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Item 3. Legal Proceedings

2025-09-17 compared with 2025-01-29 · 115 added, 63 removed, 14 unchanged (93% of the section changed)

3 - LEGAL PROCEEDINGS

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.

time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.

However, litigation is subject to inherent uncertainties and an adverse result in any legal proceedings that may arise from time to time

may harm the Company’s business.

To the best of its knowledge, except for the legal proceedings disclosed below, there are no other

material legal proceedings pending against the Company.

November 1, 2024, plaintiff Asfa Kassam filed a purported federal securities class action complaint in the United States District Court,

1 unchanged sentence

Flux Power Holdings, Inc.

2:24-cv-02051), against the Company, our Chief Executive

Officer, Ronald F.

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 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.

January 14, 2025, the court granted an unopposed motion to transfer the case to the Southern District of California for all further proceedings.

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.

14, 2025, the court granted an unopposed motion to transfer the case to the Southern District of California for all further proceedings

3:25-cv-00113-JO-DDL).

On February 20, 2025, the court appointed Brandon Paulson to act as lead plaintiff for the putative

On April 21, 2025, lead plaintiff filed an amended complaint.

On May 12, 2025, the defendants filed motions to dismiss the amended complaint.

a mediation, on July 11, 2025, the parties entered into a settlement term sheet (the “Term Sheet”) to fully resolve the

class action litigation.

The settlement was subsequently memorialized in a definitive settlement agreement, executed on August 27,

2025, which was filed with the Court on August 28, 2025 in connection with an unopposed motion for preliminary approval of the

settlement, which motion will be heard by the Court on October 23, 2025.

In settling the class action, the Company is not admitting

any liability and neither the Term Sheet nor the definitive settlement agreement constitutes an admission of liability or an admission regarding the accuracy of any allegation made by the plaintiffs.

The settlement provides for, among other things, the final dismissal of the litigation and a release of claims against the Defendants in

exchange for the Company establishing a $1.75 million escrowed settlement fund to cover payments to the settlement class,

attorneys’ fees and settlement administration expenses.

The settlement class will consist

of all persons or entities who purchased publicly traded common stock of the Company between November 15, 2021 and February 14, 2025,

but will exclude (i) persons who suffered no compensable losses;

and (ii) the Defendants;

present and former officers, directors, or control

persons of the Company at all relevant times;

members of their immediate families and their legal representatives, heirs, successors,

predecessors, or assigns;

present and former parents, subsidiaries, assigns, successors, and predecessors of the Company;

and any entity

in which any of the persons excluded hereunder has or had a controlling or majority ownership interest in the Company at any time.

plaintiff’s motion seeks certification of the settlement class, and, for settlement purposes only, Defendants will not object to

certification of the action as a class action.

settlement is subject to, among other things, court approval of such agreement.

If the settlement does not obtain approval, the parties

agree that the settlement class will be decertified without prejudice, and that all the parties will revert to their pre-settlement positions.

expect the Company’s liability insurers to directly fund approximately $1.15 million of the settlement fund.

The Company estimates

that it will contribute approximately $600,000 to the settlement fund as its remaining retention/deductible related to its insurance

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.

January 7, 2025, plaintiff Ronald Pearl filed a purported s tock holder 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.

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.

action purports to be brought derivatively on behalf of the Company and seeks damages and other various relief.

On February 19,

2025, the court granted an unopposed motion to transfer the case to the Southern District of California for all further proceedings

3:25-cv-00373-W-JLB).

On March 27, 2025, the parties filed a joint motion to stay the derivative action pending the

underlying class action, which motion was granted on May 1, 2025.

On April 1, 2025, the Court transferred the matter to Judge Ohta,

as related to the Kassam securities class action (now captioned Case No.

3:25-cv-00373-JO-DDL).

Following a mediation, on

July 11, 2025 the parties reached an agreement to resolve the derivative complaint in exchange for the Company implementing and

maintaining certain corporate governance reforms and enhancements.

In connection with the settlement, defendants agreed not to

oppose a payment of attorneys’ fees and reimbursement of expenses for plaintiff’s counsel, and a service award for

plaintiff in the total amount of $425,000, subject to Court approval.

On August 13, 2025, plaintiff filed an unopposed motion for

preliminary approval of the settlement, which will be heard by the Court on October 16, 2025.

In settling the derivative complaint,

the defendants are not admitting any liability, and the settlement does not constitute an admission regarding the accuracy of any

allegation made by the plaintiffs.

Final settlement remains subject to, among other things, court approval.

We expect the

Company’s liability insurers to directly fund approximately $350,000 of the agreed upon attorneys’ fees.

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”).

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.

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.

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.

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

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.

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

January 25, 2024, in a separate action, 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 sought

an unspecified amount of unpaid wages, statutory penalties, emotional distress damages, punitive damages, and attorneys’ fees from

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.

Following discussions, on April 28, 2025,

the parties entered into a written settlement agreement that resolved all of the asserted claims.

Pursuant to that settlement,

Defendants received a general release from the plaintiff, while expressly denying any wrongdoing whatsoever.

Thereafter, on May

6, 2025, the plaintiff dismissed the action with prejudice.

4 - MINE SAFETY DISCLOSURES

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 3. Legal Proceedings