrinsic value of the outstanding options and the

exercisable options were approximately $ 506,000

respectively.

At June 30, 2024, the aggregate intrinsic value of the outstanding options and the exercisable

options were zero and zero , respectively.

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

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Total stock-based compensation expense

Company uses the Black-Scholes valuation model to calculate the fair value of stock options.

The fair value of stock options was measured

at the grant date using the assumptions (annualized percentages) in the table below:

SCHEDULE OF FAIR VALUE ASSUMPTIONS OF STOCK OPTIONS

Year Ended June 30,

Expected volatility

Risk free interest rate

Forfeiture rate

Dividend yield

Expected term (years)

stock options were granted during the year ended June 30, 2022.

June 30, 2024, the unamortized stock-based compensation expense relating to outstanding stock options and RSUs was approximately $ 2,282,000

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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 and tax credit carryforwards.

A valuation allowance of approximately $ 23,923,000 and $ 22,951,000

has been established to offset the net deferred tax assets as of June 30, 2023 and 2022, respectively, due to uncertainties surrounding

the Company’s ability to generate future taxable income to realize these assets.

740 Income Taxes (“ASC 740”), deferred income taxes reflect the net effect

of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income

tax reporting purposes, and (b) net operating loss and tax credit carryforwards.

A valuation allowance of approximately $ 26,483,000 ,

$ 24,696,000 and $ 23,461,000 has been established to offset the net deferred tax assets as of June 30, 2024, 2023 and 2022, respectively,

due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets.

Company is subject to taxation in the United States, California and Georgia.

The Company’s tax years for 2010 and forward are subject

to examination by the United States and state taxing authorities due to the carry forward of unutilized net operating losses and research

and development credits (if any).

The Company’s tax years from 2010 and forward are

subject to examination by the United States and state taxing authorities due to the carry forward of unutilized net operating losses

and research and development credits, as applicable.

Company has incurred losses since inception.

A current state income tax provision of $ 3,000 has been recorded for state minimum and net

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

Significant components of the Company’s net deferred tax assets and liabilities are shown in the table below.

OF DEFERRED TAX ASSETS AND LIABILITIES

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Net operating loss carryforwards

Research & development credit carryforward

Research and development credit carryforward

Capitalized research and development expenses

Stock compensation

Disallowed interest expense

Lease liability

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( 24,696,000 )

( 23,461,000 )

Total deferred tax assets

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Total deferred tax liabilities

Net deferred tax liabilities

Total net deferred tax liabilities

June 30, 2024, the Company had unused net operating loss (“NOL”) carryovers of approximately $ 74,816,000 and $ 84,522,000

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$ ( 1,625,000 )

$ ( 3,459,000 )

State income taxes, net

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Permanent differences and other

Other true ups, if any

Other true ups

Change in valuation allowance

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

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

If 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 would be no impact on the Company’s consolidated financial statements as of June 30,

2024, 2023 and 2022.

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accounting in interim periods, disclosure and transition.

accordance with ASC 740, there are no unrecognized tax benefits as of June 30, 2023 or June 30, 2022.

Tax Cuts and Jobs Act resulted in significant changes to the treatment of research or experimental (“R&E”) expenditures

under Section 174.

For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&E expenditures

that are paid or incurred in connection with their trade or business which represent costs in the experimental or laboratory sense.

Specifically,

costs for U.S.

based R&E activities must be amortized over five years and costs for foreign R&E activities must be amortized

over 15 years;

both using a half year convention.

The Company has incorporated the impact of this new tax legislation into its financial

statements as of June 30, 2023 and established a $ 1.4 million deferred tax asset for the remaining amortizable tax basis in its R&E

costs in the table of net deferred tax assets above.

The impact on the Company’s financial statements was immaterial given the full valuation

allowance against the Company’s U.S.

net deferred tax assets.

accordance with ASC 740, there are no unrecognized tax benefits as of June 30, 2024, 2023 or 2022.

12 – CONCENTRATIONS

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2022, cash was approximately $ 643,000 , $ 2.4 million and $ 485,000 , respectively.

On March 10, 2023, the Federal Deposit Insurance Corporation (the “FDIC”) issued a press release stating that Silicon Valley

March 10, 2023, the Federal Deposit Insurance Corporation (the “FDIC”) issued a press release stating that Silicon Valley

Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as

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Concentrations

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

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

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

the year ended June 30, 2024, the Company had three (3) major customers that each represented more than 10% of its revenues on an individual

basis, and together represented approximately $ 47,178,000 or 78 % of its total revenues.

the year ended June 30, 2023, the Company had three (3) major customers (as restated) that each represented more than 10% of its

revenues on an individual basis, and together represented approximately $ 53,140,000

(as restated) or 80 %

(as restated) of its total revenues.

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

individual basis, and together represented approximately $ 35,229,000

(as restated) or 83 %

(as restated) of its total revenues.

Suppliers/Vendor

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$ 12,437,000 or 27 % of its total purchases.

During the year ended June 30, 2023 the

Company had one (1) supplier who accounted for more than 10% of its total purchases which represented approximately $ 17,022,000 or 31 %

of its total purchases.

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.

approximately $ 13,884,000

of its total purchases

13 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.

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may harm the Company’s business.

The Company is not aware of any material legal proceedings currently pending or expected against

To the best of its knowledge, except for the legal proceedings disclosed below, there are no other material legal proceedings pending against

November 1, 2024, plaintiff Asfa Kassam filed a purported federal securities class action complaint in the United States District Court,

District of Nevada, captioned Kassam v.

Flux Power Holdings, Inc.

2:24-cv-02051), against the Company, our Chief Executive

Officer, Ronald F.

Dutt, and our former Chief Financial Officer, Charles A.

The complaint generally alleges that the defendants

made false and misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5

promulgated thereunder.

The action purports to be brought on behalf of those who purchased or otherwise acquired the Company’s

publicly traded securities between November 11, 2022 and September 30, 2024, and seeks unspecified damages and other relief.

14, 2025, the court granted an unopposed motion to transfer the case to the Southern District of California for all further proceedings.

The case is in its early stages and a lead plaintiff has yet to be appointed.

Management believes these claims to be meritless and intends

to vigorously defend against them.

Derivative Action

January 7, 2025, plaintiff Ronald Pearl filed a purported shareholder derivative complaint in the United States District Court, District

of Nevada, captioned Pearl v.

Dutt, et al .

2:25-cv-00042), against current and former officers and directors of the Company,

naming the Company as a nominal defendant.

The complaint generally arises out of the same allegations contained in the Kassam

securities class action and alleges claims for breach of fiduciary duties and related claims.

The action purports to be brought derivatively

on behalf of the Company and seeks damages and other various relief.

Related Actions

April 30, 2024, a former employee (the “Employee”) filed a class action complaint against the Company and Insperity, its

third-party payroll service provider, in San Diego County Superior Court for claims including failure to pay minimum wage, failure to

pay overtime, failure to provide meal periods, failure to provide rest breaks, failure to pay wages at separation, failure to provide

accurate wage statements, failure to reimburse business expenses, failure to produce employment records and unfair competition, which

he has purported to assert on behalf of himself and all other individuals who worked for the Company or Insperity, as non-exempt employees

in California between April 30, 2020 and the present (the “Employment Proceeding”).

On July 1, 2024, the Company filed an

answer to the complaint that none of the asserted claims possessed any merit, contended that many of the asserted claims were subject

to immediate dismissal, and contended that certain of the asserted claims were subject to binding arbitration.

On October 14, 2024, the

Employee elected to dismiss Insperity from the action without prejudice.

July 5, 2024, the Employee filed a representative action complaint against the Company and Insperity in San Diego County Superior Court

for Violation of Private Attorneys’ General Act (“PAGA”), seeking an unspecified amount of penalties and attorneys’

fees based on allegations that the Compnay violated certain California employment laws (the “PAGA Proceeding”).

8, 2024, the Company filed an answer to the complaint in which the Company denied that any of the asserted claims possessed any merit

and contended that certain of the asserted claims were subject to binding arbitration.

December 10, 2024, the Company and the Employee stipulated to the consolidation of Employment Lawsuit and the PAGA Action.

date hereof, both proceedings are currently pending consolidation by the court.

Upon consolidation, the Company intends to move to have

the Employee’s action claims dismissed, the Employee’s individual claims compelled to binding arbitration and the Employee’s

representative PAGA claims stayed pending the arbitration of his individual claims.

On October 22, 2024, the Employee elected to dismiss

Insperity from the action without prejudice.

January 25, 2024, a former CPM, LTD Inc.

(“CPM”) employee filed a complaint against CPM, a third-party staffing service provider,

Flux Power, Inc., and Flux Power Holdings, Inc.

(collectively, the “Defendants”) in San Diego County Superior Court for claims

including harassment, failure to prevent harassment, retaliation, wrongful termination, failure to provide meal periods and rest breaks,

failure to provide accurate wage statements, and failure to pay wages at separation.

CPM is a San Diego based staffing company that provided

employees (including the plaintiff) to the Company.

The plaintiff has alleged that the Company and CPM were “joint employers”

to the plaintiff under California law and are jointly liable for the plaintiff’s claims.

The plaintiff is seeking an unspecified

amount of unpaid wages, statutory penalties, emotional distress damages, punitive damages, and attorneys’ fees from Defendants.

On June 21, 2024, the Company filed an answer to the complaint in which the Company denied that any of the asserted claims possessed

any merit and contended that certain of the asserted claims were subject to binding arbitration.

is not possible at this time to reasonably assess the final outcomes of these proceedings or reasonably to estimate the possible loss

or range of loss with respect to these proceedings.

The Company intends to vigorously defend against these claims.

April 25, 2019 the Company signed a Standard Industrial/Commercial Multi-Tenant Lease (“Lease”) with Accutek to rent approximately

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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 will terminate concurrently with the term of the original

lease, which expires on November 20, 2026 .

The base rent for the additional space is the same rate as the space rented under the terms

of the original lease, $ 0.93 per rentable square (subject to 3% annual increase).

In connection with the Amendment, the Company purchased

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

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).

lease for the additional space commenced 30 days following the occupancy date of the additional space and will terminate

concurrently with the term of the original lease, which expires on November

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

lease, $ 0.93

per rentable square foot (subject to 3% annual increase).

In connection with the Amendment, the Company purchased certain existing

office furniture for a total purchase price of $ 8,300 .

December 16, 2022 the Company signed a Lease Agreement with MM Parker Court Associates, LLC to rent approximately 4,892 square feet of

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7 to 12, escalating at 5 % each year.

rent expense was approximately $ 899,000

and $ 867,000 for the fiscal

years ended June 30, 2023 and 2022, respectively.

OF FINANCED LEASES

Company leased entered several financed leases during the year ended June 30, 2023 as follows:

rent expense was approximately $ 942,000 , $ 899,000 and $ 867,000 for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.

Company has finance leases outstanding as of June 30, 2024 as follows:

SCHEDULE OF FINANCE LEASES

Property Leased

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Manufacturing equipment

Excludes sales tax and other fees.

(1) Excludes sales

tax and other fees.

costs are amortized on a straight-line basis over their respective lease terms.

Depreciation expense related to leased assets was approximately

$ 86,000 for the year ended June 30, 2023.

Interest expense on leased liabilities was approximately $ 23,000 for the year ended June 30,

The Company had no financed leases during the year ended June 30, 2022.

Future Minimum Lease Payments as of June 30, 2023 are as follows:

$ 153,000 and $ 86,000 for the years ended June 30, 2024 and 2023, respectively.

Interest expense on leased liabilities was approximately

$ 29,000 and $ 23,000 for the years ended June 30, 2024 and 2023, respectively.

The Company did not have any finance leases during the

year ended June 30, 2022.

minimum lease payments as of June 30, 2024 are as follows:

OF FUTURE MINIMUM LEASE PAYMENTS

Year Ending June 30,

Operating Leases

Finance Leases

Years ending June 30,

Total future minimum lease payments

Total lease liability

leases payable, current portion

Leases payable, noncurrent portion

weighted average remaining lease term for operating leases was 2.6 years, 3.6 years and 4.4 years as of June 30, 2024, 2023 and 2022,

respectively.

The weighted average discount rate for operating leases was 8.8 %, 8.9 % and 10.0 % as of June 30, 2024, 2023 and 2022, respectively.

weighted average remaining lease term for finance leases was 1.6 years and 2.6 years as of June 30, 2024 and 2023, respectively.

weighted average discount rate for finance leases was 1.9 % and 1.7 % as of June 30, 2024 and 2023, respectively.

There were no finance

leases as of June 30, 2022.

14 – SUBSEQUENT EVENTS

Credit Facility

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 us with a senior secured revolving loan facility (the

“GBC Credit Facility”) for up to $ 15 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 we 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 $ 1.0 million, and (b) the total increases do not exceed $ 5.0 million 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, the Company is 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.

Agreement contains customary representations and warranties, events of default, negative and affirmative covenants and financial covenants

including maintaining minimum tangible net worth, and certain limitations on dispositions of assets.

The Agreement also contains usual

and customary events of default (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default,

payment of all amounts payable under the GBC Credit Facility may be accelerated and/or GBC’s commitment may be terminated by GBC

without any action by GBC.

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.

of Silicon Valley Bank LOC

July 28, 2023, the Company terminated the Loan and Security Agreement, by and among the Company and SVB, dated as of November 9, 2020,

as amended, and concurrent with the entry into the Loan and Security Agreement, by and among Gibraltar Business Capital and the Company,

as noted above.

The Company repaid the entire outstanding principal balance of the SVB Credit Facility plus all accrued and unpaid interest

and related fees through the date of termination with a portion of the funds from the GBC Credit Facility on July 28, 2023.

Management Transition

On November 20, 2024, Ronald F.

Dutt, the Company’s chairman and Chief Executive Officer, notified the Company’s

Board of Directors of his intentions to retire from his positions upon the appointment of a new Chief Executive Officer.

The Board has

commenced a search for a new Chief Executive Officer and Mr.

Dutt will remain with the Company through the search and transition period.

to Loan and Security Agreement with Gibraltar Business Capital

previously announced in the Company’s Form 8-K filed with the SEC on September 5, 2024, the Board of Directors of the Company,

including its audit committee members, concluded on August 30, 2024 that the previously issued audited consolidated financial statements

for the fiscal years ended June 30, 2023 and 2022, and all of the quarterly unaudited consolidated financial statements within the fiscal

years ended June 30, 2024, 2023 and 2022 (collectively, the “Prior Financial Statements”), could no longer be relied upon

due to material accounting errors identified by management.

See Note 15 – Restatement of Previously Issued Financial Statements.

Company notified GBC that the restatement of historical financial statements was likely to result in event of default with respect to

the Company’s failure to maintain the EDITDA covenant for the trailing three (3) month periods ended July 31, 2023 and August 31,

2023, or Default.

On August 30, 2025, the Company received a Waiver, which waived the Default, subject to satisfaction of the following

(i) receipt of a counterpart of the Waiver duly executed by the Company;

and (ii) receipt of the representations and warranties

from the Company that after giving effect to the Waiver, the representations and warranties contained in the Agreement, the Waiver and

the other Loan Documents shall be true and correct;

and (iii) after giving effect to the Waiver, no additional event of default shall

have occurred and be continuing on and as of the effective date of the Waiver.

Company’s failure to file this Annual Report on Form 10-K for the year ended June 30, 2024 in a timely manner resulted in an event

of default with respect to the covenant to timely deliver a copy of the Company’s annual audited financial statements.

Additionally,

the Company notified GBC that it appeared likely that as a result of the restatement it would fail to maintain the EBITDA covenant for

the trailing three (3) month periods ended May 31, 2024 and July 31, 2024, or Default.

On January 17, 2025, the Company received a Waiver,

which waived the Defaults, subject to satisfaction of the following conditions:

(i) receipt of a counterpart of the Waiver duly executed

by the Company;

and (ii) receipt of the waiver fee of $25,000;

and (iii) receipt of the representations and warranties from the Company

that after giving effect to the Waiver, the representations and warranties contained in the Agreement, the Waiver and the other Loan

Documents shall be true and correct;

and (iv) after giving effect to the Waiver, no additional event of default shall have occurred and

be continuing on and as of the effective date of the Waiver .

to Loan and Security Agreement with Gibraltar Business Capital

January 22, 2025, we entered into Amendment No.

4 to Loan and Security Agreement (the “Fourth Amendment”) with GBC which

amended certain terms of the Loan and Security Agreement dated July 28, 2023, as amended, relating to the EBITDA Minimum financial

covenant of the Company.

In consideration for the Fourth Amendment, the Company agreed to pay GBC a non-refundable amendment fee of $ 50,000

in cash, as follows:

(i) $ 25,000 shall be due and payable on March 1, 2025, and (ii) $ 25,000 shall be due and payable on

April 1, 2025.

15 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

described in Note 2 – Restatement of Previously Issued Financial Statements, and as further described below, in connection with the

preparation of its consolidated financial statements as of and for the year ended June 30, 2024, the Company identified multiple

prior-period misstatements that were improperly accounted for in its previously issued audited consolidated financial statements for

the fiscal years ended June 30, 2023 and 2022.

nature of the restatement adjustments and their impact on previously reported consolidated financial statements are as follows:

The Company did not properly evaluate its calculation of its excess and obsolescence reserve on its finished goods and

raw materials inventories, resulting in an overstatement of inventories of $ 926,000

and $ 764,000

as of June 30, 2023 and 2022, respectively, an understatement of accumulated deficit of $ 521,000 as of June 30, 2021, and an

understatement of cost of sales of $ 162,000

and $ 243,000

for the years ended June 30, 2023, and 2022, respectively.

In addition, certain inventory components were not properly recorded at

the lower of cost or net realizable value, resulting in an overstatement of inventories of $ 781,000

and $ 607,000

as of June 30, 2023 and 2022, respectively, an understatement of accumulated deficit of $ 296,000 as of June 30, 2021, and an

understatement of cost of sales of $ 174,000

and $ 311,000

for the years ended June 30, 2023 and 2022, respectively.

Further, certain loaner service packs and consigned inventory were not

reconciled in a timely manner, resulting in an overstatement of inventories of $ 670,000

and $ 210,000

as of June 30, 2023 and 2022, respectively, and an understatement of cost of sales of $ 460,000

and $ 210,000

for the years ended June 30, 2023 and 2022, respectively.

Additionally, the Company did not properly present inventory write downs

on the consolidated statement of cash flows resulting in an understatement of inventory write downs of $ 354,000

and $ 111,000

and corresponding overstatement of changes in inventories of $ 354,000

and $ 111,000

on the consolidated statement of cash flows for the years ended June 30, 2023 and 2022, respectively.

(b) Revenues.

The Company did not

properly recognize revenue in the periods in which the related performance obligations were satisfied for a certain contract with a

customer, resulting in an understatement of revenues of $ 151,000 for the year ended June 30, 2023 and a corresponding understatement

of accounts receivable of $ 151,000 as of June 30, 2023.

Company improperly recorded various inventory write downs to research and development expenses although such expenses did not meet

the classification criteria for research and development under ASC 730, resulting in an overstatement of research and development

expenses and a corresponding understatement of cost of sales of $ 208,000 and $ 828,000 for the years ended June 30, 2023 and 2022, respectively.

The Company had various

clearing accounts that were not reconciled in a timely manner, resulting in an understatement of accounts payable of $ 137,000

as of June 30, 2023, overstatement of inventories of $ 461,000

and $ 241,000

as of June 30, 2023 and 2022, respectively, an understatement of accumulated deficit of $ 141,000 as of June 30, 2021, and

understatement of cost of sales of $ 357,000

and $ 100,000

for the years ended June 30, 2023 and 2022, respectively.

(e) Cash flow presentation of debt

issuance cost in the form of issued Company stock warrants.

The Company erroneously presented $ 253,000

of debt issuance cost incurred in conjunction with credit facility arrangements made during the year ended June 30, 2022 as fair

value of warrants issued, an adjustment to reconcile net loss to cash used in operating activities in the Company’s

consolidated statement of cash flows for the year ended June 30, 2022.

As debt issuance costs are recorded as a current asset, the

presentation overstated items reconciling net loss to cash used in operating activities and understated the change in other assets

in the consolidated statement of cash flows.

Additionally, the Company improperly omitted the non-cash disclosure related to the

issuance of warrants within the supplemental disclosures of non-cash investing and financing activities for the year ended June 30,

are the restated consolidated balance sheets as of June 30, 2023 and 2022, and the restated consolidated statements of operations, statements

of stockholders’ equity and statements of cash flows for each of the years ended June 30, 2023 and 2022 that summarize the effects

of the restatement.

SCHEDULE OF ADJUSTMENT FOR CORRECTION TO PREVIOUS PERIODS

POWER HOLDINGS, INC.

BALANCE SHEET

As previously

Restatement adjustments

June 30, 2023

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,838,000 )

Other current assets

Total current assets

( 2,687,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,687,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)(d)

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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;

16,462,215 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(b)(d)

( 88,555,000 )

( 2,824,000 )

( 91,379,000 )

Total stockholders’ equity

( 2,824,000 )

Total liabilities and stockholders’ equity

$ ( 2,687,000 )

POWER HOLDINGS, INC.

BALANCE SHEET

As previously

Restatement adjustments

June 30, 2022

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a)(d)

( 1,822,000 )

Other current assets

Total current assets

( 1,822,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,822,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Preferred stock value

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

15,996,658 shares issued and outstanding

Common stock value

Additional paid-in capital

Accumulated deficit (a)(d)

( 81,814,000 )

( 1,822,000 )

( 83,636,000 )

Total stockholders’ equity

( 1,822,000 )

Total liabilities and stockholders’ equity

$ ( 1,822,000 )

POWER HOLDINGS, INC.

STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Year ended June 30, 2023

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

( 1,210,000 )

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 5,410,000 )

( 1,002,000 )

( 6,412,000 )

Other income (expense):

Interest income (expense), net

( 1,339,000 )

$ ( 6,741,000 )

$ ( 1,002,000 )

$ ( 7,743,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Year ended June 30, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

( 1,692,000 )

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 15,357,000 )

( 16,221,000 )

Other income (expense):

Interest income (expense), net

$ ( 15,609,000 )

$ ( 864,000 )

$ ( 16,473,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDING, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

Paid-in Capital

previously reported

June 30, 2022

$ ( 81,814,000 )

Issuance of common stock and warrants - registered direct

offering, net of costs

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

of costs, shares

common stock – public offering, net of costs

common stock – exercised options and RSU settlement

Fair value of warrants issued

( 6,741,000 )

June 30, 2023

( 88,555,000 )

June 30, 2022 (a)(d)

( 1,822,000 )

loss (a) (b) (d)

( 1,002,000 )

Balance, June 30, 2023

( 2,824,000 )

June 30, 2022

( 83,636,000 )

common stock – public offering, net of costs

common stock – exercised options and RSU settlement

( 7,743,000 )

June 30, 2023

$ ( 91,379,000 )

POWER HOLDING, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

Paid-in Capital

previously reported

June 30, 2021

$ ( 66,205,000 )

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

common stock – public offering, net of costs

common stock - exercised options and RSU settlement

Fair value of warrants issued

( 15,609,000 )

June 30, 2022

( 81,814,000 )

June 30, 2021 (a)(d)

Balance, June 30, 2022

( 1,822,000 )

June 30, 2021

( 67,163,000 )

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

common stock – public offering, net of costs

common stock - exercised options and RSU settlement

Fair value of warrants issued

( 16,473,000 )

June 30, 2022

$ ( 83,636,000 )

POWER HOLDING, INC.

STATEMENTS OF CASH FLOWS

As previously

Restatement adjustments

Year ended June 30, 2023

As previously

Restatement adjustments

Cash flows from operating activities:

Net loss (a)(b)(d)

$ ( 6,741,000 )

$ ( 1,002,000 )

$ ( 7,743,000 )

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

Stock-based compensation

Fair value of warrants issued as debt discount cost

Amortization of debt issuance costs

Non-cash lease expense

Inventory write downs (a)

Changes in operating assets and liabilities:

Accounts receivable (b)

Inventories (a)(d)

( 2,734,000 )

( 2,408,000 )

Accounts payable (b)(d)

Accrued expenses

Accrued interest

Office leases payable

Deferred revenue

Customer deposits

Net cash used in operating activities

( 3,574,000 )

Cash flows from investing activities:

Purchases of equipment

( 1,032,000 )

Proceeds from sale of fixed assets

Net cash used in investing activities

( 1,024,000 )

Cash flows from financing activities:

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

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

Proceeds from revolving line of credit

Payment of revolving line of credit

( 58,377,000 )

Payment of finance leases

Net cash provided by financing activities

Net change in cash

Cash, beginning of period

Cash, end of period

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Initial right of use asset recognition

Common stock issued for vested RSUs

Supplemental cash flow information:

Interest paid

POWER HOLDING, INC.

STATEMENTS OF CASH FLOWS

As previously

Restatement adjustments

Year ended June 30, 2022

As previously

Restatement adjustments

Cash flows from operating activities:

Net loss (a)(d)

$ ( 15,609,000 )

$ ( 864,000 )

$ ( 16,473,000 )

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

Stock-based compensation

Fair value of warrants issued as debt discount cost

Non-cash lease expense

Inventory write downs (a)

Changes in operating assets and liabilities:

Accounts receivable

( 2,512,000 )

Inventories (a)(d)

( 5,810,000 )

( 5,550,000 )

Accounts payable

Accrued expenses

Accrued interest

Office leases payable

Deferred revenue

Customer deposits

Net cash used in operating activities

( 23,893,000 )

Cash flows from investing activities:

Purchases of equipment

Net cash used in investing activities

Cash flows from financing activities:

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

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

Proceeds from revolving line of credit

Payment of revolving line of credit

( 3,561,000 )

Net cash provided by financing activities

Net change in cash

( 4,228,000 )

Cash, beginning of period

Cash, end of period

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Common stock issued for vested RSUs

Warrants issued in connection with borrowing agreements, recorded as debt issuance cost

Supplemental cash flow information:

Interest paid

(a) Inventories.

Company did not properly evaluate its calculation of its excess and obsolescence reserve on its finished goods and raw materials inventories,

resulting in an overstatement of inventories and an understatement of cost of sales.

In addition, certain inventory components were not

properly recorded at the lower of cost or net realizable value, resulting in an overstatement of inventory and an understatement of cost

Further, certain loaner service packs and consigned inventory were not reconciled timely, resulting in an overstatement of

inventory and an understatement of cost of sales.

Lastly, the Company also corrected the cash flow presentation related to inventory

write downs on the statement of cash flows.

The Company did not properly recognize revenue in the periods which the related performance obligations were satisfied

for a certain contract with a customer.

Additionally, the Company improperly recorded accounts receivable from the same contract with a customer as a reduction to its accounts payable owed to the customer prior to the right

of offset conditions under ASC 210-20 being met.

As a result, revenues, accounts receivable, and accounts payable were misstated.

The Company improperly recorded various inventory write downs to research and development expenses although

such expenses did not meet the classification criteria for research and development under ASC 730, resulting in an overstatement of

research and development expenses and a corresponding understatement of cost of sales.

The Company had various clearing accounts that were not reconciled in a timely manner, resulting in misstatements of accounts

payable, inventories and cost of sales.

16 – QUARTERLY FINANCIAL SUMMARY (Unaudited)

following tables present the impact of the restatement for the quarters ended March 31, 2024, December 31, 2023, September 30, 2023,

June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021 (collectively, the “Restated Quarters”).

These tables also include financial information pertaining to the quarter ended June 30, 2024.

unaudited condensed consolidated interim financial statements reflect all

adjustments, consisting only of normal and recurring items, necessary to present fairly the Company’s financial position, the results

of operations, statements of cash flows, and changes in stockholder’s equity for the quarters ended within the Restated Quarters.

nature of the restatement adjustments and their impact on previously reported unaudited condensed consolidated interim financial statements

are as follows:

The Company did not properly evaluate its calculation of its excess and obsolescence reserve on its finished goods and

raw materials inventories, resulting in an overstatement of inventories and an understatement of cost of sales.

In addition, certain

inventory components were not properly recorded at the lower of cost or net realizable value, resulting in an overstatement of

inventories and an understatement of cost of sales.

Further, certain loaner service packs and consigned inventory were not

reconciled in a timely manner, resulting in an overstatement of inventories and an understatement of cost of sales.

Additionally, the Company did not properly present inventory write downs on the consolidated statement of cash flows resulting in an understatement of inventory write downs and corresponding overstatement

of changes in inventories on the consolidated statement of cash flows.

The Company did not properly recognize revenue in the periods which the related performance obligations were satisfied

for a certain contract with a customer.

Additionally, the Company improperly recorded accounts receivable from the same contract with a customer as a reduction to its accounts payable owed to the customer prior to the right

of offset conditions under ASC 210-20 being met.

As a result, revenues, accounts receivable, and accounts payable were misstated.

Expense classification.

The Company improperly recorded various inventory write downs to research and development expenses although

such expenses did not meet the classification criteria for research and development under ASC 730, resulting in an overstatement of

research and development expenses and a corresponding understatement of cost of sales.

The Company had various clearing accounts that were not reconciled in a timely manner, resulting in misstatements of accounts

payable, inventories and cost of sales.

Product warranty liability.

The Company did not include certain product warranty-related expenses within the proper period in its calculation

of its product warranty reserve estimate, resulting in an understatement of accrued expenses, an understatement of accounts payable and an understatement of cost of sales.

(f) Cash flow presentation of debt

issuance cost in the form of issued Company stock warrants.

The Company erroneously presented debt issuance cost incurred in

conjunction with credit facility arrangements as fair value of warrants issued, an adjustment to reconcile net loss to net cash used

in operating activities in the Company’s consolidated statement of cash flows.

As debt issuance costs are recorded as a

current asset, the presentation overstated adjustments to reconcile net loss to cash used in operating activities and understated

the change in other assets in the consolidated statement of cash flows.

Additionally, the Company improperly omitted the non-cash

disclosure related to the issuance of warrants within the supplemental disclosures of non-cash investing and financing

Financial Items

following tables set forth summarized quarterly financial information of

the Restated Quarters, including the effects of the restatement on our previously reported consolidated statements of operations, and

the quarter ended June 30, 2024.

SCHEDULE OF SUMMARIZED FINANCIAL ITEMS

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

Fiscal year 2024

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

Operating loss

( 1,811,000 )

( 2,572,000 )

( 1,785,000 )

( 2,244,000 )

( 3,005,000 )

( 2,188,000 )

Net loss per share – basic and diluted

June 30, 2023

March 31, 2023

December 31, 2022

September 30, 2022

Fiscal year 2023

June 30, 2023

March 31, 2023

December 31, 2022

September 30, 2022

Operating loss

( 1,832,000 )

( 1,229,000 )

( 1,419,000 )

( 1,932,000 )

( 2,200,000 )

( 1,487,000 )

( 1,796,000 )

( 2,260,000 )

Net loss per share – basic and diluted

June 30, 2022

March 31, 2022

December 31, 2021

September 30, 2021

Fiscal year 2022

June 30, 2022

March 31, 2022

December 31, 2021

September 30, 2021

Operating loss

( 2,672,000 )

( 3,841,000 )

( 5,348,000 )

( 4,360,000 )

( 2,838,000 )

( 3,893,000 )

( 5,379,000 )

( 4,363,000 )

Net loss per share – basic and diluted

Financial Summary

net impact of the restatement on our quarterly and year-to-date unaudited condensed financial statements is as follows:

SCHEDULE OF QUARTERLY

FINANCIAL SUMMARY

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

September 30,

Fiscal year 2024

September 30,

Current assets:

Accounts receivable

Inventories, net

Other current assets

Total current assets

Right of use asset

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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;

16,599,683 , 16,532,275 and 16,478,237 shares issued and outstanding at March 31, 2024, December 31, 2023 and September 30, 2023, respectively

Additional paid-in capital

Accumulated deficit

( 97,468,000 )

( 94,463,000 )

( 93,567,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

September 30,

Fiscal year 2023

September 30,

Current assets:

Accounts receivable

Inventories, net

Other current assets

Total current assets

Right of use asset

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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;

16,156,432 , 16,029,478 and 15,998,336 shares issued and outstanding at March 31, 2023, December 31, 2022 and September 30, 2022, respectively

Additional paid-in capital

Accumulated deficit

( 89,179,000 )

( 87,692,000 )

( 85,896,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

September 30,

Fiscal Year 2022

September 30,

Current assets:

Accounts receivable

Inventories, net

Other current assets

Total current assets

Right of use asset

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

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;

15,992,080 , 15,987,502 and 15,987,502 shares issued and outstanding at March 31, 2022, December 31, 2021 and September 30, 2021, respectively

Additional paid-in capital

Accumulated deficit

( 80,798,000 )

( 76,904,000 )

( 71,526,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

March 31, 2024

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,812,000 )

Other current assets

Total current assets

( 2,748,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,748,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)(d)(e)

Accrued expenses (e)

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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;

16,599,683 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)(e)

( 94,121,000 )

( 3,347,000 )

( 97,468,000 )

Total stockholders’ equity

( 3,347,000 )

Total liabilities and stockholders’ equity

$ ( 2,748,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

December 31, 2023

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,729,000 )

Other current assets

Total current assets

( 2,582,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,582,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)(d)(e)

Accrued expenses (e)

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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;

16,532,275 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)(e)

( 91,481,000 )

( 2,982,000 )

( 94,463,000 )

Total stockholders’ equity

( 2,982,000 )

Total liabilities and stockholders’ equity

$ ( 2,582,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

September 30, 2023

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,904,000 )

Other current assets

Total current assets

( 2,763,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,763,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (d)

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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;

16,478,237 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(b)(d)

( 90,667,000 )

( 2,900,000 )

( 93,567,000 )

Total stockholders’ equity

( 2,900,000 )

Total liabilities and stockholders’ equity

$ ( 2,763,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

March 31, 2023

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,100,000 )

Other current assets

Total current assets

( 2,072,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,072,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)

Accrued expenses

Line of credit

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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;

16,156,432 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)

( 87,079,000 )

( 2,100,000 )

( 89,179,000 )

Total stockholders’ equity

( 2,100,000 )

Total liabilities and stockholders’ equity

$ ( 2,072,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

December 31, 2022

As previously

Restatement adjustments

Current assets:

Accounts receivable (b)

Inventories, net (a)(d)

( 2,058,000 )

Other current assets

Total current assets

( 2,018,000 )

Right of use asset

Property, plant and equipment, net

$ ( 2,018,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable (b)

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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;

16,029,478 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)

( 85,634,000 )

( 2,058,000 )

( 87,692,000 )

Total stockholders’ equity

( 2,058,000 )

Total liabilities and stockholders’ equity

$ ( 2,018,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

September 30, 2022

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a)(d)

( 1,943,000 )

Other current assets

Total current assets

( 1,943,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,943,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Finance leases payable, current portion

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Finance leases payable, less current portion

Office leases payable, less current portion

Total liabilities

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;

15,998,336 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)(d)

( 83,953,000 )

( 1,943,000 )

( 85,896,000 )

Total stockholders’ equity

( 1,943,000 )

Total liabilities and stockholders’ equity

$ ( 1,943,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

March 31, 2022

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a) (d)

( 1,637,000 )

Other current assets

Total current assets

( 1,637,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,637,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Customer deposits

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

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;

15,992,080 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a)

( 79,161,000 )

( 1,637,000 )

( 80,798,000 )

Total stockholders’ equity

( 1,637,000 )

Total liabilities and stockholders’ equity

$ ( 1,637,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

December 31, 2021

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a) (d)

( 1,493,000 )

Other current assets

Total current assets

( 1,493,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,493,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Line of credit

Deferred revenue

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

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;

15,987,502 shares issued and outstanding

Additional paid-in capital

Accumulated deficit (a) (d)

( 75,411,000 )

( 1,493,000 )

( 76,904,000 )

Total stockholders’ equity

( 1,493,000 )

Total liabilities and stockholders’ equity

$ ( 1,493,000 )

POWER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

As previously

Restatement adjustments

September 30, 2021

As previously

Restatement adjustments

Current assets:

Accounts receivable

Inventories, net (a)(d)

( 1,191,000 )

Other current assets

Total current assets

( 1,191,000 )

Right of use asset

Property, plant and equipment, net

$ ( 1,191,000 )

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Deferred revenue

Customer deposits

Office leases payable, current portion

Accrued interest

Total current liabilities

Long term liabilities:

Office leases payable, less current portion

Total liabilities

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

500,000 shares authorized;

none issued and outstanding

Preferred stock value

Common stock, $ 0.001 par value;

30,000,000 shares authorized;

15,987,502 shares issued and outstanding

Common stock value

Additional paid-in capital

Accumulated deficit

( 70,335,000 )

( 1,191,000 )

( 71,526,000 )

Total stockholders’ equity

( 1,191,000 )

Total liabilities and stockholders’ equity

$ ( 1,191,000 )

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal year 2024

September 30,

Cost of sales

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 2,572,000 )

( 4,804,000 )

( 2,232,000 )

( 1,785,000 )

Other income (expense):

Interest income (expense), net

( 1,285,000 )

$ ( 3,005,000 )

$ ( 6,089,000 )

$ ( 896,000 )

$ ( 3,084,000 )

$ ( 2,188,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal year 2023

September 30,

Cost of sales

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 1,229,000 )

( 4,580,000 )

( 1,419,000 )

( 3,351,000 )

( 1,932,000 )

Other income (expense):

Interest income (expense), net

$ ( 1,487,000 )

$ ( 5,543,000 )

$ ( 1,796,000 )

$ ( 4,056,000 )

$ ( 2,260,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal year 2022

September 30,

Cost of sales

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 3,841,000 )

( 13,549,000 )

( 5,348,000 )

( 9,708,000 )

( 4,360,000 )

Other income (expense):

Interest income (expense), net

$ ( 3,893,000 )

$ ( 13,635,000 )

$ ( 5,379,000 )

$ ( 9,742,000 )

$ ( 4,363,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended March 31, 2024

As previously

Restatement adjustments

Cost of sales (a)(e)

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 2,207,000 )

( 2,572,000 )

Other income (expense):

Interest income (expense), net

$ ( 2,640,000 )

$ ( 365,000 )

$ ( 3,005,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Three months ended December 31, 2023

As previously

Restatement adjustments

$ ( 141,000 )

Cost of sales (a)(c)(d)(e)

(a) (c) (d) (e)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

Other income (expense):

Interest income (expense), net

$ ( 814,000 )

$ ( 896,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended September 30, 2023

As previously

Restatement adjustments

Cost of sales (a)

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 1,709,000 )

( 1,785,000 )

Other income (expense):

Interest income (expense), net

$ ( 2,112,000 )

$ ( 2,188,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Three months ended March 31, 2023

As previously

Restatement adjustments

Cost of sales (a)(d)

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 1,187,000 )

( 1,229,000 )

Other income (expense):

Interest income (expense), net

$ ( 1,445,000 )

$ ( 1,487,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended December 31, 2022

As previously

Restatement adjustments

Cost of sales (a)(d)

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 1,304,000 )

( 1,419,000 )

Other income (expense):

Interest income (expense), net

$ ( 1,681,000 )

$ ( 115,000 )

$ ( 1,796,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Three months ended September 30, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 1,811,000 )

( 1,932,000 )

Other income (expense):

Interest income (expense), net

$ ( 2,139,000 )

$ ( 121,000 )

$ ( 2,260,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended March 31, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 3,697,000 )

( 3,841,000 )

Other income (expense):

Interest income (expense), net

$ ( 3,749,000 )

$ ( 144,000 )

$ ( 3,893,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Three months ended December 31, 2021

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 5,046,000 )

( 5,348,000 )

Other income (expense):

Interest income (expense), net

$ ( 5,077,000 )

$ ( 302,000 )

$ ( 5,379,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Three months ended September 30, 2021

As previously

Restatement adjustments

Cost of sales (a)(d)

Operating expenses:

Selling and administrative

Research and development

Total operating expenses

Operating loss

( 4,127,000 )

( 4,360,000 )

Other income (expense):

Interest income (expense), net

$ ( 4,130,000 )

$ ( 233,000 )

$ ( 4,363,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Six months ended December 31, 2023

As previously

Restatement adjustments

$ ( 151,000 )

Cost of sales (a)(c)(d)(e)

(a) (c) (d) (e)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 2,074,000 )

( 2,232,000 )

Other income (expense):

Interest income (expense), net

$ ( 2,926,000 )

$ ( 158,000 )

$ ( 3,084,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Six months ended December 31, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 3,115,000 )

( 3,351,000 )

Other income (expense):

Interest income (expense), net

$ ( 3,820,000 )

$ ( 236,000 )

$ ( 4,056,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Six months ended December 31, 2021

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

( 1,088,000 )

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 9,173,000 )

( 9,708,000 )

Other income (expense):

Interest income (expense), net

$ ( 9,207,000 )

$ ( 535,000 )

$ ( 9,742,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

As previously

Restatement adjustments

Nine months ended March 31, 2024

As previously

Restatement adjustments

$ ( 151,000 )

Cost of sales (a)(c)(d)(e)

(a) (c) (d) (e)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 4,281,000 )

( 4,804,000 )

Other income (expense):

Interest income (expense), net

( 1,285,000 )

$ ( 5,566,000 )

$ ( 523,000 )

$ ( 6,089,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

As previously

Restatement adjustments

Nine months ended March 31, 2023

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 4,302,000 )

( 4,580,000 )

Other income (expense):

Interest income (expense), net

$ ( 5,265,000 )

$ ( 278,000 )

$ ( 5,543,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDINGS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

As previously

Restatement adjustments

Nine months ended March 31, 2022

As previously

Restatement adjustments

Cost of sales (a)(c)(d)

( 1,407,000 )

Operating expenses:

Selling and administrative

Research and development (c)

Total operating expenses

Operating loss

( 12,870,000 )

( 13,549,000 )

Other income (expense):

Interest income (expense), net

$ ( 12,956,000 )

$ ( 679,000 )

$ ( 13,635,000 )

Net loss per share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

POWER HOLDING, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance, as restated, June 30, 2023

$ ( 91,379,000 )

Activity, as reported

( 2,112,000 )

( 1,836,000 )

Adjustments (a)

Balance, as restated, September 30, 2023

( 93,567,000 )

Activity, as reported

Adjustments (a)(b)(d)(e)

(a) (b) (d) (e)

Balance, as restated, December 31, 2023

( 94,463,000 )

Activity, as reported

( 2,640,000 )

( 1,967,000 )

Adjustments (a)

Balance, as restated, March 31, 2024

$ ( 97,468,000 )

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance, as restated, June 30, 2022

$ ( 83,636,000 )

Activity, as reported

( 2,139,000 )

( 2,044,000 )

Adjustments (a)

Balance, as restated, September 30, 2022

( 85,896,000 )

Activity, as reported

( 1,681,000 )

( 1,472,000 )

Adjustments (a)

Balance, as restated, December 31, 2022

( 87,692,000 )

Activity, as reported

( 1,445,000 )

Adjustments (a)

Balance, as restated, March 31, 2023

$ ( 89,179,000 )

Capital Stock Amount

Additional Paid-in Capital

Accumulated Deficit

Balance, as restated, June 30, 2021 *

$ ( 67,163,000 )

Activity, as reported

( 4,130,000 )

Adjustments (a)

Balance, as restated, September 30, 2021

( 71,526,000 )

Activity, as reported

( 5,077,000 )

( 4,933,000 )

Adjustments (a)

Balance, as restated, December 31, 2021

( 76,905,000 )

Activity, as reported

( 3,749,000 )

( 3,597,000 )

Adjustments (a)

Balance, as restated, March 31, 2022

$ ( 80,798,000 )

* June 30, 2021 total

shareholders’ equity, as restated, reflects the impact of restatement adjustments related to periods prior to the year ended June

The impact of restatement is a decrease of $ 958,000

to accumulated deficit at June 30, 2021.

POWER HOLDING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

March 31, 2024

Six months ended

December 31, 2023

Three months ended

September 30, 2023

Fiscal Year 2024

Nine months ended

March 31, 2024

Six months ended

December 31, 2023

Three months ended

September 30, 2023

Cash flows from operating activities:

$ ( 6,089,000 )

$ ( 3,084,000 )

$ ( 2,188,000 )

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

Stock-based compensation

Amortization of debt issuance costs

Non-cash lease expense

Inventory write downs

Changes in operating assets and liabilities:

Accounts receivable

( 1,668,000 )

( 3,926,000 )

( 2,040,000 )

( 1,562,000 )

Accounts payable

Accrued expenses

Accrued interest

Office leases payable

Deferred revenue

Customer deposits

Net cash used in operating activities

( 4,274,000 )

( 4,045,000 )

( 3,093,000 )

Cash flows from investing activities:

Purchases of equipment

Proceeds from sale of fixed assets

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from stock option exercises and employee stock purchase plan exercises

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

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

Proceeds from revolving line of credit

Payment of revolving line of credit

( 49,087,000 )

( 32,205,000 )

( 15,981,000 )

Payment of finance leases

Net cash provided by financing activities

Net change in cash

( 1,129,000 )

( 1,240,000 )

Cash, beginning of period

Cash, end of period

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Common stock issued for vested RSUs

Warrants issued in connection with borrowing agreements, recorded as debt issuance cost

Supplemental cash flow information:

Interest paid

POWER HOLDING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

March 31, 2023

Six months ended

December 31, 2022

Three months ended

September 30, 2022

Fiscal Year 2023

Nine months ended

March 31, 2023

Six months ended

December 31, 2022

Three months ended

September 30, 2022

Cash flows from operating activities:

$ ( 5,543,000 )

$ ( 4,056,000 )

$ ( 2,260,000 )

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

Stock-based compensation

Amortization of debt issuance costs

Non-cash lease expense

Inventory write downs

Changes in operating assets and liabilities:

Accounts receivable

( 1,272,000 )

( 1,898,000 )

( 2,987,000 )

( 4,610,000 )

( 3,097,000 )

( 2,538,000 )

Accounts payable

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

What changed 10-K

Item 9A. Controls and Procedures