Item 3. Legal Proceedings
ITEM
3 - LEGAL PROCEEDINGS
From
time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties and an adverse result in any legal proceedings that may arise from time to
time may harm the Company’s business. To the best knowledge of management, except for the legal proceedings disclosed below,
there are no other material legal proceedings pending against us.
Securities
Class Action
On
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. et al. (No. 2:24-cv-02051), against the Company, our Chief Executive
Officer, Ronald F. Dutt, and our former Chief Financial Officer, Charles A. Scheiwe. 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. On
January 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.
Shareholder
Derivative Action
On
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 . (No. 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.
Employment
Related Actions
On April 30, 2024, a
former employee (the “Employee”) filed a class action complaint against us and Insperity, our 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, we 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.
On July 5, 2024, the
Employee filed a representative action complaint against us 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 we violated certain California employment laws (the “PAGA Proceeding”). On August 8, 2024, we filed an
answer to the complaint in which we denied that any of the asserted claims possessed any merit and contended that certain of the
asserted claims were subject to binding arbitration.
On December 10, 2024, we and the Employee stipulated to the consolidation of Employment Lawsuit and the PAGA Action. As of the date hereof,
both proceedings are currently pending consolidation by the court. Upon consolidation, we intend 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.
On 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 us. The plaintiff
has alleged that we 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, we filed an answer to the complaint in which we denied that any of the asserted claims possessed
any merit and contended that certain of the asserted claims were subject to binding arbitration.
It 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. Management intends to vigorously defend
against these claims.
ITEM
4 - MINE SAFETY DISCLOSURES
Not
applicable.
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Table of Contents
PART
II