Flux Power(FLUX) - 2021 Q3 - Quarterly Report

FORM 10-Q Filing Information This section details the filing as a Quarterly Report on Form 10-Q for the period ended March 31, 2021, by FLUX POWER HOLDINGS, INC., a Nevada corporation, identifying it as a Smaller Reporting Company listed on the NASDAQ Capital Market - Filing Type: Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934[2] - For the quarterly period ended March 31, 2021[2] - Registrant: FLUX POWER HOLDINGS, INC., a Nevada corporation[2][3] - Common Stock, par value $0.001 per share, traded on NASDAQ Capital Market under symbol FLUX[3] - The registrant is a Smaller Reporting Company[3] - Number of shares of common stock outstanding as of May 10, 2021 was 13,252,563[3] NOTE REGARDING FORWARD LOOKING STATEMENTS This section warns readers about forward-looking statements in the report, which 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, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from those expressed or implied[7] - Key factors influencing future results include the ability to secure sufficient funding, manage business expansion, maintain market share, grow net revenue, keep up with technology, ensure raw material supply, retain key management, operate safely during COVID-19, and dependence on major customers[8] Use of Certain Defined Terms This section defines key terms used throughout the report, such as 'Company,' 'Flux,' 'we,' 'us,' and 'our' referring to Flux Power Holdings, Inc. and its wholly-owned subsidiary, Flux Power, Inc., and abbreviations for SEC regulations - The terms 'Company,' 'Flux,' 'we,' 'us,' and 'our' refer to the combined business of Flux Power Holdings, Inc. and its wholly-owned subsidiary, Flux Power, Inc.[11] - Key regulatory terms defined include 'Exchange Act' (Securities Exchange Act of 1934), 'SEC' (Securities and Exchange Commission), and 'Securities Act' (Securities Act of 1933)[12] PART I - Financial Information This part presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) This section provides the unaudited condensed consolidated financial statements for Flux Power Holdings, Inc., including the balance sheets, statements of operations, statements of stockholders' equity (deficit), and statements of cash flows, along with comprehensive notes explaining the basis of presentation, significant accounting policies, debt, equity, and other financial details Condensed Consolidated Balance Sheets The company's financial position as of March 31, 2021, shows a significant increase in total assets and a shift from a stockholders' deficit to positive equity compared to June 30, 2020, primarily driven by increased cash, accounts receivable, and inventories, alongside a reduction in total liabilities Condensed Consolidated Balance Sheets | Metric | March 31, 2021 | June 30, 2020 | | :------------------------------------- | :------------- | :------------ | | ASSETS | | | | Cash | $2,432,000 | $726,000 | | Accounts receivable | $4,864,000 | $3,069,000 | | Inventories | $8,611,000 | $5,256,000 | | Total current assets | $16,687,000 | $9,838,000 | | Total assets | $21,001,000 | $13,975,000 | | LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | | Total current liabilities | $8,492,000 | $15,797,000 | | Total liabilities | $11,471,000 | $20,395,000 | | Total stockholders' equity (deficit) | $9,530,000 | $(6,420,000) | | Total liabilities and stockholders' equity (deficit) | $21,001,000 | $13,975,000 | - Total assets increased by $7,026,000 (50.3%) from $13,975,000 at June 30, 2020, to $21,001,000 at March 31, 2021[17] - Total stockholders' equity shifted from a deficit of $(6,420,000) at June 30, 2020, to a positive equity of $9,530,000 at March 31, 2021, an increase of $15,950,000[17] Condensed Consolidated Statements of Operations The company's financial performance for the three and nine months ended March 31, 2021, shows increased revenues and gross profit, and a reduced net loss compared to the prior year periods, indicating improved operational efficiency and financial health Condensed Consolidated Statements of Operations (Three Months Ended March 31) | Metric | 2021 | 2020 | Change (YoY) | | :----------------------------- | :----------- | :----------- | :----------- | | Revenues | $6,964,000 | $5,051,000 | +38% | | Cost of sales | $5,287,000 | $4,402,000 | +20% | | Gross profit | $1,677,000 | $649,000 | +158% | | Operating expenses | $4,645,000 | $4,111,000 | +13% | | Operating loss | $(2,968,000) | $(3,462,000) | -14% | | Other income (expense) | $1,243,000 | $(503,000) | N/A | | Net loss | $(1,725,000) | $(3,965,000) | -56% | | Net loss per share - basic and diluted | $(0.14) | $(0.78) | -82% | Condensed Consolidated Statements of Operations (Nine Months Ended March 31) | Metric | 2021 | 2020 | Change (YoY) | | :----------------------------- | :----------- | :----------- | :----------- | | Revenues | $17,932,000 | $10,585,000 | +69% | | Cost of sales | $13,893,000 | $9,494,000 | +46% | | Gross profit | $4,039,000 | $1,091,000 | +270% | | Operating expenses | $13,801,000 | $10,963,000 | +26% | | Operating loss | $(9,762,000) | $(9,872,000) | -1% | | Other income (expense) | $689,000 | $(1,214,000) | N/A | | Net loss | $(9,073,000) | $(11,086,000) | -18% | | Net loss per share - basic and diluted | $(0.80) | $(2.17) | -63% | Condensed Consolidated Statements of Stockholders' Equity (Deficit) The statements show a significant increase in total stockholders' equity from a deficit of $(6,420,000) at June 30, 2020, to a positive $9,530,000 at March 31, 2021, primarily due to various common stock issuances from private placements, public offerings, and debt conversions, which substantially increased additional paid-in capital Stockholders' Equity (Deficit) Changes (June 30, 2020 to March 31, 2021) | Metric | June 30, 2020 | March 31, 2021 | Change | | :--------------------------- | :------------ | :------------- | :----- | | Common Shares | 7,420,487 | 13,003,795 | +5,583,308 | | Capital Stock Amount | $7,000 | $13,000 | +$6,000 | | Additional Paid-in Capital | $46,985,000 | $72,002,000 | +$25,017,000 | | Accumulated Deficit | $(53,412,000) | $(62,485,000) | $(9,073,000) | | Total Stockholders' Equity (Deficit) | $(6,420,000) | $9,530,000 | +$15,950,000 | - Issuance of common stock from private placement transactions, net, contributed $3,200,000 to additional paid-in capital[21] - Issuance of common stock, net of costs, contributed $10,698,000, $3,336,000, and $1,743,000 to additional paid-in capital in different periods[21] Condensed Consolidated Statements of Cash Flows For the nine months ended March 31, 2021, the company experienced a substantial increase in cash provided by financing activities, which offset cash used in operating and investing activities, resulting in a positive net change in cash and a significantly higher cash balance at period-end compared to the prior year Condensed Consolidated Statements of Cash Flows (Nine Months Ended March 31) | Metric | 2021 | 2020 | | :------------------------------------ | :------------- | :----------- | | Net cash used in operating activities | $(14,000,000) | $(5,744,000) | | Net cash used in investing activities | $(692,000) | $(145,000) | | Net cash provided by financing activities | $16,398,000 | $5,893,000 | | Net change in cash | $1,706,000 | $4,000 | | Cash, beginning of period | $726,000 | $102,000 | | Cash, end of period | $2,432,000 | $106,000 | - Common stock issued for conversion of related party debt amounted to $5,193,000 in 2021, a non-cash financing activity[24] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering the nature of the business, significant accounting policies, debt agreements (PPP Loan, revolving credit, related party debt), factoring arrangements, stockholders' equity activities (offerings, debt conversions, warrants, stock-based compensation), customer and supplier concentrations, commitments, contingencies, and subsequent events NOTE 1 - NATURE OF BUSINESS Flux Power Holdings, Inc. designs, develops, manufactures, and sells advanced rechargeable lithium-ion energy storage solutions for lift trucks, airport ground support equipment, stationary energy storage, and other industrial and commercial applications - The Company designs, develops, manufactures, and sells advanced rechargeable lithium-ion energy storage solutions for lift trucks, airport ground support equipment, stationary energy storage, and other industrial and commercial applications[28] - Its 'LiFT' battery packs, including a proprietary battery management system (BMS), provide a better performing, higher value, and more environmentally friendly alternative to traditional lead-acid and propane-based solutions[28] - The Company has received Underwriters Laboratory ('UL') Listing on its lithium-ion packs for most Class 1, 2, and 3 forklifts and OEM approvals from leading industrial motive manufacturers[29] NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with GAAP and SEC rules for interim reports of smaller reporting companies, with no material changes to significant accounting policies - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules applicable to interim reports of smaller reporting companies, with no material changes in accounting policies[27][30] - Basic and diluted loss per share are the same for the periods due to net losses, as potential common equivalent shares were excluded because their inclusion would have been anti-dilutive[34] Weighted Average Common Shares Outstanding (Basic and Diluted) | Period | March 31, 2021 | March 31, 2020 | | :---------------------------------------------------- | :------------- | :------------- | | Three months ended | 12,499,870 | 5,107,845 | | Nine months ended | 11,300,229 | 5,105,982 | NOTE 3 – NOTES PAYABLE The company's Paycheck Protection Program (PPP) Loan, totaling approximately $1,307,000 (principal and interest), was fully forgiven by the SBA in February 2021 and recorded as other income - The Paycheck Protection Program (PPP) Loan of approximately $1,297,000 in principal and $10,000 in accrued interest was fully forgiven by the Small Business Administration (SBA) on February 9, 2021, and recorded as $1,307,000 in other income[36] - The Company entered into a $4.0 million senior secured revolving credit facility with Silicon Valley Bank in November 2020, maturing on November 8, 2021, which was not utilized as of March 31, 2021[38] NOTE 4 - RELATED PARTY DEBT AGREEMENTS The company's related party debt, including the Esenjay Loan and Cleveland Loan, was either converted into common stock or fully repaid by August 2020 - The Esenjay Note ($1.4 million principal) was partially assigned and converted into 225,000 shares of common stock by June 30, 2020, with the remaining $564,000 (principal and accrued interest) included in the Credit Facility Agreement[39][41][42] - The Cleveland Loan ($1.0 million) was partially paid down by $200,000 and the remaining $978,000 (principal and accrued interest) was fully paid by August 19, 2020[43][44] - The $12.0 million Credit Facility with Esenjay saw significant debt-to-equity conversions: $2,161,000 into 540,347 shares in November 2020, and $2,632,000 into 658,103 shares in January and March 2021. As of March 31, 2021, the outstanding balance was $0, and the entire $12.0 million line of credit was available[45] NOTE 5 – FACTORING ARRANGEMENT The factoring agreement with CSNK Working Capital Finance Corp. was terminated effective August 30, 2020, resulting in no outstanding balance due as of March 31, 2021 - The Factoring Agreement with CSNK Working Capital Finance Corp. was terminated effective August 30, 2020[46] - As of March 31, 2021, the outstanding balance due to CSNK under the Factoring Agreement was $0, down from $469,000 at June 30, 2020[46] NOTE 6 - STOCKHOLDERS' EQUITY (DEFICIT) This section details various equity-related activities, including at-the-market (ATM) offerings, a public offering, private placements, debt conversions into common stock, warrant activity, and stock-based compensation (stock options and restricted stock units) - The Company sold 226,737 shares for $3.5 million (Dec 2020), 77,962 shares for $1.2 million (Feb 2021), and 36,944 shares for $562,000 (Mar 2021) through its At-The-Market (ATM) Offering[50] - A public offering in August 2020 issued 3,099,250 shares at $4.00 per share for gross proceeds of approximately $12.4 million, concurrent with uplisting to The NASDAQ Capital Market[51][52] - Debt conversions included $7,383,000 into 1,845,830 shares (June 2020), $2,161,000 into 540,347 shares (Nov 2020), and $2,632,000 into 658,103 shares (Jan/Mar 2021)[55][56][57] Warrant Activity (Nine Months Ended March 31, 2021) | Metric | Number of Warrants | Weighted Average Exercise Price Per Warrant | Remaining Contract Term ( years) | | :------------------------------------- | :----------------- | :------------------------------------------ | :-------------------------------- | | Outstanding and exercisable at June 30, 2020 | 83,205 | $4.00 | 2.01 | | Warrants issued | 185,955 | $4.80 | 5.00 | | Warrants exercised | (32,977) | $4.80 | - | | Warrants forfeited | (11,700) | $4.80 | - | | Outstanding and exercisable at March 31, 2021 | 224,483 | $4.50 | 3.22 | Stock Options Activity (Nine Months Ended March 31, 2021) | Metric | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term ( years) | | :------------------------------------- | :--------------- | :------------------------------ | :------------------------------------------------- | | Outstanding at June 30, 2020 | 579,584 | $11.00 | 7.55 | | Exercised | (15,812) | $5.77 | - | | Forfeited and cancelled | (18,932) | $12.45 | - | | Outstanding at March 31, 2021 | 544,840 | $11.10 | 6.81 | | Exercisable at March 31, 2021 | 490,493 | $10.91 | 6.67 | - 134,865 Restricted Stock Units (RSUs) were granted in November 2020, with 128,323 outstanding at March 31, 2021, and an unamortized stock-based compensation expense of approximately $570,000 expected to be expensed over 2.91 years[68][69][73] NOTE 7 - CONCENTRATIONS The company faces concentrations of credit risk in cash and accounts receivable, and significant customer and supplier concentrations - The Company maintains cash in federally insured financial institutions in excess of insured limits but believes it is not exposed to significant credit risk[74] - For the three months ended March 31, 2021, four major customers represented 77% ($5,352,000) of total revenues[75] - For the nine months ended March 31, 2021, three major customers represented 59% ($10,594,000) of total revenues[75] - For the nine months ended March 31, 2021, two suppliers accounted for 27% ($6,229,000) of total component and supply purchases[77] NOTE 8 - COMMITMENTS AND CONTINGENCIES The company is not aware of any material legal proceedings pending against it, and has an operating lease for industrial space in Vista, California, with future minimum lease payments totaling $4,500,000 - To the best knowledge of management, there are no material legal proceedings pending against the Company[80] - The Company leases approximately 45,600 square feet of industrial space (amended to include an additional 17,539 square feet) in Vista, California, with a lease term commencing June 28, 2019, and terminating November 20, 2026, with annual 3% rent escalation[81][82] Future Minimum Lease Payments (as of March 31, 2021) | Year | Amount | | :------------------------------------ | :---------- | | 2021 (remaining three months) | $181,000 | | 2022 | $746,000 | | 2023 | $768,000 | | 2024 | $791,000 | | 2025 | $815,000 | | Thereafter | $1,199,000 | | Total Future Minimum Lease Payments | $4,500,000 | | Less: discount | $(1,102,000) | | Total Lease Liability | $3,398,000 | NOTE 9 - SUBSEQUENT EVENTS Events occurring after March 31, 2021, include additional ATM stock sales in April 2021, generating $1.8 million, the approval of the 2021 Equity Incentive Plan with 2,000,000 shares available, and the grant of 18,312 Restricted Stock Units to non-executive directors - In April 2021, the Company sold 149,696 shares of common stock through its ATM Offering for gross proceeds of approximately $1.8 million at an average price of $12.04 per share[85] - The 2021 Equity Incentive Plan was approved by stockholders on April 29, 2021, making 2,000,000 shares of common stock available for issuance[86] - On April 29, 2021, four non-executive directors were awarded 18,312 Restricted Stock Units (RSUs) under the 2014 Plan, vesting annually over a three-year period[87] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and operational results, detailing its business overview, recent developments, segment information, and a comprehensive analysis of revenues, costs, profits, and losses for the three and nine months ended March 31, 2021 Business Overview Flux Power designs, develops, manufactures, and sells advanced lithium-ion energy storage solutions for industrial applications, with a long-term strategy focused on expanding product mix, infrastructure, OEM relationships, and production capacity - The Company designs, develops, manufactures, and sells advanced lithium-ion energy storage solutions for lift trucks, airport ground support equipment, stationary energy storage, and other industrial and commercial applications[90] - Long-term strategy includes meeting growing demand, being a supplier of choice, targeting large fleets, and building scale to drive efficiencies and improve profit margins[91] - Investing in R&D to expand product mix, including three new patents for optimizing charging cycles, understanding battery health, and applying AI for predictive cell balancing[91] - Aims to expand infrastructure, product lines, OEM relationships, production capacity, and nationwide service footprint, prioritizing relationships with OEM national account sales forces[92] - Improved financial strength and access to capital through debt reduction, a $12.4 million public offering, NASDAQ uplisting, a $50 million shelf registration, and a new $4 million revolving line of credit[94] Recent Developments Recent developments include the company being deemed an essential business during COVID-19, the full conversion of Credit Facility debt to equity, the forgiveness of the PPP Loan, and the approval of the 2021 Equity Incentive Plan - The Company was deemed an essential business during the COVID-19 pandemic, implementing protective measures, but faces potential supply chain challenges and reduced demand for airport ground support equipment[96][98][99] - The remaining $2,632,000 in principal and accrued interest under the Credit Facility (LOC) was converted into 658,103 shares of common stock in January and March 2021, resulting in a $0 outstanding balance and $12.0 million available for future draws as of May 10, 2021[101][102] - The entire PPP Loan of approximately $1,297,000 in principal and $10,000 in accrued interest was forgiven by the SBA on February 9, 2021, recorded as $1,307,000 in other income[103] - The 2021 Equity Incentive Plan was approved by stockholders on April 29, 2021, making 2,000,000 shares of common stock available for issuance[105] - New employment agreements were entered into on February 12, 2021, for CEO Ronald F. Dutt ($250,000 annual base salary), CFO Charles A. Scheiwe ($190,000), and COO Jonathan Berry ($190,000), including bonus eligibility, benefits, and severance terms[106][107][108][109] Director Compensation (Calendar Year 2021) | Director | Position | Retainer | Committee Chair Fee | Total Comp | | :------------------ | :--------------- | :------- | :------------------ | :--------- | | Lisa Walters | Audit Chair | $50,000 | $7,500 | $57,500 | | Dale Robinette | Compensation Chair | $50,000 | $5,000 | $55,000 | | John A. Cosentino Jr. | Governance Chair | $50,000 | $5,000 | $55,000 | | Michael Johnson | Board Member | $50,000 | - | $50,000 | - Four non-executive directors were awarded 18,312 Restricted Stock Units (RSUs) on April 29, 2021, vesting annually over three years[112] Segment and Related Information The company operates as a single reportable segment - The Company operates as a single reportable segment[113] Results of Operations and Financial Condition This section provides a detailed analysis of the company's financial performance for the three and nine months ended March 31, 2021, compared to the prior year, highlighting significant revenue growth, improved gross profit margins, and a reduced net loss Revenues Revenues increased significantly for both the three and nine months ended March 31, 2021, driven by higher battery pack sales across multiple series (notably M36 and X Series) and growth from both existing and new customers - Revenues for the quarter ended March 31, 2021, increased by $1,913,000 (38%) to $6,964,000, compared to $5,051,000 for the prior year, primarily due to increased battery pack sales (M36, X Series) and customer growth[116] - Revenues for the nine months ended March 31, 2021, increased by $7,347,000 (69%) to $17,932,000, compared to $10,585,000 for the prior year, driven by increased battery pack sales (M36, X, G, C Series) and customer growth, partially offset by decreased S Series sales[127] Cost of Sales Cost of sales increased in absolute terms due to higher revenues but decreased as a percentage of revenues for both the three and nine months ended March 31, 2021 - Cost of sales for the quarter ended March 31, 2021, increased by $885,000 (20%) to $5,287,000. As a percentage of revenues, it decreased to 76% from 87% in the prior year, driven by simplified component designs, reduced material costs, and lower personnel-related costs[117] - Cost of sales for the nine months ended March 31, 2021, increased by $4,399,000 (46%) to $13,893,000. As a percentage of revenues, it decreased to 77% from 90% in the prior year, due to simplified component designs, reduced material costs, reduced warranty-related expenses, and lower personnel-related costs[128] Gross Profit Gross profit and gross profit margin significantly improved for both the three and nine months ended March 31, 2021, primarily due to higher sales volumes and the aforementioned cost of sales efficiencies - Gross profit for the quarter ended March 31, 2021, increased by $1,028,000 (158%) to $1,677,000. Gross profit as a percentage of revenues increased to 24% from 13% in the prior year[119] - Gross profit for the nine months ended March 31, 2021, increased by $2,948,000 (270%) to $4,039,000. Gross profit as a percentage of revenues increased to 23% from 10% in the prior year[129] Selling and Administrative Expenses Selling and administrative expenses increased for both the three and nine months ended March 31, 2021, mainly due to higher personnel costs from new hires, sales commissions, insurance, shipping, and board compensation, partially offset by decreased stock-based compensation - Selling and administrative expenses for the quarter ended March 31, 2021, increased by $538,000 (21%) to $3,122,000, primarily due to increases in personnel expenses (new hires, sales commissions), insurance, shipping/freight, and board compensation, partially offset by a decrease in stock-based compensation[120] - Selling and administrative expenses for the nine months ended March 31, 2021, increased by $2,102,000 (30%) to $9,177,000, primarily due to increases in personnel expenses, sales commission, insurance, board compensation, accounting and legal expenses, and facility-related expenses, partially offset by decreases in stock-based compensation, marketing expenses, and travel costs[131] Research and Development Expense Research and development expenses remained relatively stable for the three-month period but increased for the nine-month period ended March 31, 2021, driven by new product development, UL certifications, and staff-related expenses - Research and development expenses for the quarter ended March 31, 2021, decreased by $4,000 (less than 1%) to $1,523,000, primarily due to staff/labor related efficiencies, partially offset by additional research expenses related to new product development including UL certification[121] - Research and development expenses for the nine months ended March 31, 2021, increased by $736,000 (19%) to $4,624,000, primarily due to additional research expenses related to new product development, UL certifications, and staff/labor related expenses[132] Interest Expense Interest expense significantly decreased for both the three and nine months ended March 31, 2021, primarily due to a lower average outstanding debt balance as note holders converted debt to equity - Interest expense for the quarter ended March 31, 2021, decreased by $439,000 (87%) to $64,000, due to a lower average outstanding debt balance as certain note holders converted their notes to equity[122] - Interest expense for the nine months ended March 31, 2021, decreased by $596,000 (49%) to $618,000, due to a lower average outstanding debt balance from debt-to-equity conversions, partially offset by $174,000 of debt discount amortization related to the Cleveland promissory note[133] Other Income Other income for both the three and nine months ended March 31, 2021, primarily represents the forgiveness of the entire PPP Loan, including principal and accrued interest - Other income for the quarter ended March 31, 2021, was $1,307,000, representing the forgiven repayment of the entire PPP Loan principal ($1,297,000) and accrued interest ($10,000)[123] - Other income for the nine months ended March 31, 2021, was $1,307,000, representing the forgiven repayment of the entire PPP Loan principal ($1,297,000) and accrued interest ($10,000)[134] Net Loss Net loss decreased substantially for both the three and nine months ended March 31, 2021, driven by increased gross profit, the PPP loan forgiveness, and reduced interest expense, partially offset by higher operating expenses - Net loss for the quarter ended March 31, 2021, decreased by $2,240,000 (56%) to $1,725,000, compared to $3,965,000 for the prior year[124] - Net loss for the nine months ended March 31, 2021, decreased by $2,013,000 (18%) to $9,073,000, compared to $11,086,000 for the prior year[135] Liquidity and Capital Resources The company's liquidity improved significantly, with a positive cash balance of $2,432,000 and a reduced accumulated deficit of $62,485,000 as of March 31, 2021 - As of March 31, 2021, the Company had a cash balance of $2,432,000 and an accumulated deficit of $62,485,000[136] - The Company believes existing cash, $12.0 million available under the LOC, a $4.0 million revolving line of credit with Silicon Valley Bank, and potential ATM stock sales ($1.8 million remaining as of May 10, 2021) will be sufficient to fund planned operations for the next twelve months[136][143][144] Cash Flow Summary (Nine Months Ended March 31) | Metric | 2021 | 2020 | | :------------------------------------ | :------------- | :----------- | | Net cash used in operating activities | $(14,000,000) | $(5,744,000) | | Net cash used in investing activities | $(692,000) | $(145,000) | | Net cash provided by financing activities | $16,398,000 | $5,893,000 | | Net change in cash | $1,706,000 | $4,000 | - Net cash provided by financing activities increased to $16,398,000 in 2021, primarily from $19,006,000 in net proceeds from equity issuances (public offering, private placement, ATM sales), partially offset by $2,580,000 in payments of outstanding related party borrowings[141] Critical Accounting Policies This section refers readers to the Annual Report on Form 10-K for a discussion of critical accounting policies, which involve significant estimates and assumptions affecting reported financial amounts - Information regarding critical accounting policies, which involve subjective or complex judgments and significant estimates and assumptions, is contained in Item 7 of the Annual Report on Form 10-K for the year ended June 30, 2020[147] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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 as defined by Rule 12b-2 of the Exchange Act and is not required to provide quantitative and qualitative disclosures about market risk[148] ITEM 4. CONTROLS AND PROCEDURES Management, including the principal executive officer and principal financial officer, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021 - Management, including the principal executive officer and principal financial officer, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2021[149] - There have been no changes in the Company's internal controls over financial reporting during the nine months ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[152] PART II - Other Information This section covers other non-financial information, including legal proceedings, risk factors, unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, and a list of exhibits filed with the report ITEM 1. LEGAL PROCEEDINGS The company may be involved in various lawsuits in the ordinary course of business, but management is not aware of any material legal proceedings currently pending against the company - To the best knowledge of management, there are no material legal proceedings pending against the Company[154] ITEM 1A. RISK FACTORS This section refers readers to the 'Risk Factors' section in the Annual Report on Form 10-K for the fiscal year ended June 30, 2020, for a comprehensive discussion of investment risks, and reiterates the importance of forward-looking statement disclaimers - An investment in the Company's common stock involves a high degree of risk, and readers should carefully consider the risks set forth in the 'Risk Factors' section of the Annual Report on Form 10-K for the fiscal year ended June 30, 2020[155] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company reported unregistered sales of common stock in January and March 2021, totaling 658,103 shares, issued to note holders (including related party Esenjay Investments, LLC) in connection with the conversion of $2,633,000 in principal and accrued interest from the Credit Facility - In January 2021, the Company issued 396,970 shares of common stock at $4.00 per share for the conversion of $1,588,000 in principal and accrued interest outstanding under the Credit Facility[156] - On March 26, 2021, 261,133 shares of common stock were issued at $4.00 per share to Esenjay Investments, LLC (a related party) for the conversion of $1,045,000 in principal and accrued interest outstanding under the Credit Facility[157] - These offers, sales, and issuances of securities were deemed exempt from registration under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D, with recipients being accredited investors[158] ITEM 3. DEFAULTS UPON SENIOR SECURITIES The company states that there are no defaults upon senior securities to report - None[159] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - Not applicable[160] ITEM 5. OTHER INFORMATION The company states that there is no other information to report under this item - None[161] ITEM 6. EXHIBITS This section provides a list of exhibits filed as part of the report, including employment agreements for key executives, the 2021 Equity Incentive Plan, RSU award agreements for non-executive directors, and certifications under the Sarbanes-Oxley Act - Exhibits include Amended and Restated Employment Agreement (Ronald Dutt), Employment Agreement (Charles Scheiwe), and Employment Agreement (Jonathan Berry)[163] - The 2021 Equity Incentive Plan and Form of Restricted Stock Unit Award Agreement – Non-Executive Director are filed as exhibits[163] - Certifications of the Chief Executive Officer and Chief Financial Officer under Sections 302 and 906 of the Sarbanes-Oxley Act are included[163] SIGNATURES The report is duly signed on behalf of Flux Power Holdings, Inc. by its Chief Executive Officer, Ronald F. Dutt, and Chief Financial Officer, Charles A. Scheiwe, on May 13, 2021 - The report was signed on May 13, 2021, by Ronald F. Dutt, Chief Executive Officer (Principal Executive Officer), and Charles A. Scheiwe, Chief Financial Officer (Principal Financial Officer)[170]