Annual report pursuant to Section 13 and 15(d)

Significant Accounting Policies (Policies)

v3.7.0.1
Significant Accounting Policies (Policies)
12 Months Ended
Jun. 30, 2017
Accounting Policies [Abstract]  
Consolidation, Policy [Policy Text Block]
Principles of Consolidation
 
The consolidated financial statements include Flux Power Holdings, Inc. and its wholly-owned subsidiary Flux Power, Inc. after elimination of all intercompany accounts and transactions.
Reclassification, Policy [Policy Text Block]
Reclassifications
 
Certain prior year amounts have been reclassified to conform to the current year presentation for comparative purposes.
Use of Estimates, Policy [Policy Text Block]
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as certain financial statement disclosures. Significant estimates include valuation allowances relating to accounts receivable, inventory, and deferred tax assets, and valuation of derivative liabilities and equity instruments. While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates.
Cash and Cash Equivalents, Policy [Policy Text Block]
Cash and Cash Equivalents
 
 
As of
June 30, 2017
, cash totaled approximately
$121,000
and consists of funds held in a non-interest bearing bank deposit account. The Company considers all liquid short-term investments with maturities of less than
three
months when acquired to be cash equivalents. The Company had
no
cash equivalents at
June 30, 2017
and
2016.
Fair Value of Financial Instruments, Policy [Policy Text Block]
Fair Values of Financial Instruments
 
The carrying amount of our cash, accounts payable, accounts receivable, and accrued liabilities approximates their estimated fair values due to the short-term maturities of those financial instruments. The carrying amount of the line of credit agreement approximates its fair values as interest approximates current market interest rates for similar instruments. Management has concluded that it is
not
practical to determine the estimated fair value of amounts due to related parties because the transactions cannot be assumed to have been consummated at arm
’s length, the terms are
not
deemed to be market terms, there are
no
quoted values available for these instruments, and an independent valuation would
not
be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs. Derivative liabilities recorded in connection with warrants are reported at their estimated fair value, with changes in fair value reported in results of operations (see Note
11
).
 
Except for derivative liabilities referenced above, the Company does
not
have any other assets or liabilities that are measured at fair value on a recurring or non-recurring basis.
Receivables, Policy [Policy Text Block]
Accounts Receivable
 
Accounts receivable are carried at their estimated collectible amounts. The Company has
not
experienced collection issues related to its accounts receivable, and has
not
recorded an allowance for doubtful accounts during the
fiscal year ended
June 30, 2017
and
2016.
Inventory, Policy [Policy Text Block]
Inventories
 
Inventories consist primarily of battery management systems and the related subcomponents, and are stated at the lower of cost (
first
-in,
first
-out) or market. The Company evaluates inventories to determine if write-downs are necessary due to obsolescence or if the inventory levels are in excess of anticipated demand at market value based on consideration of historical sales and product development plans. The Company wrote off obsolete inventory in the amount of approximately
$56,000
and
$30,000
during the years ended
June 30, 2017
and
2016,
respectively.
 
We reviewed our inventory valuation with regards to our gross loss for the year ended
June 30, 2017.
The gross loss was due to factors related to new product launch, such as low volume, early higher cost designs, and limited sourcing, as well as, the continued warranty expense of repairing products in the field and returned products. As such, we do
not
believe the loss is related to raw material inventory issues that would require write-downs.
Property, Plant and Equipment, Policy [Policy Text Block]
Property, Plant and Equipment
 
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation and amortization are provided using the straight-line method over the estimated useful lives, of the related assets ranging from
three
to
ten
years, or, in the case of leasehold improvements, over the lesser of the useful life of the related asset or the lease term.
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]
Stock-based Compensation
 
Pursuant to the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic
No.
718
-
10,
Compensation-Stock Compensation
, which establishes accounting for equity instruments exchanged for employee service, we utilize the Black-Scholes option pricing model to estimate the fair value of employee stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions
may
be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances.
 
Common stock or equity instruments such as warrants issued for services to non-employees are valued at their estimated fair value at the measurement date (the date when a firm commitment for performance of the services is reached, typically the date of issuance, or when performance is complete). If the total value exceeds the par value of the stock issued, the value in excess of the par value is added to the additional paid-in-capital.
Revenue Recognition, Policy [Policy Text Block]
Revenue Recognition
 
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, price is fixed or determinable, and collectability of the selling price is reasonably assured. Delivery occurs when risk of loss is passed to the customer, as specified by the terms of the applicable customer agreements. When a product is sold on consignment, the item remains in our inventory and revenue is
not
recognized until the product is ultimately sold to the end user. When a right of return exists, contractually or implied, the Company recognizes revenue on the sell-through method. Under this method, revenue is
not
recognized upon delivery of the products. Instead, the Company records deferred revenue upon delivery and recognize
s revenue when the product is sold through to the end user. As of
June 30, 2017
and
2016,
the Company did
not
have any deferred revenue.
Standard Product Warranty, Policy [Policy Text Block]
Product Warranties
 
The Company evaluates its exposure to product warranty obligations based on historical experience. Our products, primarily lift equipment packs, are warrantied for
five
years unless modified by a separat
e agreement. As of
June 30, 2017
and
2016,
the Company carried warranty liability of approximately
$85,000
and
$120,000,
respectively, which is included in accrued expenses on the Company’s consolidated balance sheets. 
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]
Impairment of Long-lived Assets
 
In accordance with authoritative guidance for the impairment or disposal of long-lived assets, if indicators of impairment exist, the Company assesses the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through the undiscounted future operating cash flows.
 
If impairment is indicated, the Company measures the amount of such impairment by comparing the carrying value of the asset to the present value of the expected future cash flows associated with the use of the asset. The Company believes that
no
impairment indicators were present, and accordingly
no
impairment losses were recognized during the
fiscal years ended
June 30, 2017
and
2016.
Research and Development Expense, Policy [Policy Text Block]
Research and Development
 
The Company is actively engaged in new product development efforts. Research and development cost relating to possible future products are expensed as incurred.
Income Tax, Policy [Policy Text Block]
Income Taxes
 
Pursuant to FASB ASC Topic
No.
740,
Income Taxes,
deferred tax assets or liabilities are recorded to reflect the future tax consequences of temporary differences between the financial reporting basis of assets and liabilities and their tax basis at each year-end. These amounts are adjusted, as appropriate, to reflect enacted changes in tax rates expected to be in effect when the temporary differences reverse.
The Company has analyzed filing positions in all of the federal and state jurisdictions where the Company is required to file income tax returns, as well as all open tax years in these jurisdictions. As a result,
no
unrecognized tax benefits have been identified as of
June 30,
2017
or
June 30, 2016,
and accordingly,
no
additional tax liabilities have been recorded.
 
The Company records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities and on operating loss carry forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than
not
that some portion or all of a deferred tax asset will
not
be realized.
Earnings Per Share, Policy [Policy Text Block]
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 year
s ended
June 30, 2017
and
2016,
basic and diluted weighted-average common shares outstanding were
24,544,605
and
14,927,390,
respectively. The Company incurred a net loss for the years ended
June 30, 2017
and
2016,
and therefore, basic and diluted loss per share for each fiscal year 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
June 30, 2017
and
2016,
excluded from diluted weighted-average common shares outstanding, which include common shares underlying outstanding convertible debt, stock options and warrants, were
12,607,853
and
5,795,292,
respectively. 
Derivatives, Policy [Policy Text Block]
 
Derivative Financial Instruments
 
The Company does
not
use derivative instruments to hedge exposures to cash flow, market, or foreign currency risk.
 
The Company evaluates free-standing derivative instruments (or embedded derivatives) to properly classify such instruments within equity or as liabilities in our financial statements. The classification of a derivative instrument is reassessed at each reporting date. If the classification changes because of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is
no
limit on the number of times a contract
may
be reclassified.
 
Instruments classified as derivative liabilities are recorded initially at their estimated fair value and are re-measured each reporting period (or upon reclassification). The change in fair value is recorded on our consolidated statements of operations in other (income) expense.
 
The Company follows FASB ASC Topic
No.
815,
Derivatives and Hedging
("ASC
No.
815"
) to classify and value warrant liabilities. Warrants classified as derivative liabilities are recorded at their fair values at the issuance date and are revalued at each subsequent reporting date. Using a Monte Carlo simulation model, multiple random price paths for the stock price are generated to simulate many possible future outcomes, which are then discounted at the risk-free rate. These simulated paths are then averaged to determine the fair value of the warrants (see Note
9
).
Debt, Policy [Policy Text Block]
Beneficial Conversion Feature of Notes Payable
 
The convertible feature of certain notes payable provides for a rate of conversion that is below market value. Such feature is normally characterized as a "beneficial conversion feature” of which we measure the estimated fair value in circumstances in which the conversion feature is
not
required to be separated from the host instrument and accounted for separately, and record that value in the consolidated financial statements as a discount from the face amount of the notes. Such discounts are amortized to interest expense over the term of the notes.
New Accounting Pronouncements, Policy [Policy Text Block]
New Accounting Standards
 
Recently Adopted Accounting Pronouncements
 
In
August 2014,
the FASB issued ASU
No.
2014
-
15
regarding ASC topic
No.
205,
Presentation of Financial Statements - Going Concern
. The standard requires all companies to evaluate if conditions or events raise substantial doubt about an entity’s ability to continue as a going concern and requires different disclosure of items that raise substantial doubt that are, or are
not,
alleviated as a result of consideration of management’s plans. The new guidance is effective for annual periods ending after
December 15, 2016.
We adopted ASU
No
2014
-
15
for the year ended
June 30, 2017
and have reflected the required disclosures in the accompanying consolidated financial statements.
 
Recently Issued Accounting Pronouncements
Not
Yet Adopted
 
In
August 2016,
the FASB issued ASU
No.
2016
-
15,
Statement of Cash Flows (Topic
230
) Classification of Certain Cash Receipts and Cash Payments
, which provides guidance on reducing the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. In addition to other specific cash flow issues, ASU
2016
-
15
provides clarification on when an entity should separate cash receipts and cash payments into more than
one
class of cash flows and when an entity should classify those cash receipts and payments into
one
class of cash flows on the basis of predominance. The new guidance is effective for the fiscal years beginning after
December 31, 2017,
and interim periods within those fiscal years. Early adoption is permitted including an adoption in an interim period. The adoption of this ASU is
not
expected to have a material impact on our consolidated financial statements.
 
In
March 2016,
the FASB issued ASU
No.
2016
-
09,
Compensation - Stock Compensation, (Topic
718
):  Improvements to Employee Share-Based Payment Accounting
, which will simplify how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as, classification in the statement of cash flows.  This pronouncement is effective for annual periods beginning after
December 15, 2016,
and interim periods within those annual periods. Early adoption is permitted.  The adoption of ASU
No.
2016
-
09
is
not
expected to have a material impact on our consolidated financial statments.
 
In
February 2016,
the FASB issued ASU
No.
2016
-
02,
Leases (Topic
842
).
The amendments in this ASU change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The guidance is effective for the Company’s fiscal year beginning
July 1, 2019.
Early adoption is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The adoption of this ASU is
not
expected to have a material impact on our consolidated financial statements.
 
In
May 2014,
the FASB issued ASU
No.
2014
-
09,
Revenue from Contracts with Customers
. This update outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a
five
-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. In
May 2015,
the FASB issued ASU
No.
2015
-
14
deferring the effective date to annual reporting periods beginning after
December 15, 2017,
which is effective for the Company’s fiscal year beginning
July 1, 2018.
Early adoption is permitted only as of an annual reporting period beginning after
December 15, 2016.
The adoption of this ASU is
not
expected to have a material impact on our consolidated financial statements.