Flux Power Holdings, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Stockholders' Deficit

Note 5 - Stockholders' Deficit

6 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE

- STOCKHOLDERS’ DEFICIT

Advisory Agreement

Catalyst Global LLC.

Effective

April 1, 2017,

we entered into a renewal contract (the

“2017

Renewal”) with Catalyst Global LLC to provide investor relations services for

months in exchange for monthly fees of

$3,500

per month and

23,333

shares of restricted common stock per quarter. The initial tranche of

23,333

shares was valued at

$0.45

per share or

$10,500

when issued on

June 7, 2017,

the

second

tranche of

23,333

shares was valued at

$0.50

per share or

$11,667

when issued on

September 25, 2017,

and the

third

tranche of

23,333

shares was valued at

$0.475

per share or

$11,083

when issued on

January 16, 2018.

The

2017

Renewal is cancelable upon

days written notice.

Warrant Activity

Warrant detail for the

six

months ended

December 31,

2017

is reflected below:

	Number of Warrants			Weighted Average Exercise Price Per Warrant		Remaining Contract Term (# years)
Warrants outstanding and exercisable at June 30, 2017		2,342,590		$	1.97	0.12	-	1.55
Warrants issued		-		$	-		-
Warrants forfeited		(433,282	)	$	2.20		-
Warrants outstanding and exercisable at December 31, 2017		1,909,308		$	1.92		1.27

Stock-based Compensation

November 26, 2014,

our board of directors approved our

2014

Equity Incentive Plan (the

“2014

Plan”), which was approved by our shareholders 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

10,000,000

shares of our common stock.

October 26, 2017,

we granted

1,880,000

incentive stock options

(“ISO”) of the Company’s common stock, with an estimated grant-date fair value of

$769,000,

Company employees. The ISOs vest

25%

on the grant date and then

per quarter for the following

twelve

quarters with all options expiring

ten

years from the date of grant.

In addition, the Company issued

90,000

non-qualified stock options (“NQSO”) of the Company’s common stock, with an estimated grant-date fair value of

$37,000,

three

members of its Board of Directors. The NQSOs vest

12.5%

per quarter over a

two

year period and expire

ten

years from the date of grant.

Activity in stock options during the

six

months ended

December 31,

201

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, 2017		716,277		$	1.01
Granted		1,970,000			0.46
Exercised		-
Forfeited and cancelled		(1,000	)		0.50
Outstanding at December 31, 2017		2,685,277		$	0.61		8.96
Exercisable at December 31, 2017		1,626,613		$	0.81		7.86

Activity in stock options during the

six

months ended

December 31, 2016

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, 2016		900,402		$	1.10
Granted		-
Exercised		-
Forfeited and cancelled		(80,132	)	$	2.55
Outstanding at December 31, 2016		820,270		$	1.00		7.17
Exercisable at December 31, 2016		632,232		$	1.13		6.55

Stock-based compensation expense recognized in our

condensed consolidated statements of operations for the

three

and

six

months ended

December 31, 2017

and

2016,

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.

Our average stock price during the

six

months ended

December 31,

2017

was

$0.49,

and as a result the intrinsic value of the exercisable options at

December 31, 2017

was

$5,000.

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 December 31				For the Six Months Ended December 31,

	2017		2016		2017		2016
Research and development	$	61,000	$	3,000	$	64,000	$	7,000
General and administration		92,000		7,000		100,000		13,000
Total stock-based compensation expense	$	153,000	$	10,000	$	164,000	$	20,000

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,	2017		2016
Expected volatility	100	%	100	%
Risk free interest rate	1.76	%	1.31	%
Forfeiture rate	23.0	%	23.0	%
Dividend yield	0	%	0	%
Expected term (years)	5		3

The remaining amount of unrecognized stock-based compensation expense at

December 31,

2017

relating to outstanding stock options, is approximately

$498,000,

which is expected to be recognized over the weighted average period of

2.83

years.