Financial Analysis

NOTE 12 COMMITMENTS AND CONTINGENCIES Legal Proceedings From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in any legal proceedings that may arise from time to time may harm the Companys business. To the best of its knowledge, except for the legal proceedings disclosed below, there are no other material legal proceedings pending against the Company. Securities Class Action On November 1, 2024, plaintiff Asfa Kassam filed a purported federal securities class action complaint in the United States District Court, District of Nevada, captioned Kassam v. Flux Power Holdings, Inc. et al. (No. 2:24-cv-02051), against the Company, our Chief Executive Officer, Ronald F. Dutt, and our former Chief Financial Officer, Charles A. Scheiwe. The complaint generally alleges that the defendants made false and misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The action purports to be brought on behalf of those who purchased or otherwise acquired the Companys publicly traded securities between November 11, 2022 and September 30, 2024, and seeks unspecified damages and other relief. On January 14, 2025, the court granted an unopposed motion to transfer the case to the Southern District of California for all further proceedings. On February …

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NOTE 7 NOTES PAYABLE Revolving Line of Credit Gibraltar Business Capital (GBC) Credit Facility On July 28, 2023, the Company entered into a Loan and Security Agreement (the Agreement) with GBC. The Agreement provides the Company with a senior secured revolving loan facility for up to $ 15.0 million (the Revolving Loan Commitment). The revolving amount available under the GBC Credit Facility is equal to the lesser of the Revolving Loan Commitment and the borrowing base amount (as defined in the Agreement). The GBC Credit Facility is evidenced by a revolving note, which, as amended, matures on July 31, 2027 (the Maturity Date), unless extended, modified or renewed (the Revolving Note). Provided that there is no event of default, the Maturity Date can automatically be extended for a one-year period upon payment of a renewal fee for each such extension in the amount of three-quarters of one percent ( 0.75 %) of the Revolving Loan Commitment, which fee will be due and payable on or before the applicable Maturity Date. In addition, subject to conditions and terms set forth in the Agreement, the Company may request an increase in the Revolving Loan Commitment from time to time upon not less than 30 days notice to GBC which increase may be made at the sole discretion of GBC, as long as: (a) the requested increase is in a minimum amount of $ 1,000,000 , and (b) the total increases do not exceed $ 5,000,000 and no more than five (5) increases are made. Outstanding principal under the G …

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NOTE 10 INCOME TAXES Pursuant to the provisions of FASB ASC Topic No. 740 Income Taxes (ASC 740), deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss and tax credit carryforwards. A valuation allowance of approximately $27,508,000 and $ 26,483,000 has been established to offset the net deferred tax assets as of June 30, 2025 and 2024, respectively, due to uncertainties surrounding the Companys ability to generate future taxable income to realize these assets. The Company is subject to taxation in the United States, California and Georgia. The Companys tax years from 2010 and forward are subject to examination by the federal and state taxing authorities due to the carry forward of unutilized net operating losses and research and development credits, as applicable. The Company has primarily incurred losses since inception. A current state income tax provision of $ 4,000 has been recorded for state minimum and net worth taxes. Significant components of the Companys net deferred tax assets and liabilities are shown in the table below. SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2025 2024 Year ended June 30, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 22,222,000 $ 21,553,000 Research and development credit carryforward 27,000 27,000 Capitalized research and development expenses 2, …

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Recently Issued Accounting Pronouncements Management has considered all recent accounting pronouncements not yet adopted in the Companys consolidated financial statements. In November 2024, the FASB issued Accounting Standards Update (ASU) 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses , which requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations, as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for the Companys fiscal year ending June 30, 2028 and interim periods thereafter. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is evaluating the disclosure requirements related to the new standard. In December 2023, the FASB issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires more detailed income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for the Company fiscal year ending June 30, 2026, with early …

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NOTE 8 RELATED PARTY DEBT AGREEMENTS Subordinated Line of Credit Facilities Cleveland Capital, L.P. Credit Facility On November 2, 2023, the Company entered into a Credit Facility Agreement (the Credit Facility) with Cleveland Capital, L.P., (Cleveland), a related party due to equity ownership. The Credit Facility provides the Company with a line of credit of up to $ 2,000,000 for working capital purposes (2023 Subordinated LOC). In connection with the LOC, the Company issued a subordinated unsecured promissory note for $ 2,000,000 (the Commitment Amount) in favor of Cleveland (the Note). Pursuant to the terms of the Credit Facility, Cleveland agreed to make loans (each such loan, an Advance) up to such Lenders Commitment Amount to the Company from time to time, until July 31, 2027 (the Due Date). The Note accrues interest at Secured Overnight Financing Rate plus nine percent ( 9 %) per annum on each Advance from and after the date of disbursement of such Advance. All indebtedness, obligations and liabilities of the Company to Cleveland are subject to the rights of Gibraltar Business Capital, LLC (together with its successors and assigns, GBC), pursuant to a Subordination Agreement dated on or about November 2, 2023, by and between Cleveland and GBC (the Subordination Agreement). Subject to the Subordination Agreement, the Company may, from time to time, prior to the Due Date, draw down, repay, and re-borrow on the Note, by giving notice to Cleveland of the amount to be reque …

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NOTE 13 SEGMENT INFORMATION The Company has one business activity and derives its revenue from the design, development, manufacturing, and sale of a portfolio of advanced lithium-ion energy storage solutions for electrification of a range of industrial commercial sectors which include material handling, airport ground support equipment (GSE), and stationary energy storage. Accordingly, the Company operates as a single operating and reporting segment. The Companys chief operating decision maker (the CODM) is its Chief Executive Officer. The CODM reviews financial information including operating results and assets on a consolidated basis. When evaluating the Companys financial performance and making strategic decisions, the CODM uses net income (loss) and Adjusted EBITDA to assess performance and allocate financial, capital and personnel resources. Net income (loss) and Adjusted EBITDA are used in the annual operating plan and forecasting process as well as ongoing decisions driven by the monthly or quarterly reviews of the plan versus actual results. The table below is a summary of the segment profit or loss, including significant segment expenses, for the periods presented: SCHEDULE OF SEGMENT INFORMATION 2025 2024 Year ended June 30, 2025 2024 Revenues $ 66,434,000 $ 60,824,000 Less: Cost of sales 44,694,000 43,591,000 General and administrative 18,337,000 15,669,000 Selling and marketing 2,965,000 2,218,000 Research and development 4,464,000 4,916,000 Depreciation 1,002,000 …

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NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the Companys significant accounting policies which have been consistently applied in the preparation of the accompanying consolidated financial statements follows: Principles of Consolidation The consolidated financial statements include Flux Power Holdings, Inc. and its wholly-owned subsidiary Flux Power, Inc. after elimination of all intercompany accounts and transactions. Liquidity and Financial Condition The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, substantial doubt about the Companys ability to continue as a going concern exists. Historically, the Companys revenues and operating cash flows have not been sufficient to sustain its operations and the Company has relied on debt and equity financing for additional funds. The Company has incurred an accumulated deficit of $ 106.4 million through June 30, 2025, and for the year ended June 30, 2025, generated positive cash flows from operations of $ 0.6 million and incurred a net loss of $ 6.7 million. As of July 31, 2025, the Company had a cash balance of $ 1.1 million and $ 6.7 million available funding under the Gibraltar Business Capital (GBC) Credit Facility. In addition, the Companys operations have been impacted by delays in new orders of its energy storage solutions due to corresponding …

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NOTE 9 STOCKHOLDERS EQUITY (DEFICIT) Authorized Shares of Common Stock On May 28, 2025, the Companys stockholders approved an increase in the number of authorized common shares to 75,000,000 shares from 30,000,000 shares. Authorized Shares of Preferred Stock As of June 30, 2025, there are no outstanding shares of the Companys preferred stock. On August 29, 2025, our stockholders approved the amendment and restatement of our Articles of Incorporation to, among other things, (i) increase the aggregate number of authorized shares of preferred stock from 500,000 to 3,000,000 , $ 0.001 par value per share (Preferred Stock), and (ii) grant the Board authority to fix the rights and preferences of the preferred stock by resolution from time to time, and (iii) designate 1,000,000 shares of Preferred Stock as Series A Convertible Preferred Stock, $0.001 par value per share (the Series A Preferred Stock), with rights, preferences, privileges and restrictions all as set forth in the Second Amended and Restated Certificate of Incorporation. The Second Amended and Restated Certificate of Incorporation was filed with the State of Nevada on September 10, 2025. Warrants In connection with the Companys Registered Direct Offering (RDO) in September 2021, the Company issued 5 five-year warrants to the RDO investors to purchase up to 1,071,430 shares of the Companys common stock at an exercise price of $ 7.00 per share and were estimated to have a fair value of approximately $ 3,874,000 . The war …

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NOTE 14 SUBSEQUENT EVENTS Management evaluated events subsequent to June 30, 2025 through the filing date of these consolidated financial statements and concluded there are no material subsequent events to disclose other than those presented as follows. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing On January 31, 2025, the Listing Qualifications Department (the Staff) of the Nasdaq Stock Market (Nasdaq) notified the Company that the Company did not comply with the minimum $2,500,000 stockholders equity requirement for continued listing set forth in Nasdaq Listing Rule 5550(b)(1) (the Stockholders Equity Requirement). On March 17, 2025, the Company filed its plan with Nasdaq to regain compliance with the Stockholders Equity Requirement, which included requesting an extension through July 30, 2025. On July 31, 2025, the Company received a determination letter from the Staff notifying the Company that based on the Companys most recent disclosure, the Companys stockholders equity was a deficit of $ 4,372,000 as of March 31, 2025 and that the Staff had determined that the Company had not regained compliance with the Stockholders Equity Requirement. The Staff has informed the company that trading of the Companys common stock would be suspended at the opening of business on August 11, 2025, unless the Company requested an appeal of the Staffs determination to a Nasdaq Hearings Panel (the Panel). On August 7, 2025, the Company sub …

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