FLUX

Flux Power Holdings, Inc.

NASDAQ · TECHNOLOGY · MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES

0.43

−0.01 −2.49%

USD · close Oct 30

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MKT CAP $9.3MP/E —DIV YIELD —FCF YIELD -69.13%REV TTM $42.1M −36.6%NET INCOME −$7.4MNET CASH —52W 0.40 – 2.66SEC XBRL · TTM TO Invalid Date

How FLUX rewrote its risk factors

10-K ITEM 1A · FY2025 → FY2026

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Item 1A – Risk Factors for additional information.
Segment and Related Information We operate as a single reportable segment.
Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires retrospective disclosure of significant segment expenses and other segment items on an annual and interim basis.
Additionally, it requires disclosure of the title and position of our Chief Operating Decision Maker (“CODM”).
This ASU is effective annually beginning with our fiscal year ended June 30, 2025 and for interim periods thereafter.
We adopted this standard for the year ended June 30, 2025 and the adoption did not have a material impact on our consolidated financial statements.
See Note 14 – Segment Information included in the notes to our consolidated financial statements included in this Form.
Management has considered all recent accounting pronouncements not yet adopted in our consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements .
The ASU is effective for public business entities for interim reporting periods within annual reporting periods beginning after December 15, 2027.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative , to incorporate several SEC disclosure requirements into a variety of Topics in the FASB Codification.
When effective, ASU 2023-06 will not significantly affect the disclosure requirements for entities subject to SEC’s existing disclosure requirements, given those entities’ requirement to comply with Regulation S-X.
The effective date of each amendment of the ASU will be the date of the SEC’s removal of the related disclosure from its regulations, to prevent duplication.
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 our fiscal year ending June 30, 2028 and interim periods thereafter.
Early adoption is permitted for annual financial statements that have not yet been issued.
We are evaluating the disclosure requirements related to the new standard.
Recently Adopted Accounting Pronouncements In December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures , which requires more detailed income tax disclosures.
The standard is effective for this fiscal year ending June 30, 2026 and the financial statements contained herein.
Critical Accounting Policies and Estimates updates Our discussion and analysis of our financial condition and results of operations are based upon our Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.
In addition, adjustments were made to our previously reported Financial Statements for the period ended June 30, 2025 in accordance with FASB ASC 250 – Accounting Changes and Error Corrections.
Such reclassifications consist of certain previously reported amounts in order to conform on a comparable basis with our current Financial Statement presentation.
The reclassifications had no effect on previously reported net income, total assets, stockholders’ equity or cash flows.
Management presents current and comparative results of operations with a disaggregation of intangible assets from other fixed assets and a disaggregation of interest expense from other expense.
What follows is a discussion of key areas where critical accounting policies and estimates affect the preparation of our financial statements.
Fair Values of Financial Instruments The carrying amount of our cash, accounts payable, accounts receivable, and accrued liabilities approximate their estimated fair values due to the short-term maturities of those financial instruments.
The carrying amount of the line of credit approximates fair value as interest approximates current market interest rates for similar instruments.
Management has concluded that it is not practical to determine the estimated fair value of subordinated debt due to related parties because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
We do not have any other assets or liabilities that are measured at fair value on a recurring or non-recurring basis.
Accounts Receivable Accounts receivable are evaluated according to the Financial Accounting Standards Board ASC 326-20 and Accounting Standards Update No. 2016-13 of Current Expected Credit Losses (“CECL”).
Under the CECL model, we estimate expected credit losses over the lifetime of accounts receivable using forward-looking data.
Accounts receivable are carried at their estimated collectible amounts.
We have not experienced significant issues related to the collection of our accounts receivable.
As of June 30, 2026 and 2025, we had an allowance for credit losses of $70,000 and $68,000, respectively.
Inventories Inventories consist primarily of battery management systems and the related subcomponents and are stated at the lower of cost (first-in, first-out) or net realizable value.
We evaluate inventories to determine if write-downs are necessary due to obsolescence or if the inventory levels are in excess of anticipated demand at market value based on consideration of historical sales and product development plans.
We recorded an adjustment related to obsolete inventory in the amount of approximately $658,000 and $534,000 during the years ended June 30, 2026 and 2025, respectively.

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Gone since FY2025

ITEM 1A - RISK FACTORS An investment in our common stock involves a high degree of risk.
You should carefully consider the summary of risk factors described below, together with all of the other information included in this report, before making an investment decision.
If any of the following risks actually occur, our business, financial condition or results of operations could suffer.
In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
You also should read the section entitled “Special Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.
The risk factors below do not address all the risks relating to securities, business and operations, and financial condition.
Risk Factors Relating to Our Business Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in this report.
Our audited financial statements at June 30, 2025 , and for the year then ended, were prepared assuming that we will continue as a going concern.
Management has evaluated the Company’s expected cash requirements, including investments in additional sales and marketing, research and development, capital expenditures and working capital requirements, and believes the Company’s existing cash and funding available under the GBC Credit Facility, along with the forecasted gross margin, will not be sufficient to meet the Company’s anticipated capital requirements to fund planned operations for the next twelve months following the filing date of this Annual Report The report from our independent registered public accounting firm for the year ended June 30, 2025 includes an explanatory paragraph stating that our current liquidity position and projected cash needs raise substantial doubt about our ability to continue as a going concern, along with management’s assessment and strategies.
The perception that we may not be able to continue as a going concern may make it difficult for us to raise new funds and to operate our business due to concerns about our ability to meet our contractual obligations.
There is no assurance that sufficient financing will be available when needed or on reasonable terms to allow us to continue our operations.
Our ability to continue as a going concern is contingent upon, among other factors, the availability of the GBC Credit Facility or obtaining alternate financing.
We cannot provide any assurance that we will be able to raise additional capital.
See Liquidity and Financial Condition in Note 2 – Summary of Significant Accounting Policies to the audited consolidated financial statements for additional information.
We have a history of losses and negative working capital.
For the fiscal years ended June 30, 2025 and 2024, we had net losses of $6.7 million and $8.3 million, respectively.
We have historically experienced net losses and until we generate sufficient revenue, we anticipate that we will continue to experience losses in the near future.
As of June 30, 2025 and 2024, we had a cash balance of $1.3 million and $0.6 million, respectively.
We currently believe that our existing cash balances, availability of our GBC credit facility, cash resources from operations and gross proceeds from our recent private placement will not be sufficient to fund our existing and planned operations for the next twelve months.
Until such time as we generate sufficient cash to fund our operations, we will need additional capital to continue our operations thereafter.
We have historically relied on equity financing, borrowings under short-term loans with related parties, credit facilities and/or cash resources from operating activities to fund our operations.
Specifically, we have relied heavily on a credit facility with GBC, and there can be no assurance that we will be able to maintain this facility, obtain additional funds via a new facility or that funds will be available on terms acceptable to us, if at all.
Failure to maintain the GBC debt facility without a replacement facility would have material adverse impact on our operations.
If we were to access additional capital via an equity or equity-linked financing, such funding would result in dilution of the ownership interests of our current stockholders.
If funds are not available on acceptable terms, we may be required to curtail our operations or take other actions to preserve our cash, which may have a material adverse effect on our future cash flows and results of operations.
We have identified material weaknesses in our internal control over financial reporting.
If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.
Based on management’s evaluation of our disclosure controls and procedures as of June 30, 2025, we identified material weaknesses in our internal controls over financial reporting.
The material weaknesses were based on our ineffective oversight of our internal control over financial reporting and lack of sufficient personnel resources with technical accounting expertise related to certain aspects of the financial reporting process.
While management intends to continue the use of third-party consultants and technical accounting experts and to implement measures designed to improve our internal control over financial reporting to remediate material weaknesses, there can be no assurance that these steps will be effective.
We concluded that the previously issued audited consolidated financial statements as of and for the fiscal year ended June 30, 2023 and the unaudited consolidated financial statements as of and for the quarters ended September 30, 2023, December 31, 2023, and March 31, 2024, which were filed with the Securities and Exchange Commission (“SEC”) on September 21, 2023, November 9, 2023, February 8, 2024 and May 13, 2024, respectively, should no longer be relied upon because of errors in such financial statements relating to the improper accounting for inventory.
Our Annual Report on Form 10-K filed for the year ended June 30, 2024 included the restatement of those periods.
As a part of this restatement and evaluation process, we also discovered that: (a) the Company’s original estimate of the overstatement of inventories had risen due to additional excess and obsolete inventory identified related to inventory components not recorded at the lower of cost or net realizable value, as well as consigned inventory not reconciled in a timely manner; (b) the Company had not properly recognized revenue in the periods in which the related performance obligations had been satisfied for a contract with a certain customer, and that the Company had improperly recorded accounts receivable pertaining to that contract as a reduction to its accounts payable owed to that customer although the right of offset conditions under ASC 210-20 had not been met, resulting in misstatements to revenues, accounts receivable and accounts payable; (c) the Company had improperly recorded various inventory write downs to research and development expenses although such expenses did not meet the classification criteria for research and development under ASC 730, resulting in an overstatement of research and development expenses and a corresponding understatement of cost of sales; (d) the Company had various clearing accounts that had not been reconciled in a timely manner, resulting in misstatements of accounts payable, inventories and cost of sales; (e) the Company had not included certain product warranty-related expenses within the proper periods in its calculation of its product warranty reserve estimate, resulting in an understatement of accrued expenses, an understatement of accounts payable and an understatement of cost of sales; and (f) the Company erroneously presented non-cash debt issuance cost incurred in conjunction with credit facility arrangements as a non-cash adjustment to reconcile net loss to net cash used in operating activities in the consolidated cash flow statements when such cost should have been recognized as a change in other assets.
As a result, our Annual Report on Form 10-K filed for the year ended June 30, 2024 included the restatement of our audited consolidated financial statements for the fiscal years ended June 30, 2023 and 2022, including all related unaudited consolidated interim financial statements within the fiscal years ended June 30, 2024, 2023 and 2022.
After re-evaluation, the Company’s management concluded that considering the errors described above, this represents an additional material weakness in the Company’s disclosure controls and procedures and the Company’s internal control over financial reporting.
The material weakness was based upon a lack of sufficiently designed controls over the prevention of fraud and possible management override of controls.
To address this material weakness, management plans to continue to devote significant effort and resources to the remediation and improvement of the Company’s internal control over financial reporting.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Moreover, the effectiveness of our controls and procedures may be limited by a variety of factors, including faulty human judgment and simple errors, omissions or mistakes; fraudulent action of an individual or collusion of two or more people; inappropriate management override of procedures; and the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial control.
We are committed to remediating our material weakness and have continued to remediate the identified material weaknesses through additional processes and controls, including the timing of inventory audits, review of inventory for obsolescence and completeness of data used to estimate warranty liability.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2025 ↗, FY2026 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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