Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' EQUITY

v2.4.0.8
STOCKHOLDERS' EQUITY
 6 Months Ended
Dec. 31, 2013
Stockholders' Equity Note [Abstract]  
STOCKHOLDERS' EQUITY
NOTE 6 - STOCKHOLDERS’ EQUITY
 
At December 31, 2013, the Company had 145,000,000 shares of common stock, par value of $ 0.001 authorized for issuance , of which 48,135,576 shares were issued and outstanding.
 
In addition, at December 31, 2013, the Company is authorized to issue up to 5,000,000 shares of preferred stock, par value of $0.001, in one or more classes or series within a class pursuant to our Articles of Incorporation. There are currently no shares of preferred stock issued and outstanding.
 
Holders of common stock are entitled to receive dividends, when, as, and if declared by the Board of Directors, out of any assets legally available to the Company. Dividends are declared and paid in an equal per-share amount on the outstanding shares of each series of common stock. To date the Board of Directors has neither declared nor paid common stock dividends to shareholders.
 
Common Stock and Warrants
 
Private Placements -  2012
 
In July, August, and October 2012, the Company issued an aggregated of 2,353,093 shares of common stock and 579,450 five (5) year warrants to purchase shares of our common stock at an exercise price of $0.41 per share, resulting in aggregate proceeds of approximately $980,000, pursuant to private placement transactions.
 
The common stock purchased in the above referenced private placements and the common stock issuable upon exercise of warrants have piggyback registration rights. The securities offered and sold in the private placement have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.  
 
Advisory Agreements
 
Baytree Capital - Related Party. On June 14, 2012, the Company entered into an Advisory Agreement (“Advisory Agreement”) with Baytree Capital, a significant shareholder of the Company, pursuant to which Baytree Capital agreed to provide business and advisory services for 24 months in exchange for 100,000 restricted shares of our newly issued common stock at the commencement of each six (6) month period in return for its services, and a warrant to purchase 1,837,777 restricted shares of our common stock for a period of five ( 5 ) years at an exercise price of $0.41 per share (“Advisory Agreement Warrants”). In connection with this agreement, the estimated fair value of the warrants issued in the approximate amount of $3,258,000 was recorded as prepaid advisory fees, which is expected to be amortized on a pro-rata basis over the term of the agreement. During each of the six months ended December 31, 2013, and 2012, we recorded expense of approximately $815,000 as a result of the prepaid advisory fees amortization. As of December 31, 2013, the total remaining balance of the prepaid advisory fees was approximately $747,000.
 
In accordance with the Advisory Agreement, on June 14, 2013, which was the beginning of the third six-month period, a liability was recorded based on that day’s stock price for the anticipated issuance of 100,000 shares of common stock. These shares were valued at $0.60 per share, based on the price per share of the Company’s common stock on June 14, 2013, for the total of $60,000 due to Baytree Capital. On July 9, 2013, we issued Baytree Capital 100,000 restricted shares of our newly issued common stock at $0.12 per share. During the six months ended December 31, 2013, the Company recorded expense of $6,500 for such advisory fees.
 
On December 14, 2013, the commencement of the fourth six-month period, the Company accrued for the fourth installment of the shares for services valued at $0.05 per share, the price per share of the Company’s common stock on December 14, 2013, for the total of the $5,000 due to Baytree Capital. The Company also recorded $5,000 of prepaid advisory fees to be amortized over six months. The expense recognized during the period ended December 31, 2013, was immaterial.
 
Caro Capital, LLC. On April 4, 2013, the Company entered into an Advisory Agreement (“Agreement”) with Caro Capital, LLC (“Caro Capital”), pursuant to which Caro Capital agreed to provide business and advisory services, management consulting, shareholder information, and public relations for six (6) months in exchange for 500,000 restricted shares of our newly issued common stock. Upon execution of the Agreement, Caro Capital was issued 100,000 shares of restricted stock per the contract terms, which were valued at $44,000 based on the closing price of our common stock on the issuance date. The contract calls for subsequent issuance of 100,000 shares at 30-day increments to the first tranche. Per the terms of the Agreement, Caro Capital is entitled to the second and third tranche issuance of 100,000 shares of restricted stock each.
 
The second tranche shares were valued at $ 0.50 per share, based on the price per share of the Company’s common stock on May 4, 2013, when the second tranche shares were due to be issued, for the total of $50,000. The costs associated with the 100,000 shares to be issued of approximately $50,000 were recorded as consulting expense during the fourth quarter ended June 30, 2013. On August 13, 2013, the Company issued 100,000 restricted shares of our newly issued common stock at $0.08 per share. As a result, during the six months ended December 31, 2013, the Company recorded $42,000 gain on settlement of accrued liability, which resulted from the difference in the per share value on the accrual date and stock issuance date.
 
The third tranche shares were valued at $ 0.32 per share, based on the price per share of the Company’s common stock on June 4, 2013, when the third tranche shares were due to be issued, for the total of $ 32,000. The costs associated with the 100,000 shares to be issued of approximately $32,000 were recorded as consulting expense during the fourth quarter ended June 30, 2013.
 
On June 3, 2013, the Company terminated the Agreement with Caro Capital effective July 3, 2013.  The liability for the third tranches shares of $32,000 is included in accrued expenses at December 31, 2013.
 
Catalyst Global LLC. On October 14, 2013, the Company entered into a contract with Catalyst Global LLC (“CGL”), pursuant to which CGL agreed to provide investor relations services for 12 months in exchange for monthly fees of $2,000 per month and  450,000 shares of restricted common stock issued as follows: 180,000 shares upon signing and the balance vesting pro rata upon each of the three-, six-, and nine-month anniversaries of the contract.  The initial tranche was valued at $0.05 per share at $9,000 when issued on November 8, 2013.
 
Institutional Analyst Holdings, Inc. On December 18, 2013, the Company entered into a contract with Institutional Analyst Holdings, Inc. (“IA”), pursuant to which IA agreed to provide investor relations and report writing services for six months in exchange for an initial payment of $2,500 and 400,000 restricted shares of Flux common stock upon execution of the contract.  An additional 400,000 restricted shares of Flux common stock would be issued 60 days from the date of the contract.  The initial tranche was valued at $0.06 per share at $24,000 when issued on December 18, 2013.
   
Warrant Activity
 
Warrant activity during the six months ended December 31, 2013, and related balances outstanding as of such dates are reflected below:
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
Average
 
Remaining
 
 
 
 
 
 
Exercise
 
Contract
 
 
 
 
 
 
Price Per
 
Term (#
 
 
 
Number
 
Share
 
years)
 
Shares purchasable under outstanding warrants at June 30, 2013
 
 
2,907,347
 
$
0.41
 
 
 
 
Stock purchase warrants issued
 
 
—
 
 
—
 
 
 
 
Stock purchase warrants exercised
 
 
—
 
 
—
 
 
 
 
Shares purchasable under outstanding warrants at December 31, 2013
 
 
2,907,347
 
$
0.41
 
 
3.46 - 3.84
 
 
Warrant activity during the six months ended December 31, 2012, and related balances outstanding as of such dates are reflected below:
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
Average
 
Remaining
 
 
 
 
 
 
Exercise
 
Contract
 
 
 
 
 
 
Price Per
 
Term (#
 
 
 
Number
 
Share
 
years)
 
Shares purchasable under outstanding warrants at June 30, 2012
 
 
2,400,328
 
$
0.41
 
 
 
 
Stock purchase warrants issued
 
 
507,019
 
 
—
 
 
 
 
Stock purchase warrants exercised
 
 
—
 
 
—
 
 
 
 
Shares purchasable under outstanding warrants at December 31, 2012
 
 
2,907,347
 
$
0.41
 
 
4.49
 
 
Stock-based Compensation
 
During the six months ended December 31, 2013, the Company granted 3,010,973 non-qualified stock options of the Company’s common stock.  The Company has not registered the shares of common stock underlying stock options outstanding as of December 31, 2013
 
Activity in stock options during the six months ended December 31, 2013, and related balances outstanding as of that date are reflected below:
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
Weighted
 
Average
 
 
 
 
 
Average
 
Remaining
 
 
 
Number of
 
 
Exercise Price
 
Contract
 
 
 
Shares
 
per share
 
Term (# years)
 
Outstanding at June 30, 2013
 
 
2,527,389
 
$
0.15
 
 
5.85
 
Granted
 
 
3,010,973
 
 
0.10
 
 
 
 
Exercised
 
 
—
 
 
—
 
 
 
 
Forfeited and cancelled
 
 
(460,001)
 
 
0.04
 
 
 
 
Outstanding at December 31, 2013
 
 
5,078,361
 
$
0.14
 
 
8.69
 
Exercisable at December 31, 2013
 
 
3,357,982
 
$
0.20
 
 
8.31
 
 
Activity in stock options during the six months ended December 31, 2012, and related balances outstanding as of that date are reflected below:
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
Weighted
 
Average
 
 
 
 
 
Average
 
Remaining
 
 
 
Number of
 
Exercise Price
 
Contract
 
 
 
Shares
 
per share
 
Term (# years)
 
Outstanding at June 30, 2012
 
 
4,536,949
 
$
0.17
 
 
7.61
 
Granted
 
 
—
 
 
 
 
 
 
 
Exercised
 
 
(100,000)
 
 
0.04
 
 
 
 
Forfeited and cancelled
 
 
(1,021,896)
 
 
0.30
 
 
 
 
Outstanding at December 31, 2012
 
 
3,415,053
 
$
0.13
 
 
6.26
 
Exercisable at December 31, 2012
 
 
2,333,219
 
$
0.19
 
 
5.18
 
 
Stock-based compensation expense recognized in our condensed consolidated statements of operations for the six months ended December 31, 2013, and 2012, 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 based on changes in the estimated forfeiture rate. During the first quarter of fiscal 2014 the Company revised its forfeiture rate based on prior year actual forfeitures. The change in forfeiture rate from 5% to 13% resulted in a reduction of approximately $21,000 to previously recognized stock based compensation expense.
 
The closing price of our stock at December 31, 2013, was $0.05, and as a result the intrinsic value of the exercisable options at December 31, 2013, was $12,000.
 
We allocated stock-based compensation expense included in the condensed consolidated statements of operations for employee option grants and non-employee option grants as follows:
 
 
 
For the Three Months Ended
 
For the Six Months Ended
 
 
 
December 31,
 
December 31,
 
December 31,
 
December 31,
 
 
 
2013
 
2012
 
2013
 
2012
 
Research and development
 
$
4,000
 
$
4,000
 
$
3,000
 
$
8,000
 
General and administration
 
 
33,000
 
 
(10,000)
 
 
57,000
 
 
30,000
 
Total stock-based compensation expense
 
$
37,000
 
$
(6,000)
 
$
60,000
 
$
38,000
 
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:
 
Six months ended December 31,
 
2013
 
2012
 
Expected volatility
 
218%
 
100%
 
Risk free interest rate
 
1.4% to 1.7%
 
0.8% to 3.0%
 
Forfeiture rate
 
13%
 
5%
 
Dividend yield
 
0%
 
0%
 
Expected term
 
3-5 years
 
5-10 years
 
 
The remaining amount of unrecognized stock-based compensation expense at December 31, 2013, is approximately $283,000, which is expected to be recognized over the weighted average period of 8.31 years.