Annual report pursuant to Section 13 and 15(d)

STOCKHOLDERS??? EQUITY

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STOCKHOLDERS’ EQUITY
12 Months Ended
Jun. 30, 2022
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

NOTE 9 - STOCKHOLDERS’ EQUITY

 

At-The-Market (“ATM”) Offering

 

On December 21, 2020 the Company entered into a Sales Agreement (the “Sales Agreement”) with H.C. Wainwright & Co., LLC (“HCW”) to sell shares of its common stock, par value $0.001 (the “Common Stock”) from time to time, through an “at-the-market offering” program (the “ATM Offering”).

 

The Company agreed to pay HCW a commission in an amount equal to 3.0% of the gross sales proceeds of the shares sold under the Sales Agreement. In addition, the Company agreed to reimburse HCW for certain legal and other expenses incurred up to a maximum of $50,000 to establish the ATM Offering, and $2,500 per quarter thereafter to maintain such program under the Sales Agreement. The Company has also agreed pursuant to the Sales Agreement to indemnify and provide contribution to HCW against certain liabilities, including liabilities under the Securities Act.

 

On May 27, 2021, the Company filed Amendment No. 1 (the “Amendment”) to the prospectus supplement dated December 21, 2020 (the “Prospectus Supplement”) to increase the size of the ATM Offering from an aggregate offering price of up to $10 million in the Prospectus Supplement to an amended maximum aggregate offering price of up to $20 million of shares of the Company’s common stock (the “Shares”) (which amount includes the value of shares the Company has already sold prior to the date of the Amendment) pursuant to the base prospectus dated October 26, 2020, the Prospectus Supplement, and the Amendment (collectively, the “Prospectus”).

 

From December 21, 2020 through June 30, 2022, the Company sold an aggregate of 1,169,564 shares of common stock at an average price of $12.24 per share for gross proceeds of approximately $14.3 million under the ATM Offering. The Company received net proceeds of approximately $13.7 million, net of commissions and other offering related expenses.

 

The Shares was registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-249521), declared effective by the Securities and Exchange Commission (the “Commission”) on October 26, 2020, and the Prospectus. Sales of the Shares, if any, may be made by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) of the Securities Act. The Company or the HCW may, upon written notice to the other party in accordance with the terms of the Sales Agreement, suspend offers and sales of the Shares. The Company and HCW each have the right, in its sole discretion, to terminate the Sales Agreement at any time upon prior written notice pursuant to the terms and subject to the conditions set forth in the Sales Agreement.

 

 

Public Offering

 

Registered Direct Offering

 

On September 27, 2021, the Company closed a registered direct offering, priced at-the-market under Nasdaq rules (“RDO”) for the sale of 2,142,860 shares of common stock and warrants to purchase up to an aggregate of 1,071,430 shares of common stock, at an offering price of $7.00 per share and associated warrant for gross proceeds of approximately $15.0 million prior to deducting offering expenses totaling approximately $1.0 million. The associated warrants have an exercise price equal to $7.00 per share and are exercisable upon issuance and expire in five years. HCW acted as the exclusive placement agent for the registered direct offering.

 

The securities sold in the RDO were sold pursuant to a “shelf” registration statement on Form S-3 (File No. 333-249521), including a base prospectus, previously filed with the Securities and Exchange Commission (the “SEC”) on October 16, 2020 and declared effective by the SEC on October 26, 2020. The registered direct offering of the securities was made by means of a prospectus supplement dated September 22, 2021 and filed with the SEC, that forms a part of the effective registration statement.

 

2020 Public Offering and NASDAQ Capital Market Uplisting

 

In August 2020, the Company closed an underwritten public offering of its common stock at a public offering price of $4.00 per share for gross proceeds of approximately $12.4 million, which included the full exercise of the underwriters’ over-allotment option to purchase additional shares, prior to deducting underwriting discounts and commissions and offering expenses totaling approximately $1.7 million. A total of 3,099,250 shares of common stock were issued by the Company in the offering, including the full exercise of the over-allotment option. The securities were offered pursuant to a registration statement on Form S-1 (File No. 333-231766), which was declared effective by the SEC on August 12, 2020. Concurrent with the announcement of the public offering, on August 14, 2020, the Company’s common stock commenced trading on The NASDAQ Capital Market under the symbol “FLUX.”

 

Private Placements

 

2020 Private Placement

 

On April 22, 2020, the Company sold an aggregate of 66,250 shares of common stock, at $4.00 per share, for an aggregate purchase price of $265,000 in cash to two (2) accredited investors. On June 30, 2020, the Company sold an additional 275,000 shares of common stock at $4.00 per share in its June closing of the offering, for an aggregate purchase price of $1,100,000 to six (6) accredited investors (“June Closing:”). Esenjay and Mr. Dutt, the Company’s president and chief executive officer, participated in the June Closing in the amount of $300,000 and $50,000, respectively. On July 24, 2020, the Company sold an aggregate of 800,000 shares under the 2020 Private Placement at $4.00 per share, for an aggregate purchase price of $3,200,000 in cash to accredited investors, including Mr. Cosentino, a former director, who participated in the offering in the amount of $250,000.

 

The shares offered and sold in the private placement offerings described above were sold to accredited investors in reliance upon exemptions from registration pursuant to Rule 506(b) of Regulation D promulgated under Section 4(a)(2) under the Securities Act. Such shares were not registered under the Securities Act of 1933, as amended (“Securities Act”), and could not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. Pursuant to a registration statement on Form S-3 filed with the SEC on October 16, 2020, which became effective on October 26, 2020, such shares were registered.

 

 

Debt Conversion

 

LOC Conversion

 

On June 30, 2020, there was a partial conversion of $7,383,000 in principal and accrued interest outstanding under the secured promissory notes at a conversion price of $4.00 per share that resulted in the issuance of 1,845,830 shares of common stock.

 

On November 6, 2020, there was a partial conversion of $2,161,000 in principal and accrued interest outstanding under the secured promissory notes at $4.00 per share that resulted in the issuance of 540,347 shares of common stock.

 

In January and March 2021, there were conversions of the remaining balance of approximately $2,632,000 in principal and accrued interest outstanding under the secured promissory notes that resulted in the issuance of 658,103 shares of common stock.

 

All conversions were at the option of the lenders, and all outstanding secured promissory notes were converted into shares of common stock.

 

Esenjay Note Conversion

 

On June 30, 2020, two (2) accredited individuals, who had been assigned $500,000 of the Esenjay Note, converted all principal into 125,000 shares of common stock at $4.00 per share. On July 22, 2020, one accredited individual, who had been assigned $400,000 of the Esenjay Note converted all principal into 100,000 shares of common stock at $4.00 per share.

 

Warrants

 

On July 3, 2019, the Company issued a three-year warrant to Cleveland Capital, L.P. (“Cleveland Warrant”) to purchase our 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 sold in a public offering at an exercise price equal to the per share public offering price. On September 1, 2019, the Cleveland Warrant was amended and restated to change 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 (“Offering”) at an exercise price equal the per share price of common stock sold in the Offering. The closing of a private offering constituting the Offering occurred on July 24, 2020. Upon such closing, the number and the exercise price of the Cleveland Warrant became determinable, and represented as a right to purchase up to 83,205 shares of common stock at $4.00 per share and had a fair value of approximately $174,000. As of June 30, 2021, all 83,205 warrants remained outstanding and exercisable.

 

In August 2020 and in conjunction with the Company’s public offering, the Company issued five-year warrants to the underwriters to purchase up to 185,955 shares of the Company’s common stock at an exercise price of $4.80 per share and had a fair value of approximately $513,000. The underwriters’ warrants became exercisable on February 8, 2021.

 

In connection with the Company’s RDO, in September 2021 the Company issued five-year warrants to the RDO investors to purchase up to 1,071,430 shares of the Company’s common stock at an exercise price of $7.00 per share and were estimated to have a fair value of approximately $3,874,000. The warrants were exercisable immediately and are limited to beneficial ownership of 4.99% at any point in time in accordance with the warrant agreement.

 

In May 2022 and in conjunction with entry into a credit facility with Cleveland Capital, L.P. (“Cleveland”), Herndon Plant Oakley, Ltd. (“HPO”), and other lenders (together with Cleveland and HPO, the “Lenders”), the Company issued five-year warrants to the Lenders to purchase up to 128,000 shares of the Company’s common stock at an exercise price of $2.53 per share and had a fair value of approximately $173,000.

 

 

In June 2022 and in conjunction with the entry into the Second Amendment to Loan and Security Agreement with Silicon Valley Bank (“SVB”), the Company issued twelve-year warrants to SVB and its designee, SVB Financial Group, to purchase up to 40,806 shares of the Company’s common stock at an exercise price of $2.23 per share and had a fair value of approximately $80,000.

 

Warrant detail for the year ended June 30, 2022 is reflected below:

 

   

Number of

Warrants

   

Weighted

Average

Exercise

Price Per

Warrant

   

Remaining

Contract

Term
(# years)

 
Warrants outstanding and exercisable at June 30, 2021     214,883     $ 4.49          
Warrants issued     1,240,236     $ 6.38          
Warrants outstanding and exercisable at June 30, 2022     1,455,119     $ 6.10       4.17  

 

Warrant detail for the year ended June 30, 2021 is reflected below:

 

   

Number of

Warrants

   

Weighted

Average

Exercise

Price Per

Warrant

   

Remaining

Contract

Term
(# years)

 
Warrants outstanding and exercisable at June 30, 2020     83,205     $ 4.00          
Warrants issued     185,955     $ 4.80          
Warrants exercised     (40,993 )   $ 4.80          
Warrants forfeited     (13,284 )   $ 4.80          
Warrants outstanding and exercisable at June 30, 2021     214,883     $ 4.49       2.92  

 

Stock Options

 

In connection with the reverse acquisition of Flux Power, Inc in 2012, the Company assumed the 2010 Plan. As of June 30, 2022, there were 21,944 options to purchase common stock outstanding under the 2010 Plan. No additional options may be granted under the 2010 Plan.

 

On February 17, 2015 the Company’s stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan offers certain employees, directors, and consultants the opportunity to acquire the Company’s common stock subject to vesting requirements, and serves to encourage such persons to remain employed by the Company and to attract new employees. The 2014 Plan allows for the award of the Company’s common stock and options, up to 1,000,000 shares of the Company’s common stock. As of June 30, 2022, 170,725 shares of the Company’s common stock were available for future grants under the 2014 Plan.

 

On April 29, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan authorizes the issuance of awards for up to 2,000,000 shares of common stock in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units, restricted stock awards and unrestricted stock awards to officers, directors and employees of, and consultants and advisors to, the Company or its affiliates. As of June 30, 2022, no awards had been granted under the 2021 Plan.

 

 

Activity in stock options during the year ended June 30, 2022 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, 2021     531,205     $ 11.02          
Exercised     (3,400 )   $ 4.65          
Forfeited and cancelled     (24,372 )   $ 11.65          
Outstanding and exercisable at June 30, 2022     503,433     $ 11.03       5.66  

 

Activity in stock options during the year ended June 30, 2021 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, 2020     579,584     $ 11.00          
Exercised     (22,760 )   $ 6.16          
Forfeited and cancelled     (25,619 )   $ 14.62          
Outstanding at June 30, 2021     531,205     $ 11.02       6.73  
Exercisable at June 30, 2021     490,323     $ 10.87       6.64  

 

Restricted Stock Units

 

On November 5, 2020, the Company’s Board of Directors approved an amendment to the 2014 Plan, to allow grants of Restricted Stock Units (“RSUs”). Subject to vesting requirements set forth in the RSU Award Agreement, one share of common stock is issuable for one vested RSU. On November 5, 2020, the Board of Directors authorized the following RSUs to be granted under the amended 2014 Plan: (i) a total of 43,527 RSUs to certain executive officers as one-time retention incentive awards, and (ii) a total of 91,338 RSUs to certain key employees as annual equity compensation of which 45,652 were performance-based RSUs and 45,686 were time-based RSUs. On April 29, 2021, an additional 18,312 time-based RSUs were authorized by the Company’s Board of Directors to be granted under the amended 2014 Plan. On October 29, 2021, the Board of Directors authorized the following RSUs to be granted under the amended 2014 Plan: (i) a total of 97,828 RSUs to certain executive officers of which 48,914 were performance-based RSUs and 48,914 were time-based RSUs, and (ii) a total of 81,786 time-based RSUs to certain other key employees. The RSUs are subject to the terms and conditions provided in (i) the Restricted Stock Unit Award Agreement for time-based awards (“Time-based Award Agreement”), and (ii) the Performance Restricted Stock Unit Award Agreement for performance-based awards (“Performance-based Award Agreement”).

 

 

Activity in RSUs during the year ended June 30, 2022 and related balances outstanding as of that date are reflected below:

 

    Number of Shares     Weighted Average Grant date Fair Value    

Weighted Average Remaining Contract Term

(# years)

 
Outstanding at June 30, 2021     131,652     $ 9.25          
Granted     250,786     $ 4.82          
Vested/Settled     (9,156 )   $ 11.56          
Forfeited and cancelled     (69,061 )   $ 6.93          
Outstanding at June 30, 2022     304,221     $ 6.06       1.82  

 

Activity in RSUs during the year ended June 30, 2021 and related balances outstanding as of that date are reflected below:

 

    Number of Shares     Weighted Average Grant date Fair Value    

Weighted Average Remaining Contract Term

(# years)

 
Outstanding at June 30, 2020     -     $ -          
Granted     153,177     $ 9.20          
Forfeited and cancelled     (21,525 )   $ 8.88          
Outstanding at June 30, 2021     131,652     $ 9.25       2.72  

 

Stock-based Compensation

 

Stock-based compensation expense for the years ended June 30, 2022 and 2021 represents the estimated fair value of stock options and RSUs at the time of grant amortized under the straight-line method over the expected vesting period and reduced for estimated forfeitures of options and RSUs. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from original estimates. At June 30, 2022, the aggregate intrinsic value of exercisable options was $0.

 

The following table summarizes stock-based compensation expense for employee and non-employee option and RSU grants:

 

                 
Years ended June 30,   2022     2021  
Research and development   $ 144,000     $ 178,000  
Selling and administrative     567,000       619,000  
Total stock-based compensation expense   $ 711,000     $ 797,000  

 

At June 30, 2022, the unamortized stock-based compensation expense relating to outstanding stock options and RSUs was approximately $0 and $983,000, respectively. The unamortized amount related to RSUs is expected to be expensed over the weighted-average remaining recognition period of 1.82 years.