Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Sep. 30, 2019 | Nov. 12, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Flux Power Holdings, Inc. | |
Entity Central Index Key | 0001083743 | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 5,107,595 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) | Sep. 30, 2019 | Jun. 30, 2019 |
Current assets: | ||
Cash | $ 163,000 | $ 102,000 |
Accounts receivable | 1,026,000 | 2,416,000 |
Inventories | 4,124,000 | 3,813,000 |
Other current assets | 519,000 | 371,000 |
Total current assets | 5,832,000 | 6,702,000 |
Right of use asset | 2,618,000 | 0 |
Other assets | 142,000 | 158,000 |
Property, plant and equipment, net | 417,000 | 346,000 |
Total assets | 9,009,000 | 7,206,000 |
Current liabilities: | ||
Accounts payable | 2,792,000 | 2,483,000 |
Accrued expenses | 755,000 | 858,000 |
Due to Factor | 382,000 | 0 |
Line of credit - related party | 8,000,000 | 6,405,000 |
Financing lease payable, current portion | 29,000 | 29,000 |
Office lease payable, current portion | 162,000 | 0 |
Accrued interest | 853,000 | 571,000 |
Total current liabilities | 12,973,000 | 10,346,000 |
Long term liabilities: | ||
Financing lease payable, less current portion | 22,000 | 29,000 |
Office lease payable, less current portion | 2,546,000 | 0 |
Total liabilities | 15,541,000 | 10,375,000 |
Stockholders' deficit: | ||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding | 0 | 0 |
Common stock, $0.001 par value; 30,000,000 shares authorized; 5,104,474 and 5,101,580 shares issued and outstanding at September 30, 2019 and June 30, 2019, respectively | 5,000 | 5,000 |
Additional paid-in capital | 36,353,000 | 35,902,000 |
Accumulated deficit | (42,890,000) | (39,076,000) |
Total stockholders' deficit | (6,532,000) | (3,169,000) |
Total liabilities and stockholders' deficit | $ 9,009,000 | $ 7,206,000 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2019 | Jun. 30, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 5,104,474 | 5,101,580 |
Common stock, shares outstanding | 5,104,474 | 5,101,580 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||
Net revenue | $ 1,919,000 | $ 1,835,000 |
Cost of sales | 1,802,000 | 1,817,000 |
Gross profit | 117,000 | 18,000 |
Operating expenses: | ||
Selling and administrative expenses | 2,206,000 | 1,483,000 |
Research and development | 1,397,000 | 662,000 |
Total operating expenses | 3,603,000 | 2,145,000 |
Operating loss | (3,486,000) | (2,127,000) |
Other income (expense): | ||
Interest expense | (328,000) | (274,000) |
Net loss | $ (3,814,000) | $ (2,401,000) |
Net loss per share - basic and diluted | $ (0.75) | $ (0.77) |
Weighted average number of common shares outstanding - basic and diluted | 5,103,342 | 3,106,841 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Deficit - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Balance, shares at Jun. 30, 2018 | 3,106,003 | |||
Balance at Jun. 30, 2018 | $ 3,000 | $ 19,224,000 | $ (26,662,000) | $ (7,435,000) |
Issuance of common stock - services, shares | 3,797 | |||
Issuance of common stock - services | 152,000 | 152,000 | ||
Warrants exchanged for common stock, shares | 1,278 | |||
Warrants exchanged for common stock | 0 | |||
Stock based compensation | 164,000 | 164,000 | ||
Net loss | (2,401,000) | (2,401,000) | ||
Balance, shares at Sep. 30, 2018 | 3,111,078 | |||
Balance at Sep. 30, 2018 | $ 3,000 | 19,540,000 | (29,063,000) | (9,520,000) |
Balance, shares at Jun. 30, 2019 | 5,101,580 | |||
Balance at Jun. 30, 2019 | $ 5,000 | 35,902,000 | (39,076,000) | (3,169,000) |
Issuance of common stock - exercised options, shares | 2,894 | |||
Issuance of common stock - exercised options | 0 | |||
Issuance of common stock - services | 0 | |||
Stock based compensation | 451,000 | 451,000 | ||
Net loss | (3,814,000) | (3,814,000) | ||
Balance, shares at Sep. 30, 2019 | 5,104,474 | |||
Balance at Sep. 30, 2019 | $ 5,000 | $ 36,353,000 | $ (42,890,000) | $ (6,532,000) |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (3,814,000) | $ (2,401,000) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Depreciation | 33,000 | 11,000 |
Stock-based compensation | 451,000 | 164,000 |
Stock issuance for services | 0 | 152,000 |
Noncash lease expense | 88,000 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,390,000 | 395,000 |
Inventories | (311,000) | (1,057,000) |
Other current assets | (132,000) | 15,000 |
Accounts payable | 309,000 | 313,000 |
Accrued expenses | (103,000) | (20,000) |
Due to Factor | 382,000 | 0 |
Accrued interest | 282,000 | 274,000 |
Office lease payable | 2,000 | 0 |
Customer deposits | 0 | (4,000) |
Net cash used in operating activities | (1,423,000) | (2,158,000) |
Cash flows from investing activities | ||
Purchases of equipment | (104,000) | (44,000) |
Net cash used in investing activities | (104,000) | (44,000) |
Cash flows from financing activities: | ||
Borrowings from line of credit - related party debt | 1,595,000 | 0 |
Principal payments on financing lease payable | (7,000) | 0 |
Net cash provided by financing activities | 1,588,000 | 0 |
Net change in cash | 61,000 | (2,202,000) |
Cash, beginning of period | 102,000 | 2,706,000 |
Cash, end of period | 163,000 | 504,000 |
Supplemental Disclosures of Non-Cash Investing and Financing Activities: | ||
Initial recognition of right-of-use asset | 2,706,000 | 0 |
Stock issuance for services | 0 | 152,000 |
Interest paid | $ 46,000 | $ 0 |
Note 1 - Nature of Business and
Note 1 - Nature of Business and Reverse Stock Split | 3 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Reverse Stock Split | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a smaller reporting company. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019 filed with the SEC on September 12, 2019. In the opinion of management, the accompanying condensed consolidated interim financial statements include all adjustments necessary in order to make the financial statements not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. Certain notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Company’s Annual Report on Form 10-K have been omitted. The accompanying condensed consolidated balance sheet at June 30, 2019 has been derived from the audited balance sheet at June 30, 2019 contained in such Form 10-K. Nature of Business Flux Power Holdings, Inc. was incorporated in 1998 in the State of Nevada. On June 14, 2012, we changed our name to Flux Power Holdings, Inc. Flux's operations are conducted through its wholly owned subsidiary, Flux Power, Inc. (“Flux Power”), a California corporation (collectively, the "Company"). We design, develop, manufacture, and sell advanced rechargeable lithium-ion energy storage solutions for lift trucks, airport ground support equipment (GSE) and other industrial motive applications. Our “LiFT” battery packs, including our proprietary battery management system (BMS), provide our customers with a better performing, cheaper and more environmentally friendly alternative, in many instances, to traditional lead-acid and propane-based solutions. We have received Underwriters Laboratory (UL) Listing on our Class 3 Walkie Pallet Jack (Class 3 Walkie) LiFT pack product line in 2016 and expect to receive UL Listing during calendar 2019 for our other product lines, which include Class 1 Counterbalance/Sit down/Ride-on (Class 1 Ride-on) LiFT packs, Class 2 Narrow Aisle LiFT packs, and Class 3 End Rider LiFT packs. We believe that a UL Listing demonstrates the safety, reliability and durability of our products and gives us an important competitive advantage over other lithium-ion energy suppliers. Our Class 3 Walkie LiFT packs have been approved for use by leading industrial motive manufacturers, including Toyota Material Handling USA, Inc., Crown Equipment Corporation, and Raymond Corporation. As used herein, the terms “we,” “us,” “our,” “Flux,” and “Company” mean Flux Power Holdings, Inc., unless otherwise indicated. All dollar amounts herein are in U.S. dollars unless otherwise stated. Reverse Stock Split The Company effected a 1-for-10 reverse split of its common stock and preferred stock on July 11, 2019 (2019 Reverse Split). No fractional shares were issued in connection with the 2019 Reverse Split. If, as a result of the 2019 Reverse Split, a stockholder would otherwise have been entitled to a fractional share, each fractional share was rounded up. The 2019 Reverse Split resulted in a reduction of the outstanding shares of common stock from 51,000,868 to 5,101,580 . In addition, it resulted in a reduction of the authorized shares of common stock from 300,000,000 to 30,000,000, and a reduction of the authorized shares of preferred stock from 5,000,000 to 500,000. The par value of the Company’s stock remained unchanged at $0.001. In addition, by reducing the number of the Company’s outstanding shares, the Company’s loss per share in all periods presented was increased by a factor of ten. As the par value per share of the Company’s common stock remained unchanged at $0.001 per share, a total of $46,000 was reclassified from common stock to additional paid-in capital. In connection with the 2019 Reverse Split, proportionate adjustments have been made to the per share exercise price and the number of shares issuable upon the exercise or conversion of all outstanding options, warrants, convertible or exchangeable securities entitling the holders to purchase, exchange for, or convert into, shares of common stock. All references to shares of common stock and per share data for all periods presented in the accompanying unaudited consolidated financial statements and notes thereto have been adjusted to reflect the 2019 Reverse Split on a retroactive basis. |
Note 2 - Going Concern
Note 2 - Going Concern | 3 Months Ended |
Sep. 30, 2019 | |
Note 2 - Going Concern | |
Going Concern | The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred an accumulated deficit of $42,890,000 through September 30, 2019 and a net loss of $3,814,000 for the three months ended September 30, 2019. To date, the Company’s revenues and operating cash flows have not been sufficient to sustain its operations, and the Company has relied on debt and equity financing to fund its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the filing date of this Quarterly Report on Form 10-Q, November 12, 2019. As of September 30, 2019, the Company had a cash balance of $163,000 and will need to raise additional capital in the near future. The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital on a timely basis until such time as revenues and related cash flows are sufficient to fund its operations. Management has undertaken steps as part of a plan to improve operations with the goal of sustaining its operations. These steps include (a) developing additional products to cater to the Class 1 and Class 2 industrial equipment markets; and (b) expanding its sales force throughout the United States to increase revenues. In that regard, the Company has increased its research and development efforts to focus on completing the development of energy storage solutions that can be used on larger fork lifts and has also doubled its sales force since December 2016 with personnel having significant experience in the industrial equipment handling industry. Management also plans to raise additional capital through the sale of equity securities through private placements, convertible debt placements and the utilization of its existing related-party credit facility. On March 31, 2019, the Company amended its line of credit with Esenjay Investments, LLS (“Esenjay”), a related party, to: (i) increase the maximum principal amount available under line of credit from $5,000,000 to $7,000,000 (“LOC”), (ii) add Cleveland Capital L.P., a Delaware limited partnership and our minority stockholder (“Cleveland”), as an additional lender to the LOC pursuant to which each lender has a right to advance a pro rata amount of the principal amount available under the LOC, (iii) extend the maturity date from March 31, 2019 to December 31, 2019, and (iv) to provide for additional parties to become a lender under the LOC. The outstanding principal balance as of September 30, 2019 was $7,000,000 of which Esenjay has $2,405,000 outstanding, Cleveland has $2,000,000 outstanding, and six (6) other lenders have an aggregate of $2,595,000 outstanding. Esenjay is deemed to be a related party as Mr. Michael Johnson, the beneficial owner and director of Esenjay is a current member of our board of directors and a major stockholder of the Company (owning approximately 61.4% of our outstanding common shares as of September 30, 2019). There is no guarantee the Company will be able to obtain the additional required funds on a timely basis or that funds will be available on terms acceptable to us. If such funds are not available when required, management will be required to curtail its investments in additional sales and marketing and product development, which may have a material adverse effect on its future cash flows and results of operations, and its ability to continue operating as a going concern. The accompanying financial statements do not include any adjustments that would be necessary should the Company be unable to continue as a going concern and, therefore, be required to liquidate its assets and discharge its liabilities in other than the normal course of business and at amounts that may differ from those reflected in the accompanying condensed consolidated financial statements. |
Note 3 - Summary of Significant
Note 3 - Summary of Significant Accounting Policies | 3 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | The Company's significant accounting policies are described in Note 3, "Summary of Significant Accounting Policies," in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2019. There have been no material changes in these policies or their application. Net Loss Per Common Share The Company calculates basic loss per common share by dividing net loss by the weighted-average number of common shares outstanding during the periods. Diluted loss per common share includes the impact from all dilutive potential common shares relating to outstanding convertible securities. For the three months ended September 30, 2019 and 2018, basic and diluted weighted-average common shares outstanding were 5,103,342 and 3,106,841, respectively. The Company incurred a net loss for the three months ended September 30, 2019 and 2018, and therefore, basic and diluted loss per share for the periods are the same because the inclusion of potential common equivalent shares were excluded from diluted weighted-average common shares outstanding during the period, as the inclusion of such shares would be anti-dilutive. The total potentially dilutive common shares outstanding at September 30, 2019 and 2018, excluded from diluted weighted-average common shares outstanding, which include common shares underlying outstanding stock options and warrants, were 571,421 and 1,874,513 respectively. Recently Adopted Accounting Pronouncements In 2016, the FASB issued ASU 2016-02, Leases (ASU 2016-02). ASU 2016-02 requires a lessee to recognize a lease asset representing its right to use the underlying asset for the lease term, and a lease liability for the payments to be made to lessor, on its balance sheet for all operating leases greater than 12 months. ASU 2016-02 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The new standard became effective for the Company on July 1, 2019, and it was adopted using the modified retrospective method through a cumulative-effect adjustment directly to retained earnings as of that date. The new standard increased the Company’s right-of-use assets and lease liability by approximately $2.7 million and $2.7 million, respectively. On June 20, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce the cost and complexity and to improve financial reporting for share-based payments to nonemployees for goods and services. The amendments in ASU 2018-07 are effective for fiscal years beginning after December 15, 2018, including interim periods therein. The adoption of this guidance by the Company, effective July 1, 2019, did not have a material impact on the Company’s consolidated financial statements. Management has considered all recent accounting pronouncements issued since the last audit of the Company’s consolidated financial statements, and believes that these recent pronouncements will not have a material effect on the Company’s condensed consolidated financial statements. |
Note 4 - Related Party Debt Agr
Note 4 - Related Party Debt Agreements | 3 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Debt Agreements | Shareholder Loan On July 3, 2019, the Company entered into a loan agreement with Cleveland (“Cleveland”), pursuant to which Cleveland agreed to loan the Company $1,000,000 (the “Loan”). In connection with the Loan, on July 3, 2019, the Company issued Cleveland an unsecured short-term promissory in the amount of $1,000,000 (the “Unsecured Promissory Note”). The Unsecured Promissory Note bears an interest rate of 15.0% per annum and was originally due on September 1, 2019, unless repaid earlier from a percentage of proceeds from certain identified accounts receivable. In connection with the Loan, the Company issued Cleveland a three-year warrant (the “Cleveland Warrant”) to purchase the Company’s common stock in a number equal to one-half percent (0.5%) of the number of shares of common stock outstanding after giving effect to the total number of shares of common stock to be sold in a contemplated public offering and with an exercise price equal to the per share public offering price. Effective September 1, 2019, the Company entered into that certain Amendment No. 1 to the Unsecured Promissory Note pursuant to which the maturity date was modified from September 1, 2019 to December 1, 2019 (the “Amendment”). In connection with the Amendment, the Company replaced the Cleveland Warrant with a certain Amended and Restated Warrant Certificate (the “Amended Warrant”). The Amended Warrant increased the warrant coverage from 0.5% to 1% of the number of shares of common stock outstanding after giving effect to the total number of shares of common stock sold in the next private or public offering (the “Offering”). In addition, the exercise price was also changed to equal the per share price of common stock sold in the Offering. Credit Facility On March 22, 2018, Flux Power entered into a credit facility agreement with Esenjay with a maximum borrowing amount of $5,000,000. Proceeds from the credit facility were to be used to purchase inventory and related operational expenses and accrue interest at a rate of 15% per annum (the “Original Agreement”). The outstanding balance of the Original Agreement and all accrued interest was due and payable on March 31, 2019. On March 28, 2019, Flux Power entered into an amended and restated credit facility agreement (“Amended and Restated Credit Facility Agreement”) with Esenjay and Cleveland (Cleveland and Esenjay, together with additional parties that may join as a lender, the “Lenders”) to amend and restate the terms of the Original Agreement in its entirety. The Original Agreement was amended, among other things, to (i) increase the maximum principal amount available under line of credit from $5,000,000 to $7,000,000 (“LOC”), (ii) add Cleveland as additional lender to the LOC pursuant to which each lender has a right to advance a pro rata amount of the principal amount available under the LOC, (iii) extend the maturity date from March 31, 2019 to December 31, 2019, and (iv) to provide for additional parties to become a “Lender” under the Amended and Restated Credit Facility Agreement. In connection with the LOC, on March 28, 2019 the Company issued a secured promissory note to Cleveland (the “Cleveland Note”), and an amended and restated secured promissory note to Esenjay which amended and superseded the secured promissory note dated March 22, 2018 (“Esenjay Note” and together with the Cleveland Note and other secured promissory notes to Lenders, (the “Notes”). The Notes were issued for the principal amount of $7,000,000 or such lesser principal amount advanced by the respective Lender under the Amended and Restated Credit Facility Agreement (the “Principal Amount”). The Notes bear an interest of fifteen percent (15%) per annum and a maturity date of December 31, 2019. The outstanding principal balance as of September 30, 2019 was $7,000,000 of which Esenjay has $2,405,000 outstanding, Cleveland has $2,000,000 outstanding, and other six (6) other lenders have an aggregate of $2,595,000 outstanding. To secure the obligations under the Notes, Flux Power entered into an Amended and Restated Security Agreement dated March 28, 2019 with the Lenders (the “Amended Security Agreement”). The Amended Security Agreement amends and restates the Guaranty and Security Agreement dated March 22, 2018 by and between Esenjay and the Company, and added Cleveland and other Lenders as additional secured parties to the Amended Security Agreement and appointing Esenjay as collateral agent. |
Note 5 - Factoring Arrangement
Note 5 - Factoring Arrangement | 3 Months Ended |
Sep. 30, 2019 | |
Note 5 - Factoring Arrangement | |
Factoring Arrangement | On August 23, 2019, the Company entered into a Factoring Agreement (Factoring Agreement) with CSNK Working Capital Finance Corp. d/b/a Bay View Funding (“CSNK”) for a factoring facility under which CSNK will, from time to time, buy approved receivables from the Company. The factoring facility provides for the Company to have access to the lesser of (i) $3 million (Maximum Credit) or (ii) the sum of all undisputed receivables purchased by CSNK multiplied by the 90% (which percentages may be adjusted by CSNK in its sole discretion). Upon receipt of any advance, Company will have sold and assigned all of its rights in such receivables and all proceeds thereof. The factoring facility is secured by the Company’s accounts, equipment, inventory, financial assets, chattel paper, electronic chattel paper, letters of credit, letters of credit rights, general intangibles, investment property, deposit accounts, documents, instruments, supporting obligations, commercial tort claims, the reserve, motor vehicles, all books, records, files and computer data relating to the foregoing, and all proceeds of the foregoing. The Company is required to pay CSNK a facility fee of 1.0% of the Maximum Credit upon execution of the Factoring Agreement and a factoring fee of 0.75% of the face value of purchased receivables for 1 st The factoring facility is for an initial term of twelve months and will renew on a year to year basis thereafter, unless terminated in accordance with the Factoring Agreement. The Company may terminate the Factoring Agreement at any time upon 60 days prior written notice and payment to CSNK of an early termination fee equal to 0.5% of the Maximum Credit multiplied by the number of months remaining in the current term. As of September 30, 2019, an outstanding balance of $382,000 was due to Factor. |
Note 6 - Stockholders' Deficit
Note 6 - Stockholders' Deficit | 3 Months Ended |
Sep. 30, 2019 | |
Stockholders' deficit: | |
Stockholders' Deficit | Warrant Activity Warrant detail for the three months ended September 30, 2019 is reflected below: Number of Warrants Weighted Average Exercise Price Per Warrant Remaining Contract Term (# years) Warrants outstanding and exercisable at June 30, 2019 8,333 $ 20.00 0.25 Warrants issued - $ - - Warrants exchanged - $ - - Warrants forfeited (8,333) $ 20.00 - Warrants outstanding and exercisable at September 30, 2019 - $ - - Warrant detail for the three months ended September 30, 2018 is reflected below: Number of Warrants Weighted Average Exercise Price Per Warrant Remaining Contract Term (# years) Warrants outstanding and exercisable at June 30, 2018 174,079 $ 20.30 0.74 Warrants issued - $ - - Warrants exchanged (4,000) $ 20.00 - Warrants forfeited - $ - - Warrants outstanding and exercisable at September 30, 2018 170,079 $ 20.30 0.47 Stock-based Compensation On November 26, 2014, the board of directors approved the 2014 Equity Incentive Plan (the “2014 Plan”), which was approved by the Company’s stockholders on February 17, 2015. The 2014 Plan offers selected employees, directors, and consultants the opportunity to acquire our common stock, and serves to encourage such persons to remain employed by us and to attract new employees. The 2014 Plan allows for the award of stock and options, up to 1,000,000 shares of our common stock. Activity in stock options during the three months ended September 30, 2019 and related balances outstanding as of that date are reflected below: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Term (# years) Outstanding at June 30, 2019 580,171 $ 11.05 8.59 Granted - $ - - Exercised (4,437) $ 4.69 - Forfeited and cancelled (4,313) $ 10.34 - Outstanding at September 30, 2019 571,421 $ 11.10 8.31 Exercisable at September 30, 2019 339,420 $ 10.32 7.84 Activity in stock options during the three months ended September 30, 2018 and related balances outstanding as of that date are reflected below: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Term (# years) Outstanding at June 30, 2018 354,447 $ 8.30 8.87 Granted 33,526 $ - - Exercised - - - Forfeited and cancelled (10,312 ) $ - - Outstanding at September 30, 2018 376,661 $ 9.40 8.33 Exercisable at September 30, 2018 160,967 $ 7.70 7.99 Stock-based compensation expense recognized in the condensed consolidated statements of operations for the three months ended September 30, 2019 and 2018, includes compensation expense for stock-based options and awards granted based on the grant date fair value. For options and awards granted, expenses are amortized under the straight-line method over the expected vesting period. Stock-based compensation expense recognized in the condensed consolidated statements of operations has been reduced for estimated forfeitures of options that are subject to vesting. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. At September 30, 2019, the aggregate intrinsic value of exercisable options was $659,000 . The Company allocated stock-based compensation expense included in the condensed consolidated statements of operations for employee option grants and non-employee option grants as follows: Three months ended September 30, 2019 2018 Research and development $ 54,000 $ 15,000 Selling and administrative 397,000 149,000 Total stock-based compensation expense $ 451,000 $ 164,000 The Company uses the Black-Scholes valuation model to calculate the fair value of stock options. The fair value of stock options was measured at the grant date using the assumptions (annualized percentages) in the table below: Three months ended September 30, 2019 2018 Expected volatility 111.4% -112.2% 142% Risk free interest rate 2.43% - 2.45% 2.63% Forfeiture rate 20% 20% Dividend yield 0% 0% Expected term (years) 5.61 5 The remaining amount of unrecognized stock-based compensation expense at September 30, 2019 relating to outstanding stock options, is approximately $1,163,000, which is expected to be recognized over the weighted-average period of 1.71 years. |
Note 7 - Other Related Party Tr
Note 7 - Other Related Party Transactions | 3 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Other Related Party Transactions | The Company subleased office and manufacturing space to Epic Boats (an entity founded and controlled by Chris Anthony, a board member and former Chief Executive Officer) in the facility in Vista, California pursuant to a month-to-month sublease agreement. Pursuant to this agreement, Epic Boats paid Flux Power 10% of facility costs through the end of the Company’s lease agreement which was June 30, 2019. The Company received $0 and $4,000 for the three months ended September 30, 2019 and 2018 from Epic Boats under the sublease rental agreement which is recorded as a reduction to rent expense and customer deposits. |
Note 8 - Concentrations
Note 8 - Concentrations | 3 Months Ended |
Sep. 30, 2019 | |
Risks and Uncertainties [Abstract] | |
Concentrations | Credit Risk Customer Concentrations During the three months ended September 30, 2019, the Company had three major customers that each represented more than 10% of its revenues on an individual basis, or approximately $1,507,000 or 78% of its total revenues. During the three months ended Sept 30, 2018, the Company had three major customers that each represented more than 10% of its revenues on an individual basis, or approximately $1,641,000 or 89% of its total revenues. Suppliers/Vendor Concentrations The Company obtains a limited number of components and supplies included in its products from a small group of suppliers. During the three months ended September 30, 2019 the Company had two suppliers who accounted for more than 10% of its total purchases, on an individual basis. Purchases for these two suppliers totaled $1,033,000 or 44% of its total purchases. During the three months ended September 30, 2018 the Company had two suppliers who accounted for more than 10% of its total purchases, on an individual basis. Purchases for these three suppliers totaled $1,552,000 or 56% of our total purchases. |
Note 9 - Commitments and Contin
Note 9 - Commitments and Contingencies | 3 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. To the best knowledge of management, there are no material legal proceedings pending against the Company. Operating Leases On April 25, 2019 the Company signed a lease with Accutek to rent approximately 45,600 square feet of industrial space at 2685 S. Melrose Drive, Vista, California. The lease has an initial term of seven years and four months, commencing on or about June 28, 2019. The lease contains an option to extend the term for two periods of 24 months, and the right of first refusal to lease an additional approximate 15,300 square feet. The monthly rental rate is $42,400 for the first 12 months, escalating at 3% each year. Total rent expense was approximately $170,000 and $41,000 for the three months ended September 30, 2019 and 2018, respectively, net of sublease income. The Future Minimum Lease Payments for the new lease are: 2020 $ 339,390 2021 393,269 2022 496,354 2023 512,518 2024 571,590 Thereafter 1,454,497 Total Future Minimum Lease Payments 3,767,618 Less: discount (1,059,150 ) Total lease liability $ 2,708,468 On July 1, 2019, the Company recorded a lease liability and right-of-use lease asset for the Accutek Lease based on present value of lease payments over the expected remaining lease term of 7.4 years, discounted using the Company’s estimated incremental borrow rate of 10%. For the three months ended September 30, 2019, reduction of the right-of-use lease asset was $87,784 and the increase to the lease liability was $2,510, which resulted in a net increase to the right-of-use lease asset of $90,294 during the period. Financing Leases The tables below show the initial measurement of the financing lease right-of-use assets and liabilities as of July 1, 2019 and the balances as of September 30, 2019, including the changes during the periods. The Company’s financing lease right-of-use assets are included in “Property, plant and equipment, net” on the accompanying consolidated balance sheet. Financing lease right-of-use assets Initial measurement at July 1, 2019 $ 57,000 Less depreciation of financing lease right-of-use assets (7,000 ) Financing lease right-of-use assets at September 30, 2019 $ 50,000 Financing lease liabilities Initial measurement at July 1, 2019 $ 58,000 Less principal payments on financing lease liabilities (7,000 ) Financing lease liabilities as of September 30, 2019 51,000 Less non-current portion (29,000 ) Current portion at September 30, 2019 $ 22,000 As of September 30, 2019, the Company’s financing leases have a weighted-average remaining lease term of 1.8 years and a weighted-average discount rate of 30%. The maturities of the financing lease liabilities are as follows: As of September 30, 2019 2020 $ 39,000 2021 27,000 Total financing lease payments 66,000 Less imputed interest (15,000 ) Present value of financing lease liabilities 51,000 |
Note 10 - Subsequent Events
Note 10 - Subsequent Events | 3 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | On October 10, 2019, Flux Power entered into (i) that certain Second Amended and Restated Credit Facility Agreement (“Second Amended Credit Facility”) with Esenjay, Cleveland, Otto Candies, Jr., Paul Candies, Brett Candies, Winn Interest, Ltd., David A. Modesett, and Helen M. Tabone (the “Lenders” or the “Lender”) to amend and restate the terms of that certain Amended and Restated Credit Facility Agreement dated March 28, 2019 to increase the line of credit under such agreement from $7,000,000 to $10,000,000 (“LOC Increase”), and (ii) that certain Amendment No. 1 to the Amended and Restated Security Agreement to amend the Amended and Restated Security Agreement dated March 28, 2019 to reflect the Second Amended Credit Facility. In connection therewith, each Lender and Flux entered into an amendment to amend their respective secured promissory note to reflect the LOC Increase. As of November 12, 2019, the Company had $3,000,000 available for future draws under the Second Amended Credit Facility. |
Note 3 - Significant Accounting
Note 3 - Significant Accounting Policies (Policies) | 3 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Net Loss Per Common Share | The Company calculates basic loss per common share by dividing net loss by the weighted-average number of common shares outstanding during the periods. Diluted loss per common share includes the impact from all dilutive potential common shares relating to outstanding convertible securities. For the three months ended September 30, 2019 and 2018, basic and diluted weighted-average common shares outstanding were 5,103,342 and 3,106,841, respectively. The Company incurred a net loss for the three months ended September 30, 2019 and 2018, and therefore, basic and diluted loss per share for the periods are the same because the inclusion of potential common equivalent shares were excluded from diluted weighted-average common shares outstanding during the period, as the inclusion of such shares would be anti-dilutive. The total potentially dilutive common shares outstanding at September 30, 2019 and 2018, excluded from diluted weighted-average common shares outstanding, which include common shares underlying outstanding stock options and warrants, were 571,421 and 1,874,513 respectively. |
Income Taxes | In 2016, the FASB issued ASU 2016-02, Leases (ASU 2016-02). ASU 2016-02 requires a lessee to recognize a lease asset representing its right to use the underlying asset for the lease term, and a lease liability for the payments to be made to lessor, on its balance sheet for all operating leases greater than 12 months. ASU 2016-02 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The new standard became effective for the Company on July 1, 2019, and it was adopted using the modified retrospective method through a cumulative-effect adjustment directly to retained earnings as of that date. The new standard increased the Company’s right-of-use assets and lease liability by approximately $2.7 million and $2.7 million, respectively. On June 20, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce the cost and complexity and to improve financial reporting for share-based payments to nonemployees for goods and services. The amendments in ASU 2018-07 are effective for fiscal years beginning after December 15, 2018, including interim periods therein. The adoption of this guidance by the Company, effective July 1, 2019, did not have a material impact on the Company’s consolidated financial statements. Management has considered all recent accounting pronouncements issued since the last audit of the Company’s consolidated financial statements, and believes that these recent pronouncements will not have a material effect on the Company’s condensed consolidated financial statements. |
Note 6 - Stockholders' Deficit
Note 6 - Stockholders' Deficit (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Stockholders' deficit: | |
Schedule of warrant activity | Warrant detail for the three months ended September 30, 2019 is reflected below: Number of Warrants Weighted Average Exercise Price Per Warrant Remaining Contract Term (# years) Warrants outstanding and exercisable at June 30, 2019 8,333 $ 20.00 0.25 Warrants issued - $ - - Warrants exchanged - $ - - Warrants forfeited (8,333) $ 20.00 - Warrants outstanding and exercisable at September 30, 2019 - $ - - Warrant detail for the three months ended September 30, 2018 is reflected below: Number of Warrants Weighted Average Exercise Price Per Warrant Remaining Contract Term (# years) Warrants outstanding and exercisable at June 30, 2018 174,079 $ 20.30 0.74 Warrants issued - $ - - Warrants exchanged (4,000) $ 20.00 - Warrants forfeited - $ - - Warrants outstanding and exercisable at September 30, 2018 170,079 $ 20.30 0.47 |
Schedule of stock option activity | Activity in stock options during the three months ended September 30, 2019 and related balances outstanding as of that date are reflected below: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Term (# years) Outstanding at June 30, 2019 580,171 $ 11.05 8.59 Granted - $ - - Exercised (4,437) $ 4.69 - Forfeited and cancelled (4,313) $ 10.34 - Outstanding at September 30, 2019 571,421 $ 11.10 8.31 Exercisable at September 30, 2019 339,420 $ 10.32 7.84 Activity in stock options during the three months ended September 30, 2018 and related balances outstanding as of that date are reflected below: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Term (# years) Outstanding at June 30, 2018 354,447 $ 8.30 8.87 Granted 33,526 $ - - Exercised - - - Forfeited and cancelled (10,312 ) $ - - Outstanding at September 30, 2018 376,661 $ 9.40 8.33 Exercisable at September 30, 2018 160,967 $ 7.70 7.99 |
Schedule of stock-based compensation | Three months ended September 30, 2019 2018 Research and development $ 54,000 $ 15,000 Selling and administrative 397,000 149,000 Total stock-based compensation expense $ 451,000 $ 164,000 |
Schedule of stock options valuation assumptions | Three months ended September 30, 2019 2018 Expected volatility 111.4% -112.2% 142% Risk free interest rate 2.43% - 2.45% 2.63% Forfeiture rate 20% 20% Dividend yield 0% 0% Expected term (years) 5.61 5 |
Note 9 - Commitments and Cont_2
Note 9 - Commitments and Contingencies (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum lease payments | 2020 $ 339,390 2021 393,269 2022 496,354 2023 512,518 2024 571,590 Thereafter 1,454,497 Total Future Minimum Lease Payments 3,767,618 Less: discount (1,059,150 ) Total lease liability $ 2,708,468 |
Finance lease assets and liabilities | Financing lease right-of-use assets Initial measurement at July 1, 2019 $ 57,000 Less depreciation of financing lease right-of-use assets (7,000 ) Financing lease right-of-use assets at September 30, 2019 $ 50,000 Financing lease liabilities Initial measurement at July 1, 2019 $ 58,000 Less principal payments on financing lease liabilities (7,000 ) Financing lease liabilities as of September 30, 2019 51,000 Less non-current portion (29,000 ) Current portion at September 30, 2019 $ 22,000 |
Maturities of finance lease liabilities | As of September 30, 2019 2020 $ 39,000 2021 27,000 Total financing lease payments 66,000 Less imputed interest (15,000 ) Present value of financing lease liabilities 51,000 |
Note 2 - Going Concern (Details
Note 2 - Going Concern (Details Narrative) - USD ($) | 3 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | |
Note 2 - Going Concern | |||
Accumulated deficit | $ (42,890,000) | $ (39,076,000) | |
Net loss | $ (3,814,000) | $ (2,401,000) |
Note 3 - Summary of Significa_2
Note 3 - Summary of Significant Accounting Policies (Details Narrative) - shares | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Accounting Policies [Abstract] | ||
Weighted average number of shares outstanding, basic and diluted | 5,103,342 | 3,106,841 |
Antidilutive securities excluded from computation of earnings per share | 571,421 | 1,874,513 |
Note 4 - Related Party Debt A_2
Note 4 - Related Party Debt Agreements (Details Narrative) | Sep. 30, 2019USD ($) |
Long-term line of credit | $ 7,000,000 |
Esenjay Investments, LLC | |
Long-term line of credit | 2,405,000 |
Cleveland Capital, L.P. | |
Long-term line of credit | 2,000,000 |
Other Lenders | |
Long-term line of credit | $ 2,595,000 |
Note 5 - Factoring Arrangement
Note 5 - Factoring Arrangement (Details Narrative) - USD ($) | Sep. 30, 2019 | Jun. 30, 2019 |
Note 5 - Factoring Arrangement | ||
Due to Factor | $ 382,000 | $ 0 |
Note 6 - Stockholders' Defici_2
Note 6 - Stockholders' Deficit (Details) - $ / shares | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Stockholders' deficit: | ||
Warrants outstanding and exercisable, beginning | 8,333 | 174,079 |
Warrants issued | 0 | 0 |
Warrants exchanged | 0 | (4,000) |
Warrants forfeited | (8,333) | 0 |
Warrants outstanding and exercisable, ending | 0 | 170,079 |
Warrants outstanding and exercisable, weighted average exercise price, beginning | $ 20 | $ 20.30 |
Warrants issued, weighted average exercise price | .00 | .00 |
Warrants exchanged, weighted average exercise price | .00 | 20 |
Warrants forfeited, weighted average exercise price | 20 | .00 |
Warrants outstanding and exercisable, weighted average exercise price, ending | $ .00 | $ 20.30 |
Warrants outstanding and exercisable, remaining contractual term, beginning | 3 months | 8 months 27 days |
Warrants outstanding and exercisable, remaining contractual term, ending | 0 years | 5 months 19 days |
Note 6 - Stockholders' Defici_3
Note 6 - Stockholders' Deficit (Details 1) - Employee Stock Option - $ / shares | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Options outstanding, beginning | 580,171 | 354,447 |
Options granted | 0 | 33,526 |
Options exercised | (4,437) | 0 |
Options forfeited and cancelled | (4,313) | (10,312) |
Options outstanding, ending | 571,421 | 376,661 |
Options exercisable | 339,420 | 160,967 |
Weighted average exercise price outstanding, beginning | $ 11.05 | $ 8.30 |
Weighted average exercise price, granted | .00 | .00 |
Weighted average exercise price, exercised | 4.69 | .00 |
Weighted average exercise price, forfeited and cancelled | 10.34 | .00 |
Weighted average exercise price outstanding, ending | 11.10 | 9.40 |
Weighted average exercise price exercisable | $ 10.32 | $ 7.70 |
Weighted average remaining contract term, outstanding | 8 years 3 months 22 days | 8 years 3 months 29 days |
Weighted average remaining contract term, exercisable | 7 years 10 months 2 days | 7 years 11 months 26 days |
Note 6 - Stockholders' Defici_4
Note 6 - Stockholders' Deficit (Details 2) - USD ($) | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Allocated share-based compensation expense | $ 451,000 | $ 164,000 |
Research and Development Expense | ||
Allocated share-based compensation expense | 54,000 | 15,000 |
General and Administrative Expense | ||
Allocated share-based compensation expense | $ 397,000 | $ 149,000 |
Note 6 - Stockholders' Defici_5
Note 6 - Stockholders' Deficit (Details 3) | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Expected volatility | 142.00% | |
Risk free interest rate | 2.63% | |
Forfeiture rate | 20.00% | 20.00% |
Dividend yield | 0.00% | 0.00% |
Expected term | 5 years 7 months 10 days | 5 years |
Minimum | ||
Expected volatility | 111.40% | |
Risk free interest rate | 2.43% | |
Maximum | ||
Expected volatility | 112.20% | |
Risk free interest rate | 2.45% |
Note 6 - Stockholders' Defici_6
Note 6 - Stockholders' Deficit (Details Narrative) | 3 Months Ended |
Sep. 30, 2019USD ($) | |
Stockholders' deficit: | |
Share-based compensation arrangement by share-based payment award, options, exercisable, intrinsic value | $ 659,000 |
Unrecognized stock-based compensation expense | $ 1,163,000 |
Unrecognized stock-based compensation expense recognition period | 1 year 8 months 16 days |
Note 7 - Other Related Party _2
Note 7 - Other Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Related Party Transactions [Abstract] | ||
Sublease revenue | $ 0 | $ 4,000 |
Note 8 - Concentrations (Detail
Note 8 - Concentrations (Details Narrative) - Customer Concentration Risk - Integer | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Sales Revenue, Net | ||
Number of major customers | 3 | 3 |
Concentration risk, percentage | 78.00% | 89.00% |
Accounts Receivable | ||
Number of major suppliers | 2 | 2 |
Concentration risk, percentage | 44.00% | 56.00% |
Note 9 - Commitments and Cont_3
Note 9 - Commitments and Contingencies (Details) | Sep. 30, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2020 | $ 339,390 |
2021 | 393,269 |
2022 | 496,354 |
2023 | 512,518 |
2024 | 571,590 |
Thereafter | 1,454,497 |
Total future minimum lease payments | 3,767,618 |
Less: discount | (1,059,150) |
Total lease liability | $ 2,708,468 |
Note 9 - Commitments and Cont_4
Note 9 - Commitments and Contingencies (Details 1) - USD ($) | 3 Months Ended | |
Sep. 30, 2019 | Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Financing lease right-of-use assets, beginning | $ 57,000 | |
Less depreciation of financing lease right-of-use assets | (7,000) | |
Financing lease right-of-use assets, ending | 50,000 | |
Financing lease liabilities, beginning | 58,000 | |
Less principal payments on financing lease liabilities | (7,000) | |
Financing lease liabilities, ending | 51,000 | |
Financing lease liabilities, non-current | (29,000) | $ (29,000) |
Financing lease liabilities, current | $ 22,000 | $ 29,000 |
Note 9 - Commitments and Cont_5
Note 9 - Commitments and Contingencies (Details 2) - USD ($) | Sep. 30, 2019 | Jun. 30, 2019 |
Commitments and Contingencies Disclosure [Abstract] | ||
2020 | $ 39,000 | |
2021 | 27,000 | |
Total financing lease payments | 66,000 | |
Less imputed interest | (15,000) | |
Present value of financing lease liabilities | $ 51,000 | $ 58,000 |
Note 9 - Commitments and Cont_6
Note 9 - Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 170,000 | $ 41,000 |
Weighted-average remaining lease term, finance leases | 1 year 9 months 18 days | |
Weighted-average discount rate, finance leases | 30.00% |