NASDAQ: FLUX This presentation contains forward-looking statements. All statements other than statements of historical fact contained in this presentation, including statements as to the Company's future results of operations and financial position, planned products and services, business strategy and plans and objectives of management for future operations, are forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future ...

[Special Note Regarding Forward Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD%20LOOKING%20STATEMENTS) This section provides important disclaimers about forward-looking statements and defines key terms used throughout the report [Forward-Looking Statements Disclosure](index=3&type=section&id=Forward-Looking%20Statements%20Disclosure) This section discloses that the report contains forward-looking statements, which involve known and unknown risks and uncertainties that could cause actual results to differ materially from projections - Forward-looking statements are identified by terms such as 'anticipates,' 'believes,' 'could,' 'estimates,' 'expects,' 'intends,' 'may,' 'plans,' 'potential,' 'predicts,' 'projects,' 'should,' 'would,' and similar expressions[8](index=8&type=chunk) - Key uncertainties include the ability to generate sufficient cash, secure funding, manage working capital, maintain internal controls, realize revenue from backlog, obtain raw materials, manage growth, compete, adapt to technology, and retain key management[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk) [Use of Certain Defined Terms](index=4&type=section&id=Use%20of%20Certain%20Defined%20Terms) This section defines key terms used throughout the report for clarity, including 'Company,' 'Flux,' 'we,' 'us,' 'our,' 'Exchange Act,' 'SEC,' and 'Securities Act' - Defined terms include 'Company,' 'Flux,' 'we,' 'us,' and 'our' referring to Flux Power Holdings, Inc. and its wholly owned subsidiary, Flux Power, Inc.[13](index=13&type=chunk) - Other defined terms are 'Exchange Act' (Securities Exchange Act of 1934), 'SEC' (Securities and Exchange Commission), and 'Securities Act' (Securities Act of 1933)[13](index=13&type=chunk) [PART I - Financial Information](index=5&type=section&id=PART%20I%20-%20Financial%20Information) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=ITEM%201.%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(unaudited)) This section presents the unaudited condensed consolidated financial statements for Flux Power Holdings, Inc., including balance sheets, statements of operations, stockholders' equity, and cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the unaudited condensed consolidated balance sheets as of December 31, 2022, and June 30, 2022 Condensed Consolidated Balance Sheets (December 31, 2022 vs. June 30, 2022) | ASSETS | December 31, 2022 (Unaudited) | June 30, 2022 | | :-------------------------- | :---------------------------- | :------------ | | Cash | $157,000 | $485,000 | | Accounts receivable | $10,467,000 | $8,609,000 | | Inventories, net | $19,507,000 | $16,262,000 | | Other current assets | $884,000 | $1,261,000 | | Total current assets | $31,015,000 | $26,617,000 | | Right of use assets | $2,601,000 | $2,597,000 | | Property, plant and equipment, net | $1,561,000 | $1,578,000 | | Other assets | $115,000 | $89,000 | | **Total assets** | **$35,292,000** | **$30,881,000** | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $12,797,000 | $6,645,000 | | Accrued expenses | $2,298,000 | $2,209,000 | | Line of credit | $6,811,000 | $4,889,000 | | Deferred revenue | $81,000 | $163,000 | | Customer deposits | $29,000 | $175,000 | | Finance lease payable, current portion | $64,000 | $- | | Office lease payable, current portion | $542,000 | $504,000 | | Accrued interest | $1,000 | $1,000 | | Total current liabilities | $22,623,000 | $14,586,000 | | Office lease payable, less current portion | $2,079,000 | $2,361,000 | | Finance lease payable, less current portion | $172,000 | $- | | **Total liabilities** | **$24,874,000** | **$16,947,000** | | Stockholders' equity: | | | | Common stock | $16,000 | $16,000 | | Additional paid-in capital | $96,036,000 | $95,732,000 | | Accumulated deficit | $(85,634,000) | $(81,814,000) | | **Total stockholders' equity** | **$10,418,000** | **$13,934,000** | | **Total liabilities and stockholders' equity** | **$35,292,000** | **$30,881,000** | - Total assets increased by **$4.411 million** (14.28%) from June 30, 2022, to December 31, 2022[18](index=18&type=chunk) - Total liabilities increased by **$7.927 million** (46.78%) from June 30, 2022, to December 31, 2022, primarily due to increases in accounts payable and line of credit[18](index=18&type=chunk) - Total stockholders' equity decreased by **$3.516 million** (25.23%) from June 30, 2022, to December 31, 2022, mainly due to an increased accumulated deficit[18](index=18&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the unaudited condensed consolidated statements of operations for the three and six months ended December 31, 2022 and 2021 Condensed Consolidated Statements of Operations (Three Months Ended December 31) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :----------------- | :------------------------------ | :------------------------------ | | Revenues | $17,158,000 | $7,690,000 | | Cost of sales | $13,050,000 | $6,648,000 | | Gross profit | $4,108,000 | $1,042,000 | | Operating expenses | $5,412,000 | $6,088,000 | | Operating loss | $(1,304,000) | $(5,046,000) | | Net loss | $(1,681,000) | $(5,077,000) | | Net loss per share | $(0.10) | $(0.32) | Condensed Consolidated Statements of Operations (Six Months Ended December 31) | Metric | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :----------------- | :---------------------------- | :---------------------------- | | Revenues | $34,998,000 | $13,961,000 | | Cost of sales | $26,942,000 | $11,581,000 | | Gross profit | $8,056,000 | $2,380,000 | | Operating expenses | $11,171,000 | $11,553,000 | | Operating loss | $(3,115,000) | $(9,173,000) | | Net loss | $(3,820,000) | $(9,207,000) | | Net loss per share | $(0.24) | $(0.62) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section presents the unaudited condensed consolidated statements of stockholders' equity for the six months ended December 31, 2022 and 2021 Stockholders' Equity Changes (Six Months Ended December 31, 2022) | Item | Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | | :--------------------------------------- | :----------- | :------------------ | :------------------------- | :------------------ | :------------- | | Balance at June 30, 2022 | 15,996,658 | $16,000 | $95,732,000 | $(81,814,000) | $13,934,000 | | Issuance of common stock – exercised options and RSU settlement | 32,820 | $- | $- | $- | $- | | Stock based compensation | - | $- | $304,000 | $- | $304,000 | | Net loss | - | $- | $- | $(3,820,000) | $(3,820,000) | | Balance at December 31, 2022 | 16,029,478 | $16,000 | $96,036,000 | $(85,634,000) | $10,418,000 | Stockholders' Equity Changes (Six Months Ended December 31, 2021) | Item | Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | | :--------------------------------------- | :----------- | :------------------ | :------------------------- | :------------------ | :------------- | | Balance at June 30, 2021 | 13,652,164 | $14,000 | $79,197,000 | $(66,205,000) | $13,006,000 | | Issuance of common stock and warrants – registered direct offering, net of costs | 2,142,860 | $2,000 | $14,074,000 | $- | $14,076,000 | | Issuance of common stock – public offering, net of costs | 190,782 | $- | $1,602,000 | $- | $1,602,000 | | Issuance of common stock – exercised options | 1,696 | $- | $- | $- | $- | | Stock based compensation | - | $- | $449,000 | $- | $449,000 | | Net loss | - | $- | $- | $(9,207,000) | $(9,207,000) | | Balance at December 31, 2021 | 15,987,502 | $16,000 | $95,217,000 | $(75,411,000) | $19,822,000 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the unaudited condensed consolidated statements of cash flows for the six months ended December 31, 2022 and 2021 Condensed Consolidated Statements of Cash Flows (Six Months Ended December 31) | Cash Flow Activity | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :-------------------------- | :---------------------------- | :---------------------------- | | Net cash used in operating activities | $(1,892,000) | $(15,401,000) | | Net cash used in investing activities | $(336,000) | $(530,000) | | Net cash provided by financing activities | $1,900,000 | $19,073,000 | | Net change in cash | $(328,000) | $3,142,000 | | Cash, beginning of period | $485,000 | $4,713,000 | | Cash, end of period | $157,000 | $7,855,000 | - Net cash used in operating activities significantly decreased from **$(15.4) million** in 2021 to **$(1.9) million** in 2022, indicating improved operational cash management[25](index=25&type=chunk) - Net cash provided by financing activities decreased from **$19.1 million** in 2021 to **$1.9 million** in 2022, reflecting less reliance on external financing compared to the prior year[25](index=25&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanatory notes to the unaudited condensed consolidated financial statements, covering business nature, accounting policies, and specific financial items [Note 1 - Nature of Business](index=9&type=section&id=NOTE%201%20-%20NATURE%20OF%20BUSINESS) Flux Power Holdings, Inc. designs, develops, manufactures, and sells advanced lithium-ion energy storage solutions for industrial commercial sectors like material handling and airport ground support equipment - Flux Power Holdings, Inc. (Flux) was incorporated in 2008 in Nevada, with operations conducted through its wholly owned subsidiary, Flux Power, Inc., a California corporation[28](index=28&type=chunk) - The Company designs, develops, manufactures, and sells advanced lithium-ion energy storage solutions for material handling, airport ground support equipment (GSE), and stationary energy storage[29](index=29&type=chunk) - These solutions are presented as reliable, high-performing, cost-effective, and environmentally friendly alternatives to traditional lead-acid and propane-based solutions[29](index=29&type=chunk) [Note 2 - Summary of Significant Accounting Policies](index=9&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the company's significant accounting policies, net loss per common share calculation, and liquidity considerations, including plans to achieve profitability - No material changes in significant accounting policies or their application since the Annual Report on Form 10-K for the fiscal year ended June 30, 2022[31](index=31&type=chunk) - Net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding, with basic and diluted loss per share being the same due to net losses[34](index=34&type=chunk)[35](index=35&type=chunk) - The Company has historically generated negative cash flows from operations, with an accumulated deficit of **$85.6 million** at December 31, 2022, but anticipates increased revenues and improved gross margins to fund operations[9](index=9&type=chunk)[37](index=37&type=chunk)[41](index=41&type=chunk) Potentially Dilutive Common Shares Excluded from Diluted EPS | Item | December 31, 2022 | December 31, 2021 | | :-------------- | :---------------- | :---------------- | | Stock options | 1,019,602 | 513,606 | | RSUs | 216,989 | 292,932 | | Warrants | 1,371,914 | 1,286,313 | | **Total** | **2,608,505** | **2,092,851** | [Note 3 – Accrued Expenses](index=11&type=section&id=NOTE%203%20%E2%80%93%20ACCRUED%20EXPENSES) This note details the composition of accrued expenses, primarily payroll, PTO, and warranty liabilities, which increased slightly to **$2.298 million** at December 31, 2022 Accrued Expenses Composition | Accrued Expense Item | December 31, 2022 | June 30, 2022 | | :------------------- | :---------------- | :------------ | | Payroll and bonus accrual | $719,000 | $767,000 | | PTO accrual | $412,000 | $430,000 | | Warranty liability | $1,167,000 | $1,012,000 | | **Total Accrued expenses** | **$2,298,000** | **$2,209,000**| - Warranty liability increased by **$155,000** (15.32%) from June 30, 2022, to December 31, 2022[43](index=43&type=chunk) [Note 4 – Notes Payable](index=11&type=section&id=NOTE%204%20%E2%80%93%20NOTES%20PAYABLE) This note outlines the Company's revolving line of credit with Silicon Valley Bank, detailing amendments that increased the facility to **$14.0 million** and modified covenants - The Revolving LOC with SVB was initially **$4.0 million**, increased to **$6.0 million** in October 2021, and then to **$8.0 million** in June 2022[44](index=44&type=chunk)[45](index=45&type=chunk) - The interest rate for the Revolving LOC was amended to a floating rate equal to the greater of Prime Rate plus 3.50% or 7.50%[40](index=40&type=chunk) - As of December 31, 2022, the outstanding balance under the Revolving LOC was approximately **$6.8 million**[50](index=50&type=chunk) - Subsequent to the reporting period, on January 10, 2023, the SVB Credit Facility was increased by **$6.0 million** to a total of **$14.0 million**[49](index=49&type=chunk)[51](index=51&type=chunk) [Note 5 - Related Party Debt Agreements](index=12&type=section&id=NOTE%205%20-%20RELATED%20PARTY%20DEBT%20AGREEMENTS) This note describes the Subordinated Line of Credit Facility with related parties, providing **$3.0 million to $5.0 million** for working capital at a 15.0% annual interest rate - The Subordinated LOC provides a short-term line of credit between **$3.0 million** and **$5.0 million** for working capital purposes[52](index=52&type=chunk) - As of December 31, 2022, the Lenders committed to an aggregate of **$4.0 million**[52](index=52&type=chunk) - Each Note bears an interest rate of **15.0%** per annum, payable on the Due Date (extended to December 31, 2023) or upon an event of Default[54](index=54&type=chunk) - In connection with the Subordinated LOC, the Company issued five-year warrants to the Lenders to purchase an aggregate of **128,000 shares** of common stock at an exercise price of **$2.53 per share**[57](index=57&type=chunk) [Note 6 - Stockholders' Equity](index=13&type=section&id=NOTE%206%20-%20STOCKHOLDERS%27%20EQUITY) This note details changes in stockholders' equity, including ATM and RDO offerings, warrants, stock options, and Restricted Stock Units (RSUs) - Under the ATM Offering, the Company sold **1,169,564 shares** of common stock for net proceeds of approximately **$13.7 million** from December 21, 2020, through December 31, 2022[62](index=62&type=chunk) - A Registered Direct Offering (RDO) in September 2021 sold **2,142,860 shares** of common stock and warrants for **1,071,430 shares**, generating approximately **$15.0 million** in gross proceeds[65](index=65&type=chunk) Warrants Outstanding (December 31, 2022) | Metric | Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contract Term ( years) | | :-------------------------------------- | :----------------- | :------------------------------ | :------------------------------------------------- | | Outstanding at June 30, 2022 | 1,455,119 | $6.10 | | | Warrants cancelled | (83,205) | $4.00 | | | **Outstanding at December 31, 2022** | **1,371,914** | **$6.23** | **3.92** | Stock Options Activity (Six Months Ended December 31, 2022) | Metric | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term ( years) | | :-------------------------------------- | :--------------- | :------------------------------ | :------------------------------------------------- | | Outstanding at June 30, 2022 | 503,433 | $11.03 | | | Granted | 624,441 | $3.43 | | | Exercised | (22,500) | $4.60 | | | Forfeited and cancelled | (85,772) | $13.46 | | | **Outstanding at December 31, 2022** | **1,019,602** | **$6.32** | **7.98** | | Exercisable at December 31, 2022 | 399,922 | $10.79 | **5.10** | Restricted Stock Units (RSUs) Activity (Six Months Ended December 31, 2022) | Metric | Number of Shares | Weighted Average Grant Fair Value | Weighted Average Remaining Contract Term ( years) | | :-------------------------------------- | :--------------- | :-------------------------------- | :------------------------------------------------- | | Outstanding at June 30, 2022 | 304,221 | $6.06 | | | Granted | 5,034 | $2.70 | | | Vested and settled | (32,248) | $3.49 | | | Forfeited and cancelled | (60,018) | $6.51 | | | **Outstanding at December 31, 2022** | **216,989** | **$5.92** | **1.07** | Stock-based Compensation Expense | Expense Category | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Research and development | $43,000 | $54,000 | $69,000 | $90,000 | | Selling and administrative | $166,000 | $195,000 | $235,000 | $359,000 | | **Total stock-based compensation expense** | **$209,000** | **$249,000** | **$304,000** | **$449,000** | [Note 7 - Concentrations](index=17&type=section&id=NOTE%207%20-%20CONCENTRATIONS) This note highlights concentrations of credit risk, customer base, and suppliers, with cash in a single bank and reliance on a few major customers and one key supplier - Cash balances are held in a single California commercial bank, with FDIC insurance up to **$250,000**; cash balance at December 31, 2022, was **$157,000**[88](index=88&type=chunk) - Three major customers represented **67% of revenues** for the three months ended December 31, 2022, and **64%** for the six months ended December 31, 2022[89](index=89&type=chunk) - One supplier accounted for **32% of total purchases** for the three months ended December 31, 2022, and **29%** for the six months ended December 31, 2022[92](index=92&type=chunk) [Note 8 - Commitments and Contingencies](index=18&type=section&id=NOTE%208%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses legal proceedings, operating leases, and new finance leases, with no material legal actions and an industrial space lease expiring in November 2026 - The Company is not aware of any material legal proceedings currently pending or expected against it[94](index=94&type=chunk) - The Company leases approximately **61,900 square feet** of industrial space under a lease expiring November 20, 2026[95](index=95&type=chunk)[96](index=96&type=chunk) Total Rent Expense | Period | Rent Expense | | :----------------------------------- | :----------- | | Three months ended December 31, 2022 | $217,000 | | Three months ended December 31, 2021 | $215,000 | | Six months ended December 31, 2022 | $439,000 | | Six months ended December 31, 2021 | $429,000 | - New finance leases for a corporate vehicle (60-month term) and manufacturing/testing equipment (36-month term) commenced in September and October 2022, respectively[98](index=98&type=chunk)[99](index=99&type=chunk) Future Minimum Lease Payments (Operating and Finance Leases) | Year Ending June 30, | Operating Leases | Finance Leases | | :------------------- | :--------------- | :------------- | | 2023 (remaining six months) | $385,000 | $36,000 | | 2024 | $791,000 | $81,000 | | 2025 | $815,000 | $80,000 | | 2026 | $840,000 | $32,000 | | 2027 | $359,000 | $15,000 | | Thereafter | $- | $20,000 | | **Total Future Minimum Lease Payments** | **$3,190,000** | **$264,000** | | Less: discount | $(569,000) | $(28,000) | | **Total lease liability** | **$2,621,000** | **$236,000** | [Note 9 - Subsequent Events](index=19&type=section&id=NOTE%209%20-%20SUBSEQUENT%20EVENTS) This note discloses a subsequent event where the SVB revolving line of credit was increased from **$8.0 million to $14.0 million** on January 10, 2023 - On January 10, 2023, the revolving line of credit with SVB was increased from **$8.0 million** to **$14.0 million**[102](index=102&type=chunk) - The Fourth Amendment removed the liquidity ratio financial covenant and amended the definition of Borrowing Base[102](index=102&type=chunk) - As of February 6, 2023, **$5.7 million** remained available for future draws under the SVB Credit Facility[102](index=102&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial condition and operational results, covering business overview, recent developments, and liquidity [Business Overview](index=20&type=section&id=Business%20Overview) Flux Power designs and manufactures lithium-ion energy storage solutions for industrial sectors, focusing on material handling and expanding product mix through R&D - Flux Power designs, develops, manufactures, and sells advanced lithium-ion energy storage solutions for industrial sectors like material handling and airport ground support equipment (GSE)[105](index=105&type=chunk) - The long-term strategy focuses on meeting growing demand, expanding product mix through R&D, increasing sales and marketing, improving customer support, and enhancing production capacity[106](index=106&type=chunk) - The material handling sector is the largest area of penetration, with additional growth opportunities in other industrial and commercial uses like solar energy storage[107](index=107&type=chunk) New Orders, Shipments, and Backlog Activity (Last Six Fiscal Quarters) | Quarter Ended | Backlog (Beginning) | New Orders | Shipments | Ending Backlog | | :--------------- | :------------------ | :---------- | :---------- | :------------- | | September 30, 2021 | $12,624,000 | $13,122,000 | $6,313,000 | $19,433,000 | | December 31, 2021 | $19,433,000 | $19,819,000 | $7,837,000 | $31,415,000 | | March 31, 2022 | $31,415,000 | $20,495,000 | $13,317,000 | $38,593,000 | | June 30, 2022 | $38,593,000 | $11,622,000 | $15,195,000 | $35,020,000 | | September 30, 2022 | $35,020,000 | $9,678,000 | $17,840,000 | $26,858,000 | | December 31, 2022 | $26,858,000 | $20,652,000 | $17,158,000 | $30,352,000 | - As of February 6, 2023, the order backlog was approximately **$29.8 million**[109](index=109&type=chunk) [Business Updates](index=21&type=section&id=Business%20Updates) This section discusses ongoing supply chain disruptions, mitigation strategies like price increases and inventory build-up, and strategic initiatives for profitability and cash flow breakeven - Supply chain disruptions, including delivery delays and increased costs for steel and electrical components, continue to impact the business[111](index=111&type=chunk) - The Company implemented price increases in October 2021 and April 2022 and increased inventory to **$19.5 million** by December 31, 2022, to mitigate these issues[111](index=111&type=chunk) - Strategic initiatives to achieve profitability and cash flow breakeven include gross margin improvements and business expansion through customer relationships, new markets, and enhanced capacities[112](index=112&type=chunk)[113](index=113&type=chunk)[116](index=116&type=chunk) [Recent Corporate Developments](index=22&type=section&id=Recent%20Corporate%20Developments) This section highlights the Fourth Amendment to the Loan and Security Agreement with SVB, increasing the revolving line of credit to **$14.0 million** and modifying covenants - On January 10, 2023, the Company entered into a Fourth Amendment to its Loan and Security Agreement with Silicon Valley Bank (SVB), increasing the revolving line of credit from **$8.0 million** to **$14.0 million**[118](index=118&type=chunk) - The amendment also removed the liquidity ratio financial covenant and modified the definition of Borrowing Base[118](index=118&type=chunk) - As of February 6, 2023, **$5.7 million** remained available for future draws under the SVB Credit Facility[118](index=118&type=chunk) [Results of Operations and Financial Condition (Three Months Ended December 31)](index=22&type=section&id=Results%20of%20Operations%20and%20Financial%20Condition%20(Three%20Months%20Ended%20December%2031)) This section analyzes the Company's financial performance for the three months ended December 31, highlighting significant changes in revenues, gross profit, and net loss Key Financials (Three Months Ended December 31) | Metric | 2022 ($) | % of Revenues (2022) | 2021 ($) | % of Revenues (2021) | | :----------------------------- | :---------- | :------------------- | :---------- | :------------------- | | Revenues | 17,158,000 | 100% | 7,690,000 | 100% | | Cost of sales | 13,050,000 | 76% | 6,648,000 | 86% | | Gross profit | 4,108,000 | 24% | 1,042,000 | 14% | | Selling and administrative | 4,250,000 | 25% | 4,000,000 | 53% | | Research and development | 1,162,000 | 7% | 2,088,000 | 27% | | Total operating expenses | 5,412,000 | 32% | 6,088,000 | 80% | | Operating loss | (1,304,000) | -8% | (5,046,000) | -66% | | Other income | 8,000 | 0% | - | 0% | | Interest expense, net | (385,000) | -2% | (31,000) | -0% | | Net loss | (1,681,000) | -10% | (5,077,000) | -66% | - Revenues increased by **$9.468 million** (123%) due to higher sales volume and average selling prices[115](index=115&type=chunk) - Gross profit increased by **$3.066 million** (294%), with gross profit margin improving by **10 percentage points to 24%** due to higher volume and gross margin improvement initiatives[123](index=123&type=chunk) - Net loss decreased by **$3.396 million** (67%) to **$(1.681) million**, primarily due to increased gross profit and decreased operating expenses, partially offset by higher interest expense[148](index=148&type=chunk) [Results of Operations and Financial Condition (Six Months Ended December 31)](index=24&type=section&id=Results%20of%20Operations%20and%20Financial%20Condition%20(Six%20Months%20Ended%20December%2031)) This section analyzes the Company's financial performance for the six months ended December 31, highlighting significant changes in revenues, gross profit, and net loss Key Financials (Six Months Ended December 31) | Metric | 2022 ($) | % of Revenues (2022) | 2021 ($) | % of Revenues (2021) | | :----------------------------- | :---------- | :------------------- | :---------- | :------------------- | | Revenues | 34,998,000 | 100% | 13,961,000 | 100% | | Cost of sales | 26,942,000 | 77% | 11,581,000 | 83% | | Gross profit | 8,056,000 | 23% | 2,380,000 | 17% | | Selling and administrative | 8,786,000 | 25% | 7,498,000 | 54% | | Research and development | 2,385,000 | 7% | 4,055,000 | 29% | | Total operating expenses | 11,171,000 | 32% | 11,553,000 | 83% | | Operating loss | (3,115,000) | -9% | (9,173,000) | -66% | | Other income | 8,000 | 0% | - | 0% | | Interest expense, net | (713,000) | -2% | (34,000) | -0% | | Net loss | (3,820,000) | -11% | (9,207,000) | -66% | - Revenues increased by **$21.037 million** (151%) due to higher sales volume and average selling prices[168](index=168&type=chunk) - Gross profit increased by **$5.676 million** (238%), with gross profit margin improving by **6 percentage points to 23%** due to higher volume and gross margin improvement initiatives[170](index=170&type=chunk) - Net loss decreased by **$5.387 million** (59%) to **$(3.820) million**, primarily due to increased gross profit and decreased operating expenses, partially offset by higher interest expense[153](index=153&type=chunk) Adjusted EBITDA Reconciliation (Six Months Ended December 31) | Metric | 2022 ($) | 2021 ($) | | :----------------------------- | :---------- | :---------- | | Net loss | (3,820,000) | (9,207,000) | | Interest, net | 713,000 | 34,000 | | Income tax provision | - | - | | Depreciation and amortization | 371,000 | 259,000 | | EBITDA | (2,736,000) | (8,914,000) | | Stock-based compensation | 304,000 | 449,000 | | **Adjusted EBITDA** | **(2,432,000)** | **(8,465,000)** | - Adjusted EBITDA loss improved from **$(8.465) million** in 2021 to **$(2.432) million** in 2022[154](index=154&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's historical negative cash flows from operations, current liquidity position, and plans to fund future operations through increased revenues and credit facilities - The Company has historically generated negative cash flows from operations, with **$(1.9) million** for the six months ended December 31, 2022, and **$(23.9) million** for the year ended June 30, 2022[157](index=157&type=chunk) - Management anticipates increased revenues and improved gross margins from existing backlog (**$62.4 million** in new orders over 12 months) to fund operations for the next twelve months[157](index=157&type=chunk) Cash Flow Summary (Six Months Ended December 31) | Cash Flow Activity | 2022 ($) | 2021 ($) | | :-------------------------- | :---------- | :---------- | | Net cash used in operating activities | (1,892,000) | (15,401,000)| | Net cash used in investing activities | (336,000) | (530,000) | | Net cash provided by financing activities | 1,900,000 | 19,073,000 | | Net change in cash | (328,000) | 3,142,000 | - As of February 6, 2023, the Company had **$964,000** in cash, **$5.7 million** remaining under the SVB Credit Facility, and **$4.0 million** available under the Subordinated LOC, expected to be sufficient for planned operations[175](index=175&type=chunk) - The Company may utilize the remaining **$5.7 million** available under its ATM offering if necessary and intends to explore additional capital sources[161](index=161&type=chunk) [Critical Accounting Policies](index=27&type=section&id=Critical%20Accounting%20Policies) This section notes that interim financial statements are prepared in accordance with GAAP, requiring estimates and assumptions, with detailed policies in the Annual Report on Form 10-K - The unaudited interim financial statements are prepared in accordance with GAAP, requiring estimates and assumptions that affect reported amounts[187](index=187&type=chunk) - Information on critical accounting policies, which involve subjective or complex judgments, is contained in Item 7 of the Annual Report on Form 10-K for the fiscal year ended June 30, 2022[187](index=187&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Flux Power Holdings, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[163](index=163&type=chunk) [ITEM 4. Controls and Procedures](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the Company's evaluation of disclosure controls and procedures, concluding effectiveness, and reports remediation of prior material weaknesses in internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of December 31, 2022[189](index=189&type=chunk) - Material weaknesses in internal control over financial reporting as of June 30, 2022, related to ineffective oversight and insufficient review of warranty reserve calculations, have been remediated[124](index=124&type=chunk) - Remediation efforts included implementing additional control procedures, strengthening senior management review, and adding a second level of review for manual journal entries[124](index=124&type=chunk) - No other material changes in internal controls over financial reporting occurred during the quarter ended December 31, 2022[141](index=141&type=chunk) [PART II - Other Information](index=29&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. Legal Proceedings](index=29&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is not currently involved in any material legal proceedings and is unaware of any pending or expected material legal actions - The Company is not aware of any material legal proceedings currently pending or expected against it[129](index=129&type=chunk)[142](index=142&type=chunk) [ITEM 1A. Risk Factors](index=29&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers investors to the comprehensive discussion of risks in the Company's Annual Report on Form 10-K, emphasizing the high degree of investment risk - An investment in the Company's common stock involves a high degree of risk[130](index=130&type=chunk) - Investors should carefully consider the risks outlined in the 'Risk Factors' section of the Annual Report on Form 10-K for the fiscal year ended June 30, 2022[130](index=130&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[131](index=131&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=29&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities to report[143](index=143&type=chunk) [ITEM 4. Mine Safety Disclosures](index=29&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the Company's operations - Mine safety disclosures are not applicable to the Company[131](index=131&type=chunk) [ITEM 5. Other Information](index=29&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section indicates that there is no other information to report for the period - No other information to report[132](index=132&type=chunk) [ITEM 6. Exhibits](index=30&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of the report, including the Fourth Amendment to Loan and Security Agreement and Sarbanes-Oxley Act certifications - Exhibits include the Fourth Amendment to Loan and Security Agreement (dated January 10, 2023), Certifications of the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act, and various Inline XBRL Taxonomy Extension Documents[134](index=134&type=chunk) [Signatures](index=31&type=section&id=SIGNATURES) This section contains the duly authorized signatures of Flux Power Holdings, Inc.'s CEO and CFO, affirming the report's submission on February 9, 2023 - The report was signed on behalf of Flux Power Holdings, Inc. by Ronald F. Dutt (Chief Executive Officer) and Charles A. Scheiwe (Chief Financial Officer) on February 9, 2023[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)

Flux Power Holdings, Inc. (NASDAQ:FLUX) Q1 2023 Earnings Conference Call November 10, 2022 4:30 PM ET Company Participants Peter Geantil - Director of Product Development and Marketing Ron Dutt - CEO Chuck Scheiwe - CFO Conference Call Participants Chip Moore - EF Hutton Amit Dayal - H.C. Wainwright Matthew Galinko - Maxim Group Operator Greetings, and welcome to the Flux Power Holdings First Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A q ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of Each Class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.001 per share FLUX Nasdaq Capital Market FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-31543 FLUX POWER HOLD ...

Company Overview - Flux Power's market capitalization is $37 million with 16 million shares outstanding and a float of 114 million[7] - The company specializes in developing sustainable lithium-ion energy storage solutions for material handling, airport ground support, and other industrial equipment[8] - Flux Power has shipped total battery packs throughout North America[49] Financial Performance - Revenue increased by 89% to $132 million in Q3'22 compared to $70 million in Q3'21[10] - The company achieved its 15th consecutive quarter of year-over-year revenue growth[10] - Customer order backlog reached a record $386 million as of March 31, 2022[10, 65] - Inventory increased to $209 million as of March 31, 2022, due to pre-purchasing to support increasing sales orders[65] Market and Growth - The estimated lithium-ion market share of electric forklifts is approximately 5%[42] - The addressable annual market for electric forklifts is $25 billion[42] - The electric forklift market size is estimated to reach $3 billion by 2030, with lithium market share growing to 70% ($2 billion) and Flux Power aiming for $800 million in annual revenue[42] - The estimated market size of internal combustion Ground Support Equipment (GSE) that can be replaced by electric GSE is over $400 million[48]

Third Quarter 2022 Financial Results Conference Call NASDAQ: FLUX May 12, 2022 Safe Harbor Language This presentation contains forward-looking statements. All statements other than statements of historical fact contained in this presentation, including statements as to the Company's future results of operations and financial position, planned products and services, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known a ...

[Introductory Information](index=4&type=section&id=Introductory%20Information) [Special Note Regarding Forward Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward%20Looking%20Statements) Forward-looking statements in this report involve known and unknown risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to known and unknown risks and uncertainties, potentially causing actual results to differ materially[7](index=7&type=chunk) - Key areas of uncertainty include securing sufficient funding, managing working capital, obtaining raw materials, managing growth, maintaining market share, achieving profitability, fulfilling backlog, adapting to technology changes, competing with larger companies, and dependence on major customers[8](index=8&type=chunk) - The company does not assume an obligation to publicly update forward-looking statements unless legally required[10](index=10&type=chunk) [Use of Certain Defined Terms](index=5&type=section&id=Use%20of%20Certain%20Defined%20Terms) Key terms used throughout the report, such as company references, the Exchange Act, and the SEC, are defined here - "Company," "Flux," "we," "us," and "our" refer to Flux Power Holdings, Inc. and its wholly-owned subsidiary, Flux Power, Inc[11](index=11&type=chunk) - "Exchange Act" refers to the Securities Exchange Act of 1934, as amended[11](index=11&type=chunk) - "SEC" refers to the Securities and Exchange Commission[11](index=11&type=chunk) [PART I - Financial Information](index=6&type=section&id=PART%20I%20-%20Financial%20Information) [ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)](index=6&type=section&id=ITEM%201.%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(unaudited)) This section presents the unaudited condensed consolidated financial statements and related notes for Flux Power Holdings, Inc - The financial statements are unaudited and prepared in accordance with GAAP and SEC rules for smaller reporting companies[24](index=24&type=chunk) - The company designs, develops, manufactures, and sells advanced lithium-ion energy storage solutions for industrial commercial sectors like material handling and airport ground support equipment[26](index=26&type=chunk) - The company's long-term strategy focuses on meeting growing demand for lithium-ion solutions, expanding product mix, sales/marketing, customer support, and improving production capacity[108](index=108&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's condensed consolidated balance sheets, detailing assets, liabilities, and equity at specific dates, are presented Condensed Consolidated Balance Sheets | Metric | March 31, 2022 (Unaudited) | June 30, 2021 | Change (Absolute) | Change (%) | | :---------------------- | :------------------------- | :------------ | :---------------- | :--------- | | Cash | $3,804,000 | $4,713,000 | $(909,000) | -19.29% | | Accounts receivable | $9,508,000 | $6,097,000 | $3,411,000 | 55.95% | | Inventories, net | $20,934,000 | $10,513,000 | $10,421,000 | 99.12% | | Total current assets | $34,823,000 | $21,740,000 | $13,083,000 | 60.18% | | Total assets | $39,211,000 | $26,262,000 | $12,949,000 | 49.31% | | Accounts payable | $13,361,000 | $7,175,000 | $6,186,000 | 86.22% | | Line of credit | $3,500,000 | $- | $3,500,000 | N/A | | Total current liabilities | $20,494,000 | $10,390,000 | $10,104,000 | 97.25% | | Total liabilities | $22,987,000 | $13,256,000 | $9,731,000 | 73.41% | | Total stockholders' equity | $16,224,000 | $13,006,000 | $3,218,000 | 24.74% | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the company's condensed consolidated statements of operations for the three and nine months ended March 31 Financial Performance (3 Months Ended March 31) | Metric (3 Months Ended March 31) | 2022 | 2021 | Change (Absolute) | Change (%) | | :------------------------------- | :----------- | :---------- | :---------------- | :--------- | | Revenues | $13,177,000 | $6,964,000 | $6,213,000 | 89.22% | | Cost of sales | $11,257,000 | $5,287,000 | $5,970,000 | 112.92% | | Gross profit | $1,920,000 | $1,677,000 | $243,000 | 14.49% | | Operating loss | $(3,697,000) | $(2,968,000) | $(729,000) | 24.56% | | Other income | $- | $1,307,000 | $(1,307,000) | -100.00% | | Net loss | $(3,749,000) | $(1,725,000) | $(2,024,000) | 117.33% | | Net loss per share | $(0.23) | $(0.14) | $(0.09) | 64.29% | Financial Performance (9 Months Ended March 31) | Metric (9 Months Ended March 31) | 2022 | 2021 | Change (Absolute) | Change (%) | | :------------------------------- | :------------ | :----------- | :---------------- | :--------- | | Revenues | $27,138,000 | $17,932,000 | $9,206,000 | 51.34% | | Cost of sales | $22,838,000 | $13,893,000 | $8,945,000 | 64.38% | | Gross profit | $4,300,000 | $4,039,000 | $261,000 | 6.46% | | Operating loss | $(12,870,000) | $(9,762,000) | $(3,108,000) | 31.84% | | Other income | $- | $1,307,000 | $(1,307,000) | -100.00% | | Net loss | $(12,956,000) | $(9,073,000) | $(3,883,000) | 42.79% | | Net loss per share | $(0.85) | $(0.80) | $(0.05) | 6.25% | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Stockholders' Equity (March 31, 2022) | Metric (March 31, 2022) | Common Shares | Common Stock Capital Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | | :---------------------- | :------------ | :-------------------------- | :------------------------- | :------------------ | :------------------------- | | Balance at June 30, 2021 | 13,652,164 | $14,000 | $79,197,000 | $(66,205,000) | $13,006,000 | | Issuance of common stock and warrants – registered direct offering, net of costs | 2,142,860 | $2,000 | $14,074,000 | $- | $14,076,000 | | Issuance of common stock – public offering, net of costs | 190,782 | $- | $1,602,000 | $- | $1,602,000 | | Stock based compensation | - | $- | $200,000 | $- | $200,000 | | Net loss | - | $- | $- | $(4,130,000) | $(4,130,000) | | Balance at March 31, 2022 | 15,992,080 | $16,000 | $95,369,000 | $(79,161,000) | $16,224,000 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's condensed consolidated statements of cash flows, categorizing activities into operating, investing, and financing Cash Flow Activity (9 Months Ended March 31) | Cash Flow Activity (9 Months Ended March 31) | 2022 | 2021 | Change (Absolute) | Change (%) | | :------------------------------------------- | :------------ | :------------ | :---------------- | :--------- | | Net cash used in operating activities | $(19,338,000) | $(14,000,000) | $(5,338,000) | 38.13% | | Net cash used in investing activities | $(644,000) | $(692,000) | $48,000 | -6.94% | | Net cash provided by financing activities | $19,073,000 | $16,398,000 | $2,675,000 | 16.31% | | Net change in cash | $(909,000) | $1,706,000 | $(2,615,000) | -153.28% | | Cash, end of period | $3,804,000 | $2,432,000 | $1,372,000 | 56.49% | - Financing activities in 2022 included **$13,971,000** from a registered direct offering, **$3,500,000** from the SVB Line of Credit, and **$1,602,000** from ATM Offering sales[161](index=161&type=chunk) - Non-cash investing and financing activities for 2022 included **$9,700** in common stock issued for vested RSUs[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and breakdowns of various financial statement line items, accounting policies, and other significant financial information - The notes clarify that the financial statements are prepared under GAAP and SEC rules for smaller reporting companies, and should be read with the prior annual report[24](index=24&type=chunk) - The company designs, develops, manufactures, and sells lithium-ion energy storage solutions for industrial commercial sectors[26](index=26&type=chunk) - No material changes in significant accounting policies or their application have occurred since the last annual report[28](index=28&type=chunk) [NOTE 1 - NATURE OF BUSINESS](index=10&type=section&id=NOTE%201%20-%20NATURE%20OF%20BUSINESS) This note describes Flux Power Holdings, Inc.'s core business of designing, developing, manufacturing, and selling lithium-ion energy storage solutions - Flux Power Holdings, Inc. operates through its wholly-owned subsidiary, Flux Power, Inc[25](index=25&type=chunk) - The company designs, develops, manufactures, and sells advanced lithium-ion energy storage solutions for material handling, airport ground support equipment (GSE), and stationary energy storage[26](index=26&type=chunk) - These solutions are positioned as reliable, high-performing, cost-effective, and environmentally friendly alternatives to traditional lead-acid and propane-based solutions[26](index=26&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note confirms that no material changes in significant accounting policies have occurred and recent pronouncements are not expected to have a material effect - No material changes in significant accounting policies or their application have occurred since the Annual Report on Form 10-K for June 30, 2021[28](index=28&type=chunk) - Recent accounting pronouncements are not expected to have a material effect on the condensed consolidated financial statements[29](index=29&type=chunk) [NOTE 3 – ACCRUED EXPENSES](index=11&type=section&id=NOTE%203%20%E2%80%93%20ACCRUED%20EXPENSES) This note provides a breakdown of accrued expenses, including payroll, PTO, and warranty liabilities Accrued Expenses | Accrued Expense | March 31, 2022 | March 31, 2021 | Change (Absolute) | Change (%) | | :-------------- | :------------- | :------------- | :---------------- | :--------- | | Payroll and bonus accrual | $784,000 | $1,271,000 | $(487,000) | -38.32% | | PTO accrual | $438,000 | $417,000 | $21,000 | 5.04% | | Warranty liability | $920,000 | $895,000 | $25,000 | 2.79% | | Total Accrued expenses | $2,142,000 | $2,583,000 | $(441,000) | -17.07% | [NOTE 4 – NOTES PAYABLE](index=11&type=section&id=NOTE%204%20%E2%80%93%20NOTES%20PAYABLE) This note details the company's notes payable, including the PPP Loan forgiveness and the revolving line of credit with SVB - The PPP Loan of approximately **$1,297,000** principal and **$10,000** accrued interest was fully forgiven by the SBA on February 9, 2021, recorded as other income[34](index=34&type=chunk) - The revolving line of credit with SVB was increased from **$4.0 million** to **$6.0 million** in October 2021, maturing November 7, 2022[37](index=37&type=chunk) - As of March 31, 2022, the outstanding balance on the SVB Revolving LOC was **$3,500,000**, with **$2,500,000** remaining available[37](index=37&type=chunk) [NOTE 5 - RELATED PARTY DEBT AGREEMENTS](index=12&type=section&id=NOTE%205%20-%20RELATED%20PARTY%20DEBT%20AGREEMENTS) This note confirms no outstanding related party debt and details the repayment and termination of prior agreements - No outstanding related party debt agreements as of March 31, 2022[38](index=38&type=chunk) - The Esenjay Note, initially **$1,400,000**, was partially assigned and converted into common stock, with the remaining balance transferred to the Credit Facility[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - The Credit Facility with Esenjay and other lenders, with a maximum of **$12,000,000**, was fully repaid and terminated on June 10, 2021[42](index=42&type=chunk)[45](index=45&type=chunk) - The Cleveland Loan of **$1,000,000** was fully repaid by August 19, 2020[46](index=46&type=chunk)[48](index=48&type=chunk) [NOTE 6 – FACTORING ARRANGEMENT](index=13&type=section&id=NOTE%206%20%E2%80%93%20FACTORING%20ARRANGEMENT) This note states that the factoring agreement with CSNK Working Capital Finance Corp. was terminated - The Factoring Agreement with CSNK Working Capital Finance Corp. was terminated effective August 30, 2020[49](index=49&type=chunk) [NOTE 7 - STOCKHOLDERS' EQUITY](index=13&type=section&id=NOTE%207%20-%20STOCKHOLDERS'%20EQUITY) This note provides details on changes in stockholders' equity, including stock issuances, warrants, and stock-based compensation - From December 21, 2020, to March 31, 2022, the company sold **1,169,564 shares** under the ATM Offering for gross proceeds of approximately **$14.3 million** and net proceeds of **$13.7 million**[54](index=54&type=chunk) - In September 2021, a registered direct offering (RDO) sold **2,142,860 shares** and warrants for **$15.0 million** gross proceeds, with warrants exercisable at **$7.00 per share**[58](index=58&type=chunk) - As of March 31, 2022, **1,286,313 warrants** were outstanding and exercisable at a weighted average exercise price of **$6.58**[71](index=71&type=chunk) - Stock-based compensation expense for the nine months ended March 31, 2022, was **$601,000**, down from **$650,000** in the prior year[82](index=82&type=chunk) [NOTE 8 - CONCENTRATIONS](index=18&type=section&id=NOTE%208%20-%20CONCENTRATIONS) This note discusses concentrations of credit risk related to cash balances, major customers, and key suppliers - Cash balances at a California commercial bank exceeded the FDIC insured limit of **$250,000**, but management believes there is no significant credit risk[83](index=83&type=chunk) - For the three months ended March 31, 2022, four major customers accounted for **82%** of total revenues; for the nine months, three major customers accounted for **59%** of total revenues[85](index=85&type=chunk) - For the three months ended March 31, 2022, three suppliers accounted for **48%** of total purchases; for the nine months, one supplier accounted for **32%** of total purchases[87](index=87&type=chunk) [NOTE 9 - COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=NOTE%209%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's legal proceedings, lease commitments, and future minimum lease payments - No material legal proceedings are currently pending or expected against the company[89](index=89&type=chunk)[175](index=175&type=chunk) - The company leases approximately **45,600 square feet** of industrial space, with an amendment in February 2020 for an additional **17,539 square feet**, expiring November 20, 2026[90](index=90&type=chunk)[91](index=91&type=chunk) Future Minimum Lease Payments as of March 31, 2022 | Year Ending June 30, | Amount | | :------------------- | :---------- | | 2022 (remaining) | $187,000 | | 2023 | $768,000 | | 2024 | $791,000 | | 2025 | $815,000 | | 2026 | $840,000 | | Thereafter | $359,000 | | Total | $3,760,000 | | Less: discount | $(781,000) | | Total lease liability | $2,979,000 | [NOTE 10 - SUBSEQUENT EVENTS](index=20&type=section&id=NOTE%2010%20-%20SUBSEQUENT%20EVENTS) This note describes significant events occurring after the balance sheet date, including RSU grants and a new subordinated line of credit - On April 28, 2022, **71,172 RSUs** were granted to non-executive directors, vesting on April 28, 2023[95](index=95&type=chunk) - On May 11, 2022, the company secured a new subordinated line of credit of **$3.0 million** to **$5.0 million**, with an initial commitment of **$4.0 million**, bearing **15.0%** annual interest[96](index=96&type=chunk)[98](index=98&type=chunk) - In connection with the new line of credit, the company agreed to issue warrants to purchase **160,000 shares** of common stock (pro-rata based on commitment) at an exercise price of **$2.53 per share**, exercisable immediately and expiring in five years[101](index=101&type=chunk)[102](index=102&type=chunk) - A financial advisory agreement was entered with Cleveland Capital Management, L.L.C. on May 11, 2022[104](index=104&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition and results of operations, including strategic initiatives and financial performance - The company's long-term strategy is to meet growing demand for lithium-ion energy solutions, expand product mix, sales, marketing, and improve production capacity and efficiency[108](index=108&type=chunk) - Supply chain disruptions due to COVID-19 have led to increased backlog, higher procurement costs for steel and electronic components, and increased shipping costs[112](index=112&type=chunk)[113](index=113&type=chunk)[127](index=127&type=chunk) - Strategic initiatives include expanding supplier base, introducing new product designs for cost reduction and serviceability, improving manufacturing capacity, seeking competitive carriers, and transitioning to new cell technology[116](index=116&type=chunk) [Business Overview](index=22&type=section&id=Business%20Overview) This section provides an overview of the company's core business, new patent filings, and order backlog - The company's core business is lithium-ion energy storage solutions for material handling, GSE, and stationary energy storage[107](index=107&type=chunk) - New patent filings focus on optimizing charging cycles, understanding battery health, and applying AI for predictive cell balancing[108](index=108&type=chunk) Order Backlog | Quarter Ended | Backlog (Start of Period) | New Orders | Shipments | Backlog (End of Period) | | :--------------- | :------------------------ | :----------- | :----------- | :---------------------- | | December 31, 2020 | $2,528,000 | $6,561,000 | $6,330,000 | $2,759,000 | | March 31, 2021 | $2,759,000 | $9,977,000 | $6,826,000 | $5,910,000 | | June 30, 2021 | $5,910,000 | $15,053,000 | $8,339,000 | $12,624,000 | | September 30, 2021 | $12,624,000 | $13,122,000 | $6,313,000 | $19,433,000 | | December 31, 2021 | $19,433,000 | $19,819,000 | $7,837,000 | $31,415,000 | | March 31, 2022 | $31,415,000 | $20,495,000 | $13,317,000 | $38,593,000 | - As of May 10, 2022, the order backlog was approximately **$33.1 million**[111](index=111&type=chunk) [Business Updates](index=22&type=section&id=Business%20Updates) This section highlights that the backlog of open orders increased due to growing demand and ongoing supply chain disruptions - Backlog of open orders increased due to growth in demand and supply chain disruptions from COVID-19[112](index=112&type=chunk) [Supply Chain Issues and Higher Procurement Costs](index=23&type=section&id=Supply%20Chain%20Issues%20and%20Higher%20Procurement%20Costs) This section addresses the impact of supply chain disruptions, increased costs, and mitigation strategies on the business - Supply chain disruptions, including port delays, increased prices for steel and electrical components, and higher shipping costs, are impacting the business[113](index=113&type=chunk) - Price increases were implemented in October 2021 and April 2022 to offset rising costs[113](index=113&type=chunk) - Inventory of raw materials and component parts increased to **$20.9 million** as of March 31, 2022, to mitigate disruptions[113](index=113&type=chunk) [Strategic Initiatives](index=24&type=section&id=Strategic%20Initiatives) This section outlines the company's strategic initiatives to expand its supplier base, reduce costs, improve capacity, and grow its customer base - Initiatives include expanding supplier base, new product designs for cost reduction, improving manufacturing capacity, and seeking competitive carriers[116](index=116&type=chunk) - The company plans to transition product lines to new cell technology for lower costs, improved supplier reliability, and higher energy capabilities[116](index=116&type=chunk) - Efforts are underway to expand the customer base, particularly among Fortune 100 & 500 companies, and deploy Sky BMS telematics technology[116](index=116&type=chunk) [New Product Update](index=24&type=section&id=New%20Product%20Update) This section provides an update on new product designs and recent product launches aimed at higher capacities and lower ownership costs - New product designs introduced in Q1 2022 offer higher capacities, easier servicing, and lower total cost of ownership[118](index=118&type=chunk) - Three new products launched at MODEX March 2022: L36 (36-volt for 3-wheel forklifts), C48 (for AGV/AMR), and S24 (210Ah for Walkie Pallet Jacks)[119](index=119&type=chunk) [Recent Corporate Development](index=24&type=section&id=Recent%20Corporate%20Development) This section details the establishment of a new subordinated line of credit and the issuance of warrants to lenders - On May 11, 2022, a new subordinated line of credit (LOC) was established for **$3.0 million** to **$5.0 million**, with an initial commitment of **$4.0 million** from lenders[119](index=119&type=chunk) - The LOC bears an interest rate of **15.0%** per annum and has a due date of December 31, 2022, with options for extension[121](index=121&type=chunk) - Lenders received warrants to purchase common stock, with an exercise price of **$2.53 per share**, exercisable immediately and expiring in five years[123](index=123&type=chunk)[124](index=124&type=chunk) [COVID-19 Update](index=26&type=section&id=COVID-19%20Update) This section discusses the ongoing impact of COVID-19 on supply chains, operations, and associated risks - COVID-19 continues to cause supply chain disruptions, leading to shortages, price increases, and production delays[127](index=127&type=chunk) - The company has implemented safety measures and navigated staffing challenges due to COVID-19[127](index=127&type=chunk) - Significant risks of supply shortages, shipping delays, and price increases remain, potentially affecting financial condition and operating results[127](index=127&type=chunk) [Segment and Related Information](index=26&type=section&id=Segment%20and%20Related%20Information) This section states that the company operates as a single reportable segment - The company operates as a single reportable segment[128](index=128&type=chunk) [Results of Operations and Financial Condition (Three Months Ended March 31)](index=26&type=section&id=Results%20of%20Operations%20and%20Financial%20Condition%20(Three%20Months%20Ended%20March%2031)) This section analyzes the company's financial performance for the three months ended March 31, including revenues, costs, and net loss Financial Performance (Three Months Ended March 31) | Metric (3 Months Ended March 31) | 2022 | 2021 | Change (Absolute) | Change (%) | | :------------------------------- | :----------- | :---------- | :---------------- | :--------- | | Revenues | $13,177,000 | $6,964,000 | $6,213,000 | 89.22% | | Cost of sales | $11,257,000 | $5,287,000 | $5,970,000 | 112.92% | | Gross profit | $1,920,000 | $1,677,000 | $243,000 | 14.49% | | Gross profit margin | 15% | 24% | -9 percentage pts | -37.50% | | Selling and administrative | $3,904,000 | $3,122,000 | $782,000 | 25.05% | | Research and development | $1,713,000 | $1,523,000 | $190,000 | 12.48% | | Other income | $- | $1,307,000 | $(1,307,000) | -100.00% | | Net loss | $(3,749,000) | $(1,725,000) | $(2,024,000) | 117.33% | [Results of Operations and Financial Condition (Nine Months Ended March 31)](index=28&type=section&id=Results%20of%20Operations%20and%20Financial%20Condition%20(Nine%20Months%20Ended%20March%2031)) This section analyzes the company's financial performance for the nine months ended March 31, including revenues, costs, and net loss Financial Performance (Nine Months Ended March 31) | Metric (9 Months Ended March 31) | 2022 | 2021 | Change (Absolute) | Change (%) | | :------------------------------- | :------------ | :----------- | :---------------- | :--------- | | Revenues | $27,138,000 | $17,932,000 | $9,206,000 | 51.34% | | Cost of sales | $22,838,000 | $13,893,000 | $8,945,000 | 64.38% | | Gross profit | $4,300,000 | $4,039,000 | $261,000 | 6.46% | | Gross profit margin | 16% | 23% | -7 percentage pts | -30.43% | | Selling and administrative | $11,402,000 | $9,177,000 | $2,225,000 | 24.25% | | Research and development | $5,768,000 | $4,624,000 | $1,144,000 | 24.74% | | Other income | $- | $1,307,000 | $(1,307,000) | -100.00% | | Interest expense | $86,000 | $618,000 | $(532,000) | -86.08% | | Net loss | $(12,956,000) | $(9,073,000) | $(3,883,000) | 42.79% | [Adjusted EBITDA](index=30&type=section&id=Adjusted%20EBITDA) This section defines Adjusted EBITDA as a non-GAAP financial measure and provides its reconciliation to net loss - Adjusted EBITDA is a non-GAAP financial measure used to assess the performance of fundamental business activities[153](index=153&type=chunk)[154](index=154&type=chunk) Adjusted EBITDA Reconciliation (9 Months Ended March 31) | Metric | 2022 | 2021 | Change (Absolute) | Change (%) | | :------------------------ | :------------- | :------------ | :---------------- | :--------- | | Net loss | $(12,956,000) | $(9,073,000) | $(3,883,000) | 42.79% | | Interest, net | $86,000 | $618,000 | $(532,000) | -86.08% | | Depreciation and amortization | $412,000 | $176,000 | $236,000 | 134.09% | | EBITDA | $(12,458,000) | $(8,279,000) | $(4,179,000) | 50.48% | | Stock-based compensation | $601,000 | $650,000 | $(49,000) | -7.54% | | Adjusted EBITDA | $(11,857,000) | $(7,629,000) | $(4,228,000) | 55.42% | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, capital resources, and plans for securing additional funding to support operations and growth - Cash balance was **$3,804,000** and accumulated deficit was **$79,161,000** as of March 31, 2022[157](index=157&type=chunk) - Management believes existing cash, **$2.5 million** from SVB Line of Credit, and **$4.0 million** from the new subordinated line of credit will be sufficient for the next twelve months[157](index=157&type=chunk)[164](index=164&type=chunk) - Net cash used in operating activities was **$19,338,000** for the nine months ended March 31, 2022, an increase from **$14,000,000** in the prior year[158](index=158&type=chunk)[159](index=159&type=chunk) - Net cash provided by financing activities was **$19,073,000** for the nine months ended March 31, 2022, primarily from stock issuances and SVB Line of Credit borrowings[158](index=158&type=chunk)[161](index=161&type=chunk) - The company intends to secure additional capital from various sources, including equity securities, to support operations and anticipated growth[164](index=164&type=chunk) [Critical Accounting Policies](index=32&type=section&id=Critical%20Accounting%20Policies) This section notes that interim financial statements involve estimates and assumptions consistent with prior annual reports - Interim financial statements involve estimates and assumptions that could differ from actual results[167](index=167&type=chunk) - Critical accounting policies are consistent with those detailed in the Annual Report on Form 10-K for June 30, 2021[167](index=167&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=32&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Flux Power Holdings, Inc. is not required to provide the information typically required under this item - The company is exempt from providing quantitative and qualitative disclosures about market risk as a smaller reporting company[168](index=168&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=32&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management evaluated the effectiveness of disclosure controls and procedures, concluding they were effective with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022[169](index=169&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022[173](index=173&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures as evaluated by management - Disclosure controls and procedures were evaluated and found effective as of March 31, 2022[169](index=169&type=chunk) - Internal control over financial reporting aims to provide reasonable assurance regarding financial reporting reliability but has inherent limitations[171](index=171&type=chunk) [Changes in Internal Control Over Financial Reporting](index=33&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section states that no material changes in internal control over financial reporting occurred during the quarter - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022[173](index=173&type=chunk) [PART II - OTHER INFORMATION](index=33&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=33&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not aware of any material legal proceedings currently pending or expected against it, though litigation is subject to inherent uncertainties - No material legal proceedings are pending or expected against the company[175](index=175&type=chunk) [ITEM 1A. RISK FACTORS](index=33&type=section&id=ITEM%201A.%20RISK%20FACTORS) Investors are advised to carefully consider the risks outlined in the "Risk Factors" section of the company's Annual Report on Form 10-K - Investment in common stock involves a high degree of risk, and investors should review the "Risk Factors" in the Annual Report on Form 10-K for June 30, 2021[176](index=176&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=33&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of equity securities or use of proceeds to report for this period - No unregistered sales of equity securities or use of proceeds to report[177](index=177&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=33&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities to report for this period - No defaults upon senior securities to report[177](index=177&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=33&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Mine safety disclosures are not applicable to the company[178](index=178&type=chunk) [ITEM 5. OTHER INFORMATION](index=33&type=section&id=ITEM%205.%20OTHER%20INFORMATION) There is no other information to report under this item - No other information to report[179](index=179&type=chunk) [ITEM 6. EXHIBITS](index=33&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of the report, including certifications under the Sarbanes-Oxley Act and XBRL-related documents - Exhibits include certifications (Sarbanes-Oxley Act Sections 302 and 906) and XBRL documents[172](index=172&type=chunk)[181](index=181&type=chunk) [SIGNATURES](index=35&type=section&id=SIGNATURES) [Signatures](index=35&type=section&id=Signatures) The report is duly signed on behalf of Flux Power Holdings, Inc. by Ronald F. Dutt, Chief Executive Officer, and Charles A. Scheiwe, Chief Financial Officer, on May 12, 2022 - The report was signed by Ronald F. Dutt (CEO) and Charles A. Scheiwe (CFO) on May 12, 2022[185](index=185&type=chunk)

Second Quarter 2022 Financial Results Conference Call NASDAQ: FLUX February 10, 2022 Safe Harbor Language This presentation contains forward-looking statements. All statements other than statements of historical fact contained in this presentation, including statements as to the Company's future results of operations and financial position, planned products and services, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve k ...

Financial Data and Key Metrics Changes - Revenue increased by 19% to $7.7 million compared to $6.5 million a year ago, marking the 14th consecutive quarter of year-over-year revenue growth [8] - Customer purchase orders reached $19.8 million, a 51% increase from the first quarter of fiscal 2022 and over 200% from the same period a year ago [8] - Gross profit margin decreased to $1 million or 13.6% in Q2 2022, down from $1.5 million or 23% in the same year-ago quarter [29] Business Line Data and Key Metrics Changes - Significant orders received for large Class 1 X-series battery packs from a global consumer appliance manufacturer and airport ground support equipment battery packs from a large domestic airline [9] - Customer order backlog increased to a record $31.4 million as of December 31, 2021, reflecting growing demand from new and existing customers [10] Market Data and Key Metrics Changes - The company experienced supply chain disruptions impacting production and increasing costs for steel and electronic components, which affected gross margins [12][13] - Increased purchasing and related inventory to $9.6 million to mitigate supply chain disruptions, particularly for hard-to-acquire microchips and electronic components [23] Company Strategy and Development Direction - The company aims to capture leadership in the lithium-ion sector for industrial and commercial equipment, focusing on best-in-class products and services [19] - Plans to broaden reach into stationary energy storage and related sectors, particularly for solar-powered EV charging stations [26] - Implementation of lean manufacturing and a second shift to improve production throughput [24][65] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented level of supply chain uncertainty but expressed optimism about accelerating towards cash flow breakeven [22] - The company is actively working to reduce inventory balances and improve supply chain efficiency [32][87] - Management is focused on strategic initiatives to increase profitability and mitigate ongoing global supply chain disruptions [33] Other Important Information - The company appointed Cheemin Bo-Linn to the Board of Directors to strengthen corporate governance [11] - The company is pursuing sourcing strategies in Mexico to better align with growing production demands [17] Q&A Session Summary Question: Breakdown of $19.8 million in purchase orders and backlog deliverability - Management indicated that the backlog should be delivered by the end of June, with major contributions from Delta Airlines, Electrolux, and PepsiCo [38][39] Question: Growth curve outlook for the next quarters - Management expressed confidence in robust growth but noted challenges due to electronic component shortages [42] Question: SG&A growth outpacing revenue growth - Management explained that increased insurance premiums, public company expenses, and shipping costs contributed to higher SG&A expenses [49][52] Question: Inventory composition and supply chain issues - Management stated that finished goods inventory is around $2 million to $3 million, with electronic components being the largest part of the inventory affected by supply chain issues [55] Question: Gross margin improvements and production lines - Management confirmed the addition of a second shift to increase production of high-volume packs and ongoing efforts to reduce material costs [65] Question: Cash burn dynamics in the second half of the fiscal year - Management acknowledged cash burn as a concern but emphasized efforts to manage inventory and improve efficiency [82][87]

Flux Power Holdings, Inc. (NASDAQ:FLUX) Q1 2022 Results Conference Call November 12, 2021 4:30 PM ET Company Participants Justin Forbes - IR Ron Dutt - CEO Chuck Scheiwe - CFO Conference Call Participants Chip Moore - EF Hutton Amit Dayal - H.C. Wainwright Allen Klee - Maxim Group Scott Billeadeau - Walrus Partners Operator Good day, and thank you for standing by. Welcome to the Flux Power First Quarter 2022 Financial Results and Company Update Conference Call. At this time, all participants are in a listen ...