8-K: Flux Power Holdings to Settle Class Action Lawsuit for $1.75 Million

Flux Power Holdings, Inc. has entered into a settlement term sheet to resolve a class action litigation for $1.75 million, with its insurers covering a significant portion.

Summary

• Flux Power Holdings, Inc. (the Company) entered into a settlement term sheet on July 11, 2025, to fully resolve the previously disclosed class action litigation captioned Kassam v. Flux Power Holdings, Inc. et al.
• The settlement provides for the final dismissal of the litigation and a release of claims against the Company, its former chief executive officer, Ronald F. Dutt, and its former chief financial officer, Charles A. Scheiwe.
• The Company will establish a $1.75 million escrowed settlement fund to cover payments to the settlement class, attorneys' fees, and settlement administration expenses.
• The Company's liability insurers are expected to directly fund approximately $1.15 million of the settlement fund.
• The Company estimates it will contribute approximately $600,000 to the settlement fund as its remaining retention/deductible related to its insurance policy.
• The settlement class consists of persons or entities who purchased publicly traded common stock of the Company between November 15, 2021, and February 14, 2025, with specific exclusions.
• The Company is not admitting any liability as part of the settlement.
• Final settlement is subject to a definitive settlement agreement not inconsistent with the Term Sheet and court approval of such agreement.

Sentiment

Score: 6

Explanation: The settlement resolves a significant legal overhang, which is positive. However, it still involves a material cash outlay from the company and stems from past issues, preventing a higher score. The insurance coverage is a mitigating factor.

Positives

• Resolution of previously disclosed class action litigation, removing a significant legal and financial uncertainty.
• A substantial portion of the settlement fund, approximately $1.15 million, is expected to be covered by the Company's liability insurers.
• The Company is not admitting any liability as part of the settlement, which helps maintain its legal position.

Negatives

• The Company will contribute approximately $600,000 to the settlement fund, representing a direct cash outlay.
• The existence of the class action lawsuit indicates past issues that led to shareholder claims, potentially impacting investor confidence.

Risks

• Actual results could differ materially and adversely from forward-looking statements.
• Risks and uncertainties are related to the Term Sheet and the final settlement.
• Uncertainty exists regarding the timing and court approval of the Term Sheet and definitive settlement agreement.
• There is a risk concerning the payment of the settlement amount by the Company's insurance carrier and the Company.
• General risk factors contained in the Company's SEC filings, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, remain applicable.

Future Outlook

The Company expects the settlement to be finalized through a definitive agreement and court approval. The settlement is subject to risks and uncertainties, including the timing of court approval and the actual payment of the settlement amount by the insurance carrier and the Company.

Management Comments

• "The Company is not admitting any liability and neither the Term Sheet nor the definitive settlement agreement that the parties will enter into constitutes or will constitute an admission of liability or an admission regarding the accuracy of any allegation made by the plaintiffs."
• "We expect the Company's liability insurers to directly fund approximately $1.15 million of the settlement fund."
• "The Company estimates that it will contribute approximately $600,000 to the settlement fund as its remaining retention/deductible related to its insurance policy."

Industry Context

This settlement reflects a common challenge faced by publicly traded companies, where past financial disclosures or operational events can lead to shareholder litigation. Resolving such lawsuits, often with significant insurance contributions, is a standard practice to mitigate ongoing legal costs and reputational damage, allowing the company to focus on its core business.

Comparison to Industry Standards

• NA

Legal Proceedings

• Resolution of the class action litigation captioned Kassam v. Flux Power Holdings, Inc. et al. (Case No. 3:25-cv-00113-JO-DDL).
• The settlement provides for final dismissal of the litigation and a release of claims against the Company, its former CEO Ronald F. Dutt, and its former CFO Charles A. Scheiwe.
• The Company is establishing a $1.75 million escrowed settlement fund.
• The settlement is subject to a definitive agreement and court approval.

Stakeholder Impact

• Shareholders: The settlement resolves a legal uncertainty, potentially reducing future legal costs and liabilities. However, it involves a $600,000 contribution from the company, which impacts cash flow. The settlement class members (certain past shareholders) will receive payments from the fund.
• Management (Former): Former CEO and CFO are released from claims as part of the settlement.

Next Steps

• The parties will document the definitive settlement within a reasonable time, not exceeding 45 days of the execution of the Term Sheet, unless mutually agreed otherwise.
• The plaintiff will move for certification of the settlement class.
• The definitive settlement agreement is subject to court approval.

Key Dates

Recommendation

Keywords

Flux Power Holdings, FLUX, SEC Filing, 8-K, Class Action Lawsuit, Settlement, Litigation, Financial Obligation, Insurance Coverage, Shareholder Lawsuit, Legal Settlement, Corporate Governance