Item
1.01 Entry into a Material Definitive
Agreement.
Credit Facility Agreement With Cleveland Capital, L.P.
On
October 26, 2018, Flux Power Holdings, Inc.’s (the
“Company”) wholly-owned subsidiary, Flux Power, Inc.
(“Flux”), 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 Two Million Dollars
($2,000,000).
The
Cleveland LOC has an origination fee in the amount of Twenty
Thousand Dollars ($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.
Credit Facility Agreement With Private Investor
On
October 31, 2018, Flux entered into a credit facility agreement
with a private investor in Louisana, (“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 Five Hundred Thousand
Dollars ($500,000).
The
Investor LOC has an origination fee in the amount of Five Thousand
Dollars ($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.
Early Note Conversion Agreement
On
October 31, 2018, the Company entered into an Early Note Conversion
Agreement (the “Early Note Conversion Agreement”) with
Esenjay Investments, LLC (“Esenjay”), an entity owned
and controlled by Michael Johnson, a director of the Company,
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 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
$160,811, which is equal to the interests that Esenjay would have
earned on the Principal had Esenjay converted the Esenjay Loan on
the maturity date of January 31, 2019.
Amendment to Convertible Promissory Note
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
Five Hundred Thousand Dollars ($500,000) to the Company. This
transaction was initially reported on Form 8-K on February 9, 2017.
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.
The
foregoing description of the terms of the Cleveland LOC, the
Investor LOC, the Early Note Conversion Agreement, and the
Amendment do not purport to be complete and are qualified in their
entirety by reference to the full text of the respective
agreements, copies of which are file hereto as Exhibits 10.1, 10.2,
10.3, and 10.4.