United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
Commission File Number 001-34044
REAL GOODS SOLAR, INC.
(Exact name of registrant as specified in its charter)
COLORADO | 26-1851813 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
833 W. SOUTH BOULDER ROAD
LOUISVILLE, COLORADO 80027-2452
(Address of principal executive offices)
(303) 222-8400
(Registrants 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 and 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. YES x 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 x NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:
Class |
Outstanding at August 8, 2013 | |||
Class A Common Stock ($.0001 par value) |
30,228,266 |
REAL GOODS SOLAR, INC.
FORM 10-Q
PART I. FINANCIAL INFORMATION | 3 | |||||
Item 1. | 3 | |||||
4 | ||||||
5 | ||||||
6 | ||||||
7 | ||||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
13 | ||||
Item 3. | 18 | |||||
Item 4. | 18 | |||||
PART II. OTHER INFORMATION | 19 | |||||
Item 1. | 19 | |||||
Item 1A. | 19 | |||||
Item 2. | 19 | |||||
Item 6. | 19 | |||||
20 |
2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report may contain forward-looking statements that involve risks and uncertainties. Forward-looking statements provide our current expectations and forecasts about future events, and include statements regarding our future results of operations and financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations. The words anticipate, believe, plan, estimate, expect, strive, future, intend, may and similar expressions as they relate to us are intended to identify such forward-looking statements. Readers are urged not to place undue reliance on these forward looking statements, which speak only as of the date made. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors set forth in the section entitled RISK FACTORS and elsewhere in this report. Risks and uncertainties that could cause actual results to differ include, without limitation, the level of government subsidies and economic incentives for solar energy, general economic conditions, adoption of solar energy technologies, pricing, including pricing of conventional energy sources, construction risks, changing regulatory environment, changing energy technologies, our geographic concentration, our business plan, acquisitions, integration of acquired businesses, insufficient cash flow, indebtedness, loss of key personnel, brand value, litigation, merchandise and solar panel supply problems, construction costs, competition, third party financing costs, customer satisfaction, product liabilities, warranty and service claims, credit risk, non-compliance with NASDAQ continued listing standards, volatile market price of our Class A common stock, penny stock rules, security analyst coverage of our Class A common stock, dilution for shareholders upon the exercise of warrants, limited public trading market, the significant ownership and voting power of our Class A common stock held by Gaiam, Inc. (Gaiam) and Riverside Renewable Energy Investment LLC (Riverside), our historical association with Gaiam, our inability to resolve disputes with Gaiam, conflicts of interest between some of our directors and Gaiam or Riverside, a future sale of securities by Gaiam or Riverside, our inability to successfully consummate the proposed merger with mercury Energy, Inc. (Mercury) and other risks and uncertainties included in our filings with the SEC. We caution you that no forward-looking statement is a guarantee of future performance, and you should not place undue reliance on these forward-looking statements which reflect our view only as of the date of this report. We undertake no obligation to update any forward-looking information.
PART I FINANCIAL INFORMATION
Item 1. | Financial Statements (Unaudited) |
Unaudited Interim Condensed Consolidated Financial Statements
We have prepared our unaudited interim condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to these rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, the unaudited interim condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly, in all material respects, our consolidated financial position as of June 30, 2013, the interim results of operations for the three and six months ended June 30, 2013 and 2012, and cash flows for the six months ended June 30, 2013 and 2012. These interim statements have not been audited. The balance sheet as of December 31, 2012 was derived from our audited consolidated financial statements included in our annual report on Form 10-K. The interim condensed consolidated financial statements contained herein should be read in conjunction with our audited financial statements, including the notes thereto, for the year ended December 31, 2012.
3
REAL GOODS SOLAR, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data) |
June 30, 2013 |
December 31, 2012 |
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(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: |
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Cash |
$ | 6,859 | $ | 10,390 | ||||
Accounts receivable, net |
10,194 | 13,902 | ||||||
Costs in excess of billings on uncompleted contracts |
2,749 | 5,288 | ||||||
Inventory, net |
4,697 | 5,711 | ||||||
Other current assets |
1,710 | 3,026 | ||||||
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Total current assets |
26,209 | 38,317 | ||||||
Property and equipment, net |
3,596 | 3,991 | ||||||
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Total assets |
$ | 29,805 | $ | 42,308 | ||||
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LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
Current liabilities: |
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Line of credit |
$ | | $ | 6,498 | ||||
Accounts payable |
10,183 | 15,951 | ||||||
Accrued liabilities |
3,315 | 4,943 | ||||||
Billings in excess of costs on uncompleted contracts |
2,474 | 2,975 | ||||||
Related party debt |
3,600 | 6,850 | ||||||
Other current liabilities |
776 | 723 | ||||||
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Total current liabilities |
20,348 | 37,940 | ||||||
Related party debt |
3,150 | | ||||||
Common stock warrant liability |
3,702 | | ||||||
Other liabilities |
696 | 443 | ||||||
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Total liabilities |
27,896 | 38,383 | ||||||
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Commitments and contingencies |
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Shareholders equity: |
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Class A common stock, $.0001 par value, 150,000,000 shares authorized, 30,040,212 and 26,693,696 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively |
3 | 3 | ||||||
Additional paid-in capital |
86,870 | 82,185 | ||||||
Accumulated deficit |
(84,964 | ) | (78,263 | ) | ||||
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Total shareholders equity |
1,909 | 3,925 | ||||||
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Total liabilities and shareholders equity |
$ | 29,805 | $ | 42,308 | ||||
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See accompanying notes.
4
REAL GOODS SOLAR, INC.
Condensed Consolidated Statements of Operations
For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
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(in thousands, except per share data) |
2013 | 2012 | 2013 | 2012 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net revenue |
$ | 20,666 | $ | 21,447 | $ | 37,458 | $ | 39,703 | ||||||||
Cost of goods sold |
15,898 | 16,128 | 28,099 | 27,957 | ||||||||||||
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Gross profit |
4,768 | 5,319 | 9,359 | 11,746 | ||||||||||||
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Expenses: |
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Selling and operating |
6,088 | 7,600 | 12,317 | 15,515 | ||||||||||||
General and administrative |
1,851 | 1,679 | 3,579 | 3,194 | ||||||||||||
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Total expenses |
7,939 | 9,279 | 15,896 | 18,709 | ||||||||||||
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Loss from operations |
(3,171 | ) | (3,960 | ) | (6,537 | ) | (6,963 | ) | ||||||||
Interest and other expense |
263 | (110 | ) | (164 | ) | (159 | ) | |||||||||
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Loss before income taxes |
(2,908 | ) | (4,070 | ) | (6,701 | ) | (7,122 | ) | ||||||||
Income tax benefit |
| (1,552 | ) | | (2,748 | ) | ||||||||||
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Net loss |
$ | (2,908 | ) | $ | (2,518 | ) | $ | (6,701 | ) | $ | (4,374 | ) | ||||
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Net loss per share: |
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Basic |
$ | (0.11 | ) | $ | (0.09 | ) | $ | (0.25 | ) | $ | (0.16 | ) | ||||
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Diluted |
$ | (0.11 | ) | $ | (0.09 | ) | $ | (0.25 | ) | $ | (0.16 | ) | ||||
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Weighted-average shares outstanding: |
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Basic |
27,804 | 26,669 | 27,253 | 26,669 | ||||||||||||
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Diluted |
27,804 | 26,669 | 27,253 | 26,669 | ||||||||||||
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See accompanying notes.
5
REAL GOODS SOLAR, INC.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, |
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(in thousands except share data) |
2013 | 2012 | ||||||
(unaudited) | ||||||||
Operating activities |
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Net loss |
$ | (6,701 | ) | $ | (4,374 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
411 | 580 | ||||||
Amortization |
| 195 | ||||||
Share-based compensation |
208 | 293 | ||||||
Deferred income tax benefit |
| (2,796 | ) | |||||
Deferred interest on related party debt |
368 | | ||||||
Change in fair value of common stock warrant liability |
(690 | ) | | |||||
Changes in operating assets and liabilities, net of effects from acquisitions: |
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Accounts receivable, net |
3,707 | 6,990 | ||||||
Costs in excess of billings on uncompleted contracts |
2,539 | 2,803 | ||||||
Inventory, net |
1,014 | 4,090 | ||||||
Other current assets |
1,309 | (341 | ) | |||||
Accounts payable |
(5,768 | ) | (20,031 | ) | ||||
Accrued liabilities |
(1,350 | ) | (635 | ) | ||||
Billings in excess of costs on uncompleted contracts |
(501 | ) | 390 | |||||
Other current liabilities |
53 | (1,726 | ) | |||||
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Net cash used in operating activities |
(5,401 | ) | (14,562 | ) | ||||
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Investing activities |
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Purchase of property and equipment |
(16 | ) | (288 | ) | ||||
Change in restricted cash |
| 172 | ||||||
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Net cash used in investing activities |
(16 | ) | (116 | ) | ||||
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Financing activities |
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Proceeds from issuance of common stock and warrants, net |
8,414 | | ||||||
Principal borrowings (payments) on revolving line of credit, net |
(6,498 | ) | 6,500 | |||||
Principal payments on debt and capital lease obligations, net |
(108 | ) | (190 | ) | ||||
Exercise of stock options |
78 | | ||||||
Principal (repayments) borrowings from related party |
| 3,150 | ||||||
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Net cash provided by financing activities |
1,886 | 9,460 | ||||||
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Net change in cash |
(3,531 | ) | (5,218 | ) | ||||
Cash at beginning of period |
10,390 | 11,813 | ||||||
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Cash at end of period |
$ | 6,859 | $ | 6,595 | ||||
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Supplemental cash flow information |
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Income taxes paid |
$ | 8 | $ | 47 | ||||
Interest paid |
$ | 278 | $ | 134 | ||||
Non-cash items |
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Common stock warrant liability recorded in conjunction with equity funding |
$ | 4,392 | $ | | ||||
Issuance of warrants to purchase 212,555 shares in conjunction with bank debt extension |
$ | 278 | $ | | ||||
Class A common stock issued in conjunction with debt conversion, 62,111 shares |
$ | 100 | $ | |
See accompanying notes.
6
Notes to Condensed Consolidated Financial Statements
1. Organization, Nature of Operations, and Principles of Consolidation
Real Goods Solar, Inc. (the Company) is a leading residential and commercial solar energy integrator. The Company incorporated in Colorado on January 29, 2008. The Companys initial public offering of common stock occurred on May 7, 2008.
The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, including its accounts and those of its subsidiaries. Intercompany transactions and balances have been eliminated.
The unaudited condensed consolidated financial position, results of operations and cash flows for the interim periods disclosed in this report are not necessarily indicative of future financial results.
Amounts are reported in thousands, except share, per share and monthly amounts, or as otherwise noted. Certain prior period amounts have been reclassified to conform to the current period presentation.
Liquidity and Financial Resources Update
The Company has experienced recurring losses in recent years, including $47,206 for the fiscal year ended December 31, 2012 and a loss of $6,701 for the six months ended June 30, 2013. The Company believes the seasonality of its operations, investments in its selling and marketing efforts and reductions in operating expenses will significantly reduce future losses. The Company increased its financial resources during the six months ended June 30, 2013. On June 3, 2013, the Company closed a private placement with unaffiliated investors resulting in the Company receiving net proceeds of $8,414 (See Note 7. Shareholders Equity). At June 30, 2013 the Company has cash of $6,859 and unused borrowing capacity of $5,247 with Silicon Valley Bank. As of June 30, 2013, the Company had no outstanding borrowings under its revolving credit facility. The Company does not believe it will borrow against the facility prior to September 30, 2013.
The Companys revolving line of credit with Silicon Valley Bank (See Note 4. Revolving Line of Credit) matures on September 30, 2013. The Company is presently discussing an extension of the revolving line of credit with Silicon Valley Bank.
The Company believes it has sufficient resources to operate through June 30, 2014 and that a replacement revolving line of credit will be in place prior to maturity of the Silicon Valley Bank line of credit on September 30, 2013. However, there can be no assurance that the Company will be able to renew the revolving line of credit, continue to maintain sufficient receivables and maintain borrowing availability under the revolving line of credit, continue to reduce its losses, have sufficient resources to continue to invest in its selling and marketing efforts or to otherwise expand its business, or be able to repay related party debt with Gaiam of $2,600 maturing in April 2014.
2. Significant Accounting Policies
The Company made no changes to its significant accounting policies during the three and six months ended June 30, 2013.
Use of Estimates and Reclassifications
The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions including, but not limited to, the collectibility of accounts receivable, the valuation of inventories, the estimated total costs for long-term contracts used as a basis of determining percentage of completion for such contracts, the useful lives of equipment, the determination of accrued liabilities, the valuation of stock-based compensation, and the determination of valuation allowances associated with deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates.
Warrant Accounting
The Company accounts for common stock warrants and put options in accordance with applicable accounting guidance provided in ASC 480, Liabilities Distinguishing Liabilities from Equity, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. The common stock warrants are accounted for as a liability due to a provision for the warrant holder to request redemption upon a change of control. We classify these derivative liabilities on the condensed consolidated balance sheets as a long term liability, which is revalued at each balance sheet date subsequent to the initial issuance. We use a modified binomial pricing model to value these derivative liabilities. The modified binomial pricing model, which is based, in part, upon unobservable inputs for which there is little or no market data, requires the Company to develop its own assumptions. The Company used the following assumptions for its common stock warrants. The risk-free interest rate for June 3, 2013 (issuance date) and June 30, 2013 were 1.03% and 1.03%, respectively. The volatility of the market price of the Companys common stock for June 3, 2013 (issuance date) and June 30, 2013 were 102.93% and 102.93%, respectively. The expected average term of the warrant used for both periods was 5 years. There was no expected dividend yield for the warrants granted. In building the modified binomial model, the Company assumed a 15% probability of a change in control and used 20 nodes (See Note 3. Fair Value Measurements). As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different. Changes in the fair value of the warrants are reflected in the condensed consolidated statement of operations as change in fair value of warrant liability, with an offsetting non-cash entry recorded as interest expense or benefit.
7
3. Fair Value Measurements
The Company complies with the provisions of FASB ASC No. 820, Fair Value Measurements and Disclosures (ASC 820), in measuring fair value and in disclosing fair value measurements. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. FASB ASC No. 820-10-35, Fair Value Measurements and Disclosures- Subsequent Measurement (ASC 820-10-35), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820-10-35-3 also requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model.
ASC 820-10-35 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1 Inputs Level 1 inputs are unadjusted quoted prices in active markets for assets or liabilities identical to those to be reported at fair value. An active market is a market in which transactions occur for the item to be fair valued with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 Inputs Level 2 inputs are inputs other than quoted prices included within Level 1. Level 2 inputs are observable either directly or indirectly. These inputs include: (a) Quoted prices for similar assets or liabilities in active markets; (b) Quoted prices for identical or similar assets or liabilities in markets that are not active, such as when there are few transactions for the asset or liability, the prices are not current, price quotations vary substantially over time or in which little information is released publicly; (c) Inputs other than quoted prices that are observable for the asset or liability; and (d) Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 Inputs Level 3 inputs are unobservable inputs for an asset or liability. These inputs should be used to determine fair value only when observable inputs are not available. Unobservable inputs should be developed based on the best information available in the circumstances, which might include internally generated data and assumptions being used to price the asset or liability.
When determining the fair value measurements for assets or liabilities required or permitted to be recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.
The following tables summarize the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the condensed consolidated balance sheets:
Basis of Fair Value Measurements
Balance at June 30, 2013 (in thousands, except per share data) |
Total | Quoted Prices in Active Markets for Identical Items (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
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Common stock warrant liability |
$ | 3,702 | $ | | $ | | $ | 3,702 | ||||||||
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8
The following tables show reconciliations of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (i.e. Level 3) for the six months ended June 30, 2013:
Common Stock Warrant Liability |
Fair Value Measurements Using Significant Unobservable Inputs |
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Beginning of period |
$ | | ||
Issuance of common stock warrants |
4,392 | |||
Change in the fair value of common stock warrant liability |
(690 | ) | ||
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Fair value of common stock warrant liability at June 30, 2013 |
3,702 | |||
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The following summarizes the valuation technique for assets and liabilities measured and recorded at fair value:
Common stock warrant liability: For our level 3 securities, which represent common stock warrants, fair value is based on a modified binomial pricing model which is based, in part, upon unobservable inputs for which there is little or no market data, requiring the Company to develop its own assumptions (See Note 2. Significant Accounting Policies). The Company used a market approach to valuing the derivative liabilities.
4. Revolving Line of Credit
Under a loan agreement, as amended, with Silicon Valley Bank, the Company has a revolving line of credit that provides for advances for the lesser of $6,500 or a borrowing base availability of 75% of eligible accounts receivable (SVB Loan). At June 30, 2013, our borrowing base availability was $5,247. All borrowings are collateralized by a security interest in substantially all of the Companys assets other than its interests in Alteris Project Financing Company LLC, and bear interest at the greater of the banks prime rate or 4.00% plus 4.75%. The interest rate accruing on borrowings during a Streamline Period (as defined in the SVB Loan) is the greater of the banks prime rate or 4.00%, plus 2.00%. The original maturity date for the SVB Loan was August 31, 2012; following several amendments to the agreement, the maturity date of the SVB Loan was extended to September 30, 2013. The line of credit has a facility fee of 0.5% per year of the average daily unused portion of the available line of credit during the applicable calendar quarter. The Company may reserve up to $500 for stand-by letters of credit under the line of credit. The SVB Loan establishing the line of credit contains various covenants, including a covenant requiring compliance with a liquidity ratio. The SVB Loan initially required the Company to pay a final payment fee of $60 upon termination or maturity of the revolving line of credit. In accordance with the terms of the SVB Loan, SVB reduced the final payment fee to $40 based on the equity funding in excess of $3,000 completed on June 3, 2013. As of June 30, 2013, the Company had no outstanding borrowings under this facility.
Pursuant to the second and third loan modification agreements for the SVB Loan, on March 26, 2013 and March 27, 2013, the Company issued warrants to SVB to purchase 106,557 and 105,978 shares of Class A common stock at per share exercise prices of $1.83 and $1.84, respectively (collectively, the SVB Warrants). Each warrant expires 7 years from the date of issuance. The company determined the warrants had a combined estimated fair value of $278 on the dates of their issuances, which the Company recognized as discounts to the SVB Loan, with the offsets recorded to additional paid-in capital. The Company determined the fair values of the warrants using the Black-Scholes valuation model, which is affected by historical stock price volatility as well as the Companys assumptions regarding expected life (level three of the fair value hierarchy). The SVB Loan discounts are amortized to interest expense over the remaining term of the SVB Loan using the interest method. On June 18, 2013, SVB exercised the warrants in a cashless transaction, resulting in the net issuance of 78,973 shares of Class A common stock to SVB. At June 30, 2013, the SVB Loan discounts had a combined unamortized balance of $67.
On May 10, 2013, the Company entered into a consent agreement with SVB to extend until June 30, 2013 the requirement that it obtain net proceeds of not less than $3,400 from borrowings under a new subordinated debt agreement. In addition, until receipt of such proceeds, the Company agreed to deposit with Silicon Valley Bank $500 of unrestricted cash, which it was required to maintain under the terms of the SVB Loan, in a restricted account at the bank. On June 3, 2013, the Company closed on the private placement of Class A common shares and warrants described in Note 6, realizing net proceeds on $8,414. SVB determined that the private placement meets the terms of the consent agreement. Consequently SVB released the restricted cash.
5. Related Party Debt
The Companys outstanding related party debt at June 30, 2013 consisted of $2,600 from Gaiam and $4,150 from Riverside.
The Gaiam loans mature as follows: $1,000 on April 26, 2014 and $1,600 on April 30, 2014. These loans bear interest at an annual rate of 10% and are subordinated to the Companys SVB Loan. On April 23, 2013, the Company entered into a conversion agreement with Gaiam pursuant to which the principal amount of Gaiams $1,700 promissory note dated March 27, 2013 was reduced by $100 in exchange for 62,111 shares of Class A common stock. The conversion ratio was determined based on the closing market price of the Companys Class A common stock on the date of the agreement.
On May 21, 2013, the Company and Riverside extended the maturity dates of two loans in the aggregate principal amount of $3,150 made by Riverside to the Company. The maturity date of a $3,000 loan was extended from May 4, 2014 to September 3, 2014 and the maturity date of a $150 loan was extended from June 20, 2014 to October 29, 2014. These loans bear interest at an annual rate of 10% and are subordinated to the Companys SVB Loan.
9
Accrued interest on the Companys related party debt was $479 at June 30, 2013; $111 is reported in accrued liabilities and $368 is reported in other liabilities on our condensed consolidated balance sheet.
Gaiam and Riverside hold approximately 13.4% and 25.9% of the Companys outstanding Class A common stock, respectively. Each is also a creditor of the Company. Pursuant to the terms of a Shareholders Agreement, Gaiam and Riverside each has the right to designate a certain number of individuals for appointment or nomination to our Board of Directors, tied to their respective ownership of our Class A common stock.
On May 28, 2013, Gaiam sold 6,017,500 shares of the Companys Class A common shares. On June 11, 2013, Gaiams Chairperson resigned as the Companys Chairperson. There are no amounts payable to Gaiam, other than debt and accrued interest, as of June 30, 2013.
6. Debt and Capital Lease Obligations
The Companys debt, other than related party debt, consisted of the following at June 30, 2013:
(in thousands, except installment amounts and interest rates) |
June 30, 2013 |
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Notes payable to finance companies for the purchase of vehicles and equipment in 36 to 60 monthly installments totaling $10,020, including interest ranging from 2.9% to 10.35%. The notes are secured by vehicles and equipment |
$ | 117 | ||
Less current portion of debt |
(89 | ) | ||
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|
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Debt, net of current portion |
$ | 28 | ||
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Maturities of debt are as follows:
(in thousands) |
Years Ending December 31, |
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2013 |
$ | 49 | ||
2014 |
66 | |||
2015 |
2 | |||
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$ | 117 | |||
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The Company has vehicles financed under capital leases. The cost of the capitalized leased assets included in property and equipment is $2,067 and $2,000 at June 30, 2013 and December 31, 2012, respectively. Accumulated amortization of capitalized leased assets was $1,452 and $1,300 at June 30, 2013 and December 31, 2012, respectively. Amortization expense for capitalized leased assets was $51 and $85 for each of the three months ended June 30, 2013 and 2012, and $133 and $123 for the six months ended June 30, 2013 and 2012, respectively.
Our future minimum lease payments and capital lease obligations are as follows:
(in thousands) |
At June 30, 2013 |
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Year ending December 31, |
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2013 |
$ | 153 | ||
2014 |
214 | |||
2015 |
173 | |||
2016 |
33 | |||
2017 |
12 | |||
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|
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Total future minimum lease payments |
585 | |||
Less amounts representing interest |
(40 | ) | ||
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|
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Total capital lease obligations |
545 | |||
Less current portion of capital lease obligations |
(244 | ) | ||
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|
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Capital lease obligations, net of current portion |
$ | 301 | ||
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10
The current portions of debt and capital lease obligations are recorded in other current liabilities on the condensed consolidated balance sheet. Debt and capital lease obligations, each net of current portion, are recorded in other liabilities on the condensed consolidated balance sheet.
7. Shareholders Equity
During the three- and six-month periods ended June 30, 2013, the Company issued 2,756 and 6,923 shares of Class A common stock, respectively, in lieu of cash compensation, to its independent directors for services rendered during 2013. Additionally, the Company issued to employees 60,000 and 618,000 options, during the three- and six-month periods ending June 30, 2013, respectively, to purchase shares of Class A common stock upon vesting and exercise.
During March 2013, the Company issued warrants to purchase shares of our Class A common stock pursuant to our SVB Loan agreements (see Note 3. Revolving Line of Credit). On June 18, 2013, SVB completed a cashless exercise of the SVB Warrants resulting in the Company issuing 78,973 shares of Class A common stock to SVB. The cashless exercise is based on the closing price of the Companys stock on the day before notification of exercise is received. On June 17, 2013, the Companys stock closed at $2.92 per share.
On June 3, 2013, the Company closed the private placement (the Private Placement) contemplated by the Securities Purchase Agreement (the SPA) entered into on May 24, 2013 with unaffiliated investors (each an Investor and collectively, the Investors). Upon closing, the Company issued 3,366,974 shares of Class A common stock (the Common Stock) at a purchase price of $2.75 per share, or $9,259 in the aggregate, and Common Stock Purchase Warrants (the Private Placement Warrants) to purchase up to an aggregate of 1,683,488 shares of Common Stock with an exercise price of $2.75 per share, which are immediately exercisable and have a term of 5 years. The Company received net proceeds of $8,414 after offering expenses. Proceeds from the transaction will be used for general corporate and working capital purposes.
The Company reviewed the accounting treatment for the warrants issued under the Private Placement and determined the warrants met the applicable requirement under ASC 480 for classification as a liability (See Note 3. Fair Value Measurements). Under the terms of a Registration Rights Agreement between the Company and the Investors in conjunction with the Private Placement, the Company filed a Form S-3 Registration Statement with the SEC on June 20, 2013, for the purpose of registering under the Securities Act the shares of common stock issued pursuant to the Private Placement and the shares of common stock to be issued upon exercise of the Private Placement Warrants issued pursuant to the Private Placement. The SEC declared the registration statement effective on July 3, 2013.
8. Share-Based Payments
During the three and six-month periods ended June 30, 2013, the Company granted 60,000 and 618,000 new stock options, respectively, and cancelled 93,620 and 188,480 stock options, respectively, under its 2008 Long-Term Incentive Plan. The new stock options vest at 2% per month for the 50 months beginning in the eleventh month after date of grant.
On January 29, 2013, for 114 non-officer employees, the Company repriced their existing options to $1.00 per share, which represented the closing market price of the Class A common stock on that date. This modification resulted in total incremental share-based compensation expense of $63, with $25 immediately recognizable and $38 to be expensed over the remaining vesting periods of the options.
Total share-based compensation expense recognized was $87 and $147 for the three months ended June 30, 2013 and 2012, respectively, and $208 and $314 for the six months ended June 30, 2013 and 2012, respectively, and is reported in general and administrative expenses on our condensed consolidated statements of operations.
9. Income Taxes
The Company performed assessments of the realizability of its net deferred tax assets generated during the three and six months ended June 30, 2013, considering all available evidence, both positive and negative. As a result of these assessments, the Company concluded that it was more likely than not that none of our net deferred tax assets would be recoverable through the reversal of temporary differences and near term normal business results. During the three months ended June 30, 2013, the Company reduced its valuation allowance by $90 through a noncash charge. During the six months ended June 30, 2013, the Company established additional valuation allowances through a noncash charge of $1,442 to its income tax provision.
10. Net Loss Per Share
Basic net loss per share excludes any dilutive effects of options or warrants. The Company computes basic net loss per share using the weighted average number of common shares outstanding during the period. The Company computes diluted net loss per share using the weighted average number of common stock and common stock equivalents outstanding during the period. The Company excluded
11
common stock equivalents of 2,137,007 and 2,186,534 for the three months ended June 30, 2013 and 2012, respectively, and 2,304,256 and 2,102,873 for the six months ended June 30, 2013 and 2012, respectively, from the computation of diluted net loss per share because their effect was antidilutive. The following table sets forth the computation of basic and diluted net loss per share:
Three Months Ended June 30, |
Six Months Ended June 30, |
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(in thousands, except per share data) |
2013 | 2012 | 2013 | 2012 | ||||||||||||
Numerator for basic and diluted net loss per share |
$ | (2,908 | ) | $ | (2,518 | ) | $ | (6,701 | ) | $ | (4,374 | ) | ||||
Denominator: |
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Weighted average shares for basic net loss per share |
27,804 | 26,669 | 27,253 | 26,669 | ||||||||||||
Effect of dilutive securities: |
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Weighted average of stock options, restricted stock awards, and warrants |
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Denominators for diluted net loss per share |
27,804 | 26,669 | 27,253 | 26,669 | ||||||||||||
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Net loss per share basic |
$ | (0.11 | ) | $ | (0.09 | ) | $ | (0.25 | ) | $ | (0.16 | ) | ||||
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Net loss per share diluted |
$ | (0.11 | ) | $ | (0.09 | ) | $ | (0.25 | ) | $ | (0.16 | ) | ||||
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11. Subsequent Event
As disclosed in the Companys Current Report on Form 8-K filed August 9, 2013, on August 8, 2013, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) whereby it will acquire Mercury, a widely-held private company in the solar engineering, procurement and construction industry. Upon the consummation of the merger upon satisfaction of all applicable closing conditions, the Company will issue 7.9 million shares of its Class A common stock as merger consideration, subject to certain adjustments described in the Merger Agreement. The acquisition is primarily aimed at strengthening our capabilities in selling and deploying commercial solar systems in the north east region. The merger is subject to the approval of the Companys shareholders.
As disclosed in the Companys Current Report on Form 8-K filed August 12, 2013, on August 9, 2013, the Company acquired the business operated by Syndicated Solar, Inc. (Syndicated), a Colorado-based solar engineering, procurement and construction firm, by acquiring substantially all of Syndicateds assets. The Company paid net consideration of $2,500, plus 400,000 shares of its unregistered Class A common stock. Syndicated also has the potential to earn up to $500 in additional earn-out payments following the close of the 2013 fiscal year and an additional 1.3 million shares of unregistered Class A common stock in performance based earn-outs over the next two and half year period. The acquisition enables the Company to expand its residential solar operations in Colorado and California and to expand its sales presence into the state of Missouri.
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
The Company recommends users read the following discussion and analysis of its financial condition and results of operations in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this document. This section is designed to provide information that will assist in understanding the Companys condensed consolidated financial statements, changes in certain items in those statements from period to period, the primary factors that caused those changes and how certain accounting principles, policies and estimates affect the condensed consolidated financial statements.
Overview
We are a leading residential and commercial solar energy engineering, procurement and construction firm. We also perform most of our own sales and marketing activities to generate leads and secure projects. We offer turnkey services, including design, procurement, permitting, build-out, grid connection, financing referrals and warranty and customer satisfaction activities. Our solar energy systems use high-quality solar photovoltaic modules. We use proven technologies and techniques to help customers achieve meaningful savings by reducing their utility costs. In addition, we help customers lower their emissions output and reliance upon fossil fuel energy sources.
We, including our predecessors, have 35 years of experience in residential solar energy and trace our roots to 1978, when Real Goods Trading Corporation sold the first solar photovoltaic panels in the United States. We have designed and installed more than 14,500 residential and commercial solar systems since our founding. Our focused customer acquisition approach and our efficiency in converting customer leads into sales enable us to have what we believe are competitive customer acquisition costs that we continuously focus on improving.
We continue to expect strong demand for both residential and commercial solar installations in the United States. As one of the few solar installers with a relatively strong national footprint, we expect to capitalize on our expanded footprint and the evolving U.S. solar industry.
Amounts in the following discussion and analysis are reported in thousands, except share and per share amounts or where otherwise noted.
Recent Developments
On June 3, 2013, we closed a private placement of securities and issued 3,366,974 shares of Class A common stock and warrants to purchase an aggregate of 1,683,488 shares of Class A common stock for an aggregate purchase price of $9,259 (approximately $8,414, net of associated offering costs). See Note 6 (Shareholders Equity) of the Notes to Condensed Consolidated Financial Statements for further details.
Based on a Form 4, as amended, filed by Gaiam, we understand that Gaiam sold an aggregate of 6,017,500 shares of our Class A common stock on May 28, 2013, reducing its ownership of our Class A common stock to approximately 13.4% of our issued and outstanding Class A common stock after the closing of our June 3, 2013 private placement.
As a result, we believe that Riverside is now our largest shareholder, holding approximately 25.9% of our issued and outstanding Class A common stock after the closing of our June 3, 2013 private placement.
On June 11, 2013, Jirka Rysavy resigned as Chairman of our board of directors. Mr. Rysavy is Chairman of the board of directors of Gaiam, Inc, formerly our largest shareholder.
On June 12, 2013, our board of directors unanimously appointed David Belluck as Chairman of our board of directors. Mr. Belluck is General Partner of Riverside Partners, LLC, a Boston-based, private equity investment firm affiliated with Riverside, and has been a company director since June 2011.
On August 8, 2013, we entered into an Agreement and Plan of Merger (the Merger Agreement) whereby we will acquire Mercury Energy, Inc. (Mercury), a widely-held private company in the solar engineering, procurement and construction industry. Upon the consummation of the merger and upon satisfaction of all applicable closing conditions, we will issue 7.9 million shares of its Class A common stock as merger consideration, subject to certain adjustments described in the Merger Agreement. The acquisition is primarily aimed at strengthening our capabilities in selling and deploying commercial solar systems in the north east region.
On August 9, 2013, we acquired the business operated by Syndicated Solar, Inc. (Syndicated), a Colorado-based solar engineering, procurement and construction firm, by acquiring substantially all of Syndicateds assets. We paid net consideration of $2,500, plus 400,000 shares of our unregistered Class A common stock. Syndicated also has the potential to earn up to $500 in additional earn-out payments following the close of the 2013 fiscal year and an additional 1.3 million shares of unregistered Class A common stock in performance based earn-outs over the next two and half year period. The acquisition enables us to expand our residential solar operations in Colorado and California and to expand our sales presence into the state of Missouri.
13
Results of Operations
The following table sets forth certain financial data as a percentage of revenue for the periods indicated:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | 2013 | 2012 | |||||||||||||
Net revenue |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of goods sold |
76.9 | % | 75.2 | % | 75.0 | % | 70.4 | % | ||||||||
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Gross profit |
23.1 | % | 24.8 | % | 25.0 | % | 29.6 | % | ||||||||
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Expenses: |
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Selling and operating |
29.5 | % | 35.5 | % | 32.9 | % | 39.1 | % | ||||||||
General and administrative |
9.0 | % | 7.8 | % | 9.6 | % | 8.0 | % | ||||||||
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Total expenses |
38.5 | % | 43.3 | % | 42.5 | % | 47.1 | % | ||||||||
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Loss from operations |
15.4 | % | 18.5 | % | 17.5 | % | 17.5 | % | ||||||||
Interest and other expense |
1.3 | % | 0.5 | % | 0.4 | % | 0.4 | % | ||||||||
Income tax benefit |
| % | 7.3 | % | | % | 6.9 | % | ||||||||
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Net loss |
14.1 | % | 11.7 | % | 17.9 | % | 11.0 | % | ||||||||
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Three Months Ended June 30, 2013 Compared to Three Months Ended June 30, 2012
Net revenue. Net revenue decreased $781, or 3.6%, to $20,666 during the three months ended June 30, 2013, from $21,447 during the three months ended June 30, 2012. The revenue decline reflects lower prices paid by customers as a result of pricing pressures within the solar installation market. We deployed solar energy systems totaling 5.6 megawatts during the three months ended June 30, 2013, an increase of 17.8% over the same period last year. However, the increase in volume was more than offset by the decrease in the average per watt selling price of our solar energy systems.
Gross profit. Gross profit decreased $554, or 10.4%, to $4,768 during the three months ended June 30, 2013 from $5,319 during the three months ended June 30, 2012. As a percentage of net revenue, gross profit decreased to 23.1% during the three months ended June 30, 2013 from 24.8% during the three months ended June 30, 2012. The margin decrease reflects the impact of lower average selling price, net of lower average cost of goods sold.
Selling and operating expenses. Selling and operating expenses decreased $1,512, or 19.9%, to $6,088 during the three months ended June 30, 2013 from $7,600 during the three months ended June 30, 2012. As a percentage of net revenue, selling and operating expenses decreased to 29.5% during the three months ended June 30, 2013 from 35.5% during the three months ended June 30, 2012. The decrease in selling and operating expenses is attributable to reduction in payroll and other personnel costs associated with the integration of Alteris, as well as other cost saving initiatives.
General and administrative expenses. General and administrative expenses increased $172, or 10.2%, to $1,851 during the three months ended June 30, 2013 from $1,679 during the three months ended June 30, 2012. As a percentage of net revenue, general and administrative expenses increased to 9.0% during the three months ended June 30, 2013 from 7.8% during the three months ended June 30, 2012. The increase in general and administrative expenses is primarily due to increased legal and public company expenses incurred to comply with applicable NASDAQ listing requirements.
Interest and other expense. Interest and other expense decreased $373, from $110 during the three months ended June 30, 2012 to a benefit of $263, during the three months ended June 30, 2013. The decrease is primarily attributable to the non-cash adjustment to the fair value of the common stock warrant liability, partially offset by an increase in our related party debt, which bears interest at an annual rate of 10%, and the amortization of the warrants issued to Silicon Valley Bank.
Income tax benefit. Income tax benefit was reduced to $0 by a noncash benefit of $206.
Net loss. As a result of the above factors, our net loss during the three months ended June 30, 2013 was $2,908, or $0.11 per share, as compared to a net loss of $2,518, or $0.09 per share, during the three months ended June 30, 2012.
Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012
Net revenue. Net revenue decreased $2,245, or 5.7%, to $37,458 during the six months ended June 30, 2013 from $39,703 during the six months ended June 30, 2012. The revenue decline reflects lower prices paid by customers as a result of pricing pressures within the
14
solar installation market. We deployed solar energy systems totaling 10.2 megawatts during the six months ended June 30, 2013, an increase of 20.1% over the six months ended June 30, 2012. However, the increase in volume was offset by the decrease in the average per watt selling price of our solar energy systems.
Gross profit. Gross profit decreased $2,387, or 20.3%, to $9,359 during the six months ended June 30, 2013 from $11,746 during the six months ended June 30, 2012. As a percentage of net revenue, gross profit decreased to 25.0% during the six months ended June 30, 2013 from 29.6% during the six months ended June 30, 2012. The margin decrease reflects the impact of lower average selling price.
Selling and operating expenses. Selling and operating expenses decreased $3,198, or 20.6%, to $12,317 during the six months ended June 30, 2013 from $15,515 during the six-month period ended June 30, 2012. As a percentage of net revenue, selling and operating expenses decreased to 32.9% during the six-month period ended June 30, 2013 from 39.1% during the six months ended June 30, 2012. The decrease in selling and operating expenses is attributable to reduction in payroll and other personnel costs associated with the integration of Alteris, as well as other cost saving initiatives.
General and administrative expenses. General and administrative expenses increased $395, or 12.1%, to $3,579 during the six-month period ended June 30, 2013 from $3,194 during the six months ended June 30, 2012. As a percentage of net revenue, general and administrative expenses increased to 9.6% during the six-month period ended June 30, 2013 from 8.0% during the six-month period ended June 30, 2012. The increase in general and administrative expenses is due to legal fees and other costs incurred to comply with applicable NASDAQ listing requirements.
Interest and other expense. Interest and other expense increased $5 to $164 during the six-month period ended June 30, 2013 from $159 during the six months ended June 30, 2012. The increase is primarily attributable to the increase in our related party debt, which bears interest at an annual rate of 10%, and the amortization of the warrants issued to Silicon Valley Bank, partially offset by the non-cash adjustment to the fair value of the common stock warrant liability.
Income tax benefit. Income tax benefit was reduced by a noncash charge of $296 to establish an additional valuation allowance for net deferred taxes generated during the six months ended June 30, 2013.
Net loss. As a result of the above factors, our net loss during the six months ended June 30, 2013 was $6,701, or $0.25 per share, as compared to a net loss of $4,374, or $0.16 per share, during the six months ended June 30, 2012.
Seasonality
Our quarterly net revenue and operating results for solar energy system installations are difficult to predict and have, in the past, and may, in the future, fluctuate from quarter to quarter as a result of changes in state, federal, or private utility company subsidies, as well as weather, economic trends and other factors. We have historically experienced seasonality in our solar installation business, with the first quarter representing our slowest installation quarter of the year.
Liquidity and Capital Resources
Our capital needs arise from capital related to acquisitions of new businesses, working capital required to fund our purchases of solar PV modules and inverters, expansions and improvements to our infrastructure, and future growth. These capital requirements depend on numerous factors, including business acquisitions, the ability to attract new solar energy system installation customers, market acceptance of our product offerings, the cost of ongoing upgrades to our product offerings, the level of expenditures for sales and marketing, the level of investment in support systems and facilities and other factors. The timing and amount of these capital requirements are variable and may fluctuate.
To the extent we have or can arrange available capital, we plan to evaluate appropriate acquisitions and other opportunities to expand our sales territories, technologies, and products. Additionally, we plan to increase our sales and marketing programs as needed. We did not have any material commitments for capital expenditures as of June 30, 2013, and we do not presently have any plans for future material capital expenditures.
On June 3, 2013, we closed a private placement contemplated by the Securities Purchase Agreement entered into on May 24, 2013 with unaffiliated investors. Upon closing, we issued 3,366,974 shares of Class A common stock at a purchase price of $2.75 per share, or $9,259 in the aggregate, and Common Stock Purchase Warrants to purchase an aggregate of 1,683,488 share of Class A common stock with an exercise price of $2.75 per share, which are immediately exercisable and have a term of 5 years. We received net proceeds of approximately $8,414 after offering expenses. Proceeds from the transaction will be used for general corporate and working capital purposes.
On March 27, 2013, our wholly owned subsidiaries Real Goods Energy Tech, Inc., Real Goods Trading Corporation, and Alteris Renewables, Inc.(Alteris) entered into a Third Loan Modification Agreement with Silicon Valley Bank (the Loan Agreement Amendment) pursuant to which the parties thereto agreed to certain amendments to the Loan and Security Agreement, dated as of December 19, 2011, (as amended by the First Loan Modification Agreement, dated as of August 28, 2012, and the Second Loan Modification and Reinstatement Agreement, dated as of November 13, 2012, and together with the Loan Agreement Amendment, the Loan Agreement).
Under the Loan Agreement, the amount of available credit under the revolving line of credit is $6,500, subject to the Borrowing Base (as defined in the Loan Agreement) of 75% of Eligible Accounts (as defined in the Loan Agreement). The Loan Amendment extended the maturity date from March 31, 2013 to September 30, 2013. The Loan Agreement provides for an interest rate on borrowings of the greater of the banks prime rate or 4.00%, plus 4.75%. The interest rate accruing on borrowings during a Streamline Period (as defined in the Loan Agreement) increased from the greater of the banks prime rate or 4.00%, to the greater of the banks prime rate or 4.00%, plus 2.00%.
15
We paid Silicon Valley Bank a $60 extension fee and agreed to reimburse the bank for certain expenses incurred in connection with entering into the Loan Agreement Amendment.
As amended, the Loan Agreement now requires the us to pay a final payment fee of $60 in cash upon termination or maturity of the revolving line of credit, or $40 in the event we raise at least $3,000 in net proceeds through a public offering of our Class A common stock prior to August 31, 2013. During June 2013, we completed an equity financing transaction resulting in net proceeds of $8,529; as a result the final payment fee is reduced to $40 and is due on September 30, 2013.
On May 10, 2013, we entered into a consent agreement with Silicon Value Bank to extend until June 30, 2013 the requirement that we obtain net proceeds of not less than $3,400 from borrowing under a new subordinated debt agreement. In addition, until receipt of such proceeds, we agreed to deposit with Silicon Valley Bank $500 of unrestricted cash, which we are required to maintain under the terms of the SVB Loan, in a restricted account at the bank. Although we are presently exploring new financing alternatives, we were unable to comply with the subordinated debt requirement by June 30, 2013. However, SVB agreed that the terms of the consent agreement were met prior to June 30, 2013 based on the equity financing closed on June 3, 2013.
Upon the closing of the Alteris transaction on December 19, 2011, we received commitments from Riverside to make a single loan to us of up to $3,150 and from Gaiam to loan us up to $1,700. Gaiam funded its loan commitment on December 30, 2011. Riverside loaned us $3,000 on May 3, 2012 and another $150 on June 20, 2012. The loans originally were for a period of 12 months. The maturity dates for these loans have been extended and Gaiams $1,700 loan, with a current outstanding balance of $1,600, is now due April 30, 2014, Riversides $3,000 loan is due September 3, 2014 and Riversides $150 loan is due October 29, 2014. The loans bear interest at a rate of 10%. If we repay the loans owed to Riverside on or before their respective maturity date, the accrued interest is waived.
On November 13, 2012, we entered into a Loan Commitment with Gaiam and Riverside pursuant to which each agreed to advance to us up to an additional $1,000 in cash upon request from us until March 31, 2013 at an annual interest rate of 10% and with an original maturity date of April 26, 2013. During December 2012, we requested and received an advance of $1,000 from each of Gaiam and Riverside under this Loan Commitment. The maturity date for these loans has been extended until April 26, 2014. Furthermore, as required by the Loan Commitment, we executed with Gaiam an option agreement permitting Gaiam to purchase for $200 all tenant improvements constructed by us in our principal office space leased by us from Gaiam and we amended our lease to cancel, effective March 28, 2013, the $3 per square foot credit set forth in the current lease.
The loans from Gaiam and Riverside are subordinate to all indebtedness for borrowed money owed by us to any lenders unaffiliated with us. Payment of the unpaid principal and all accrued but unpaid interest under a loan is accelerated and becomes immediately due and payable upon the occurrence of certain events related to proceedings under bankruptcy, insolvency, receivership or similar laws, the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for our company or a substantial part of our assets, and our making a general assignment for the benefit of creditors.
Gaiam owns approximately 13.4% of our Class A common stock and is one of our creditors. Riverside owns approximately 25.9% of our Class A common stock and is one of our creditors. Pursuant to the terms of a Shareholders Agreement, Gaiam and Riverside each has the right to designate a certain number of individuals for appointment or nomination to our Board of Directors, tied to their respective ownership of our Class A common stock.
At June 30, 2013, there was approximately $5,247 of available borrowing capacity under our revolving line of credit with Silicon Valley Bank. We also had $5,861 of net working capital, including $6,859 of cash. We continue to make operational improvements to reduce our operating cash requirements. Operational initiatives to reduce costs include productivity enhancements within support functions through greater use of information technology and other process improvements and greater project level control over working capital deployed and labor utilization. While there can be no assurances, we believe that our existing capital resources along with savings through further operational efficiencies are sufficient to fund our continuing operations, execute on our business plan and meet our current debt repayment obligations until June 30, 2014, assuming that we are successful in extending the maturity date of our existing revolving line of credit with Silicon Valley Bank. However, no assurance can be given that we will achieve those objectives. Further, our projected cash needs may change as a result of unforeseen operational difficulties or other factors.
If we are unable to extend the maturity date of our revolving line of credit with Silicon Valley Bank or encounter unplanned operational difficulties, we may not have sufficient funds to repay any outstanding borrowings on September 30, 2013 or to fund our operating cash needs for the next twelve months. These circumstances would require us to obtain financing from another source or raise additional capital through debt financing, equity financing or capital contributions from shareholders, if available to us. We are continuing to explore new financing alternatives with other financial institutions, including a new credit facility to replace the Silicon Valley Bank revolving line of credit. There can be no assurance that we will successfully obtain new financing.
The acquisition of Mercury includes approximately $18,000 of tangible assets, including approximately $10,000 of cash. Following the acquisition, the cash balance will be available to us for general corporate purposes and to invest in the growth of the combined business. There can be no assurance that we will successfully consummate the Mercury acquisition.
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Cash Flows
The following table summarizes our primary sources (uses) of cash during the periods presented:
Six Months Ended June 30, |
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(in thousands) |
2013 | 2012 | ||||||
Net cash provided by (used in): |
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Operating activities |
$ | (5,401 | ) | $ | (14,562 | ) | ||
Investing activities |
(16 | ) | (116 | ) | ||||
Financing activities |
1,886 | 9,460 | ||||||
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Net change in cash |
$ | (3,531 | ) | $ | (5,218 | ) | ||
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|
Operating activities. Our operating activities used net cash of $5,401 and $14,562 during the six months ended June 30, 2013 and 2012, respectively. Our net cash used in operating activities during the six months ended June 30, 2013 was primarily due to decreased accounts payable of $5,768, decreased accrued liabilities of $1,350, net of the non-cash effect of warrants issued, and our net loss of $7,302, partially offset by decreased costs in excess of billings on uncompleted contracts and accounts receivable of $2,539 and $3,707, respectively, deferred interest on related party debt of $368, and increases in other current assets of $1,309. Our net cash used in operating activities during the six-month period ended June 30, 2012 was primarily due to decreased accounts payable of 20,031, decreased accrued liabilities of $635, our net loss of $4,374, decreased deferred revenue and other current liabilities of $1,733, and noncash adjustments to our net loss of $1,728, partially offset by decreased accounts receivable, inventory, and costs in excess of billings on uncompleted contracts of $6,990, $4,090, and $2,803, respectively. A significant portion of the reduction in accounts payable reflects payments for Alteris liabilities assumed on December 19, 2011.
Investing activities. Our investing activities used net cash of $16 and $116 during the six months ended June 30, 2013 and 2012, respectively. Our net cash used in investing activities during the six months ended June 30, 2013 was to acquire property and equipment. Our net cash used in investing activities during the six months ended June 30, 2012 was primarily due to the purchase of property and equipment for $288, partially offset by a decrease in restricted cash of $172.
Financing activities. Our financing activities provided net cash of $1,886 and $9,460 during the six months ended June 30, 2013 and 2012, respectively. Our net cash provided by financing activities during the six-month period ended June 30, 2013 reflected the net issuance of common stock of $8.414, repayments of our line of credit of $6,498 and other debt and capital lease obligations of $109. Our net cash provided by financing activities during the six-month period ended June 30, 2012 was primarily the result of borrowings on our line of credit of $6,500 and a loan from a shareholder of $3,150, partially offset by payments on debt and capital lease obligations of $190.
Off-Balance Sheet Arrangements
We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as special purpose entities or variable interest entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other limited purposes.
Risk Factors
We caution that there are risks and uncertainties that could cause our actual results to be materially different from those indicated by forward-looking statements that, from time-to-time, we make in filings with the Securities and Exchange Commission, news releases, reports, proxy statements, registration statements and other written communications as well as oral forward-looking statements made by our representatives, from time to time. These risks and uncertainties include, but are not limited to, those risks listed in our Annual Report on Form 10-K for the year ended December 31, 2012. Except for the historical information contained herein, the matters discussed in this analysis are forward-looking statements that involve risk and uncertainties, including, but not limited to, general economic and business conditions, competition, pricing, brand reputation, consumer trends, and other factors which are often beyond our control. We do not undertake any obligation to update forward-looking statements except as required by law.
Investing in our securities involves significant risks. You should carefully read the risk factors in the section entitled RISK FACTORS in our Annual Report on Form 10-K for the year ended December 31, 2012, which is on file with the SEC. Before making an investment decision, you should carefully consider these risks as well as other information we include or incorporate by reference in this prospectus and any prospectus supplement. The risks and uncertainties we have described are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business operations. We do not undertake any obligation to update forward-looking statements except as required by law.
17
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act)) at the end of the period covered by this report. Based on such evaluation, our management concluded that, at the end of such period, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
No changes in our internal control over financial reporting occurred during the three and six months ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
18
Item 1. | Legal Proceedings |
From time to time, we are involved in legal proceedings that we consider to be in the normal course of business. We do not believe that any of these proceedings will have a material adverse effect on our business.
Item 1A. | Risk Factors |
No material changes.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
On June 3, 2013, as previously disclosed in the Companys Current Report on Form 8-K filed on June 3, 2013 and as discussed elsewhere in this Quarterly Report on Form 10-Q, the Company closed a private placement of securities and issued 3,366,974 shares of Class A common stock and warrants to purchase an aggregate of 1,683,488 shares of Class A common stock for an aggregate purchase price of $9,259,178.50 (approximately $8,414,000 net of associated offering costs).
On June 18, 2013, the Company issued 78,973 shares of Class A common stock to Silicon Valley Bank upon the exercise of the SVB Warrants. Silicon Valley Bank exercised the SVB Warrants in full in a cashless manner pursuant to the terms of the SVB Warrants, resulting in a net issuance. As a result, the Company did not receive any consideration in connection therewith. The issuance of the Class A common stock upon exercise of the SVB Warrants was exempt from registration under Section 3(a)(9) and Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act), because it involved an exchange of securities by the Company with an existing security holder where no commission or other remuneration was paid or given and it did not involve a public offering as such term is interpreted under Section 4(a)(2) of the Securities Act.
Item 6. | Exhibits |
a) | Exhibits. |
Exhibit |
Description | |
4.1 | Form of Warrant, dated June 3, 2013, issued to the investors under the Securities Purchase Agreement, dated May 24, 2013, among Real Goods Solar, Inc. and such investors (incorporated by reference to Exhibit 4.1 to Real Goods Solar, Inc.s Current Report on Form 8-K filed June 3, 2013 (No. 001-34044)) | |
10.1 | Employment Letter, dated May 10, 2013, between John Schaeffer and Real Goods Solar, Inc. | |
10.2 | Form of Second Amended and Restated Promissory Note issued to Riverside Fund III, L.P. on May 21, 2013 in the principal amounts of $3.0 million and $150,000, respectively (incorporated by reference to Exhibit 10.3 to Real Goods Solar, Inc.s Current Report on Form 8-K filed May 24, 2013 (No. 001-34044)) | |
10.3 | Securities Purchase Agreement, dated May 24, 2013, among Real Goods Solar, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.1 to Real Goods Solar, Inc.s Registration Statement on Form S-3 filed June 20, 2013 (No. 333-189500) | |
10.4 | Registration Rights Agreement, dated June 3, 2013, among Real Goods Solar, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.1 to Real Goods Solar, Inc.s Current Report on Form 8-K filed June 3, 2013 (No. 001-34044)) | |
31.1* | Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | |
31.2* | Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | |
32.1** | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2** | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
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 |
** | Furnished herewith |
19
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
Real Goods Solar, Inc. | ||||
(Registrant) | ||||
Date: August 13, 2013 |
By: | /s/ Kam Mofid | ||
Kamyar (Kam) Mofid | ||||
Chief Executive Officer (authorized officer) | ||||
Date: August 13, 2013 |
By: | /s/ Anthony DiPaolo | ||
Anthony DiPaolo | ||||
Chief Financial Officer | ||||
(principal financial and accounting officer) |
20
EXHIBIT INDEX
Exhibit |
Description | |
4.1 | Form of Warrant, dated June 3, 2013, issued to the investors under the Securities Purchase Agreement, dated May 24, 2013, among Real Goods Solar, Inc. and such investors (incorporated by reference to Exhibit 4.1 to Real Goods Solar, Inc.s Current Report on Form 8-K filed June 3, 2013 (No. 001-34044)) | |
10.1 | Employment Letter, dated May 10, 2013, between John Schaeffer and Real Goods Solar, Inc. | |
10.2 | Form of Second Amended and Restated Promissory Note issued to Riverside Fund III, L.P. on May 21, 2013 in the principal amounts of $3.0 million and $150,000, respectively (incorporated by reference to Exhibit 10.3 to Real Goods Solar, Inc.s Current Report on Form 8-K filed May 24, 2013 (No. 001-34044)) | |
10.3 | Securities Purchase Agreement, dated May 24, 2013, among Real Goods Solar, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.1 to Real Goods Solar, Inc.s Registration Statement on Form S-3 filed June 20, 2013 (No. 333-189500) | |
10.4 | Registration Rights Agreement, dated June 3, 2013, among Real Goods Solar, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.1 to Real Goods Solar, Inc.s Current Report on Form 8-K filed June 3, 2013 (No. 001-34044)) | |
31.1* | Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | |
31.2* | Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | |
32.1** | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2** | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
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 |
** | Furnished herewith |
21
Exhibit 10.1
May 10, 2013
CONFIDENTIAL
John Schaeffer
2001 Duncan Springs Road
Hopland, CA 95449
Re: Bonus and Severance Eligibility
Dear John:
Pursuant to the terms of this letter (this Letter) and in consideration of your long-standing contribution to the Real Goods Solar, Inc. (the Company), we are pleased to provide you with the following additional bonus and severance package. Please review the following bonus details set forth in this Letter and sign it below.
| Change of Control Bonus. Upon a Change of Control (as defined below), the Company will pay you a bonus of $250,000 (the Change of Control Bonus), to be paid on or before the 30th day following such Change of Control; provided that you must be employed by the Company on the effective date of the Change of Control in order to be entitled to receive the Change of Control Bonus. |
| Retirement, Termination without Cause and Severance. |
| Upon Retirement (as defined below) or termination without Cause (as defined below), the Company will pay you a severance payment equal to $200,000 (the Severance Payments), to be paid in 12 equal monthly installments commencing on the 1-month anniversary of such termination. If the Company pays you a Change of Control Bonus, you will not receive the Severance Payments. |
| Upon your termination of employment for any reason, you will be paid all of your accrued salary, all accrued but unused PTO per the Companys policy, any other bonuses earned prior to the termination date on a pro-rata basis, the time and form of any such bonus to be paid in accordance with the terms of the applicable bonus plan or program. All other benefits shall cease upon your termination of employment unless otherwise required by applicable laws. |
| Non-Compete; Non-Solicitation. You agree that, in consideration for the Severance Payments contemplated hereby, for so long as you are receiving Severance Payments, you shall not directly or indirectly (a) own, manage, control, participate in, consult with, render services at the time of termination for or engage in any manner in any business in which the Company or its subsidiaries is engaged anywhere within 100 miles of any business location of the Company on the date of termination or (b) induce or attempt to induce any employee of the Company or its subsidiaries to leave the employ of the Company or such subsidiaries, or in any way interfere with the relationship between the Company or any such subsidiary and any employee thereof. Nothing herein shall prohibit you from being a passive owner of not more than 5% of the outstanding stock of another corporation, so long as you have no active participation in the management or the business of such corporation. If, at the time of enforcement of any of the provisions of this paragraph, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, you agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area. |
| Certain Terms. |
| Cause means (a) misappropriation of funds, (b) conviction of a crime involving moral turpitude, (c) gross negligence in the performance of duties, (d) breach of fiduciary duty to the Company, or (e) material breach of any contractual obligations to the Company. |
| Change of Control means a new or an existing shareholder currently owning less than 10% of shares of the Company becoming a majority shareholder within 12 months of the date hereof. |
| Retirement means voluntary termination of your employment by you on a date mutually agreed upon by you and the Company. |
| Miscellaneous. |
| You understand and agree that you are solely responsible for any and all taxes due as a result of any compensation, including any Change of Control Bonus or Retirement Bonus, provided hereunder. Notwithstanding provision to the contrary, in no event does the Company guarantee any particular tax consequences, outcome or tax liability to you. No provision of this Letter shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as it may be amended from time to time (Section 409A) from you or any other individual to the Company or its affiliates. |
| Compensation and benefits provided hereunder are subject to applicable payroll taxes and the related withholding obligations. |
| This Letter shall be governed by and construed in accordance with the laws of the State of Colorado without regard to principles of conflict of laws. |
| This Letter may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. |
Upon your execution below, this Jetter agreement is binding and effective as of the date set forth above.
Page 2 of 2
Exhibit 31.1
CERTIFICATION
I, Kamyar (Kam) Mofid, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Real Goods Solar, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 13, 2013
/s/ Kam Mofid |
Kamyar (Kam) Mofid |
Chief Executive Officer (principal executive officer) |
Exhibit 31.2
CERTIFICATION
I, Anthony DiPaolo, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Real Goods Solar, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 13, 2013
/s/ Anthony DiPaolo |
Anthony DiPaolo |
Chief Financial Officer (principal financial officer) |
Exhibit 32.1
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Real Goods Solar, Inc. (the Company) on Form 10-Q for the period ended June 30, 2013, as filed with the U.S. Securities and Exchange Commission on the date hereof (the Report), I, Kamyar (Kam) Mofid, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) | The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 13, 2013
/s/ Kam Mofid |
Kamyar (Kam) Mofid |
Chief Executive Officer (principal executive officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of Real Goods Solar, Inc. (the Company) on Form 10-Q for the period ended June 30, 2013, as filed with the U.S. Securities and Exchange Commission on the date hereof (the Report), I, Anthony DiPaolo, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) | The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 13, 2013
/s/ Anthony DiPaolo |
Anthony DiPaolo |
Chief Financial Officer (principal financial officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Subsequent Event
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Subsequent Event | 11. Subsequent Event As disclosed in the Company’s Current Report on Form 8-K filed August 9, 2013, on August 8, 2013, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) whereby it will acquire Mercury, a widely-held private company in the solar engineering, procurement and construction industry. Upon the consummation of the merger upon satisfaction of all applicable closing conditions, the Company will issue 7.9 million shares of its Class A common stock as merger consideration, subject to certain adjustments described in the Merger Agreement. The acquisition is primarily aimed at strengthening our capabilities in selling and deploying commercial solar systems in the north east region. The merger is subject to the approval of the Company’s shareholders. As disclosed in the Company’s Current Report on Form 8-K filed August 12, 2013, on August 9, 2013, the Company acquired the business operated by Syndicated Solar, Inc. (“Syndicated”), a Colorado-based solar engineering, procurement and construction firm, by acquiring substantially all of Syndicated’s assets. The Company paid net consideration of $2,500, plus 400,000 shares of its unregistered Class A common stock. Syndicated also has the potential to earn up to $500 in additional earn-out payments following the close of the 2013 fiscal year and an additional 1.3 million shares of unregistered Class A common stock in performance based earn-outs over the next two and half year period. The acquisition enables the Company to expand its residential solar operations in Colorado and California and to expand its sales presence into the state of Missouri. |
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Net revenue | $ 20,666 | $ 21,447 | $ 37,458 | $ 39,703 |
Cost of goods sold | 15,898 | 16,128 | 28,099 | 27,957 |
Gross profit | 4,768 | 5,319 | 9,359 | 11,746 |
Expenses: | ||||
Selling and operating | 6,088 | 7,600 | 12,317 | 15,515 |
General and administrative | 1,851 | 1,679 | 3,579 | 3,194 |
Total expenses | 7,939 | 9,279 | 15,896 | 18,709 |
Loss from operations | (3,171) | (3,960) | (6,537) | (6,963) |
Interest and other expense | 263 | (110) | (164) | (159) |
Loss before income taxes | (2,908) | (4,070) | (6,701) | (7,122) |
Income tax benefit | (1,552) | (2,748) | ||
Net loss | $ (2,908) | $ (2,518) | $ (6,701) | $ (4,374) |
Net loss per share: | ||||
Basic | $ (0.11) | $ (0.09) | $ (0.25) | $ (0.16) |
Diluted | $ (0.11) | $ (0.09) | $ (0.25) | $ (0.16) |
Weighted-average shares outstanding: | ||||
Basic | 27,804 | 26,669 | 27,253 | 26,669 |
Diluted | 27,804 | 26,669 | 27,253 | 26,669 |
Revolving Line of Credit
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Revolving Line of Credit | 4. Revolving Line of Credit Under a loan agreement, as amended, with Silicon Valley Bank, the Company has a revolving line of credit that provides for advances for the lesser of $6,500 or a borrowing base availability of 75% of eligible accounts receivable (“SVB Loan”). At June 30, 2013, our borrowing base availability was $5,247. All borrowings are collateralized by a security interest in substantially all of the Company’s assets other than its interests in Alteris Project Financing Company LLC, and bear interest at the greater of the bank’s prime rate or 4.00% plus 4.75%. The interest rate accruing on borrowings during a Streamline Period (as defined in the SVB Loan) is the greater of the bank’s prime rate or 4.00%, plus 2.00%. The original maturity date for the SVB Loan was August 31, 2012; following several amendments to the agreement, the maturity date of the SVB Loan was extended to September 30, 2013. The line of credit has a facility fee of 0.5% per year of the average daily unused portion of the available line of credit during the applicable calendar quarter. The Company may reserve up to $500 for stand-by letters of credit under the line of credit. The SVB Loan establishing the line of credit contains various covenants, including a covenant requiring compliance with a liquidity ratio. The SVB Loan initially required the Company to pay a final payment fee of $60 upon termination or maturity of the revolving line of credit. In accordance with the terms of the SVB Loan, SVB reduced the final payment fee to $40 based on the equity funding in excess of $3,000 completed on June 3, 2013. As of June 30, 2013, the Company had no outstanding borrowings under this facility. Pursuant to the second and third loan modification agreements for the SVB Loan, on March 26, 2013 and March 27, 2013, the Company issued warrants to SVB to purchase 106,557 and 105,978 shares of Class A common stock at per share exercise prices of $1.83 and $1.84, respectively (collectively, the “SVB Warrants”). Each warrant expires 7 years from the date of issuance. The company determined the warrants had a combined estimated fair value of $278 on the dates of their issuances, which the Company recognized as discounts to the SVB Loan, with the offsets recorded to additional paid-in capital. The Company determined the fair values of the warrants using the Black-Scholes valuation model, which is affected by historical stock price volatility as well as the Company’s assumptions regarding expected life (level three of the fair value hierarchy). The SVB Loan discounts are amortized to interest expense over the remaining term of the SVB Loan using the interest method. On June 18, 2013, SVB exercised the warrants in a cashless transaction, resulting in the net issuance of 78,973 shares of Class A common stock to SVB. At June 30, 2013, the SVB Loan discounts had a combined unamortized balance of $67. On May 10, 2013, the Company entered into a consent agreement with SVB to extend until June 30, 2013 the requirement that it obtain net proceeds of not less than $3,400 from borrowings under a new subordinated debt agreement. In addition, until receipt of such proceeds, the Company agreed to deposit with Silicon Valley Bank $500 of unrestricted cash, which it was required to maintain under the terms of the SVB Loan, in a restricted account at the bank. On June 3, 2013, the Company closed on the private placement of Class A common shares and warrants described in Note 6, realizing net proceeds on $8,414. SVB determined that the private placement meets the terms of the consent agreement. Consequently SVB released the restricted cash. |
Basis of Fair Value Measurements (Detail) (Common stock warrants, USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Common stock warrant liability | $ 3,702 |
Level 3
|
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Common stock warrant liability | $ 3,702 |
Significant Accounting Policies (Policies)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Use of Estimates and Reclassifications | Use of Estimates and Reclassifications The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions including, but not limited to, the collectibility of accounts receivable, the valuation of inventories, the estimated total costs for long-term contracts used as a basis of determining percentage of completion for such contracts, the useful lives of equipment, the determination of accrued liabilities, the valuation of stock-based compensation, and the determination of valuation allowances associated with deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates. |
Warrant Accounting | Warrant Accounting The Company accounts for common stock warrants and put options in accordance with applicable accounting guidance provided in ASC 480, Liabilities – Distinguishing Liabilities from Equity, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. The common stock warrants are accounted for as a liability due to a provision for the warrant holder to request redemption upon a change of control. We classify these derivative liabilities on the condensed consolidated balance sheets as a long term liability, which is revalued at each balance sheet date subsequent to the initial issuance. We use a modified binomial pricing model to value these derivative liabilities. The modified binomial pricing model, which is based, in part, upon unobservable inputs for which there is little or no market data, requires the Company to develop its own assumptions. The Company used the following assumptions for its common stock warrants. The risk-free interest rate for June 3, 2013 (issuance date) and June 30, 2013 were 1.03% and 1.03%, respectively. The volatility of the market price of the Company’s common stock for June 3, 2013 (issuance date) and June 30, 2013 were 102.93% and 102.93%, respectively. The expected average term of the warrant used for both periods was 5 years. There was no expected dividend yield for the warrants granted. In building the modified binomial model, the Company assumed a 15% probability of a change in control and used 20 nodes (See Note 3. Fair Value Measurements). As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different. Changes in the fair value of the warrants are reflected in the condensed consolidated statement of operations as change in fair value of warrant liability, with an offsetting non-cash entry recorded as interest expense or benefit. |
Subsequent Event - Additional Information (Detail) (USD $)
Share data in Millions, unless otherwise specified |
1 Months Ended | 1 Months Ended | ||||
---|---|---|---|---|---|---|
Aug. 08, 2013
Mercury
|
Aug. 08, 2013
Mercury
Common Class A
|
Aug. 09, 2013
Syndicated Solar , Inc
|
Aug. 09, 2013
Syndicated Solar , Inc
Contingent Earnout
|
Aug. 09, 2013
Syndicated Solar , Inc
Common Class A
|
Aug. 09, 2013
Syndicated Solar , Inc
Common Class A
Contingent Earnout
|
|
Subsequent Event [Line Items] | ||||||
Business acquisition date | Aug. 08, 2013 | Aug. 09, 2013 | ||||
Business acquisition, shares issued | 7.9 | |||||
Acquisition consideration paid, net | $ 2,500,000 | |||||
Additional earn out payments, shares | 400,000 | 1,300,000 | ||||
Additional earn out payments | $ 500,000 |
Related Party Debt - Additional Information (Detail) (USD $)
|
6 Months Ended | 1 Months Ended | 6 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2013
Accrued Liabilities
|
Jun. 30, 2013
Other Liabilities
|
Jun. 30, 2013
Gaiam Incorporated
|
Apr. 23, 2013
Gaiam Incorporated
Convertible Promissory Notes
|
May 28, 2013
Gaiam Incorporated
Common Class A
|
Apr. 23, 2013
Gaiam Incorporated
Common Class A
|
Jun. 30, 2013
Gaiam Incorporated
Period One
|
Jun. 30, 2013
Gaiam Incorporated
Period Two
|
Jun. 30, 2013
Riverside Renewable Energy Investments
|
Jun. 30, 2013
Riverside Renewable Energy Investments
Period Three
|
Jun. 30, 2013
Riverside Renewable Energy Investments
Period Four
|
|
Related Party Transaction [Line Items] | ||||||||||||
Related party debt | $ 2,600,000 | $ 4,150,000 | ||||||||||
Debt, repayment amount | 10,020 | 1,000,000 | 1,600,000 | 3,000,000 | 150,000 | |||||||
Debt, repayment date | Apr. 26, 2014 | Apr. 30, 2014 | Sep. 03, 2014 | Oct. 29, 2014 | ||||||||
Promissory note payable | 1,700,000 | |||||||||||
Promissory note amount reduced | 100,000 | |||||||||||
Share exchange with promissory note (shares) | 62,111 | |||||||||||
Interest rate | 10.00% | 10.00% | ||||||||||
Related party debt | 3,150,000 | 3,150,000 | ||||||||||
Accrued interest on related party debt | $ 479,000 | $ 111,000 | $ 368,000 | |||||||||
Ownership of common stock related party | 13.40% | 25.90% | ||||||||||
Sales of shares | 6,017,500 |
Revolving Line of Credit - Additional Information (Detail) (USD $)
|
6 Months Ended | 1 Months Ended | 6 Months Ended | 1 Months Ended | 6 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2013
Silicon Valley Bank
|
Jun. 18, 2013
Silicon Valley Bank
Common Class A
|
Jun. 30, 2013
Silicon Valley Bank
Common Class A
|
Mar. 26, 2013
Silicon Valley Bank
Second Loan Modification Agreement
|
Mar. 27, 2013
Silicon Valley Bank
Third Loan Modification Agreement
|
Jun. 03, 2013
Line of Credit
|
May 10, 2013
Line of Credit
|
May 10, 2013
Subordinated Debt
Line of Credit
|
May 10, 2013
Subordinated Debt
Line of Credit
|
Jun. 30, 2013
Alteris
|
Jun. 30, 2013
Alteris
Based on the equity funding in excess of $3,000 completed
|
Jun. 30, 2013
Alteris
Silicon Valley Bank
|
Jun. 30, 2013
Alteris
Revolving Credit Streamline Facility
|
|
Line of Credit Facility [Line Items] | ||||||||||||||
Revolving line of credit facility | $ 6,500,000 | |||||||||||||
Borrowing Base | 75.00% | |||||||||||||
Borrowing base availability | 5,247,000 | |||||||||||||
Bear interest rate | Greater of the bank’s prime rate or 4.00% plus 4.75% | Greater of the bank's prime rate or 4.00%, plus 2.00% | ||||||||||||
Interest rate | 4.00% | 4.00% | ||||||||||||
Line of credit facility, maturity date | Jun. 30, 2013 | Sep. 30, 2013 | ||||||||||||
Interest rate excluding prime rate | 4.75% | 2.00% | ||||||||||||
Line of credit, facility fee | 0.50% | |||||||||||||
Reserve credit of subsidiary | 500,000 | |||||||||||||
Final payment fee | 60,000 | 40,000 | ||||||||||||
Equity funding in excess | 3,000,000 | |||||||||||||
Borrowings outstanding under line of credit facility | 0 | |||||||||||||
Expiration period of warrants issued | 7 years | 7 years | ||||||||||||
Shares of common stock to purchase by warrants issued | 106,557 | 105,978 | ||||||||||||
Exercise price of warrants issued | 1.83 | 1.84 | ||||||||||||
Estimated fair value of warrant issued | 278,000 | |||||||||||||
Common stock shares issued due to cashless exercise of warrants | 78,973 | 78,973 | ||||||||||||
Loan discounts combined unamortized balance | 67,000 | |||||||||||||
Net proceeds subordinated debt agreement | 3,400,000 | |||||||||||||
Deposit for debt agreement | 500 | |||||||||||||
Proceeds from issuance of common stock, net | $ 8,414,000 | $ 8,414,000 |
Debt and Capital Lease Obligations - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
|
Cost of the capitalized leased assets included in property and equipment | $ 2,067 | $ 2,067 | $ 2,000 | ||
Accumulated amortization of capitalized leased assets | 1,452 | 1,452 | 1,300 | ||
Amortization expense for capitalized leased assets | $ 51 | $ 85 | $ 133 | $ 123 |
Reconciliation of Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Change in the fair value of common stock warrant liability | $ 690 |
Common stock warrants
|
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Issuance of common stock warrants | 4,392 |
Change in the fair value of common stock warrant liability | (690) |
Fair value of liability, Ending Balance | $ 3,702 |
Condensed Consolidated Statements of Cash Flows (Parenthetical)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Class A common stock issued | 62,111 |
Debt Extension
|
|
Number of shares called by warrants | 212,555 |
Significant Accounting Policies
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Significant Accounting Policies | 2. Significant Accounting Policies The Company made no changes to its significant accounting policies during the three and six months ended June 30, 2013. Use of Estimates and Reclassifications The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions including, but not limited to, the collectibility of accounts receivable, the valuation of inventories, the estimated total costs for long-term contracts used as a basis of determining percentage of completion for such contracts, the useful lives of equipment, the determination of accrued liabilities, the valuation of stock-based compensation, and the determination of valuation allowances associated with deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates. Warrant Accounting The Company accounts for common stock warrants and put options in accordance with applicable accounting guidance provided in ASC 480, Liabilities – Distinguishing Liabilities from Equity, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. The common stock warrants are accounted for as a liability due to a provision for the warrant holder to request redemption upon a change of control. We classify these derivative liabilities on the condensed consolidated balance sheets as a long term liability, which is revalued at each balance sheet date subsequent to the initial issuance. We use a modified binomial pricing model to value these derivative liabilities. The modified binomial pricing model, which is based, in part, upon unobservable inputs for which there is little or no market data, requires the Company to develop its own assumptions. The Company used the following assumptions for its common stock warrants. The risk-free interest rate for June 3, 2013 (issuance date) and June 30, 2013 were 1.03% and 1.03%, respectively. The volatility of the market price of the Company’s common stock for June 3, 2013 (issuance date) and June 30, 2013 were 102.93% and 102.93%, respectively. The expected average term of the warrant used for both periods was 5 years. There was no expected dividend yield for the warrants granted. In building the modified binomial model, the Company assumed a 15% probability of a change in control and used 20 nodes (See Note 3. Fair Value Measurements). As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different. Changes in the fair value of the warrants are reflected in the condensed consolidated statement of operations as change in fair value of warrant liability, with an offsetting non-cash entry recorded as interest expense or benefit. |
Related Party Debt
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Related Party Debt | 5. Related Party Debt The Company’s outstanding related party debt at June 30, 2013 consisted of $2,600 from Gaiam and $4,150 from Riverside. The Gaiam loans mature as follows: $1,000 on April 26, 2014 and $1,600 on April 30, 2014. These loans bear interest at an annual rate of 10% and are subordinated to the Company’s SVB Loan. On April 23, 2013, the Company entered into a conversion agreement with Gaiam pursuant to which the principal amount of Gaiam’s $1,700 promissory note dated March 27, 2013 was reduced by $100 in exchange for 62,111 shares of Class A common stock. The conversion ratio was determined based on the closing market price of the Company’s Class A common stock on the date of the agreement. On May 21, 2013, the Company and Riverside extended the maturity dates of two loans in the aggregate principal amount of $3,150 made by Riverside to the Company. The maturity date of a $3,000 loan was extended from May 4, 2014 to September 3, 2014 and the maturity date of a $150 loan was extended from June 20, 2014 to October 29, 2014. These loans bear interest at an annual rate of 10% and are subordinated to the Company’s SVB Loan.
Accrued interest on the Company’s related party debt was $479 at June 30, 2013; $111 is reported in accrued liabilities and $368 is reported in other liabilities on our condensed consolidated balance sheet. Gaiam and Riverside hold approximately 13.4% and 25.9% of the Company’s outstanding Class A common stock, respectively. Each is also a creditor of the Company. Pursuant to the terms of a Shareholders Agreement, Gaiam and Riverside each has the right to designate a certain number of individuals for appointment or nomination to our Board of Directors, tied to their respective ownership of our Class A common stock. On May 28, 2013, Gaiam sold 6,017,500 shares of the Company’s Class A common shares. On June 11, 2013, Gaiam’s Chairperson resigned as the Company’s Chairperson. There are no amounts payable to Gaiam, other than debt and accrued interest, as of June 30, 2013. |
Fair Value Measurements
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Fair Value Measurements | 3. Fair Value Measurements The Company complies with the provisions of FASB ASC No. 820, Fair Value Measurements and Disclosures (ASC 820), in measuring fair value and in disclosing fair value measurements. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. FASB ASC No. 820-10-35, Fair Value Measurements and Disclosures- Subsequent Measurement (ASC 820-10-35), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820-10-35-3 also requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model. ASC 820-10-35 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1 Inputs – Level 1 inputs are unadjusted quoted prices in active markets for assets or liabilities identical to those to be reported at fair value. An active market is a market in which transactions occur for the item to be fair valued with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 Inputs – Level 2 inputs are inputs other than quoted prices included within Level 1. Level 2 inputs are observable either directly or indirectly. These inputs include: (a) Quoted prices for similar assets or liabilities in active markets; (b) Quoted prices for identical or similar assets or liabilities in markets that are not active, such as when there are few transactions for the asset or liability, the prices are not current, price quotations vary substantially over time or in which little information is released publicly; (c) Inputs other than quoted prices that are observable for the asset or liability; and (d) Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs – Level 3 inputs are unobservable inputs for an asset or liability. These inputs should be used to determine fair value only when observable inputs are not available. Unobservable inputs should be developed based on the best information available in the circumstances, which might include internally generated data and assumptions being used to price the asset or liability. When determining the fair value measurements for assets or liabilities required or permitted to be recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets. The following tables summarize the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the condensed consolidated balance sheets: Basis of Fair Value Measurements
The following tables show reconciliations of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (i.e. Level 3) for the six months ended June 30, 2013:
The following summarizes the valuation technique for assets and liabilities measured and recorded at fair value: Common stock warrant liability: For our level 3 securities, which represent common stock warrants, fair value is based on a modified binomial pricing model which is based, in part, upon unobservable inputs for which there is little or no market data, requiring the Company to develop its own assumptions (See Note 2. Significant Accounting Policies). The Company used a market approach to valuing the derivative liabilities. |
Summary of Debt other than Related Party Debt (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
---|---|
Debt Instrument [Line Items] | |
Notes payable | $ 117 |
Less - current portion of debt | (89) |
Debt, net of current portion | $ 28 |
Future Minimum Lease Payments and Capital Lease Obligations (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
---|---|
Future minimum lease payments and capital lease obligations | |
2013 | $ 153 |
2014 | 214 |
2015 | 173 |
2016 | 33 |
2017 | 12 |
Total future minimum lease payments | 585 |
Less - amounts representing interest | (40) |
Total capital lease obligations | 545 |
Less - current portion of capital lease obligations | (244) |
Capital lease obligations, net of current portion | $ 301 |
Computation of Basic and Diluted Net Loss Per Share (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Schedule For Earning Per Share Basic And Diluted [Line Items] | ||||
Numerator for basic and diluted net loss per share | $ (2,908) | $ (2,518) | $ (6,701) | $ (4,374) |
Denominator: | ||||
Weighted average shares for basic net loss per share | 27,804 | 26,669 | 27,253 | 26,669 |
Effect of dilutive securities: | ||||
Weighted average of stock options, restricted stock awards, and warrants | ||||
Denominators for diluted net loss per share | 27,804 | 26,669 | 27,253 | 26,669 |
Net loss per share - basic | $ (0.11) | $ (0.09) | $ (0.25) | $ (0.16) |
Net loss per share - diluted | $ (0.11) | $ (0.09) | $ (0.25) | $ (0.16) |
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