10-K: Flux Power Navigates Nasdaq Delisting, Secures Capital

Flux Power Holdings, Inc. reports increased revenue and gross profit for fiscal year 2025, but faces Nasdaq delisting concerns and ongoing legal proceedings, while securing $5 million in a private placement.

Summary

• Revenue increased by 9% to $66.434 million for fiscal year 2025, up from $60.824 million in fiscal year 2024.
• Gross profit rose by 26% to $21.740 million in fiscal year 2025, with the gross profit margin improving to 33% from 28% in the prior year.
• Net loss decreased by 20% to $6.674 million for fiscal year 2025, compared to a net loss of $8.333 million in fiscal year 2024.
• Adjusted EBITDA significantly improved to a loss of $147,000 in fiscal year 2025, from a loss of $3.999 million in fiscal year 2024.
• The company received a Nasdaq delisting notice due to a stockholders' equity deficit of $4.372 million as of March 31, 2025, but was granted an exception for continued listing until October 31, 2025, to regain compliance.
• A $5.0 million private placement of Prefunded Warrants and Common Warrants was completed on September 15, 2025, generating approximately $3.8 million in cash proceeds.
• Settled a federal securities class action for $1.75 million, with $1.15 million expected to be funded by liability insurers and $600,000 by the company.
• Settled a stockholder derivative action for corporate governance reforms and $425,000 in attorneys' fees, with $350,000 expected from liability insurers.
• Identified material weaknesses in internal control over financial reporting, leading to prior financial restatements, and is actively working on remediation.
• Experienced delays in new orders for energy storage solutions due to lower capital spending by large customer fleets, interest rate variability, and global tariff uncertainties.
• Implemented a workforce reduction of approximately 15% to decrease the cash burn rate.

Sentiment

Score: 3

Explanation: While the company shows positive trends in revenue growth and gross profit margin, and has secured a capital raise and Nasdaq extension, these are overshadowed by significant financial instability. The 'going concern' doubt, negative stockholders' equity, material weaknesses in internal controls, and ongoing order delays indicate fundamental challenges that pose substantial risks to the company's long-term viability.

Positives

• Revenue increased by 9% to $66.434 million in fiscal year 2025, demonstrating continued sales growth.
• Gross profit increased by 26% to $21.740 million in fiscal year 2025, indicating improved operational efficiency.
• Gross profit margin improved to 33% in fiscal year 2025 from 28% in fiscal year 2024, reflecting successful cost-saving initiatives and design enhancements.
• Net loss decreased by 20% to $6.674 million in fiscal year 2025, showing progress towards profitability.
• Adjusted EBITDA significantly improved to a loss of $147,000 in fiscal year 2025, nearing break-even on an adjusted basis.
• Generated positive cash flow from operations of $610,000 during fiscal year 2025.
• Successfully completed a $5.0 million private placement, securing crucial capital for general corporate purposes and growth.
• Nasdaq granted an exception for continued listing until October 31, 2025, providing additional time to regain compliance with stockholders' equity requirements.
• Expanded product offerings with a second tier one OEM private label battery program, including UL Type EE certified S-Series line, enhancing market reach and safety credentials.
• Announced a new partnership for enhancing the recycling process for end-of-life lithium-ion batteries, demonstrating commitment to environmental responsibility.
• Improvements in sourcing and purchasing activity, including more secondary sources and lower costs, are targeting continued gross margin improvement.
• Proprietary SkyBMS telemetry solution provides customers with real-time reports on pack performance, health, and remaining useful life, enhancing asset management.
• Holds two issued U.S. patents and one pending patent related to advanced lithium-ion energy storage technology, protecting core innovations.

Negatives

• The company has recurring losses from operations and an accumulated deficit of $106.4 million as of June 30, 2025.
• The independent registered public accounting firm included an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern.
• Stockholders' equity was a deficit of $5.404 million as of June 30, 2025, and $4.372 million as of March 31, 2025, indicating non-compliance with Nasdaq's minimum $2.5 million requirement.
• Identified material weaknesses in internal control over financial reporting, leading to prior financial restatements and potential future reporting inaccuracies.
• Experienced delays in new orders due to lower capital spending by large customers, interest rate variability, and global tariff uncertainties.
• Backlog decreased from $16.895 million at March 31, 2025, to $9.922 million at June 30, 2025, and further to $7.5 million as of September 12, 2025.
• Dependent on a single supplier in China for battery cells, exposing the company to significant supply chain disruptions and tariff risks.
• Incurred substantial unanticipated costs for accounting, legal, and consultancy fees related to financial restatements and internal investigations.
• Subject to a $1.75 million settlement for a federal securities class action and $425,000 in attorneys' fees for a stockholder derivative action.
• Implemented a workforce reduction of approximately 15% to manage cash burn.
• Currently ineligible to use a registration statement on Form S-3, limiting the ability to raise capital in a timely and cost-efficient manner.
• Ownership of common stock is highly concentrated, with one director beneficially owning in excess of 25%.

Risks

• Substantial doubt about the ability to continue as a going concern due to recurring losses and insufficient capital.
• Inability to comply with the terms of the GBC credit facility or obtain alternate financing, which is critical for operations.
• Significant expense, uncertain timing, and unpredictable outcomes of legal proceedings, including a pending federal securities class action, a stockholder derivative lawsuit, and employment lawsuits.
• Failure to meet projected revenue targets and generate cash from operations due to delays in new orders, lower capital spending, interest rate variability, and global tariff uncertainties.
• Inability to remediate identified material weaknesses in internal control over financial reporting, which could adversely affect financial reporting accuracy and stock price.
• Failure to regain and maintain compliance with Nasdaq's continued listing standards, potentially leading to delisting and adverse impacts on stock price and market liquidity.
• Inability to secure sufficient additional funding to support current and proposed operations.
• Challenges in managing working capital requirements efficiently.
• Difficulties in obtaining raw materials and other supplies for products at existing or competitive prices and on a timely basis.
• Inability to effectively manage the expansion of business operations.
• Failure to maintain or increase market share in competitive markets.
• Inability to achieve sustained revenue growth, increase gross profit margin, and become a profitable business.
• Inability to fulfill backlog of open sales orders due to delays in key component parts and other potential manufacturing disruptions.
• Failure to keep up with rapidly changing technologies and evolving industry standards.
• Dependence on the growth in demand for the company's products.
• Competition from larger companies with significantly greater resources.
• Inability to shift to new suppliers and incorporate new components into products without disrupting business operations.
• Failure to obtain and maintain UL Listings and OEM approvals for energy storage solutions.
• Inability to diversify product offerings and capture new market opportunities.
• Challenges in sourcing skilled labor, machinery, parts, and raw materials economically.
• Inability to retain and/or successfully recruit key members of the senior management team.
• Dependence on a few major customers for a significant portion of net revenues (73% from three customers in FY2025).
• Adverse impact of U.S. government tariffs on cost-effectively sourcing battery packs and materials from China.
• Material adverse impact from the restatement of previously issued financial statements, including increased costs and loss of investor confidence.
• Real or perceived hazards associated with Lithium-ion battery technology affecting product demand.
• Product quality problems, negative publicity, litigation, product recalls, and warranty claims.
• Exposure to product liability claims.
• Inability to protect intellectual property rights from unauthorized use or infringement by third parties.
• Reliance on trade secret protections through confidentiality agreements, with risks of breach or independent development by competitors.
• Difficulties in complying with legal and regulatory requirements as a public company if forced to implement workforce and other cost reductions.
• Increased expenses and diversion of management time due to compliance with changing corporate governance and public disclosure regulations.
• Significant costs relating to environmental regulations for the storage and shipment of lithium-ion energy storage solutions.
• Disruptions to operations or critical systems due to natural disasters, public health crises, political crises, or other catastrophic events.
• Security breaches, loss of data, and other disruptions compromising sensitive information or exposing the company to liability.
• Volatility or weakness in the market price and trading volume of common stock.
• Concentrated ownership of stock by one director, potentially influencing stockholder approval matters.
• No intention to pay dividends on common stock for the foreseeable future.
• Issuance of Preferred Stock with superior rights (voting, conversion, liquidation) that may dilute common stock holders.

Future Outlook

The company expects revenue growth, gross margin improvement, and lower operating expenses to move closer to profitability. Management is actively evaluating strategies to improve profitability, including planned price increases for energy storage solutions, cost-saving initiatives, and supply chain adjustments. The company plans to continue introducing new product designs that enhance margins, increase part commonality, and improve serviceability. It is also exploring additional avenues to raise equity capital to ensure compliance with Nasdaq listing requirements and fund operations, as existing cash and anticipated funding are not sufficient for the next twelve months.

Management Comments

• "We believe our mobile energy storage solutions provide our customers a reliable, high performing, cost effective, and more environmentally friendly alternative as compared to traditional lead acid and propane-based solutions."
• "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."
• "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 near-term priority will be to achieve profitability within our capital constraints."
• "We believe that lithium-ion battery systems have significant advantages over existing technologies and will displace lead acid batteries and propane-based solutions, in most applications."
• "We believe our strengths include our core competencies and capabilities in designing and developing proprietary technology for our BMS, lean manufacturing processes, systems engineering, engineering application, and software engineering for both energy storage solutions and telemetry."
• "Management believes that Adjusted EBITDA, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period results."
• "Management believes that the Company is not exposed to any significant credit risk with respect to its cash."

Industry Context

The company operates within the rapidly expanding lithium-ion energy storage market, specifically targeting industrial and commercial sectors such as material handling and airport ground support equipment. This market is experiencing a significant shift away from traditional lead-acid and propane-based power solutions due to the superior performance, environmental benefits, and lower life cycle costs offered by lithium-ion technology. The price of lithium-ion batteries has seen a substantial decline (85% since 2010), making them increasingly cost-competitive. The global lift truck market, a key segment for the company, is projected to grow at a compound annual growth rate of 5.7% from 2024 through 2030, driven by global manufacturing, e-commerce, and construction.

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 eight hours for charging and another eight hours for cooling.
• Lithium-ion batteries demonstrate an extended life, lasting up to five times longer (cycle life) than lead-acid batteries in industrial equipment applications (e.g., 500 cycles for lead-acid).
• Lithium-ion is approximately one-third the weight of lead-acid for comparable power ratings, allowing for optimized forklift truck designs.
• The company's lithium-ion energy storage solutions use 20-50% less energy compared to lead-acid solutions, based on internal studies.
• The company's products have obtained UL Listing, providing assurance of rigorous independent safety and durability testing, which is a significant competitive advantage.
• Many of the company's energy storage packs have received OEM approvals from top global lift truck manufacturers by revenue, including Toyota Material Handling USA, Inc., Crown Equipment Corporation, and The Raymond Corporation.

Management Changes

Corporate Governance

Legal Proceedings

• **Securities Class Action (Kassam v. Flux Power Holdings, Inc. et al.)**: Filed November 1, 2024, alleging false and misleading statements from November 11, 2022, to September 30, 2024. A settlement term sheet was entered on July 11, 2025, for $1.75 million, with $1.15 million expected from liability insurers and $600,000 from the company. The settlement class includes purchasers of common stock between November 15, 2021, and February 14, 2025. A preliminary approval hearing is scheduled for October 23, 2025.
• **Stockholder Derivative Action (Pearl v. Dutt, et al.)**: Filed January 7, 2025, against current and former officers and directors, alleging breach of fiduciary duties. An agreement to resolve the complaint was reached on July 11, 2025, involving corporate governance reforms and a payment of $425,000 for plaintiffs' attorneys' fees and expenses, with $350,000 expected from liability insurers. A preliminary approval hearing is scheduled for October 16, 2025.
• **Employment Related Actions**: A class action complaint was filed on April 30, 2024, by a former employee for wage and labor law violations, which has been stipulated for consolidation with a PAGA representative action filed on July 5, 2024. The company intends to move for dismissal of class claims, arbitration of individual claims, and a stay of PAGA claims. A separate action by a former CPM employee, filed January 25, 2024, alleging harassment, retaliation, wrongful termination, and wage violations, was settled on April 28, 2025, and dismissed with prejudice on May 6, 2025.

Related Party Transactions

• Cleveland Capital, L.P., a related party due to equity ownership, provided a $2.0 million Subordinated Line of Credit (2023 Subordinated LOC) on November 2, 2023.
• The due date of the Subordinated Unsecured Promissory Note with Cleveland Capital, L.P. was extended from August 15, 2025, to September 30, 2025, via a First Amendment on July 16, 2025.
• On September 15, 2025, the outstanding obligations under the Cleveland Note and Subordinated LOC were applied in full satisfaction of Cleveland's subscription in the $5.0 million private placement, leading to the termination and cancellation of the Cleveland Note and Subordinated LOC.
• Cleveland Capital, L.P., which beneficially owns approximately 7.3% of the company's common stock, participated in the $5.0 million private placement.
• Company affiliates, including Krishna Vanka (CEO), Kevin Royal (CFO), Jeffrey Mason (COO), Dale Robinette (director), and Michael Johnson (director), also participated in the private placement.

Stakeholder Impact

• **Shareholders**: Face potential dilution from the recent increase in authorized common stock and the issuance of Series A Preferred Stock with superior rights. There is a risk of delisting from Nasdaq, which could adversely affect stock price and liquidity. The company does not anticipate paying cash dividends in the foreseeable future. Legal settlements will impact financial resources, though partially covered by insurance. A high concentration of ownership by one director could influence corporate decisions.
• **Employees**: Experienced a workforce reduction of approximately 15%. The company is involved in employment-related lawsuits.
• **Customers**: May experience delays in new orders due to broader economic concerns and tariffs. However, new product offerings, expanded service capacities, and the proprietary SkyBMS telemetry solution aim to enhance customer satisfaction and product performance.
• **Suppliers**: The company's dependence on a single battery cell supplier in China creates significant supply chain and tariff-related risks, prompting efforts to diversify suppliers.
• **Creditors (GBC)**: The GBC Credit Facility is senior secured by substantially all of the company's assets. While multiple waivers for covenant defaults have been obtained, ongoing compliance is critical to maintain this financing source.

Next Steps

• Demonstrate compliance with the Nasdaq Stockholders Equity Requirement on or before October 31, 2025.
• Continue to pursue supply chain improvements, gross margin expansion initiatives, and cost reductions.
• Invest in research and development to expand product mix and develop new features for the Battery Management System (BMS).
• Expand sales and marketing efforts and improve customer support.
• Expand manufacturing and service capacities to meet increased deliveries and customer satisfaction.
• Continue to strengthen internal processes and procedures to remediate identified material weaknesses in internal control over financial reporting.
• Attend the court hearing for preliminary approval of the class action settlement on October 23, 2025.
• Attend the court hearing for preliminary approval of the derivative settlement on October 16, 2025.
• Move to dismiss the employee class action claims, compel individual claims to binding arbitration, and stay the PAGA claims.
• Prepare and file a registration statement with the SEC covering the resale of common stock underlying the Series A Preferred Stock and Common Warrants issued in the private placement.

Key Dates

Recommendation

Despite some positive operational improvements like increased revenue and gross profit, the company faces severe financial distress, as evidenced by recurring net losses, a substantial accumulated deficit, and a negative stockholders' equity. The independent auditor's 'going concern' doubt is a critical indicator of fundamental instability. While a recent private placement and Nasdaq extension provide temporary relief, the company's liquidity is explicitly stated as insufficient for the next 12 months. Ongoing material weaknesses in internal controls, persistent order delays, dependence on a single foreign supplier, and significant legal settlement costs further compound the risks. These factors collectively point to a highly precarious financial position, making the stock a 'sell' for seasoned investors due to the high probability of further value erosion and potential long-term viability concerns.

Keywords

Lithium-ion batteries, Energy storage solutions, Material handling, Airport ground support equipment, SEC filing, 10-K, Financial results, Nasdaq compliance, Private placement, Corporate governance, Risk factors, Supply chain, Tariffs, Battery management system, Industrial equipment, Financial restatement, Legal settlement, Going concern, FLUX