Flux Power Holdings, Inc. SEC 10-K Report

Flux Power Holdings, Inc., a leading provider of advanced lithium-ion energy storage solutions, has released its annual Form 10-K report, detailing significant financial and operational achievements, strategic initiatives, and the challenges it faces. The company, which focuses on material handling and ground support equipment (GSE) markets, has shown notable progress in revenue growth and operational efficiency, despite facing various market and regulatory challenges.

Financial Highlights

• Revenues: $66.434 million, a 9% increase from the previous year, driven by heightened demand in both the material handling and GSE markets.
• Gross Profit: $21.740 million, representing a 26% increase due to manufacturing efficiencies, cost-saving initiatives, and lower warranty-related expenses.
• Operating Loss: $5.028 million, an improvement from the previous year, attributed to increased gross profit despite higher general and administrative costs.
• Net Loss: $6.674 million, a 20% decrease compared to the previous year, primarily due to the increase in gross profit.
• Adjusted EBITDA: Loss of $147,000, significantly improved from a loss of $3.999 million in the previous year, reflecting better operational performance.

Business Highlights

• Revenue Segments: The company has expanded its product offerings into adjacent applications, including airport ground support equipment (GSE), alongside its traditional focus on material handling equipment. This expansion has led to increased demand in both markets, with a notable rise in unit demand for private label walkie packs and higher average selling prices in the GSE market.
• Sales Units: Increased unit demand for private label walkie packs has contributed to overall growth in the material handling sector. The launch of larger packs over the past two years has shifted the portfolio mix to include packs with higher average selling prices.
• New Product Launches: In fiscal 2025, the company introduced the G96, a higher-voltage battery system with greater capacity for intensive applications in the Airline and Aviation industry, and improved the G80 design for GSE. Additionally, the company began developing and showcasing SkyEMS, an energy management solution aimed at building a more comprehensive energy ecosystem.
• New Production Launches: The company has expanded its manufacturing and service capacities to ensure customer satisfaction from increased deliveries and service. This includes leveraging Lean Manufacturing principles within its ISO 9001 certified facility in Vista, California, which includes six assembly lines.
• Future Outlook: The company plans to continue introducing designs that enhance margins, increase part commonality, and improve serviceability. It is also focused on expanding its supply chain and customer partnerships, seeking further partnerships and/or acquisitions that provide synergy to meet growth and scale objectives. The company is targeting gross margin improvement through strategic supply chain and profitability improvement initiatives, lower costs, and higher volume purchasing.

Strategic Initiatives

• Strategic Initiatives: The company is focused on expanding its product mix and enhancing its sales and marketing efforts to meet the growing demand for lithium-ion energy solutions. It has established relationships with large fleet customers and is investing in research and development to improve its energy storage solutions. The company has filed three new patents aimed at increasing battery life, improving battery health monitoring, and using AI for optimal cell performance. Additionally, the company is working on enhancing the recycling process for end-of-life lithium-ion batteries through a new partnership with a major U.S. battery recycling company.
• Capital Management: The company has been actively managing its capital through various amendments to its Loan and Security Agreement with GBC, including modifications to financial covenants and extensions of maturity dates. It has also secured waivers for non-compliance with certain financial covenants. The company completed a private placement, raising $5.0 million, with $3.8 million in cash proceeds, to support its capital needs. The company has not declared or paid any cash dividends and does not expect to do so in the foreseeable future, preferring to reinvest earnings into operations.
• Future Outlook: The company anticipates that revenue growth, coupled with improvements in gross margin and lower operating expenses, will move it closer to profitability and improve cash flow. However, it acknowledges that existing cash resources and credit facilities may not be sufficient to meet anticipated needs over the next twelve months, necessitating potential additional fundraising. The company is focused on maintaining operational flexibility and adapting its supply chain to navigate uncertainties related to tariffs and global economic conditions.

Challenges and Risks

• Market and Economic Risks: The company is facing delays in new orders for its energy storage solutions due to reduced capital spending by large customer fleets, influenced by economic uncertainty, higher interest rates, and geopolitical factors. Additionally, the impact of global tariffs has affected new purchase orders, requiring the company to adopt new selling strategies to maintain its sales trajectory.
• Financial Challenges: The company is experiencing significant financial challenges, including a history of losses and negative working capital, raising substantial doubt about its ability to continue as a going concern. The company's liquidity position is precarious, with existing cash and funding sources insufficient to meet anticipated capital requirements for the next twelve months. The company is also not in compliance with Nasdaq's continued listing requirements, risking potential delisting, which could adversely affect stock price and market liquidity.
• Operational Risks: Reliance on a single supplier in China for battery cells exposes the company to supply chain disruptions and tariff impacts. The company has identified material weaknesses in its internal control over financial reporting, which could lead to inaccurate financial reporting and adversely affect business operations and stock price.
• Regulatory Risks: Increased tariffs on lithium-ion batteries and other components could increase costs and affect gross margins. The company is also subject to environmental regulations for the storage and shipment of its products, which could impose additional compliance costs.
• Emerging Risks: Potential product liability claims due to the inherent dangers associated with lithium-ion batteries could result in significant legal costs and damage to the company's reputation. The company is also exposed to cybersecurity threats that could compromise sensitive information and disrupt operations.
• Management Strategies: Management is focused on achieving profitability by improving supply chain efficiencies, expanding gross margins, and reducing costs. The company is leveraging existing customer relationships and exploring new markets to drive growth. However, the success of these initiatives is uncertain, and the company may need to raise additional capital to support its operations.
• Market Risks: The company is exposed to market risks, including fluctuations in the price of raw materials, particularly lithium-ion phosphate cells, which could impact production costs and profitability. Additionally, the company faces risks related to foreign currency exchange rate fluctuations, which may adversely affect financial results.

SEC Filing: Flux Power Holdings, Inc. [ FLUX ] - 10-K - Sep. 16, 2025