f+
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer | |
|
|
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
|
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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
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.
Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company | |
Emerging growth company |
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
The number of shares outstanding of the registrant’s common stock as of November 9, 2021 was
CAPSTONE GREEN ENERGY CORPORATION
INDEX
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
September 30, |
| March 31, |
| |||
2021 |
| 2021 |
| |||
Assets | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net of allowances of $ |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant, equipment and rental assets, net |
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Non-current portion of inventories |
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Other assets |
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Total assets | $ | | $ | | ||
Liabilities and Stockholders’ Equity | ||||||
Current Liabilities: | ||||||
Accounts payable and accrued expenses | $ | | $ | | ||
Accrued salaries and wages |
| |
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Accrued warranty reserve |
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Deferred revenue |
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Current portion of notes payable and lease obligations |
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Total current liabilities |
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Deferred revenue - non-current | | | ||||
Term note payable, net | | | ||||
Long-term portion of notes payable and lease obligations |
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Total liabilities |
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Commitments and contingencies (Note 14) | ||||||
Stockholders’ Equity: | ||||||
Preferred stock, $ | — | — | ||||
Common stock, $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Treasury stock, at cost; |
| ( |
| ( | ||
Total stockholders’ equity |
| |
| | ||
Total liabilities and stockholders' equity | $ | | $ | |
See accompanying notes to condensed consolidated financial statements
3
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||
September 30, | September 30, |
| |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 |
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Revenue: |
| ||||||||||||
Product and accessories | $ | | $ | | $ | |
| $ | | ||||
Parts and service | | | | | |||||||||
Total revenue | | | | | |||||||||
Cost of goods sold: |
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Product and accessories | | | | | |||||||||
Parts and service | | | | | |||||||||
Total cost of goods sold | | |
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Gross margin |
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Operating expenses: | |||||||||||||
Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
| ( | ( |
| ( |
| ( | ||||||
Other income |
| ( |
| |
| |
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Interest income |
| | |
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| | ||||||
Interest expense |
| ( |
| ( |
| ( |
| ( | |||||
Gain on debt extinguishment | — | — | | — | |||||||||
Loss before provision for income taxes |
| ( |
| ( |
| ( |
| ( | |||||
Provision for income taxes |
| |
| |
| |
| | |||||
Net loss | ( | ( | ( | ( | |||||||||
Less: Deemed dividend on purchase warrant for common shares | — | | — | | |||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Net loss per common share attributable to common stockholders—basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Weighted average shares used to calculate basic and diluted net loss per common share attributable to common stockholders |
| |
| |
| |
| |
See accompanying notes to condensed consolidated financial statements
4
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except per share data)
(Unaudited)
Additional | Total | ||||||||||||||||||
Common Stock | Paid-in | Accumulated | Treasury Stock | Stockholders’ | |||||||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Shares |
| Amount |
| Equity | ||||||
Balance, March 31, 2021 | | $ | | $ | | $ | ( |
| | $ | ( | $ | | ||||||
Purchase of treasury stock | — | — |
| — |
| — |
| |
| ( |
| ( | |||||||
Vested restricted stock awards | | — |
| |
| — |
| — |
| — |
| | |||||||
Stock-based compensation | — | — |
| |
| — |
| — |
| — |
| | |||||||
Issuance of common stock, net of issuance costs | | | | — | — | — | | ||||||||||||
Net loss | — | — |
| — |
| ( |
| — |
| — |
| ( | |||||||
Balance, June 30, 2021 | | | | ( |
| | ( | | |||||||||||
Purchase of treasury stock | — | — |
| — |
| — |
| |
| ( |
| ( | |||||||
Vested restricted stock awards | | — |
| |
| — |
| — |
| — |
| | |||||||
Stock-based compensation | — | — |
| |
| — |
| — |
| — |
| | |||||||
Stock awards to Board of Directors | | — |
| — |
| — |
| — |
| — |
| — | |||||||
Issuance of common stock, net of issuance costs | — | — | ( | — | — | — | ( | ||||||||||||
Net loss | — | — |
| — |
| ( |
| — |
| — |
| ( | |||||||
Balance, September 30, 2021 | | $ | | $ | | $ | ( |
| | $ | ( | $ | |
Additional | Total | ||||||||||||||||||
Common Stock | Paid-in | Accumulated | Treasury Stock | Stockholders’ | |||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Equity | |||||||||||||
Balance, March 31, 2020 |
| | $ | | $ | | $ | ( |
| | $ | ( | $ | | |||||
Purchase of treasury stock | — | — | — | — | | ( | ( | ||||||||||||
Vested restricted stock awards | | — | | — | — | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — | | ||||||||||||
Issuance of common stock, net of issuance costs | | | | — | — | — | | ||||||||||||
Change in warrants valuation | — | — | | — | — | — | | ||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||
Balance, June 30, 2020 | | | | ( | | ( | | ||||||||||||
Purchase of treasury stock | — | — | — | — | | ( | ( | ||||||||||||
Vested restricted stock awards | | — | | — | — | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — | | ||||||||||||
Stock awards to Board of Directors | | — | ( | — | — | — | ( | ||||||||||||
Deemed dividend on purchase warrant for common shares | — | — | | ( | — | — | — | ||||||||||||
Net loss | — | — | — | ( | — | — | ( | ||||||||||||
Balance, September 30, 2020 | | $ | | $ | | $ | ( | | $ | ( | $ | |
See accompanying notes to condensed consolidated financial statements
5
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended | ||||||
September 30, | ||||||
| 2021 |
| 2020 | |||
Cash Flows from Operating Activities: | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation and amortization |
| |
| | ||
Amortization of financing costs and discounts |
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Amortization of right-of-use assets | | | ||||
Gain on debt extinguishment | ( | — | ||||
Reduction in accounts receivable allowances |
| — |
| ( | ||
Inventory provision |
| |
| | ||
Provision for warranty expenses |
| |
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Gain on disposal of equipment |
| — | ( | |||
Stock-based compensation |
| |
| | ||
Changes in operating assets and liabilities: | ||||||
Accounts receivable |
| ( | | |||
Inventories |
| ( |
| | ||
Prepaid expenses, other current assets and other assets |
| |
| | ||
Accounts payable and accrued expenses |
| |
| ( | ||
Accrued salaries and wages and long term liabilities |
| ( |
| ( | ||
Accrued warranty reserve |
| ( |
| ( | ||
Deferred revenue |
| ( |
| ( | ||
Net cash used in operating activities |
| ( |
| ( | ||
Cash Flows from Investing Activities: | ||||||
Expenditures for property, plant, equipment and rental assets |
| ( |
| ( | ||
Net cash used in investing activities |
| ( |
| ( | ||
Cash Flows from Financing Activities: | ||||||
Net proceeds from term note payable | — | | ||||
Repayment of notes payable and lease obligations |
| ( |
| ( | ||
Cash used in employee stock-based transactions |
| ( |
| ( | ||
Net proceeds from issuance of common stock and warrants |
| |
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Net cash provided by financing activities |
| |
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Net increase (decrease) in Cash and Cash Equivalents |
| ( |
| | ||
Cash and Cash Equivalents, Beginning of Year |
| |
| | ||
Cash and Cash Equivalents, End of Year | $ | | $ | | ||
Supplemental Disclosures of Cash Flow Information: | ||||||
Cash paid during the period for: | ||||||
Interest | $ | | $ | | ||
Income taxes | $ | | $ | | ||
Supplemental Disclosures of Non-Cash Information: | ||||||
Acquisition of property and equipment through accounts payable | $ | | $ | | ||
Renewal of insurance contracts financed by notes payable | $ | | $ | | ||
Issuance of common stock for services to be received | $ | | $ | — | ||
Deemed dividend | $ | — | $ | |
See accompanying notes to condensed consolidated financial statements
6
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Organization
Capstone Green Energy Corporation (“Capstone”, or the “Company”) is a provider of customized microgrid solutions and on-site energy technology systems focused on helping customers around the globe meet their environmental, energy savings, and resiliency goals. These solutions include stationary distributed power generation applications and distribution networks, including cogeneration (combined heat and power (“CHP”), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), renewable energy, natural resources, and critical power supply. In April 2021, the Company added additional products to its portfolio and shifted its focus to four key business lines. The Energy Conversion Products business line is driven by the Company’s industry-leading, highly efficient, low-emission, resilient microturbine energy systems, which offer scalable solutions in addition to a broad range of customer-tailored solutions, including hybrid energy systems and larger frame industrial turbines. Through the Energy as a Service business line, the Company offers rental solutions utilizing its microturbine energy systems and battery storage systems, comprehensive factory protection plan service contracts that guarantee life-cycle costs, as well as aftermarket spare parts. The Company’s two emerging business lines are Energy Storage Products and Hydrogen Energy Solutions. The Energy Storage Products business line is driven by the design and installation of microgrid storage systems creating customized solutions using a combination of battery technologies and monitoring software. Through the Company’s Hydrogen Energy Solutions business line, it offers customers a variety of hydrogen products, including the Company’s microturbine energy systems. Because these are new offerings, Energy Storage Products and Hydrogen Energy Solutions revenue has been immaterial to date. The Company was organized in 1988 and has been commercially producing its microturbine generators since 1998.
2. Basis of Presentation and Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”) for interim financial information and the instructions to Form 10-Q and Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The condensed consolidated balance sheet at March 31, 2021 was derived from audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the Fiscal year ended March 31, 2021. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim condensed consolidated financial statements include all adjustments (including normal recurring adjustments) necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. Results of operations for any interim period are not necessarily indicative of results for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the Fiscal Year 2021 filed with the SEC on June 14, 2021. This Quarterly Report on Form 10-Q (this “Form 10-Q”) refers to the Company’s fiscal years ending March 31 as its “Fiscal” years.
Certain reclassifications have been made to the prior year’s financial statements to enhance comparability with the current year’s financial statements. As a result, certain line items have been amended in the Condensed Consolidated Statements of Operations and the related notes to the consolidated financial statements. Comparative figures have been adjusted to conform to the current year’s presentation. The items were reclassified as follows (in thousands):
Previously Reported |
| After Reclassification | ||||||||||
Three Months Ended September 30, 2020 | Six Months Ended September 30, 2020 | Three Months Ended September 30, 2020 |
| Six Months Ended September 30, 2020 | ||||||||
Product, accessories and parts | $ | |
| $ | |
| Product and accessories | $ | |
| $ | |
Service |
| |
| | Parts and service |
| |
| | |||
Total revenue | $ | | $ | | Total revenue | $ | | $ | |
7
Significant Accounting Policies There have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for Fiscal Year 2021 filed with the SEC on June 14, 2021, that have had a material impact on the Company's condensed consolidated financial statements and related notes.
Evaluation of Ability to Maintain Current Level of Operations In connection with the preparation of these condensed consolidated financial statements for the three and six months ended September 30, 2021, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to meet its obligations as they became due over the next twelve months from the date of issuance of the Company’s second quarter of Fiscal 2022 interim condensed consolidated financial statements. Management assessed that there were such conditions and events, including a history of recurring operating losses, negative cash flows from operating activities, the continued impact of the COVID-19 pandemic, volatility of the global oil and gas markets, a strong U.S. dollar in certain markets making its products more expensive in such markets. The Company incurred a net loss of $
Management evaluated these conditions in relation to the Company’s ability to meet its obligations as they become due over the next twelve months from the date of issuance of these condensed consolidated financial statements. The Company’s ability to continue current operations and to execute on management’s plans is dependent on its ability to generate sufficient cash flows from operations. While no assurances can be provided, management believes that the Company will continue to make progress on its path to profitability by continuing to maintain low operating expenses and further developing its geographical and vertical markets. The Company may seek to raise funds by selling additional securities (through at-the-market offerings or otherwise). There is no assurance that the Company will be able to obtain additional funds on commercially favorable terms or at all. If the Company raises additional funds by issuing additional equity, the fully diluted ownership percentages of existing stockholders will be reduced. In addition, any equity that the Company would issue may include rights, preferences or privileges senior to those of the holders of its Common Stock.
Based on the Company’s current operating plan, management anticipates that, given current working capital levels, current financial projections and funds received under debt agreements as further described in Note 10 – Term Note Payable, and funds received under offerings of Common Stock as further described in Note 8 – Offerings of Common Stock and Warrants, the Company will be able to meet its financial obligations as they become due over the next twelve months from the date of issuance of the Company’s second quarter of Fiscal 2022 interim condensed consolidated financial statements.
Company Response to COVID-19
In March 2020, the Company began to monitor the global effects of COVID-19, the worldwide spread of which led the World Health Organization (“WHO”) to characterize it as a pandemic on March 11, 2020. Thereafter, most U.S. states imposed “stay-at-home” orders on their populations to stem the spread of COVID-19. Of specific interest to the Company, stay-at-home orders were imposed in the state of California on March 20, 2020.
On March 23, 2020 the Company enacted a Business Continuity Plan in response to COVID-19. Beginning March 30, 2020, the Company furloughed
8
by the pandemic; however, the Company has been able to maintain sufficient supply flow to continue operations as of the date hereof.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security (the “CARES Act”), which, among other things, outlines the provisions of the Paycheck Protection Program (the “PPP”). The Company determined that it met the criteria to be eligible to obtain a loan under the PPP because, among other reasons, in light of the COVID-19 outbreak and the uncertainty of economic conditions related thereto, the loan was necessary to support the Company’s ongoing operations. Under the PPP, the Company could obtain a U.S. Small Business Administration loan in an amount equal to the average of the Company’s monthly payroll costs (as defined under the PPP) for calendar 2019 multiplied by 2.5 (approximately 10 weeks of payroll costs). Section 1106 of the CARES Act contains provisions for the forgiveness of all or a portion of a PPP loan, subject to the satisfaction of certain requirements. The amount eligible for forgiveness is, subject to certain limitations, the sum of the Company’s payroll costs, rent and utilities paid by the Company during the eight-week period beginning on the funding date of the PPP loan.
On
Basis for Consolidation These condensed consolidated financial statements include the accounts of the Company, Capstone Turbine International, Inc., its wholly owned subsidiary that was formed in June 2004 and Capstone Turbine Financial Services, LLC, its wholly owned subsidiary that was formed in October 2015, after elimination of inter-company transactions.
3. Recently Issued Accounting Pronouncements
Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions to the general principles of Accounting Standards Codification (“ASC”) 740 in order to simplify the complexities of its application. These changes include eliminations to the exceptions for intraperiod tax allocation, recognizing deferred tax liabilities related to outside basis differences, and year-to-date losses in interim periods, among others. The effective date of this guidance for public companies is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company
Not yet adopted
In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this ASU reduce the number of accounting models for convertible debt instruments and convertible preferred stock in order to simplify the accounting for convertible instruments and reduce complexity. In addition, it amends the guidance for scope exception surrounding derivatives for contracts in an entity’s own equity. In each case, the related guidance surrounding EPS has also been amended. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU provide guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable forecasts. With certain exceptions, transition to the new guidance will be through a cumulative effect adjustment to opening accumulated deficit as of the beginning of the first reporting period in which the
9
guidance is adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which defers the adoption of ASU 2016-13 for Smaller Reporting Companies (“SRCs”) as defined by the SEC for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently
Other standards issued but not yet effective, which are not discussed, are not considered material to the Company.
4. Customer Concentrations and Accounts Receivable
E-Finity Distributed Generation, LLC (“E-Finity),
Additionally, E-Finity accounted for
5. Inventories
Inventories are valued at the lower of cost (determined on a first in first out (“FIFO”) basis) or net realizable value and consisted of the following (in thousands):
September 30, | March 31, | ||||||
| 2021 |
| 2021 |
| |||
Raw materials | $ | | $ | | |||
Work in process | — |
| ( | ||||
Finished goods | | — | |||||
Total | | | |||||
Less: inventory reserve | ( | ( | |||||
Less: non-current portion | ( | ( | |||||
Total inventory, net-current portion | $ | | $ | |
The non-current portion of inventories represent the portion of inventories in excess of amounts expected to be sold or used in the next twelve months and primarily comprise of repair parts for older generation products still in operation but not technologically compatible with current configurations. The weighted average age of the non-current portion of inventories on hand as of September 30, 2021 is
Non-current Inventory | ||||
| Balance Expected | |||
Expected Period of Use |
| to be Used |
| |
13 to 24 months | $ | | ||
25 to 36 months |
| | ||
Total | $ | |
10
6. Property, Plant, Equipment and Rental Assets
Property, plant, equipment and rental assets consisted of the following (in thousands):
September 30, | March 31, | ||||||
| 2021 |
| 2021 |
| |||
Machinery, equipment, automobiles and furniture | $ | | $ | |
| ||
Leasehold improvements |
| |
| |
| ||
Molds and tooling | | | |||||
Rental assets |
| |
| |
| ||
| |
| | ||||
Less: accumulated depreciation |
| ( |
| ( | |||
Total property, plant, equipment and rental assets, net | $ | | $ | |
During the six months ended September 30, 2021, the Company deployed an additional
The Company regularly assesses the useful lives of property and equipment and retires assets no longer in service. Depreciation expense for property, plant, equipment and rental assets was $
7. Stock-Based Compensation
The following table summarizes, by condensed consolidated statements of operations line item, stock-based compensation expense (in thousands):
Three Months Ended | Six Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |||||
Cost of goods sold | $ | |
| $ | | $ | |
| $ | | |||
Research and development |
| |
| |
| |
| | |||||
Selling, general and administrative |
| |
| |
| |
| | |||||
Stock-based compensation expense | $ | | $ | | $ | | $ | |
Stock Plans
2000 Equity Incentive Plan and 2017 Equity Incentive Plan
In June 2017, the Company’s Board adopted the Capstone Green Energy Corporation 2017 Equity Incentive Plan (the “2017 Plan”), which was approved by the stockholders at the Company’s 2017 annual meeting of stockholders on August 31, 2017 (the “2017 Annual Meeting”). The 2017 Plan provides for awards of up to
As of September 30, 2021, there were
11
Restricted Stock Units and Performance Restricted Stock Units
The Company issued restricted stock units under the Company’s 2000 Equity Incentive Plan, as well as issued (and may in the future issue) restricted stock units under the 2017 Plan to employees, non-employee directors and consultants. The restricted stock units are valued based on the closing price of the Company’s Common Stock on the date of issuance, and compensation cost is recorded on a straight-line basis over the vesting period. The restricted stock units issued to employees vest over a period of
Weighted | ||||||
Average Grant | ||||||
Date Fair | ||||||
Restricted Stock Units and Performance Restricted Stock Units | Shares | Value |
| |||
Non-vested restricted stock units outstanding at March 31, 2021 |
| |
| $ | | |
Granted |
| | | |||
Vested and issued |
| ( | | |||
Forfeited |
| ( | | |||
Non-vested restricted stock units outstanding at September 30, 2021 |
| | | |||
Restricted stock units expected to vest beyond September 30, 2021 |
| | $ | |
The following table provides additional information on restricted stock units and performance restricted stock units:
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Restricted stock compensation expense (in thousands) | $ | |
| $ | |
| $ | |
| $ | | |
Aggregate fair value of restricted stock units vested and issued (in thousands) | $ | |
| $ | |
| $ | |
| $ | | |
Weighted average grant date fair value of restricted stock units granted during the period | $ | |
| $ | |
| $ | |
| $ | |
As of September 30, 2021, there was approximately $
The Company’s PRSU activity is included in the above restricted stock units tables. The PRSU program has a
During the six months ended September 30, 2021, the Company granted
The weighted average per share grant date fair value of PRSUs granted during the six months ended September 30, 2021 was $
12
Company’s assessment of the probable level of achievement of the performance goals change. The Company will continue to assess the likelihood of the PRSU threshold being met until the end of the applicable performance period.
Stockholder Rights Plan
On May 6, 2019, the Board declared a dividend of one right (a “New Right”) for each of the Company’s issued and outstanding shares of Common Stock. The dividend was paid to the stockholders of record at the close of business on May 16, 2019 (the “Record Date”). Each New Right entitles the registered holder, subject to the terms of the NOL Rights Agreement (as defined below), to purchase from the Company one
The NOL Rights Agreement replaced the Company’s Rights Agreement, dated May 6, 2016, by and between the Company and Broadridge Financial Solutions, Inc., as successor-in-interest to Computershare Inc., as rights agent (the “Original Rights Agreement”). The Original Rights Agreement, and the rights thereunder to purchase fractional shares of Preferred Stock, expired at 5:00 p.m., New York City time, on May 6, 2019 and the NOL Rights Agreement was entered into immediately thereafter.
The purpose of the NOL Rights Agreement is to diminish the risk that the Company’s ability to use its net operating losses and certain other tax assets (collectively, “Tax Benefits”) to reduce potential future federal income tax obligations would become subject to limitations by reason of the Company’s experiencing an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Tax Code”). A company generally experiences such an ownership change if the percentage of its stock owned by its “5-percent shareholders,” as defined in Section 382 of the Tax Code, increases by more than 50 percentage points over a rolling three-year period. The NOL Rights Agreement is designed to reduce the likelihood that the Company will experience an ownership change under Section 382 of the Tax Code by (i) discouraging any person or group from becoming a
The New Rights will not be exercisable until the earlier to occur of (i) the close of business on the tenth business day after a public announcement or filing that a person has, or group of affiliated or associated persons have, become an “Acquiring Person,” which is defined as a person or group of affiliated or associated persons who, at any time after the date of the NOL Rights Agreement, have acquired, or obtained the right to acquire, beneficial ownership of
With respect to certificates representing shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the New Rights will be evidenced by such certificates for shares of Common Stock registered in the names of the holders thereof, and not by separate Rights Certificates, as described further below. With respect to book entry shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the New Rights will be evidenced by the balances indicated in the book entry account system of the transfer agent for the Common Stock. Until the earlier of the Distribution Date and the Expiration Date, as described below, the transfer of any shares of Common Stock outstanding on the Record Date will also constitute the transfer of the New Rights associated with such shares of Common Stock. As soon as practicable after the Distribution Date, separate certificates evidencing the New Rights (“Right Certificates”) will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date, and such Right Certificates alone will evidence the New Rights.
The New Rights, which are not exercisable until the Distribution Date, will expire prior to the earliest of (i) May 6, 2022 or such later day as may be established by the Board prior to the expiration of the New Rights, provided that the extension is submitted to the Company’s stockholders for ratification at the next annual meeting of stockholders of the Company succeeding such extension; (ii) the time at which the New Rights are redeemed pursuant to the NOL Rights
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Agreement; (iii) the time at which the New Rights are exchanged pursuant to the NOL Rights Agreement; (iv) the time at which the New Rights are terminated upon the occurrence of certain transactions; (v) the close of business on the first day after the Company’s 2019 annual meeting of stockholders, if approval by the stockholders of the Company of the NOL Rights Agreement has not been obtained on or prior to the close of business on the first day after the Company’s 2019 annual meeting of stockholders; (vi) the close of business on the effective date of the repeal of Section 382 of the Tax Code, if the Board determines that the NOL Rights Agreement is no longer necessary or desirable for the preservation of Tax Benefits; and (vii) the close of business on the first day of a taxable year of the Company to which the Board determines that no Tax Benefits are available to be carried forward, (the earliest of (i), (ii), (iii), (iv), (v), (vi) and (vii) is referred to as the “Expiration Date”).
Each share of Preferred Stock will be entitled, when, as and if declared, to a preferential per share quarterly dividend payment equal to the greater of (i) $
8. Offerings of Common Stock and Warrants
Common Stock Offering
On June 17, 2021, the Company entered into an amended and restated underwriting agreement (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC (the “Underwriter”) whereby the Company agreed to sell to the Underwriter, and the Underwriter agreed to purchase, in a firm commitment underwritten public offering
The Offering of the Shares was registered pursuant to a shelf registration statement (No. 333-254290) on Form S-3 filed by the Company with the Securities and Exchange Commission on March 22, 2021, and declared effective on April 14, 2021 (the “Registration Statement”), and made pursuant to a prospectus supplement, dated June 17, 2021, and accompanying prospectus that form a part of the Registration Statement relating to the Offering.
The Offering closed on June 22, 2021, and the Company received net proceeds of $
Warrants
Series A Warrants
As of September 30, 2021, there were
Goldman Warrant
On February 4, 2019, the Company sold to Goldman Sachs & Co. LLC (the “Holder”), a Purchase
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consolidated balance sheets. As of September 30, 2021, the Holder may purchase shares of the Company’s Common Stock in an aggregate amount of up to
On December 9, 2019, the Company entered into an Amendment No. 1 to the Purchase Warrant for Common Shares (the “Amendment No. 1”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs & Co. LLC) (the “Warrant Holder”) that amends the Warrant. The Amendment No. 1 amended the Warrant to increase the number of Warrant Shares issuable under the Warrant (on a post-reverse split basis) and to decrease the exercise price from $
On June 16, 2020, the Company entered into an Amendment No. 2 to the Purchase Warrant for Common Shares (“Amendment No. 2”) with the Warrant Holder to increase the number of Warrant Shares (as defined therein) issuable under the Warrant and to decrease the exercise price from $
Amendment No. 2 also amends the Warrant such that the Per Share Anti-Dilution Price (as defined therein) is equal to the Per Share Warrant Exercise Price as provided in the Amendment No. 2 to the Warrant. As a result of the decrease in exercise price, the Company recorded the change in valuation of $
Goldman “2020 Warrant”
On October 1, 2020, the Company entered into an Amendment No. 3 to the Purchase Warrant for Common Shares (the “Amendment No. 3”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs & Co. LLC) (the “Warrant Holder”) that amends that certain Purchase Warrant for Common Shares originally issued by the Company to Goldman Sachs & Co. LLC, dated February 4, 2019, as amended (the “Original Warrant”). Amendment No. 3 amends the Original Warrant to amend Section 2.1, Section 2.2(c) and Section 18.1 of the Warrant to, among other things, make certain changes necessitated by the issuance of a second Warrant (the “2020 Warrant”) to the Warrant Holder pursuant to the Company’s entry into the Amended & Restated (“A&R”) Note Purchase Agreement (See Note 10 – Term Note Payable).
On October 1, 2020, and pursuant to the Company’s entry into the A&R Note Purchase Agreement, the Company sold to the Warrant Holder the 2020
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September 2019 Pre-Funded and Series D Warrants
On September 4, 2019, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors pursuant to which the Company agreed to issue and sell in a registered direct offering (the “Registered Direct Offering”) an aggregate of
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$
In a concurrent private placement, the Company issued to the purchasers warrants to purchase
Stock to Vendors
From time to time, the Company may enter into agreements with vendors for sponsorship, marketing or investor relation services whereby it may agree to compensate the vendor in cash and unregistered shares of Common Stock of the Company. The value of the unregistered shares of Common Stock is recorded as prepaid marketing cost and included in prepaid expenses and other current assets and stockholder’s equity in the Condensed Consolidated Balance Sheets and is amortized in proportion to the terms of their respective agreements.
On February 10, 2020, the Company issued
On February 17, 2021 and April 1, 2021, the Company issued
9. Fair Value Measurements
The FASB has established a framework for measuring fair value using generally accepted accounting principles. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows:
Level 1. Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2. Inputs to the valuation methodology include:
● | Quoted prices for similar assets or liabilities in active markets |
● | Quoted prices for identical or similar assets or liabilities in inactive markets |
● | Inputs other than quoted prices that are observable for the asset or liability |
● | Inputs that are derived principally from or corroborated by observable market data by correlation or other means |
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
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The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used must maximize the use of observable inputs and minimize the use of unobservable inputs.
Basis for Valuation
The carrying values reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate their fair values because of the immediate or short-term maturities of these financial instruments. The term note payable has been recorded net of a discount based on the fair value of the associated warrant and capitalized debt issuance costs and as of September 30, 2021 includes the Three-Year Term Note as discussed in Note 10 – Term Note Payable. The carrying values and estimated fair values of these obligations are as follows (in thousands):