Flux Power Holdings, Inc. - Quarter Report: 2018 September (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
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☑
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For
the quarterly period ended September 30, 2018
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission
File Number: 000-25909
FLUX POWER HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
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Nevada
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86-0931332
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
Number)
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985 Poinsettia Avenue, Suite A, Vista, California
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92081
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(Address
of principal executive offices)
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(Zip
Code)
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877-505-3589
(Registrant’s
telephone number, including area code)
Indicate by check
mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such
shorter period that the issuer was required to file such reports),
and (2) has been subject to such filing requirements for the
past 90 days.
Yes
☑
No ☐
Indicate by check
mark whether the registrant has submitted electronically and posted
on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes ☑ No
☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer”, “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act. (Check one):
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Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
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Smaller
reporting company
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☑
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(Do
not check if a smaller reporting company)
Emerging
growth company ☐
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
☐ No ☑
Indicate number of
shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
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Class
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Outstanding as of November 13, 2018
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Common Stock, $0.001 par value
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46,932,368
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FLUX
POWER HOLDINGS, INC.
FORM
10-Q
For
the Quarterly Period Ended September 30, 2018
Table of Contents
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PART I - Financial Information
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ITEM
1.
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FINANCIAL
STATEMENTS
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4
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CONDENSED
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2018 (unaudited)
AND JUNE 30, 2018
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4
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CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
-THREE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
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5
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CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) -THREE MONTHS
ENDED SEPTEMBER 30, 2018 AND 2017
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6
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NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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7
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ITEM
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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14
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ITEM
3.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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18
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ITEM
4.
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CONTROLS
AND PROCEDURES
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18
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PART II - Other Information
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ITEM
1.
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LEGAL
PROCEEDINGS
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19
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ITEM
1A.
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RISK
FACTORS
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19
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ITEM
2.
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UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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19
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ITEM
3.
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DEFAULTS
UPON SENIOR SECURITIES
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19
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ITEM
4.
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MINE
SAFETY DISCLOSURES
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19
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ITEM
5.
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OTHER
INFORMATION
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19
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ITEM
6.
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EXHIBITS
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20
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SIGNATURES
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21
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2
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This
report contains forward-looking statements. The forward-looking
statements are contained principally in the section entitled
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” These statements
involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to
be materially different from any future results, performances or
achievements expressed or implied by the forward-looking
statements. These risks and uncertainties include, but are not
limited to, the factors described in the section captioned
“Risk Factors” below. In some cases, you can identify
forward-looking statements by terms such as
“anticipates,” “believes,”
“could,” “estimates,”
“expects,” “intends,” “may,”
“plans,” “potential,”
“predicts,” “projects,”
“should,” “would,” and similar expressions
intended to identify forward-looking statements. Forward-looking
statements reflect our current views with respect to future events
and are based on assumptions and subject to risks and
uncertainties. Given these uncertainties, you should not place
undue reliance on these forward-looking statements. These
forward-looking statements include, among other things, statements
relating to:
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our ability to secure sufficient funding and alternative source of
funding to support our current and proposed
operations;
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our anticipated growth strategies and our ability to manage the
expansion of our business operations effectively;
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our ability to maintain or increase our market share in the
competitive markets in which we do business;
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our ability to keep up with rapidly changing technologies and
evolving industry standards, including our ability to achieve
technological advances;
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our dependence on the growth in demand for our
products;
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our ability to diversify our product offerings and capture new
market opportunities;
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our ability to source our needs for skilled labor, machinery,
parts, and raw materials economically; and
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the loss of key members of our senior management.
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Also,
forward-looking statements represent our estimates and assumptions
only as of the date of this report. You should read this report and
the documents that we reference and file as exhibits to this report
completely and with the understanding that our actual future
results may be materially different from what we expect. Except as
required by law, we assume no obligation to update any
forward-looking statements publicly, or to update the reasons
actual results could differ materially from those anticipated in
any forward-looking statements, even if new information becomes
available in the future.
Use of
Certain Defined Terms
Except
where the context otherwise requires and for the purposes of this
report only:
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the “Company,” “we,” “us,” and
“our” refer to the combined business of Flux Power
Holdings, Inc., a Nevada corporation and its wholly-owned
subsidiary, Flux Power, Inc. (“Flux Power”), a
California corporation;
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“Exchange Act” refers to the Securities Exchange Act of
1934, as amended;
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“SEC” refers to the Securities and Exchange Commission;
and
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“Securities Act” refers to the Securities Act of 1933,
as amended.
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3
PART I - Financial Information
Item 1.
Financial Statements
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FLUX POWER HOLDINGS, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30,
2018
(Unaudited)
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June 30,
2018
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ASSETS
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Current
assets:
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Cash
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$504,000
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$2,706,000
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Accounts
receivable
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551,000
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946,000
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Inventories
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2,569,000
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1,512,000
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Other
current assets
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77,000
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92,000
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Total
current assets
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3,701,000
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5,256,000
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Other
assets
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26,000
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26,000
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Property,
plant and equipment, net
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120,000
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87,000
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Total
assets
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$3,847,000
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$5,369,000
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
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Current
liabilities:
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Accounts
payable
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$730,000
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$417,000
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Accrued
expenses
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371,000
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391,000
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Line
of credit - related party
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10,380,000
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10,380,000
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Convertible
promissory note - related party
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500,000
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500,000
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Accrued
interest
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1,288,000
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1,014,000
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Total
current liabilities
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13,269,000
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12,702,000
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Long
term liabilities:
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Customer
deposits from related party
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98,000
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102,000
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Total
liabilities
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13,367,000
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12,804,000
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Stockholders’
deficit:
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Preferred
stock, $0.001 par value; 5,000,000 shares authorized; none issued
and outstanding
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-
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-
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Common
stock, $0.001 par value; 300,000,000 shares authorized; 31,110,783
and 31,060,028 shares issued and outstanding at September 30, 2018
and June 30, 2018, respectively
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31,000
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31,000
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Additional
paid-in capital
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19,512,000
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19,196,000
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Accumulated
deficit
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(29,063,000)
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(26,662,000)
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Total
stockholders’ deficit
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(9,520,000)
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(7,435,000)
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Total
liabilities and stockholders’ deficit
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$3,847,000
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$5,369,000
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
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4
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FLUX POWER HOLDINGS, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(Unaudited)
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Three Months Ended September 30,
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2018
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2017
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Net
revenue
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$1,835,000
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$153,000
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Cost
of sales
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1,817,000
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314,000
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Gross
profit (loss)
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18,000
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(161,000)
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Operating
expenses:
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Selling
and administrative expenses
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1,483,000
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671,000
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Research
and development
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662,000
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478,000
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Total
operating expenses
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2,145,000
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1,149,000
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Operating
loss
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(2,127,000)
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(1,310,000)
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Other
income (expense):
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Interest
expense
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(274,000)
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(136,000)
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Net
loss
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$(2,401,000)
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$(1,446,000)
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Net
loss per share - basic and diluted
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$(0.08)
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$(0.06)
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Weighted
average number of common shares outstanding - basic and
diluted
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31,068,411
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25,086,794
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
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5
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FLUX POWER HOLDINGS, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
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Three Months Ended September 30,
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2018
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2017
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Cash
flows from operating activities:
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Net
loss
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$(2,401,000)
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$(1,446,000)
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Adjustments
to reconcile net loss to net cash used in operating
activities
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Depreciation
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11,000
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12,000
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Stock-based
compensation
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164,000
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11,000
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Stock
issuance for services
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152,000
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12,000
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Changes
in operating assets and liabilities:
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Accounts
receivable
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395,000
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6,000
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Inventories
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(1,057,000)
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(190,000)
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Other
current assets
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15,000
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45,000
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Accounts
payable
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313,000
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(94,000)
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Accrued
expenses
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(20,000)
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(58,000)
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Accrued
interest
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274,000
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158,000
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Customer
deposits
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(4,000)
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(5,000)
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Net
cash used in operating activities
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(2,158,000)
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(1,549,000)
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Cash
flows from investing activities
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Purchases
of equipment
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(44,000)
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(27,000)
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Net
cash used in investing activities
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(44,000)
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(27,000)
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Cash
flows from financing activities:
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Borrowings
from line of credit - related party debt
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-
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1,495,000
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Net
cash provided by financing activities
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-
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1,495,000
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Net
change in cash
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(2,202,000)
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(81,000)
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Cash,
beginning of period
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2,706,000
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121,000
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Cash,
end of period
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$504,000
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$40,000
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Supplemental Disclosures of Non-Cash Investing and Financing
Activities:
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Stock
issuance for services
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$152,000
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$12,000
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
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6
FLUX POWER HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
NOTE
1 - NATURE OF BUSINESS
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, 2018
filed with the SEC on September 26, 2018. In the opinion of
management, the accompanying condensed consolidated interim
financial statements include all necessary adjustments. 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,
2018 has been derived from the audited balance sheet at June 30,
2018 contained in such Form 10-K.
Nature
of Business
Flux
Power Holdings, Inc. designs, develops and sells rechargeable
advanced lithium-ion batteries for industrial equipment. As used
herein, the terms “we”, “us”,
“our”, “Flux” and “Company”
refer to Flux Power Holdings, Inc. and our wholly owned subsidiary,
Flux Power, Inc. (“Flux Power”), unless otherwise
indicated. We have structured our business around our core
technology, the “Battery Management System”
(“BMS”). Our BMS provides three critical functions to
our battery systems: cell balancing, monitoring and error
reporting. Using our proprietary management technology, we are able
to offer complete integrated energy storage solutions or custom
modular standalone systems to our customers. We have also developed
a suite of complementary technologies and products that accompany
our core products. Sales have been primarily to customers located
throughout the United States.
NOTE
2 – LIQUIDITY AND GOING CONCERN
The
accompanying condensed 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 $29,063,000 through September 30, 2018, and a net loss
of $2,401,000 for the three months ended September 30, 2018. To
date, our revenues and operating cash flows have not been
sufficient to sustain our operations and we have relied on debt and
equity financing to fund our operations. These factors raise
substantial doubt about our ability to continue as a going concern
for the twelve months following the filing date of this Quarterly
Report on Form 10-Q. Our ability to continue as a going concern is
dependent upon our ability to raise additional capital on a timely
basis until such time as revenues and related cash flows are
sufficient to fund our operations.
Management has
undertaken steps to improve operations with the goal of sustaining
our operations. These steps include (a) developing additional
products to serve the Class 1 and Class 2 industrial equipment
markets; and (b) expand our sales force throughout the United
States. In that regard, we have increased our research and
development efforts to focus on completing the development of
energy storage solutions that can be used on larger forklifts and
have also doubled our sales force since December 2016 with
personnel having significant experience in the industrial equipment
handling industry. Those efforts have resulted in evaluations of
battery packs on larger forklifts and ground support equipment
(“GSE”) along with commercial sales of GSE
packs.
We have
evaluated our expected cash requirements over the next twelve
months, which include, but are not limited to, investments in
additional sales and marketing and product development resources,
capital expenditures, and working capital requirements and have
determined that our existing cash resources are not sufficient to
meet our anticipated needs during the next twelve months, and that
additional financing is required to support current operations.
Based on our current and planned levels of expenditure, we estimate
that total financing proceeds of approximately $7,800,000 will be
required to fund current and planned operations for the twelve
months following the filing date of this Quarterly Report on Form
10-Q. In addition, we anticipate that further additional financing
may be required to fund our business plan subsequent to that date,
until such time as revenues and related cash flows become
sufficient to support our operating costs.
We
intend to continue to seek capital through the sale of equity
securities through private placements, convertible debt placements
and the utilization of our existing related-party credit
facility.
7
Although management
believes that the additional required funding will be obtained,
there is no guarantee we 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 resources,
and capital expenditures, which may have a material adverse effect
on our future cash flows and results of operations, and our ability
to continue operating as a going concern. The accompanying
financial statements do not include any adjustments that would be
necessary should we be unable to continue as a going concern and,
therefore, be required to liquidate our assets and discharge our
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 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, 2018.
There have been no material changes in these policies or their
application.
Reclassifications
Certain
prior period amounts have been reclassified to conform to the
current period presentation for comparative purposes.
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, 2018 and 2017, basic and diluted
weighted-average common shares outstanding were 31,068,411 and
25,086,794, respectively. The Company incurred a net loss for the
three months ended September 30, 2018 and 2017, 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, 2018 and 2017, excluded from diluted
weighted-average common shares outstanding, which include common
shares underlying outstanding convertible debt, stock options and
warrants, were 18,745,125 and 15,050,184,
respectively.
Recent Accounting Pronouncements Not Yet Adopted
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.
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.
8
NOTE
4 - RELATED PARTY DEBT AGREEMENTS
Esenjay Credit Facilities
Between
October 2011 and September 2012, the Company entered into three
debt agreements with Esenjay. 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
shareholder of the Company (owning approximately 52% of our
outstanding common shares as of September 30, 2018). The three debt
agreements consisted of a Bridge Loan Promissory Note, a Secondary
Revolving Promissory Note and an Unrestricted Line of Credit
(collectively, the “Loan Agreements”). On December 31,
2015, the Bridge Loan Promissory Note and the Secondary Revolving
Promissory Note expired, leaving the Unrestricted Line of Credit
available for future draws.
The
Unrestricted Line of Credit has a maximum borrowing amount of
$10,000,000, is convertible at a rate of $0.60 per share, bears
interest at 8% per annum and matures on January 31, 2019. Advances
under the Unsecured Line of Credit are subject to Esenjay's
approval.
The
outstanding principal balance of the Unrestricted Line of Credit as
of September 30, 2018 was $7,975,000, convertible at $0.60 per
share or 13,291,667 shares of common stock, resulting in a
remaining $2,025,000 available for future draws under this
agreement, subject to lender’s approval. During the
three months ended September 30, 2018 and 2017, the Company
recorded approximately $161,000 and $121,000, respectively of
interest expense in the accompanying condensed consolidated
statements of operations related to the Unrestricted Line of
Credit. The Unrestricted Line of Credit was converted to
common stock in October 2018 (see Note 8).
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 are to be used to purchase
inventory and related operational expenses and accrue interest at a
rate of 15% per annum (the “Inventory Line of Credit”).
The outstanding balance of the Inventory Line of Credit and accrued
interest is due and payable on March 31, 2019. Funds received from
Esenjay since December 5, 2017 were transferred to the Inventory
Line of Credit resulting in $2,405,000 outstanding as of September
30, 2018 and $2,595,000 available for future draws, subject to the
lender’s approval. During the three months ended September
30, 2018, the Company recorded approximately $91,000 of interest
expense in the accompanying condensed consolidated statements of
operations related to the Inventory Line of
Credit.
Shareholder Convertible Promissory Note
On
April 27, 2017, we formalized an oral agreement for advances
totaling $500,000, received from a shareholder
(“Shareholder”) into a written Convertible Promissory
Note (the “Convertible Note”). Borrowings under the
Convertible Note accrue interest at 12% per annum, with all unpaid
principal and accrued interest due and payable on October 27, 2018.
In addition, at any time commencing on or after the date that is
six (6) months from the issue date, at the election of Shareholder,
all or any portion of the outstanding principal, accrued but unpaid
interest and/or late charges under the Convertible Note may be
converted into shares of the Company’s common stock at a
conversion price of $1.20 per share; provided, however, the
Shareholder shall not have the right to convert any portion of the
Convertible Note to the extent that the Shareholder would
beneficially own in excess of 5% of the total number of shares of
common stock outstanding immediately after giving effect to the
issuance of shares of common stock issuable upon conversion of the
Convertible Note. During the three months ended September 30,
2018, we recorded approximately $15,000 of interest expense in the
accompanying condensed consolidated statements of operations
related to the Convertible Note. The Convertible Note was
converted to common stock in October 2018 (see Note
8).
NOTE
5 - STOCKHOLDERS’ DEFICIT
Advisory Agreements
Catalyst Global LLC.
Effective April 1, 2018, we entered into a renewal contract (the
“2018 Renewal”) with Catalyst Global LLC to provide
investor relations services for 12 months in exchange for monthly
fees of $4,500 per month and 34,840 shares of restricted common
stock per quarter. During the three months ended September 30,
2018, we issued 8,710 shares of common stock valued at $2.01 per
share or $17,507. The 2018 Renewal is cancelable upon 60 days
written notice.
Shenzhen Reach Investment
Development Co. (“SRID”). On March 14, 2018, we
entered into a consulting agreement with SRID to assist us with
identifying strategic partners, suppliers and manufacturers in
China for a term of 12 months. Included with the services is a
two-week trip to China to meet with potential manufacturers, which
took place in April 2018. In consideration for the services, we
agreed to issue to SRID, up to 174,672 shares of restricted common
stock valued at approximately $80,000 over the course of the
12-month term. As of September 30, 2018, 116,158 shares have been
issued.
Warrant Activity
Warrant
detail is reflected below:
|
|
Number
|
Weighted Average
Exercise Price Per
Share
|
Remaining Contract
Term (# years)
|
|
Shares
purchasable under outstanding warrants at June 30,
2018
|
1,740,790
|
$2.03
|
0.74
|
|
Stock
purchase warrants exercised
|
(40,000)
|
$2.00
|
-
|
|
Shares
purchasable under outstanding warrants at September 30,
2018
|
1,700,790
|
$2.03
|
0.47
|
9
Stock-based
Compensation
On
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 Option Plan was
amended by our board of directors on October 26, 2017 and approved
by our shareholders on July 23, 2018. 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.
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
|
3,544,473
|
$0.83
|
8.87
|
|
Granted
|
335,264
|
|
|
|
Exercised
|
-
|
|
|
|
Forfeited
and cancelled
|
103,125
|
|
|
|
Outstanding
at September 30, 2018
|
3,766,612
|
$0.94
|
8.33
|
|
Exercisable
at September 30, 2018
|
1,609,667
|
$0.77
|
7.99
|
Activity in stock
options during the three months ended September 30, 2017 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
|
-
|
|
|
|
Exercised
|
-
|
|
|
|
Forfeited
and cancelled
|
-
|
|
|
|
Outstanding
at September 30, 2017
|
716,277
|
$1.01
|
6.83
|
|
Exercisable
at September 30, 2017
|
612,623
|
$1.09
|
6.60
|
Stock-based
compensation expense recognized in our condensed consolidated
statements of operations for the three months ended September 30,
2018 and 2017, 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.
10
Our
average stock price during the three months ended September 30,
2018 was $2.27 and as a result the intrinsic value of the
exercisable options at September 30, 2018 was
$2,218,000.
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:
|
Three months ended September 30,
|
2018
|
2017
|
|
Research
and development
|
$15,000
|
$8,000
|
|
General
and administrative
|
149,000
|
3,000
|
|
Total
stock-based compensation expense
|
$164,000
|
$11,000
|
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,
|
2018
|
2017
|
|
Expected
volatility
|
142%
|
100%
|
|
Risk
free interest rate
|
2.63%
|
1.31%
|
|
Forfeiture
rate
|
20.0%
|
23.0%
|
|
Dividend
yield
|
0%
|
0%
|
|
Expected
term (years)
|
5
|
3
|
The
remaining amount of unrecognized stock-based compensation expense
at September 30, 2018 relating to outstanding stock options is
approximately $1,648,000 which is expected to be recognized over
the weighted average period of 1.47
years.
11
NOTE
6 - OTHER RELATED PARTY TRANSACTIONS
Transactions with Epic Boats
The
Company subleases office and manufacturing space to Epic Boats (an
entity founded and controlled by Chris Anthony, our board member
and former Chief Executive Officer) in our facility in Vista,
California pursuant to a month-to-month sublease agreement.
Pursuant to this agreement, Epic Boats pays Flux Power 10% of
facility costs through the end of our lease agreement.
The
Company received $5,000 and $5,000 during the three-month ended
September 30, 2018 and 2017, respectively, from Epic Boats under
the sublease rental agreement which is recorded as a reduction to
rent expense and the customer deposits discussed
below.
As of
September 30, 2018 and June 30, 2018, customer deposits totaling
approximately $98,000 and $102,000, respectively, were recorded in
the accompanying condensed consolidated balance sheets. There were
no receivables outstanding from Epic Boats as of September 30, 2018
and June 30, 2018.
NOTE
7 - CONCENTRATIONS
Credit Risk
Financial
instruments that potentially subject the Company to concentrations
of credit risk consist principally of temporary cash investments
and unsecured trade accounts receivable. The Company maintains cash
balances at a financial institution in San Diego, California. Our
cash balance at this institution is secured by the Federal Deposit
Insurance Corporation up to $250,000. The Company has not
experienced any losses in such accounts. Management believes that
the Company is not exposed to any significant credit risk with
respect to its cash.
Customer Concentrations
During
the three months ended September 30, 2018, we had three major
customers that each represented more than 10% of our revenues on an
individual basis, or approximately 89% in the
aggregate.
During
the three months ended September 30, 2017, we had three major
customers that each represented more than 10% of our revenues on an
individual basis, or approximately 71% in the
aggregate.
Suppliers/Vendor Concentrations
We
obtain a limited number of components and supplies included in our
products from a small group of suppliers. During the three months
ended September 30, 2018 we had two suppliers who accounted for
more than 10% of our total inventory purchases on an individual
basis or approximately 56% in the aggregate.
During
the three months ended September 30, 2017 we had three suppliers
who accounted for more than 10% of our total inventory purchases on
an individual basis or approximately 50% in the
aggregate.
12
NOTE
8 - SUBSEQUENT EVENTS
On
October 26, 2018, we entered into a credit facility agreement with
Cleveland Capital, L.P., a Delaware limited partnership
(“Cleveland”), our minority shareholder, pursuant to
which Cleveland agreed to make available to Flux a line of credit
(“Cleveland LOC”) in a maximum principal amount at any
time outstanding of up to $2,000,000. The Cleveland LOC has an
origination fee of $20,000, which represents one percent (1%) of
the Cleveland LOC, and carries a simple interest of twelve percent
(12%) per annum. Interest is calculated on the basis of the actual
daily balances outstanding under the Cleveland LOC. The Cleveland
LOC is due on December 31, 2018.
On October 31, 2018, we entered into a credit facility agreement
with a private investor in Louisiana (“Investor”),
pursuant to which Investor agreed to make available to Flux a line
of credit (“Investor LOC”) in a maximum principal
amount at any time outstanding of up to $500,000. The Investor LOC
has an origination fee in of $5,000, which represents one percent
(1%) of the Investor LOC, and carries a simple interest of twelve
percent (12%) per annum. Interest is calculated on the basis of the
actual daily balances outstanding under the Investor LOC. The
Investor LOC is due on December 31, 2018.
On
October 31, 2018, the Company entered into an Early Note Conversion
Agreement (the “Early Note Conversion Agreement”) with
Esenjay, pursuant to which Esenjay agreed to immediately exercise
its conversion rights under the Unrestricted and Open Line of
Credit, dated September 24, 2012 (as amended from time to time, the
“Esenjay Loan”) to convert the outstanding principal
amount of $7,975,000 (“Principal”) plus accrued and
unpaid interest of $1,041,280 for 15,027,134 shares of the
Company’s common stock. In order to induce Esenjay to
exercise early the conversion of the Esenjay Loan, the Company
agreed to issue an additional 268,018 Shares (“Additional
Shares”), valued at $466,351 based on the fair market value
of the shares as of the conversion date.
On October
25, 2018, the Company and Scott Kiewit entered into an Amendment
(“Amendment to Kiewit Note”) to amend the Convertible
Promissory Note, dated as of April 27, 2017 (the “Kiewit
Note”), pursuant to which Scott Kiewit loaned $500,000 to the
Company. The Amendment (i) extends the maturity date of the
Convertible Note from October 27, 2018 to February 1, 2019 and (ii)
allows for the automatic conversion of the Convertible Note
immediately following the full conversion of the line of credit
granted by Esenjay to the Company under the Esenjay Loan into
shares of Common Stock of the Company. As a result of the
conversion of Esenjay Loan, the Kiewit Note automatically converted
into the right to receive 502,091 Shares.
13
ITEM
2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This
information should be read in conjunction with the unaudited
interim condensed consolidated financial statements and the notes
thereto included in this Quarterly Report on Form 10-Q, and the
audited financial statements and notes thereto and Part II, Item 7,
Management’s Discussion and Analysis of Financial Condition
and Results of Operations contained in our Annual Report on Form
10-K for the year ended June 30, 2018.
Overview
We
design, develop and sell rechargeable advanced lithium-ion
batteries for industrial uses, including our first-ever UL 2271
Listed lithium-ion “LiFT Pack” forklift batteries. We
have developed an innovative high-power battery cell management
system (“BMS”) and have structured our business around
this core technology. Our proprietary BMS provides three critical
functions to our battery systems:
|
|
●
|
Cell
Balancing: This is performed by
continuously adjusting the capacity of each cell in a storage
system according to temperature, voltage, and internal impedance
metrics. This management ensures longevity of the overall
system.
|
|
|
●
|
Monitoring: This is performed through temperature probes,
physical connection to individual cells for voltage and
calculations from basic metrics to determine remaining capacity and
internal impedance. This monitoring uses accurate measurements to
best manage the system and ensure longevity.
|
|
|
●
|
Error
reporting: This is performed by
analyzing data from individual cell and to determine whether the
system is operating within normal specifications. This error
reporting is crucial to system management as it ensures ancillary
devices are not damaging the battery; it will give the operator an
opportunity to take corrective action to maintain long overall
system life.
|
Using
our proprietary battery management technology, we offer completely
integrated energy storage solutions or custom modular standalone
systems to our customers. In addition, we have developed a suite of
complementary technologies and products that enhance the abilities
of our BMS to meet the needs of the growing advanced energy storage
market.
We
currently focus our business on lift equipment. Lift equipment
commonly called a forklift truck (also called a lift truck, a fork
truck, or a forklift) is a powered industrial truck used to lift
and transport materials. The modern forklift was developed in the
1960s by various companies including the transmission manufacturing
company Clark and the hoist company Yale & Towne Manufacturing.
The forklift has since become an indispensable piece of equipment
in manufacturing and warehousing operations. Lift equipment is
produced in a range of power capacities from smaller lift type
equipment such as a Walkie (ie., pallet jack) to a ride-on
forklift. A segment of forklifts, particularly larger forklifts,
use propane with an internal combustion engine for power. This
segment has been experiencing a secular decline, with a shift to
electric powered forklifts. The larger fleets of forklifts more
typically use battery powered forklifts. Lift equipment vehicles
are not new technology and don’t require new testing, which
can cause delays in product placement. The existing lift equipment
market primarily uses lead-acid batteries, which is a legacy
technology and can lead to customer dissatisfaction with life
cycles, performance, and additional maintenance costs. We believe
the replacement of lead-acid batteries with lithium cells
dramatically extends run time and the battery system life, lowering
the overall cost of ownership to a level which makes lithium very
competitive with lead-acid in numerous applications.
In
January 2016, we obtained certification from Underwriters
Laboratories (“UL”), a global safety science
organization, on our LiFT Packs for forklift use. This UL 2271
Listing demonstrates the quality, safety and reliability of our
LiFT Pack line for customers, distributors, dealers and OEM
partners. We believe we have emerged from this effort with a
product of substantially enhanced design, durability, performance
and value. Additionally, during September 2017, we completed our
initial ISO 9001 audit and have since been approved for
certification. We received our ISO 9001 certificate in November
2017. Obtaining the ISO 9001 certification further demonstrates our
strong customer focus, the motivation and involvement of top
management and our commitment to consistently providing high
quality products and services to our customers.
In
April 2016, we began piloting our custom-developed, 72-volt battery
pack for use with electric aviation ground support equipment.
The pilot program, organized by Averest, Inc., a leading
distributor of industrial batteries and chargers for aviation
ground support equipment, was with a leading regional airline at
Los Angeles International Airport. The test program wrapped up in
August 2016 and was deemed an unqualified success. Now,
working with a distributor focused on the airlines, we are planning
to provide more test units, to support the sales cycle, for
additional airlines. The successful development and 3-month pilot
highlights the scalability of our design and engineering
capabilities, as well as, our proprietary battery management
technology for a broad array of motive power applications.
Importantly it also moves us into a customer price point of roughly
$20,000 to $34,000 per pack for several power rating alternatives,
creating an excellent new leg of growth potential.
We have
since developed, field tested our evaluation units, and sold units
of LiFT Packs for use in Class 3 end riders, Class 2 reach trucks,
and Class 1 counterbalance forklifts. The evaluation units have
provided us with crucial information on the further development of
the battery packs in order to better serve this
market.
14
Segment
and Related Information
We
operate as a single reportable segment.
Results
of Operations and Financial Condition
The
following table represents our unaudited condensed consolidated
statement of operations for the three months ended September 30,
2018 (“Q1 2019”) and September 30, 2017 (“Q1
2018”).
|
|
Q1 2019
|
Q1 2018
|
||
|
|
$
|
%
of
Revenues
|
$
|
%
of
Revenues
|
|
|
|
|
|
|
|
Revenues
|
$1,835,000
|
100%
|
$153,000
|
100%
|
|
Cost
of sales
|
1,817,000
|
99%
|
314,000
|
205%
|
|
Gross
profit (loss)
|
18,000
|
1%
|
(161,000)
|
-105%
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Selling
and administrative expenses
|
1,483,000
|
81%
|
671,000
|
439%
|
|
Research
and development
|
662,000
|
36%
|
478,000
|
312%
|
|
Total
operating expenses
|
2,145,000
|
117%
|
1,149,000
|
751%
|
|
|
|
|
|
|
|
Operating
loss
|
(2,127,000)
|
-116%
|
(1,310,000)
|
-856%
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
Interest
expense, net
|
(274,000)
|
-15%
|
(136,000)
|
-89%
|
|
|
|
|
|
|
|
Net
loss
|
$(2,401,000)
|
-131%
|
$(1,446,000)
|
-945%
|
15
Revenues
Revenues for Q1
2019 increased $1,682,000 or 1,099%, compared to Q1 2018. This
increase in revenues during Q1 2019 was due to a significant
increase in orders for both the LiFT Packs and airport ground
support equipment (“GSE”) batteries. The completion of
a full offering of batteries and the focus of the sales team has
driven the new orders.
Cost of Sales
Cost of
sales for Q1 2019 increased $1,503,000 or 479% compared to Q1 2018.
The increase in cost of sales is directly related to a significant
increase in LiFT Pack and GSE sales. The Company’s
development efforts and improvements to all of the battery packs
have resulted in reductions in inventory costs, improved workforce
efficiencies, and reduced warranty expense per pack which have all
contributed to an improvement in gross margin. We expect continued
improvements to the gross margin as the sales volumes increase,
assembly productivity improves, and cost reductions are
achieved.
Selling and Administrative
Expenses
Selling
and administrative expenses consist primarily of salaries and
personnel related expenses, stock-based compensation expense,
public company costs, consulting costs, professional fees and other
expenses. Such expense for Q1 2019 increased $812,000 or 121%
compared to Q1 2018. The increase is primarily related to
additional staff needed to support the sales efforts and back
office operation as well as increased stock-based compensation and
additional professional fees.
Research and Development Expense
Research and
development expenses for Q1 2019 increased $184,000 or 38% compared
to Q1 2018. Such expenses consist primarily of materials, supplies,
salaries and personnel related expenses, stock-based compensation
expense, consulting costs, and other expenses associated with the
continued development of our full product line rollout. During Q1
2019, we continued our efforts in refining the lithium-ion battery
packs for Class 1 and Class 2 forklifts. We anticipate research and
development expenses continuing to be a significant portion of our
expenses as we continue to develop new and improved products to our
product line.
Interest Expense
Interest expense
for Q1 2019 increased $138,000 or 101% compared to Q1 2018 and
consists of interest expense related to our outstanding lines of
credit and convertible promissory note (see Note 4 in the
accompanying condensed consolidated financial
statements).
Net Loss
Net
losses for Q1 2019 increased $955,000 or 66%, compared to Q1
2018. The increase is primarily attributable to increased
selling and administrative expenses, research and development
costs, and interest expense.
16
Liquidity
and Capital Resources
Overview
As of
September 30, 2018, we had a cash balance of $504,000 and an
accumulated deficit of $29,063,000. We do not have sufficient
liquidity and capital resources to fund planned operations for
the twelve months following the filing date of this Quarterly
Report. The Company is exploring and working on securing additional
capital in the form of convertible debt and private placements from
both current sources and new sources. See “Future Liquidity
Needs” below.
Cash Flows
Operating Activities
Cash
used by operating activities was $2,158,000 for Q1 2019, as
compared to $1,549,000 cash used for Q1 2018. The approximate
increase of $609,000 was primarily attributable to a larger net
loss offset by increases in accounts receivable, inventory,
accounts payable, accrued interest, and accrued expenses. The
significant changes in operating assets and liabilities for Q1 2019
compared to Q1 2018 are primarily a result of the increase in
orders that result in increases in inventory, accounts receivable,
and accounts payable to support the additional orders.
Investing Activities
Net
cash used in investing activities during Q1 2019 consists primarily
of the purchase of leasehold improvements and warehouse equipment
for $44,000.
Net
cash used in investing activities during Q1 2018 consists primarily
of the purchase of leasehold improvements and office equipment for
$27,000.
Financing Activities
There
were no financing activities during Q1 2019.
Net
cash provided by financing activities during Q1 2018 was $1,495,000
as a result of borrowings from our line of credit with
Esenjay.
Future Liquidity Needs
We have
evaluated our expected cash requirements over the next twelve
months, which include, but are not limited to, investments in
additional sales and marketing and product development resources,
capital expenditures, and working capital requirements and have
determined that our existing cash resources are not sufficient to
meet our anticipated needs during the next twelve months, and that
additional financing is required to support current operations.
Based on our current and planned levels of expenditure, we estimate
that total financing proceeds of approximately $7,800,000 will be
required to fund current and planned operations for the twelve
months following the filing date of this Quarterly Report on Form
10-Q. In addition, we anticipate that further additional financing
may be required to fund our business plan subsequent to that date,
until such time as revenues and related cash flows become
sufficient to support our operating costs.
We
intend to continue to seek capital through the sale of equity
securities through private placements. As of September 30,
2018, the amount outstanding under the Inventory Line of Credit was
$2,405,000 with $2,595,000 available for future draws at
Esenjay’s discretion. 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 shareholder of the Company. The Unrestricted and Open
Line of Credit with Esenjay was converted to common stock and is no
longer a source of capital (see Note 8). Esenjay owns approximately
67% of our issued and outstanding common stock as of November 13,
2018. In addition, the Shareholder Convertible Note was converted
to common stock and is no longer a use of capital (see Note
8).
17
Although management
believes that the additional required funding will be obtained,
there is no guarantee we will be able to obtain the additional
required funds in the future or that funds will be available on
terms acceptable to us. If such funds are not available, management
will be required to curtail its investments in additional sales and
marketing and product development resources, and capital
expenditures, which will have a material adverse effect on our
future cash flows and results of operations, and its ability to
continue operating as a going concern.
To the
extent that we raise additional funds by issuing equity or debt
securities, our shareholders may experience additional significant
dilution and such financing may involve restrictive covenants. To
the extent that we raise additional funds through collaboration and
licensing arrangements, it may be necessary to grant licenses on
terms that may not be favorable to us. Such actions may have a
material adverse effect on our business.
Off-Balance
Sheet Arrangements
None.
Critical
Accounting Policies
The
unaudited interim financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America, which require us to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the unaudited financial statements and
revenues and expenses during the periods reported. Actual results
could differ from those estimates. Information with respect to our
critical accounting policies which we believe could have the most
significant effect on our reported results and require subjective
or complex judgments by management is contained in Item 7,
Management’s Discussion and Analysis of Financial Condition
and Results of Operations, of our Annual Report on Form 10-K for
the year ended June 30, 2018.
Recently
Issued Accounting Pronouncements Not Yet Adopted
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.
ITEM
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The
Company is a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and is not required to provide the information
required under this item.
ITEM
4 - CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the reports
that we file with the SEC under the Securities Exchange Act of
1934, as amended is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and
forms and that such information is accumulated and communicated to
our management, including our principal executive and financial
officers, as appropriate, to allow for timely decisions regarding
required disclosure. As required by SEC Rules 13a-15(e) and
15d-15(e) 15d-15(b), we carried out an evaluation as of the end of
the fiscal quarter ended September 30, 2018, under the supervision
and with the participation of our management, including our
principal executive and principal financial officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in the Securities Exchange Act
of 1934, as amended (“Exchange Act”) and concluded that
our disclosure controls and procedures were effective to ensure the
information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed and
reported within the time periods specified in the SEC’s rules
and forms.
Changes
in Internal Control Over Financial Reporting
There
have been no changes in the Company’s internal controls over
financial reporting during the most recently completed fiscal
quarter that have materially affected or are reasonably likely to
materially affect the Company’s internal control over
financial reporting.
18
PART II - OTHER INFORMATION
ITEM
1 - LEGAL PROCEEDINGS
From
time to time, we may be involved in routine legal proceedings, as
well as demands, claims and threatened litigation that arise in the
normal course of our business. The ultimate amount of liability, if
any, for any claims of any type (either alone or in the aggregate)
may materially and adversely affect our financial condition,
results of operations and liquidity. In addition, the ultimate
outcome of any litigation is uncertain. Any outcome, whether
favorable or unfavorable, may materially and adversely affect us
due to legal costs and expenses, diversion of management attention
and other factors. We expense legal costs in the period incurred.
We cannot assure you that contingencies of a legal nature or
contingencies having legal aspects will not be asserted against us
in the future, and these matters could relate to prior, current or
future transactions or events. As of September 30, 2018, we are not
a party to any legal proceedings that are expected, individually or
in the aggregate, to have a material adverse effect on our
business, financial condition or operating results.
ITEM
1A - RISK FACTORS
Any
investment in our common stock involves a high degree of risk.
Investors should carefully consider the risks described in our
Annual Report on Form 10-K as filed with the SEC on September 26,
2018 and all of the information contained in our public filings
before deciding whether to purchase our common stock.
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
Effective April 1,
2018, we entered into a renewal contract (the “2018
Renewal”) with Catalyst Global LLC to provide investor
relations services for 12 months in exchange for monthly fees of
$4,500 per month and 8,710 shares of restricted common stock per
quarter. The initial tranche of 8,710 shares was valued at $1.70
per share or $14,807 when issued on June 21, 2018, the second
tranche of 8,710 shares was valued at $2.01 per share or $17,507
when issued on September 28, 2018. The 2018 Renewal is cancelable
upon 60 days written notice. These shares have not been
registered under the Securities Act. Such shares were issued upon
exemptions from registration pursuant to Section 4(a)(2) of the
Securities Act.
On
March 14, 2018, we entered into a consulting agreement with
Shenzhen Reach Investment Development Co. (“SRID”) to
assist us with identifying strategic partners, suppliers and
manufacturers in China for a term of 12 months. Included with the
services is a two-week trip to China to meet with potential
manufacturers, which took place in April 2018. In consideration for
the services, we agreed to issue to SRID, up to 174,672 shares of
restricted common stock valued at approximately $80,000 over the
course of the 12-month term. As of September 30, 2018, 116,158
shares have been issued. These shares have not been registered
under the Securities Act. Such shares were issued upon exemptions
from registration pursuant to Section 4(a)(2) of the Securities
Act.
ITEM
3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4 - MINE SAFETY DISCLOSURES
Not
applicable.
ITEM
5 - OTHER INFORMATION
None.
19
ITEM
6 - EXHIBITS
The
following exhibits are filed as part of this Report.
|
Exhibit
No.
|
|
Description
|
|
|
Certifications of the Chief Executive Officer under Section 302 of
the Sarbanes-Oxley Act.*
|
|
|
|
Certifications of the Chief Financial Officer under Section 302 of
the Sarbanes-Oxley Act.*
|
|
|
|
Certifications of the Chief Executive Officer under Section 906 of
the Sarbanes-Oxley Act.*
|
|
|
|
Certifications of the Chief Financial Officer under Section 906 of
the Sarbanes-Oxley Act.*
|
|
|
101.INS
|
|
XBRL Instance Document*
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema*
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase*
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase*
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase*
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase*
|
|
*
|
Filed herewith.
|
20
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
Flux Power Holding, Inc.
|
||
|
|
|
|
|
|
Date: November 13, 2018
|
By:
|
|
/s/ Ronald F. Dutt
|
|
|
|
|
Ronald F. Dutt
|
|
|
|
|
Chief Executive Officer and Chief Financial Officer
|
|
|
|
|
(Principal Executive Officer and Principal Financial
Officer)
|
21