S-1: Flux Power Boosts Capital, Narrows Losses Amidst Growth

Flux Power Holdings, Inc. reports increased revenue and gross profit, reduced net losses, and a successful capital raise to address Nasdaq listing compliance and liquidity concerns.

Summary

• Revenue for fiscal year 2025 increased by 9% to $66.43 million, up from $60.82 million in fiscal year 2024.
• Gross profit rose by 26% to $21.74 million in fiscal 2025, compared to $17.23 million in fiscal 2024, with gross profit margin improving from 28% to 33%.
• Net loss decreased by 20% to $6.67 million in fiscal 2025, an improvement from $8.33 million in fiscal 2024.
• Adjusted EBITDA significantly improved from a loss of $3.99 million in fiscal 2024 to a loss of $147,000 in fiscal 2025.
• Operating cash flow turned positive, generating $610,000 in fiscal 2025, compared to a use of $4.79 million in fiscal 2024.
• Successfully raised approximately $5.0 million in gross proceeds through a private placement of Prefunded Warrants and Common Warrants on September 15, 2025, with $3.8 million as the cash portion.
• Received an exception from Nasdaq to demonstrate compliance with the Stockholders Equity Requirement by October 31, 2025, contingent on filing the Form 10-K (which was filed) and achieving minimum net proceeds of $7.5 million from the current offering.
• Settled a securities class action lawsuit for $1.75 million, with $1.15 million expected to be covered by liability insurers and the company contributing $600,000.
• Settled a stockholder derivative action for corporate governance reforms and $425,000 in attorneys' fees and service awards, with $350,000 expected from liability insurers.
• The GBC Credit Facility maturity date was automatically extended to July 31, 2027, following the conversion of the Cleveland Note into equity.
• Implemented a workforce reduction of approximately 15% to reduce cash burn rate.

Sentiment

Score: 6

Explanation: The company shows significant operational improvements (revenue growth, gross margin, reduced losses, positive operating cash flow) and has taken concrete steps to address liquidity and Nasdaq compliance through capital raises and debt restructuring. However, substantial doubt about its going concern status, a worsening working capital deficit, negative stockholders' equity, and ongoing risks related to supply chain, customer concentration, and tariffs temper the overall positive developments.

Positives

• Achieved 9% revenue growth in fiscal 2025, reaching $66.43 million, driven by increased demand in material handling and GSE markets.
• Significantly improved gross profit margin to 33% in fiscal 2025 from 28% in fiscal 2024, due to manufacturing efficiencies, cost savings, and lower warranty expenses.
• Reduced net loss by 20% to $6.67 million in fiscal 2025, indicating progress towards profitability.
• Generated positive cash flow from operating activities of $610,000 in fiscal 2025, a substantial improvement from a negative cash flow in the prior year.
• Adjusted EBITDA improved significantly to a loss of $147,000 in fiscal 2025, nearing break-even.
• Secured $5.0 million in gross proceeds from a private placement, enhancing capital resources.
• Successfully obtained a Nasdaq exception for continued listing, with the current offering expected to help regain compliance with the Stockholders Equity Requirement.
• Resolved significant class action and derivative litigation, reducing future legal uncertainties and costs.
• Extended the GBC Credit Facility maturity date to July 31, 2027, providing longer-term financing stability.
• Expanded product offerings, including a second tier one OEM private label battery program and UL Type EE certified S-Series products, enhancing safety and durability.
• Introduced new products like the G96 high-voltage battery system and improved G80 design for GSE, and is developing SkyEMS energy management solution.

Negatives

• Reported a negative working capital of $(7.81) million as of June 30, 2025, worsening from $(2.33) million in 2024.
• Stockholders' equity moved into a deficit of $(5.40) million as of June 30, 2025, from a positive $194,000 in 2024.
• The independent registered public accounting firm included an explanatory paragraph raising substantial doubt about the company's ability to continue as a going concern.
• Identified material weaknesses in internal control over financial reporting, including ineffective oversight and lack of technical accounting expertise, which led to financial restatements.
• Experienced delays in new orders for energy storage solutions due to lower capital spending, interest rate variability, and global tariff uncertainties, with some customers deferring orders to fiscal 2026.
• Order backlog decreased to approximately $7.5 million as of September 12, 2025, from $9.92 million at June 30, 2025, and $16.89 million at the start of Q4 2025.
• Remains dependent on a single supplier in China for battery cells, posing significant supply chain and cost risks due to tariffs and geopolitical tensions.
• Reliance on a few major customers, with three customers accounting for 73% of fiscal 2025 sales and 78% of fiscal 2024 sales, creates concentration risk.
• Does not have long-term contracts with customers, leading to uncertainty in future sales.
• Incurred substantial unanticipated costs for accounting, legal, and consultancy fees related to financial restatements and litigation.

Risks

• Ability to continue as a going concern is in substantial doubt due to recurring losses, accumulated deficit, and need for additional working capital.
• Failure to remediate material weaknesses in internal control over financial reporting could lead to inaccurate financial reporting and adversely affect business and stock price.
• Ongoing litigation and legal proceedings, including a securities class action and stockholder derivative lawsuit, could result in significant costs and divert management attention.
• Need to raise additional capital or financing to fund operations and expansion, with no assurance of availability on acceptable terms, potentially leading to dilution or curtailment of operations.
• Default under the GBC Credit Facility could result in termination of commitments and foreclosure on substantially all assets.
• Backlog may not be indicative of future operating results and is dependent on timely delivery of key parts from vendors.
• Economic conditions, including higher interest rates and global tariff uncertainties, may adversely affect customer spending and demand for products.
• Dependence on a few major customers for the majority of net revenues creates significant concentration risk.
• Absence of long-term contracts with customers makes future sales and resource allocation difficult to forecast.
• Real or perceived hazards associated with Lithium-ion battery technology could affect demand for products.
• Quality problems, product recalls, and warranty claims could result in negative publicity, litigation, decreased revenues, and harm to brands.
• Increases in costs, disruption of supply, or shortage of raw materials, particularly lithium-ion phosphate cells from a single supplier in China, could harm the business.
• Inability to protect intellectual property rights from unauthorized use or infringement by third parties could lead to loss of competitive advantage.
• Patent applications may not result in issued patents, affecting the ability to prevent commercial exploitation of similar products by others.
• Significant costs may arise from environmental regulations for the storage and shipment of lithium-ion energy storage solutions.
• Natural disasters, public health crises, political crises, or other catastrophic events could damage facilities or disrupt supply chains.
• Security breaches, loss of data, and other disruptions could compromise sensitive information or expose the company to liability.
• The sale of common stock in the current offering and future sales may depress the stock price and ability to raise funds.
• New investors will experience immediate and substantial dilution due to the public offering price being substantially higher than the as-adjusted net tangible book value per share.
• Stock price volatility and potential for an inactive trading market could result in substantial losses for investors.
• Failure to comply with Nasdaq continued listing standards could lead to delisting, adversely affecting stock price and liquidity.
• High concentration of stock ownership in one director (Michael Johnson, 25%) could influence stockholder approval matters and delay change of control.
• Issuance of Series A Preferred Stock reduces voting power and dilutes ownership of common stockholders, with superior rights for preferred holders.
• Ineligibility to use a Form S-3 registration statement limits the ability to raise capital in a timely and cost-efficient manner.

Future Outlook

The company anticipates continued revenue growth, gross margin improvement, and lower operating expenses to move closer to profitability and improve cash flow. It plans to invest in additional sales and marketing, research and development, and capital expenditures. The company is actively evaluating strategies to improve profitability, including price increases, product cost efficiencies, and operating cost savings. It also expects to expand its supply chain and customer partnerships and seek further partnerships and/or acquisitions. The company believes the current offering will allow it to regain Nasdaq compliance and expects the revolving credit facility to remain available until July 31, 2027.

Management Comments

• Our long-term strategy is to meet the rapidly growing demand for lithium-ion energy solutions and to be the supplier of choice, targeting large companies having energy storage needs.
• Our research and development efforts will continue to focus on providing adaptable, reliable and cost-effective energy storage solutions for our customers.
• We believe that the increasing demand for lithium-ion energy storage solutions and more environmentally friendly energy storage solutions in the material handling sector should continue to drive our revenue growth.
• We believe that completion of this offering with minimum net proceeds of at least $7.5 million will allow us to regain compliance with the Stockholders Equity Requirement prior to the October Deadline.
• We expect our liability insurers to directly fund approximately $1.15 million of the settlement fund for the class action, with the Company contributing approximately $600,000.
• We intend to use the net proceeds from the Private Placement for general corporate purposes and growth capital.
• Our near-term priority will be to achieve profitability within our capital constraints. Accordingly, we will continue to pursue supply chain improvements, gross margin expansion initiatives and cost reductions.
• We are highly focused on expanding sales and marketing initiatives to secure new customer relationships and support continued migration to lithium of current customers.
• Management is actively evaluating ways to mitigate potential impacts of tariffs and expects to offset some impact with supply chain adjustments, alternative manufacturing locations and cost reduction actions.

Industry Context

The company operates in the rapidly growing lithium-ion energy storage solutions market, particularly for industrial and commercial sectors like material handling and airport ground support equipment. This market is experiencing a significant shift away from traditional lead-acid and propane-based solutions due to the superior performance, environmental benefits, and lower life-cycle costs of lithium-ion batteries. The price of lithium-ion batteries has declined significantly (85% since 2010), making them more cost-competitive. The global lift truck market is projected to grow at a compound annual growth rate of 5.7% from 2024 through 2030, indicating a strong underlying demand for the company's products.

Comparison to Industry Standards

• Lithium-ion batteries offer up to 50% longer run times compared to lead-acid batteries of comparable capacity.
• Lithium-ion batteries can be recharged in as little as one hour, eliminating the need for battery changeouts in multi-shift operations, unlike lead-acid batteries which require 8 hours for charging and 8 hours for cooling.
• Lithium-ion batteries are approximately one-third the weight of lead-acid batteries for comparable power ratings, allowing for optimized equipment design.
• Lithium-ion energy storage solutions use 20-50% less energy than lead-acid solutions, based on internal studies.
• Lithium-ion batteries last up to five times longer than lead-acid batteries in industrial equipment applications (500 cycles for lead-acid).
• The company's UL Listing for its core products provides a significant competitive advantage and assurance of safety, durability, and reliability, a key factor in the industry.
• The company has received OEM approvals from top global lift truck manufacturers like Toyota Material Handling USA, Inc., Crown Equipment Corporation, and The Raymond Corporation, indicating strong product acceptance within the industry.

Management Changes

Corporate Governance

Legal Proceedings

• Securities Class Action (Kassam v. Flux Power Holdings, Inc. et al.): Settled for $1.75 million, with $1.15 million expected from insurers and $600,000 from the company. Court approval pending October 23, 2025.
• Stockholder Derivative Action (Pearl v. Dutt, et al.): Settled for corporate governance reforms and $425,000 in attorneys' fees/service awards, with $350,000 expected from insurers. Court approval pending October 16, 2025.
• Employment Related Class Action (April 30, 2024): Filed by a former employee for wage and labor violations, currently pending consolidation.
• Employment Related PAGA Action (July 5, 2024): Filed by a former employee for California employment law violations, currently pending consolidation.
• Separate Employment Action (January 25, 2024): Filed by a former CPM, LTD Inc. employee, settled on April 28, 2025, and dismissed with prejudice on May 6, 2025.

Related Party Transactions

• Cleveland Capital, L.P. (an affiliate due to equity ownership) participated in the Private Placement on September 15, 2025, with its subscription price satisfying all obligations under the Cleveland Note and Subordinated LOC, leading to its termination.
• Certain affiliates of the company, including CEO Krishna Vanka, CFO Kevin Royal, COO Jeffrey Mason, and directors Dale Robinette and Michael Johnson, participated in the Private Placement on September 15, 2025.
• Michael Johnson, a director, beneficially owns approximately 25% of the outstanding Common Stock, including shares held by Esenjay Investments LLC, of which he is the sole director and beneficial owner.

Stakeholder Impact

• Shareholders: Will experience immediate and substantial dilution from the current offering. The issuance of Series A Preferred Stock and its superior rights could further dilute voting power and economic interests. However, the capital raise and Nasdaq compliance efforts aim to stabilize the company and potentially increase long-term value. Resolution of litigation reduces uncertainty.
• Employees: A 15% workforce reduction has occurred to reduce cash burn, impacting affected employees. The company's ability to continue as a going concern and achieve profitability is crucial for remaining employees.
• Customers: Delays in new orders due to economic conditions and tariffs may impact product availability and delivery timelines. However, expanded product offerings and improved supply chain efforts aim to enhance customer satisfaction.
• Suppliers: Continued dependence on a single battery cell supplier in China poses risks, but efforts to diversify the supply chain could benefit other suppliers.
• Creditors: The extension of the GBC Credit Facility maturity date and the satisfaction of the Cleveland Note improve the company's debt profile and financial stability, benefiting creditors.

Next Steps

• Complete the current public offering of common stock and pre-funded warrants to raise capital.
• Demonstrate compliance with Nasdaq's Stockholders Equity Requirement by October 31, 2025.
• Obtain court approval for the settlement of the Kassam securities class action on October 23, 2025.
• Obtain court approval for the settlement of the Pearl stockholder derivative action on October 16, 2025.
• Continue to implement measures to remediate material weaknesses in internal control over financial reporting.
• Pursue supply chain improvements, gross margin expansion initiatives, and cost reductions to achieve profitability.
• Invest in research and development to expand product mix and capabilities, including new features for SkyBMS and SkyEMS.
• Expand sales and marketing initiatives to secure new customer relationships and support migration to lithium solutions.
• Actively assess options to diversify battery cell suppliers to lessen concentration risk and mitigate tariff impacts.
• Monitor macroeconomic conditions and trade policy shifts, adapting sourcing strategies and pricing actions.

Key Dates

Recommendation

While Flux Power Holdings, Inc. has demonstrated notable operational improvements, including revenue growth, gross margin expansion, and a significant reduction in net loss and Adjusted EBITDA, the company still faces substantial financial challenges. The going concern doubt, worsening working capital deficit, and negative stockholders' equity indicate underlying instability. The successful capital raise and Nasdaq compliance efforts are positive steps, but the company's reliance on a single supplier, exposure to tariffs, and customer concentration risks remain significant. Given the mixed signals and the need for sustained execution to achieve consistent profitability and financial health, a 'hold' recommendation is appropriate for seasoned investors. Further monitoring of operational improvements, risk mitigation strategies, and financial stability is warranted before a stronger recommendation can be made.

Keywords

Lithium-ion batteries, Energy storage solutions, SEC filing, S-1 Registration, Nasdaq compliance, Capital raise, Financial performance, Material handling, Airport GSE, Battery management system, FLUX, Pre-funded warrants, Corporate governance, Supply chain risk, Tariffs, Litigation settlement