10-Q 1 ftci-20240331.htm 10-Q 10-Q
0001828161false--12-31Q151http://fasb.org/us-gaap/2023#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesCurrent0001828161us-gaap:SoftwareDevelopmentMember2023-12-310001828161srt:MaximumMemberus-gaap:DevelopedTechnologyRightsMember2024-03-310001828161us-gaap:CommonStockMember2024-01-012024-03-310001828161us-gaap:EquipmentMember2024-03-3100018281612024-01-012024-03-310001828161us-gaap:CommonStockMember2024-03-310001828161ftci:AlphaSteelMember2023-07-282023-07-280001828161us-gaap:RetainedEarningsMember2024-03-310001828161us-gaap:AdditionalPaidInCapitalMember2023-12-310001828161us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-310001828161ftci:AlphaSteelMember2024-01-012024-03-310001828161us-gaap:LeaseholdImprovementsMember2023-12-310001828161us-gaap:LetterOfCreditMemberftci:PlcBarclaysBankMember2024-03-310001828161us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-03-310001828161ftci:TreasuryStock1Member2023-12-310001828161srt:MinimumMemberus-gaap:DevelopedTechnologyRightsMember2024-03-310001828161us-gaap:TechnologyEquipmentMember2024-03-310001828161us-gaap:RestrictedStockMember2024-01-012024-03-310001828161ftci:SouthLakeOneLlcMember2022-02-012022-02-280001828161us-gaap:SellingAndMarketingExpenseMember2024-01-012024-03-310001828161us-gaap:CommonStockMember2023-03-310001828161us-gaap:RevolvingCreditFacilityMemberus-gaap:LetterOfCreditMemberftci:PlcBarclaysBankMember2024-03-310001828161us-gaap:PreferredStockMember2022-12-3100018281612023-12-222023-12-220001828161us-gaap:RevolvingCreditFacilityMemberus-gaap:LetterOfCreditMemberftci:PlcBarclaysBankMember2021-04-300001828161us-gaap:PreferredStockMember2023-03-310001828161us-gaap:RevolvingCreditFacilityMemberus-gaap:LetterOfCreditMemberftci:PlcBarclaysBankMember2024-01-012024-03-310001828161us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001828161us-gaap:AdditionalPaidInCapitalMember2023-03-310001828161us-gaap:AdditionalPaidInCapitalMember2022-12-310001828161ftci:DayvLlcMember2023-02-090001828161us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001828161us-gaap:ServiceMember2024-01-012024-03-310001828161ftci:TreasuryStock1Member2022-12-310001828161us-gaap:RevolvingCreditFacilityMemberftci:PlcBarclaysBankMember2024-01-012024-03-310001828161us-gaap:CommonStockMember2022-12-310001828161ftci:MajorCustomersMember2024-03-310001828161us-gaap:CostOfSalesMember2024-01-012024-03-310001828161us-gaap:TechnologyEquipmentMember2023-12-310001828161us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001828161us-gaap:SoftwareDevelopmentMember2024-03-310001828161us-gaap:EquipmentMember2023-12-310001828161us-gaap:ServiceMember2023-01-012023-03-310001828161us-gaap:SellingAndMarketingExpenseMember2023-01-012023-03-310001828161ftci:AtmProgramMember2023-01-012023-03-310001828161ftci:AssessmentMember2024-01-012024-03-310001828161ftci:CbpAssessmentsMember2024-01-012024-03-310001828161srt:MinimumMember2022-08-162022-08-160001828161us-gaap:ToolsDiesAndMoldsMember2024-03-310001828161us-gaap:ProductMember2023-01-012023-03-310001828161us-gaap:PreferredStockMember2023-12-310001828161ftci:FernwehEngagedOperatorCompanyLlcMemberus-gaap:RelatedPartyMember2023-01-012023-03-310001828161us-gaap:DevelopedTechnologyRightsMember2024-03-310001828161ftci:MajorCustomersMember2024-01-012024-03-310001828161us-gaap:RetainedEarningsMember2022-12-310001828161us-gaap:RetainedEarningsMember2024-01-012024-03-310001828161srt:MaximumMember2022-08-162022-08-160001828161us-gaap:PreferredStockMember2024-03-310001828161us-gaap:LeaseholdImprovementsMember2024-03-310001828161us-gaap:RestrictedStockMember2023-01-012023-03-310001828161us-gaap:RevolvingCreditFacilityMemberftci:PlcBarclaysBankMember2024-03-310001828161us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001828161ftci:TreasuryStock1Member2023-03-310001828161us-gaap:ProductMember2024-01-012024-03-310001828161us-gaap:AdditionalPaidInCapitalMember2024-03-310001828161us-gaap:CommonStockMember2023-01-012023-03-310001828161us-gaap:EmployeeStockOptionMember2024-01-012024-03-3100018281612023-12-310001828161ftci:TreasuryStock1Member2024-03-310001828161us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001828161us-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310001828161us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001828161us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001828161srt:MinimumMember2024-01-012024-03-310001828161ftci:AtmProgramMember2022-09-1400018281612024-04-260001828161ftci:AlphaSteelMember2024-03-310001828161us-gaap:RetainedEarningsMember2023-03-310001828161us-gaap:RetainedEarningsMember2023-01-012023-03-310001828161ftci:MajorCustomersMemberus-gaap:SubsequentEventMember2024-04-032024-04-030001828161us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001828161ftci:AlphaSteelMember2023-12-310001828161srt:MaximumMember2024-03-310001828161us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-310001828161us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001828161us-gaap:DevelopedTechnologyRightsMember2023-12-310001828161ftci:TaihuaNewEnergyMember2023-02-090001828161us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001828161us-gaap:CommonStockMember2023-12-3100018281612023-01-012023-03-310001828161ftci:AlphaSteelMember2023-02-0900018281612024-03-310001828161us-gaap:RevolvingCreditFacilityMember2023-01-012023-03-310001828161us-gaap:CostOfSalesMember2023-01-012023-03-3100018281612022-12-310001828161srt:MinimumMember2024-03-310001828161srt:MinimumMember2023-12-220001828161us-gaap:RetainedEarningsMember2023-12-310001828161srt:MaximumMemberftci:AlphaSteelMember2024-01-012024-03-3100018281612023-03-310001828161srt:MaximumMember2024-01-012024-03-310001828161us-gaap:ToolsDiesAndMoldsMember2023-12-310001828161ftci:AtmProgramMember2024-03-31ftci:Daysxbrli:purexbrli:sharesiso4217:USDiso4217:USDxbrli:shares

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended March 31, 2024

 

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to__________

Commission File Number 001-40350

FTC SOLAR, INC.
(Exact name of registrant as specified in its charter)

Delaware

 

81-4816270

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

9020 N Capital of Texas Hwy, Suite I-260,

Austin, Texas 78759

 

 

78759

 (Address of principal executive offices)

 

(Zip Code)

 

(737) 787-7906

Registrant's telephone number, including area code

 

Not Applicable

Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

FTCI

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of April 26, 2024, 125,979,165 shares of the registrant's common stock were outstanding.

 

 


 

img146218138_0.jpg 

TABLE OF CONTENTS

 

 

 

Page

PART I - FINANCIAL INFORMATION

 

 

Forward-looking statements

1

 

Item 1.

Financial Statements (Unaudited)

2

 

 

Condensed Consolidated Balance Sheets

2

 

 

Condensed Consolidated Statements of Comprehensive Loss

3

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

4

 

 

Condensed Consolidated Statements of Cash Flows

5

 

 

Notes to Condensed Consolidated Financial Statements

6

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

 

 

 

 

 

Item 4.

Controls and Procedures

36

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

37

 

Item 1A.

Risk Factors

37

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

 

Item 3.

Defaults Upon Senior Securities

39

 

Item 4.

Mine Safety Disclosures

39

 

Item 5.

Other Information

39

 

Item 6.

Exhibits

40

SIGNATURE

41

 

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements. All statements other than statements of historical or current facts contained in this Quarterly Report may be forward-looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, liquidity, growth and profitability strategies and factors and trends affecting our business are forward-looking statements. Forward-looking statements can be identified in some cases by the use of words such as “believe,” “can,” “could,” “potential,” “plan,” “predict,” “goals,” “seek,” “should,” “may,” “may have,” “would,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” the negative of these words, other similar expressions or by discussions of strategy, plans or intentions.

The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these factors include, but are not limited to, the factors set forth under Part II, Item 1A. "Risk Factors" of this Quarterly Report, and more comprehensively in Part I, Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2023. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.

These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.

1


 

ITEM 1. FINANCIAL STATEMENTS

 

FTC Solar, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except shares and per share data)

 

March 31, 2024

 

 

December 31, 2023

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

14,041

 

 

$

25,235

 

Restricted cash

 

 

1,896

 

 

 

 

Accounts receivable, net

 

 

66,379

 

 

 

65,279

 

Inventories

 

 

3,844

 

 

 

3,905

 

Prepaid and other current assets

 

 

14,069

 

 

 

14,089

 

Total current assets

 

 

100,229

 

 

 

108,508

 

Operating lease right-of-use assets

 

 

1,637

 

 

 

1,819

 

Property and equipment, net

 

 

1,994

 

 

 

1,823

 

Intangible assets, net

 

 

399

 

 

 

542

 

Goodwill

 

 

7,213

 

 

 

7,353

 

Equity method investment

 

 

1,010

 

 

 

240

 

Other assets

 

 

2,548

 

 

 

2,785

 

Total assets

 

$

115,030

 

 

$

123,070

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

12,059

 

 

$

7,979

 

Accrued expenses

 

 

29,690

 

 

 

34,848

 

Income taxes payable

 

 

27

 

 

 

88

 

Deferred revenue

 

 

4,897

 

 

 

3,612

 

Other current liabilities

 

 

7,859

 

 

 

8,138

 

Total current liabilities

 

 

54,532

 

 

 

54,665

 

Operating lease liability, net of current portion

 

 

934

 

 

 

1,124

 

Other non-current liabilities

 

 

4,406

 

 

 

4,810

 

Total liabilities

 

 

59,872

 

 

 

60,599

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock par value of $0.0001 per share, 10,000,000 shares authorized; none issued as of March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock par value of $0.0001 per share, 850,000,000 shares authorized; 125,952,253 and 125,445,325 shares issued and outstanding as of March 31, 2024 and December 31, 2023

 

 

13

 

 

 

13

 

Treasury stock, at cost; 10,762,566 shares as of March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Additional paid-in capital

 

 

363,525

 

 

 

361,886

 

Accumulated other comprehensive loss

 

 

(474

)

 

 

(293

)

Accumulated deficit

 

 

(307,906

)

 

 

(299,135

)

Total stockholders’ equity

 

 

55,158

 

 

 

62,471

 

Total liabilities and stockholders’ equity

 

$

115,030

 

 

$

123,070

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

2


 

FTC Solar, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

 

 

Three months ended March 31,

 

(in thousands, except shares and per share data)

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

Product

 

$

10,905

 

 

$

32,579

 

Service

 

 

1,682

 

 

 

8,315

 

Total revenue

 

 

12,587

 

 

 

40,894

 

Cost of revenue:

 

 

 

 

 

 

Product

 

 

12,367

 

 

 

31,767

 

Service

 

 

2,328

 

 

 

7,092

 

Total cost of revenue

 

 

14,695

 

 

 

38,859

 

Gross profit (loss)

 

 

(2,108

)

 

 

2,035

 

Operating expenses

 

 

 

 

 

 

Research and development

 

 

1,439

 

 

 

1,922

 

Selling and marketing

 

 

2,388

 

 

 

1,711

 

General and administrative

 

 

6,567

 

 

 

10,799

 

Total operating expenses

 

 

10,394

 

 

 

14,432

 

Loss from operations

 

 

(12,502

)

 

 

(12,397

)

Interest expense, net

 

 

(136

)

 

 

(58

)

Gain from disposal of investment in unconsolidated subsidiary

 

 

4,085

 

 

 

898

 

Other income (expense), net

 

 

36

 

 

 

(74

)

Loss from unconsolidated subsidiary

 

 

(265

)

 

 

 

Loss before income taxes

 

 

(8,782

)

 

 

(11,631

)

(Provision for) benefit from income taxes

 

 

11

 

 

 

(131

)

Net loss

 

 

(8,771

)

 

 

(11,762

)

Other comprehensive loss:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(181

)

 

 

(5

)

Comprehensive loss

 

$

(8,952

)

 

$

(11,767

)

Net loss per share:

 

 

 

 

 

 

Basic and diluted

 

$

(0.07

)

 

$

(0.11

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic and diluted

 

 

125,569,375

 

 

 

106,791,198

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

3


 

FTC Solar, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

 

Three months ended March 31, 2024:

 

 

 

Preferred stock

 

 

Common stock

 

 

Treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except shares)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional
paid-In
capital

 

 

Accumulated other comprehensive loss

 

 

Accumulated deficit

 

 

Total
stockholders'
equity
(deficit)

 

Balance as of December 31, 2023

 

 

 

 

$

 

 

 

125,445,325

 

 

$

13

 

 

 

10,762,566

 

 

$

 

 

$

361,886

 

 

$

(293

)

 

$

(299,135

)

 

$

62,471

 

Shares issued during the period for vested restricted stock awards

 

 

 

 

 

 

 

 

506,928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,639

 

 

 

 

 

 

 

 

 

1,639

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,771

)

 

 

(8,771

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(181

)

 

 

 

 

 

(181

)

Balance as of March 31, 2024

 

 

 

 

$

 

 

 

125,952,253

 

 

$

13

 

 

 

10,762,566

 

 

$

 

 

$

363,525

 

 

$

(474

)

 

$

(307,906

)

 

$

55,158

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2023:

 

 

 

Preferred stock

 

 

Common stock

 

 

Treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except shares)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional
paid-In
capital

 

 

Accumulated
other
comprehensive
loss

 

 

Accumulated
deficit

 

 

Total
stockholders'
equity
(deficit)

 

Balance as of December 31, 2022

 

 

 

 

$

 

 

 

105,032,588

 

 

$

11

 

 

 

10,762,566

 

 

$

 

 

$

315,345

 

 

$

(61

)

 

$

(248,845

)

 

$

66,450

 

Shares issued during the period for vested restricted stock awards

 

 

 

 

 

 

 

 

1,498,987

 

 

 

 

 

 

 

 

 

 

 

 

2,775

 

 

 

 

 

 

 

 

 

2,775

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

265,125

 

 

 

 

 

 

 

 

 

 

 

 

51

 

 

 

 

 

 

 

 

 

51

 

Shares issued for legal settlement

 

 

 

 

 

 

 

 

797,396

 

 

 

 

 

 

 

 

 

 

 

 

2,000

 

 

 

 

 

 

 

 

 

2,000

 

Sale of shares

 

 

 

 

 

 

 

 

2,683,000

 

 

 

 

 

 

 

 

 

 

 

 

6,292

 

 

 

 

 

 

 

 

 

6,292

 

Stock offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32

)

 

 

 

 

 

 

 

 

(32

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,472

 

 

 

 

 

 

 

 

 

2,472

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,762

)

 

 

(11,762

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

Balance as of March 31, 2023

 

 

 

 

$

 

 

 

110,277,096

 

 

$

11

 

 

 

10,762,566

 

 

$

 

 

$

328,903

 

 

$

(66

)

 

$

(260,607

)

 

$

68,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

4


 

FTC Solar, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

Three months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(8,771

)

 

$

(11,762

)

Adjustments to reconcile net loss to cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

1,639

 

 

 

4,890

 

Depreciation and amortization

 

 

404

 

 

 

334

 

Amortization of debt issue costs

 

 

177

 

 

 

177

 

Provision (credit) for obsolete and slow-moving inventory

 

 

177

 

 

 

1,261

 

Loss from unconsolidated subsidiary

 

 

265

 

 

 

 

Gain from disposal of investment in unconsolidated subsidiary

 

 

(4,085

)

 

 

(898

)

Warranty and remediation provisions

 

 

838

 

 

 

1,543

 

Warranty recoverable from manufacturer

 

 

98

 

 

 

(54

)

Credit loss provisions

 

 

670

 

 

 

 

Deferred income taxes

 

 

225

 

 

 

216

 

Lease expense and other

 

 

309

 

 

 

229

 

Impact on cash from changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(1,770

)

 

 

(11,412

)

Inventories

 

 

(116

)

 

 

5,078

 

Prepaid and other current assets

 

 

45

 

 

 

817

 

Other assets

 

 

(226

)

 

 

(882

)

Accounts payable

 

 

3,989

 

 

 

7,882

 

Accruals and other current liabilities

 

 

(6,200

)

 

 

(616

)

Deferred revenue

 

 

1,285

 

 

 

(2,677

)

Other non-current liabilities

 

 

(523

)

 

 

(2,212

)

Lease payments and other, net

 

 

(287

)

 

 

(230

)

Net cash used in operations

 

 

(11,857

)

 

 

(8,316

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(432

)

 

 

(28

)

Equity method investment in Alpha Steel

 

 

(1,035

)

 

 

(900

)

Proceeds from disposal of investment in unconsolidated subsidiary

 

 

4,085

 

 

 

898

 

Net cash provided by (used in) investing activities

 

 

2,618

 

 

 

(30

)

Cash flows from financing activities:

 

 

 

 

 

 

Sale of common stock

 

 

 

 

 

5,450

 

Stock offering costs paid

 

 

 

 

 

(32

)

Proceeds from stock option exercises

 

 

 

 

 

51

 

Net cash provided by financing activities

 

 

 

 

 

5,469

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(59

)

 

 

(15

)

Decrease in cash, cash equivalents and restricted cash

 

 

(9,298

)

 

 

(2,892

)

Cash and cash equivalents at beginning of period

 

 

25,235

 

 

 

44,385

 

Cash, cash equivalents and restricted cash at end of period

 

$

15,937

 

 

$

41,493

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Purchases of property and equipment included in ending accounts payable and accruals

 

$

175

 

 

$

32

 

Stock issued for accrued legal settlement

 

$

 

 

$

2,000

 

Right-of-use asset and lease liability recognition for new leases

 

$

 

 

$

1,417

 

Cash paid during the period for interest

 

$

140

 

 

$

129

 

Cash paid during the period for taxes, net of refunds

 

$

58

 

 

$

6

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

5


 

FTC Solar, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Description of business

FTC Solar, Inc. (the “Company”, “we”, “our”, or “us”) was founded in 2017 and is incorporated in the state of Delaware. In April 2021, we completed an initial public offering ("IPO"), and our common stock began trading on the Nasdaq Global Market under the symbol “FTCI”.

We are a global provider of solar tracker systems, supported by proprietary software and value-added engineering services. Solar tracker systems move solar panels throughout the day to maintain an optimal orientation relative to the sun, thereby increasing the amount of solar energy produced at a solar installation. Our original two-panel in-portrait solar tracker system is currently marketed under the Voyager brand name (“Voyager”) and our one module-in-portrait ("1P") solar tracker system, which became certified in 2023, is marketed under the Pioneer brand name ("Pioneer"). We also have a mounting solution to support the installation and use of U.S.-manufactured thin-film modules by project owners. Our primary software offerings include SUNPATH which is intended to help customers optimize solar tracking for increased energy production, our SUNOPS real-time operations management platform and our web-based ATLAS portfolio management software. In addition, we have a team of renewable energy professionals available to assist our U.S. and worldwide clients in site layout, structural design, pile testing and other needs across the solar project development and construction cycle. The Company is headquartered in Austin, Texas, and has international subsidiaries in Australia, China, India, South Africa and Spain.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups (JOBS) Act. Under the JOBS Act, we elected to use the allowed extended transition period to delay adopting new or revised accounting standards until such time as those standards apply to private companies.

 

2. Summary of significant accounting policies

Basis of presentation and principles of consolidation

The accompanying unaudited condensed consolidated financial statements include the results of the Company and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements and pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature have been made that are considered necessary for a fair statement of our financial position as of March 31, 2024, and December 31, 2023, our results of operations for the three months ended March 31, 2024 and 2023, and our cash flows for the three months ended March 31, 2024 and 2023. The condensed consolidated balance sheet as of December 31, 2023 has been derived from the Company’s audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. Intercompany balances and transactions have been eliminated in consolidation.

Certain information and disclosures normally included in the notes to annual financial statements prepared in accordance with U.S. GAAP have been omitted from these interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (our "2023 Annual Report").

We currently operate in one business segment, the manufacturing and servicing of solar tracker systems.

Liquidity

We have incurred cumulative losses since inception and have a history of cash outflows from operations. As of March 31, 2024, we had $14.0 million of cash on hand, $45.7 million of working capital and approximately $64.9 million of remaining capacity available for future sales of our common stock under our ATM program as defined and described further in Note 4 below. There can be no assurance that we will be able to sell any additional shares of our common stock under the ATM program and no assurance regarding the price at

 

6


 

which we will be able to sell such shares, and any sales of our common stock under the ATM program may be at prices that result in additional dilution to our existing stockholders. On December 22, 2023, we received notification from The Nasdaq Stock Market LLC (“Nasdaq”) that we were not in compliance with the requirement to maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5450(a)(1), because the closing bid price of the Company’s common stock was below $1.00 per share for 30 consecutive business days. The notification does not impact the listing of our common stock on the Nasdaq Global Market at this time.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days from the date of notification, or until June 19, 2024, to regain compliance with the minimum bid price requirement. During this period, our common stock will continue to trade on the Nasdaq Global Market. If at any time before June 19, 2024 the bid price of our common stock closes at or above $1.00 per share for a minimum of ten consecutive business days, Nasdaq will provide written notification that we have achieved compliance with this minimum bid price requirement.

In the event we do not regain compliance by June 19, 2024, we may be eligible for an additional 180 calendar day compliance period to demonstrate compliance with the minimum bid price requirement. To qualify for the additional 180-day period, we may be required to meet the continued listing requirements for market value of publicly held shares and all other initial listing standards (with the exception of the bid price requirement) and transfer our listing to the Nasdaq Capital Market. In addition, we will need to provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If we do not qualify for the second compliance period or fail to regain compliance during the second 180-day period, then Nasdaq will notify us that our common stock is subject to delisting.

As of March 31, 2024, we were not in compliance with the minimum liquidity covenant in our existing Senior Secured Revolving Credit Facility (the "Credit Facility") which prevented us from borrowing under the Credit Facility prior to its termination on April 30, 2024.

Also, as of March 31, 2024, we had a material contractual obligation that could require us to make additional capital contributions of up to $1.6 million to Alpha Steel, as described further in Note 3, "Equity method investment".

The most notable incentive program impacting our U.S. business has historically been the investment tax credit ("ITC") for solar energy projects, which allows taxpayers to offset their U.S. federal income tax liability by a certain percentage of their cost basis in solar energy systems placed in service for commercial use. The Inflation Reduction Act of 2022, passed by the U.S. Congress and signed into law by President Biden on August 16, 2022, expanded and extended the tax credits and other tax benefits available to solar energy projects and the solar energy supply chain. ITCs have been extended for such projects through at least 2032 and, depending on the location of a particular project and its ability to satisfy certain labor and domestic content requirements, the ITC percentage can range between 30% and 50%. U.S. manufacturers of specific solar components are now eligible to claim production tax credits as an alternative to the ITC. Implementing regulations for this law are, in certain cases, still being finalized and the impact of these regulations continue to be evaluated by developers of new solar projects and manufacturers of solar components. Our investment in and commitments made to Alpha Steel will allow us to obtain certain benefits as a result of this new production tax credit program.

We have taken steps to expand and diversify our manufacturing partnerships and have adjusted our modes of transportation to mitigate the impact of headwinds that might arise in the global supply chain and logistics markets. As an example, we modified our ocean freight from previously using charter shipments to now using containerized shipments as costs in the container market began to decrease starting in 2022. We continue to monitor the logistics markets and will continue to evaluate our use of various modes of transportation when warranted to optimize our transportation costs. Additionally, from February 2022 to September 2023, we utilized a related-party consulting firm to support us in making improvements to our processes and performance in various areas, including design, sourcing, logistics, pricing, software and our distributed generation business. For further information regarding this consulting firm, see Note 16, "Related party transactions" below.

Similar to previous periods, we continue to evaluate our opportunities in 2024 to address existing market challenges, our cost structure and our historical use of cash. Further, in 2023, we introduced a new mounting solution to support the installation and use of U.S.-manufactured thin-film modules, Pioneer, our 1P solar tracker solution became certified, and we introduced SUNOPS, a cloud-based, tracker agnostic solar asset monitoring solution allowing asset owners and managers to evaluate the operation and performance of their solar deployments. Additionally, we have seen improvements in the logistics markets and easing of supply chain constraints since 2022. These factors contributed to us having positive gross profit during each quarter in 2023, a first since our IPO in April 2021.

 

7


 

In accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, we have evaluated whether there are conditions and events, considered in the aggregate, which raise substantial doubt about our ability to continue as a going concern within one year after the date our condensed consolidated financial statements are issued.

Management believes that our existing cash on hand, including cash received in April 2024 as a result of our agreement with a major customer as discussed further in Note 18, "Subsequent events" below, as well as the continuing impact of certain of the actions described above and our expectations of (i) improved market conditions, (ii) the expected timing of customer project activity, including activity related to certain large project awards received in 2023, and (iii) positive results in recent periods from our efforts to increase our direct product margins, will allow us to grow profitably and generate positive cash flow from operations during the next twelve months in amounts that will be sufficient, along with our other available resources such as our existing working capital and, if conditions become more conducive, the remaining capacity available for future sales of our common stock under our ATM program, to fund our operations for at least one year from the date of issuance of the condensed consolidated financial statements.

While there are already many underlying drivers of growth in the solar industry, the expected positive impact on demand for our products, or the timing of construction activity by existing customers and solar project developers, could take longer than expected to occur. In addition, domestic and international market conditions could deteriorate significantly from what we currently expect, and regulatory and international trade policies could become more stringent as a result of (i) findings from an ongoing investigation by the U.S. Department of Commerce (the Solar Circumvention Investigation") in response to a petition by Auxin Solar, Inc. of claims related to alleged circumvention of U.S. antidumping and countervailing duties ("AD/CVD") by solar manufacturers in certain Southeast Asian countries, (ii) enforcement of the Uyghur Forced Labor Prevention Act ("UFLPA") passed by the U.S. Congress and signed into law by President Biden on December 23, 2021, by U.S. Customs and Border Protection ("CBP'), and (iii) other factors, which may result in a need for us to issue additional debt or obtain new equity financing to adequately fund our existing operations beyond the next twelve months. We continue to actively explore options to obtain additional sources of capital through the issuance of new debt, asset financing or other potential measures for our longer-term needs. However, we may be unable to obtain any desired additional financing on terms favorable to us, or at all, depending on market and other conditions, which could result in curtailment of our current operations and our ability to further invest in our products and new technology. The ability to raise additional financing depends on numerous factors, some of which that are outside of our control, including macroeconomic factors such as the impact of inflation, the level of interest rates, supply chain or other effects from the ongoing conflicts in the Ukraine and the Middle East, general market conditions, the health of financial institutions (including recent bankruptcies and financial difficulties involving certain regional banks and related impacts that have occurred and continue to occur in the banking industry), investors' and lenders' assessments of our prospects and the prospects of the solar industry in general and the ability of our common stock to continue to trade in active markets.

Use of estimates

Preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenue and expenses during the period. Estimates are used for calculating the measure of progress of our solar tracker projects and deriving the standalone selling prices of the individual performance obligations when determining amounts to recognize for revenue, estimating allowances for credit losses and slow-moving and obsolete inventory, determining useful lives of long-lived assets and the estimated fair value of those assets for impairment assessments, and estimating the fair value of investments, stock compensation awards, warranty liabilities and federal and state taxes, including tax valuation allowances, as well as other contingencies. We base our estimates on historical experience and anticipated results, trends, and various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates due to risks and uncertainties.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and accounts receivable.

We regularly maintain cash balances with various financial institutions that exceed federally insured amounts, but we have experienced no losses associated with these amounts to date. We also took action in early 2023 to reallocate cash balances between different financial institutions based on our assessment as to the financial health of certain institutions.

We extend credit to customers in the normal course of business, often without requiring collateral. We also perform credit analyses and monitor the financial health of our customers to reduce credit risk.

 

8


 

The Company’s accounts receivables are derived from revenue earned from customers primarily located in the U.S. and Australia. No countries other than the U.S. and Australia accounted for 10% or more of our revenue. Most of our customers are project developers, solar asset owners and engineering, procurement and construction (“EPC”) contractors that design and build solar energy projects. We typically rely on a small number of customers that account for a large portion of our revenue each period and our outstanding receivables at each period end.

Cash and cash equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Certain of our cash equivalents include deposits in money market funds that invest primarily in short-term securities issued or guaranteed by the U.S. government or its agencies or instrumentalities and contain no restrictions on immediate redemption. These deposits totaled $9.3 million at March 31, 2024 and $13.9 million at December 31, 2023. Interest earned on cash equivalents is included in interest income, which is reported net of interest expense in our condensed consolidated statements of comprehensive loss.

Restricted cash

Cash balances that are legally, contractually or otherwise restricted as to withdrawal or usage are considered restricted cash.

Accounts receivable, net

Trade receivables are recorded at invoiced amounts, net of allowances for credit losses, and do not bear interest. We generally do not require collateral from our customers; however, in certain circumstances, we may require letters of credit, other collateral, additional guarantees or advance payments.

The allowance for credit losses is based on the lifetime expected credit loss of our customer accounts. To assess the lifetime expected credit loss, we utilize a loss rate method that takes into consideration historical experience and certain other factors, as appropriate, such as credit quality and current economic or other conditions that may affect a customer's ability to pay. Provisions for credit losses are included as a component of our selling and marketing expenses.

Receivables arising from revenue recognized in excess of billings represents our unconditional right to consideration before customers are invoiced due to the level of progress obtained as of period end on our contracts to procure and deliver tracker systems and related equipment. Further information may be found below in our revenue recognition policy.

Inventories, net

Inventories are stated at the lower of cost or net realizable value, with costs computed on a first-in, first-out basis. The Company periodically reviews its inventories for excess and obsolete items and adjusts carrying costs to estimated net realizable values when they are determined to be less than cost.

Impairment

We review our long-lived assets that are held for use for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable or that its useful life may be shorter than previously expected. If such impairment indicators are present or other factors exist that indicate the carrying amount of the asset may not be recoverable, we determine whether an impairment has occurred through the use of an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset, which in most cases is estimated based upon Level 3 unobservable inputs. If the asset is determined to have a remaining useful life shorter than previously expected, an adjustment for the shorter remaining life will be made for purposes of recognizing future depreciation expense. Assets are classified as held for sale when we have a plan, approved by the appropriate levels of management, for disposal of such assets, as well as other considerations, and those assets are stated at the lower of carrying value or estimated fair value less estimated costs to sell.

 

9


 

Intangible assets, net

Intangible assets are recorded at fair value when acquired in connection with a business combination and consist of developed technology in the form of software tools, licenses, and intellectual property, which are amortized over the period of their estimated useful lives, generally 2.5 - 3.0 years, using the straight-line method. Costs incurred to renew or extend the term of a recognized intangible asset, if any, are expensed as incurred. We evaluate intangible assets for impairment using the method described above under "Impairment".

Goodwill

We recognize goodwill as the excess of the purchase price over the estimated fair value of the identified assets and liabilities acquired in a business combination accounted for using the acquisition method. Goodwill is not amortized but is subject to a periodic assessment for impairment at least annually, or whenever events and circumstances indicate an impairment may exist. Our assessments may include qualitative factors such as current or expected industry and market conditions, our overall financial performance, share price trends, market capitalization and other company-specific events.

We operate in one segment, being the consolidated entity, which we have also determined is the reporting unit for goodwill impairment.

No impairment of goodwill was recognized as of March 31, 2024 or 2023.

Equity method investment

We use the equity method of accounting for investments in which we have the ability to exercise significant influence, but not control, over operating and financial policies of the investee. Our proportionate share of the net income or loss of these investees is included in our condensed consolidated statements of comprehensive loss. Judgment regarding the level of influence over each equity method investment includes considering key factors such as our ownership interest, legal form of the investee, representation on the board of directors or managers, participation in policy-making decisions and material intra-entity transactions.

We account for distributions received from equity method investees under the “nature of the distribution” approach based on the nature of the activity or activities of the investee that generated the distribution as either a return on investment (classified as cash inflows from operating activities) or a return of investment (classified as cash inflows from investing activities).

We evaluate equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. Factors considered by the Company when reviewing an equity method investment for impairment include the length of time and the extent to which the fair value of the equity method investment has been less than its cost, the investee’s financial condition and near-term prospects and the intent and ability to hold the investment for a period of time sufficient to allow for anticipated recovery. An impairment that is other-than temporary is recognized in the period identified.

We made an accounting policy election that, upon the sale of our equity method investments, we will recognize contractual contingent gains arising from earnout provisions and project escrow releases when such amounts are realizable in periods subsequent to the disposal date.

Warranty

Typically, the sale of solar tracker projects includes parts warranties to customers as part of the overall price of the product. We provide standard assurance type warranties for our products for periods generally ranging from five to ten years. We also accrue for costs relating to remediation efforts involving product issues we believe require correction. We record a provision for estimated warranty and remediation expenses in cost of sales, net of amounts recoverable from manufacturers under their warranty obligations to us. When historical claims information relating to our equipment is not sufficient, we will base our estimates on industry studies involving the nature and frequency of product failure rates for similar parts used by our competitors, as well as other related businesses. We do not maintain general or unspecified reserves; all warranty reserves are related to specific projects. All actual or estimated material costs incurred for warranty or remediation services in subsequent periods are charged to those established reserves.

While we periodically monitor our warranty activities and claims, if actual costs incurred were to be different from our estimates, we would recognize adjustments to our warranty reserves in the period in which those differences arise or are identified.

 

10


 

Stock-based compensation

We recognize compensation expense for all share-based payment awards made, including stock options and restricted stock units ("RSUs"), based on the estimated fair value of the award on the grant date. We calculate the fair value of stock options using the Black-Scholes option pricing model for awards with service-based vesting or through use of a lattice model or a Monte Carlo simulation for stock option and RSU awards with market conditions. The fair value of RSUs with service or performance-based vesting is based on the estimated fair value of the Company's common stock on the date of grant. We consider the closing price of our stock, as reported on the Nasdaq Global Market, to be the fair value of our stock on the grant date.

Forfeitures are accounted for as they occur. For service-based awards, stock-based compensation is recognized using the straight-line attribution approach over the requisite service period. For performance-based awards, stock-based compensation is recognized based on graded vesting over the requisite service period when the performance condition is probable of being achieved. Stock compensation expense for market-based awards is recognized over the derived service period determined in the valuation model, inclusive of any vesting conditions.

Revenue recognition

Product revenue is derived from the sale of solar tracker systems and customized components for those systems, individual part sales for certain specific transactions and the sale of term-based software licenses. Term-based licensed software is deployed on the customers’ own servers and has significant standalone functionality.

Service revenue includes revenue from shipping and handling services, engineering consulting and pile testing services, our subscription-based enterprise licensing model and maintenance and support services in connection with the term-based software licenses. Our subscription-based enterprise licensing model typically has contract terms ranging from one to two years and consists of subscription fees from the licensing of subscription services. Our hosted on-demand service arrangements do not provide customers with the right to take possession of the software supporting the hosted services. Support services include ongoing security updates, upgrades, bug fixes, and maintenance.

We recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services by following a five-step process: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when or as the Company satisfies a performance obligation, as further described below.

Identify the contract with a customer: A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the products and services to be transferred and identifies the payment terms related to these products and services, (ii) the contract has commercial substance, and (iii) the Company determines that collection of substantially all consideration for products and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. In assessing the recognition of revenue, we also evaluate whether two or more contracts should be combined and accounted for as one contract and if the combined or single contract should be accounted for as multiple performance obligations which could change the amount of revenue and profit (loss) recorded in a period. Change orders may include changes in specifications or design, manner of performance, equipment, materials, scope of work, and/or the period of completion of the project. We analyze change orders to determine if they should be accounted for as a modification to an existing contract or a new stand-alone contract.

Contracts we enter into with our customers for sale of solar tracker systems are generally under two different types of arrangements: (1) purchase agreements and equipment supply contracts (“Purchase Agreements”), and (2) sale of individual parts for those systems.

Change orders from our customers are generally modifications to existing contracts and are included in the total estimated contract revenue when it is probable that the change order will result in additional value that can be reliably estimated and realized.

Identify the performance obligations in the contract: We enter into contracts that can include various combinations of products and services, which are either capable of being distinct and accounted for as separate performance obligations or as one performance obligation since the majority of tasks and services are part of a single project or capability. However, determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may sometimes require significant judgment.

 

11


 

Our Purchase Agreements typically include two performance obligations: 1) our solar tracker systems or customized components of those systems, and 2) shipping and handling services. The deliverables included as part of our solar tracker systems are predominantly accounted for as one performance obligation, as these deliverables are part of a combined promise to deliver a project.

The revenue for shipping and handling services will be recognized over time based on progress in meeting shipping terms of the arrangements, as this faithfully depicts the Company’s performance in transferring control. Revenue for stand-alone engineering consulting and pile testing services is recognized at a point in time upon completion of the services performed.

Sales of individual parts of our solar tracker systems for certain specific transactions include multiple performance obligations consisting of individual parts of those systems. Revenue is recognized for parts sales at a point in time when the obligations under the terms of the contract with our customer are satisfied. Generally, this occurs with the transfer of control of the asset, which is in line with shipping terms.

Determine the transaction price: The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring services to the customer. Such amounts are typically stated in the customer contract, and to the extent that we identify variable consideration, we will estimate the variable consideration at the onset of the arrangement as long as it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The majority of our contracts do not contain variable consideration provisions as a continuation of the original contract. None of our contracts contain a significant financing component. Taxes collected from customers and remitted to governmental authorities are not included in revenue.

Allocate the transaction price to performance obligations in the contract: Once we have determined the transaction price, we allocate the total transaction price to each performance obligation in a manner depicting the amount of consideration to which we expect to be entitled in exchange for transferring the good(s) or service(s) to the customer. We allocate the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis.

We use the expected cost-plus margin approach based on hardware, labor, and related overhead cost to estimate the standalone selling price of our solar tracker systems, customized components of those systems, and individual parts for certain specific transactions. We also use the expected cost-plus margin approach based on expected third-party shipping and transportation costs to estimate the standalone selling price of our shipping, handling and logistics performance obligations. We use the adjusted market assessment approach for all other performance obligations.

Recognize revenue when or as the Company satisfies a performance obligation: For each performance obligation identified, we determine at contract inception whether we satisfy the performance obligation over time or at a point in time. The performance obligations in the contracts for our solar tracker systems and customized components of those systems are satisfied over time as work progresses, utilizing an input measure of progress determined by cost-to-cost measures on these projects as this faithfully depicts our performance in transferring control. Additionally, our performance does not create an asset with an alternative use, due to the highly customized nature of the product, and we have an enforceable right to payment for performance completed to date. Our performance obligations for individual part sales for certain specific transactions are recognized at a point in time as and when control transfers based on the Incoterms for the contract. Our performance obligations for engineering consulting and pile testing services are recognized at a point in time upon completion of the services. Our performance obligations for term-based software licenses are recognized at a point in time as and when control transfers, either upon delivery to the customer or the software license start date, whichever is later. Our performance obligations for shipping and handling services are satisfied over time as the services are delivered over the term of the contract. We recognize revenue for subscription and other services on a straight-line basis over the contract period. With regard to support revenue, a time-elapsed method is used to measure progress because we transfer control evenly over the contractual period. Accordingly, the fixed consideration related to support revenue is generally recognized on a straight-line basis over the contract term.

Contract assets and liabilities: The timing of revenue recognition, billing, and cash collection results in the recognition of accounts receivable, unbilled receivables for revenue recognized in excess of billings, and deferred revenue in the condensed consolidated balance sheets. We have elected to use the practical expedient of expensing incremental costs of obtaining a contract as incurred since the majority of the performance obligations in our contracts are satisfied in less than one year. We may receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities, which are reflected as “deferred revenue” in our condensed consolidated balance sheets. Customer deposits are short term as the related performance obligations are typically fulfilled within 12 months. Changes in deferred revenue relate to fluctuations in the timing of customer deposits and completion of performance obligations. Revenue recognized during the three months ended March 31, 2024 and 2023, from amounts included in deferred revenue at December 31, 2023 and December 31, 2022, totaled $2.4 million and $7.6 million, respectively.

 

12


 

Cost of revenue consists primarily of costs related to raw materials, equipment manufacturing activities, freight and delivery, product warranty, remediation and personnel costs (salaries, bonuses, benefits, and stock-based compensation). Personnel costs in cost of revenue include both direct labor costs, as well as costs attributable to any individuals whose activities relate to the procurement, installment and delivery of the finished product and services. Cost of revenue owed but not yet paid is recorded as accrued cost of revenue in the accompanying condensed consolidated financial statements. Deferred cost of revenue results from the timing differences between the costs incurred in advance of the satisfaction of all revenue recognition criteria consistent with our revenue recognition policy.

Recent accounting and regulatory pronouncements not yet adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which will become effective for us for our year end 2024 financial reporting and our interim reporting beginning January 1, 2025. ASU 2023-07 requires public companies to disclose significant segment expenses and other segment items on an annual and interim basis and will require interim disclosures about a reportable segment's profit or loss and assets that are currently required annually. As noted above, we operate in one segment. We are currently evaluating the impact of ASU 2023-07 on our existing disclosures. ASU 2023-07 will be applied retrospectively to all periods when presented in our consolidated financial statements for the year ending December 31, 2024.

In December 2023, the FASB issued ASU No. 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires companies to disclose (i) additional categories of information about federal, state and foreign income taxes above a quantitative threshold in their rate reconciliation table and (ii) income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods, as well as other disclosure changes. As an emerging growth company, we are not required to adopt ASU 2023-09 prior to 2026, although earlier adoption is permitted. We are currently evaluating the impact of ASU 2023-09 on our existing income tax disclosures.

In March 2024, the U.S. Securities and Exchange Commission ("SEC") adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule would require registrants to disclose certain climate-related information in registration statements and annual reports. In April 2024, the SEC issued a stay of the final rules pending a judicial review of the validity of the rules by the Eighth Circuit Court of Appeals. We are currently evaluating the final rule to determine its impact on our disclosures.

Other standards or regulatory requirements that have been issued but not yet adopted as of March 31, 2024, are either not applicable to us or are not expected to have any material impact upon adoption.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. There was no impact on our financial condition or results of operations as a result of the reclassification.

 

3. Equity method investment

On February 9, 2023, we entered into a limited liability company agreement (the "LLC Agreement") with Taihua New Energy (Thailand) Co., LTD ("Taihua"), a leading steel fabricator and an existing vendor, and DAYV LLC, for the creation of Alpha Steel LLC ("Alpha Steel"), a Delaware limited liability company dedicated to producing steel components, including torque tubes, for utility-scale solar projects. The Alpha Steel facility, which is located outside of Houston in Sealy, Texas, began commercial production late in the fourth quarter of 2023.

We entered into amendment no. 1 to the Alpha Steel LLC Agreement with Taihua and DAYV LLC on July 28, 2023, to allow for members at their option, and with the approval of the Board of Managers, to make payments in respect of Alpha Steel’s contractual obligations in the event that Alpha Steel does not or is not able to make such payments from its own resources (“Credit Support Payments”). Any such Credit Support Payments will be treated as capital contributions by the members to Alpha Steel, with any member funding more than its ratable share of Credit Support Payments being deemed to have loaned such excess to each underfunding member at the U.S. prime rate plus 2%.

 

13


 

Alpha Steel is intended to enhance our domestic supply chain, our ability to support our customers and the growth of the U.S. solar market, with domestic manufacturing utilizing U.S. steel. We have a 45% interest in Alpha Steel, which is accounted for under the equity method of accounting. Taihua has a 51% interest in Alpha Steel and DAYV LLC, an entity owned by members of the Board of Managers of Alpha Steel and a related party with the parent company of Taihua, has a 4% interest in Alpha Steel. The Chief Executive Officer of Taihua is the General Manager of Alpha Steel. We have equal voting representation with Taihua and DAYV LLC, combined, on Alpha Steel's Board of Managers which will be responsible, through majority vote, for making certain "major decisions" involving Alpha Steel, as specified in the LLC Agreement, including, among other things, approval of an annual business plan.

During 2023, we made a required initial capital contribution of $0.9 million to Alpha Steel. For the three months ended March 31, 2024, we also made a required additional capital contribution of $1.0 million. Pursuant to the LLC Agreement, we could be required to make up to $1.6 million in future additional capital contributions as Alpha Steel continues to expand production. For the three months ended March 31, 2024, we recognized a loss of $0.3 million which represents our share of the net operating losses incurred by Alpha Steel during the period.

In connection with the creation of Alpha Steel, we also entered into a three-year equipment supply agreement (the "Supply Agreement") with Alpha Steel, the terms of which will apply to our equipment purchase orders. Pursuant to the Supply Agreement, we have committed to placing a minimum level of purchase orders for torque tubes with Alpha Steel during the year ended December 31, 2024, with such volume commitments increasing in each of the next two annual periods. In the event we fail to meet our minimum required purchase commitments in any annual period, we may be required to make a cash payment for the net profit attributable to any unfilled requirements, calculated as specified in the agreement, in an amount not to exceed $4.0 million in the aggregate. As of March 31, 2024, we had met approximately 6% of our 2024 annual purchase commitments. The Supply Agreement may be terminated early in accordance with its provisions or may be extended beyond the initial term if mutually agreed to by the parties.

At March 31, 2024, in addition to our requirement to meet the remaining minimum purchase obligations for the remainder of the year, as described above, we were contingently liable for unpaid vendor obligations, including issued but unsatisfied purchase orders, of Alpha Steel totaling approximately $5.2 million. We expect Alpha Steel will be able to satisfy these obligations with financial resources available to them in the normal course of operations.

 

4. ATM program

On September 14, 2022, we filed a prospectus supplement and entered into an equity distribution agreement (as amended from time to time, the "EDA") under which we may from time to time, in one or more transactions, offer and sell newly issued shares of our common stock having an aggregate offering price of up to $100 million in "at the money" offerings (the "ATM program"). We have and may continue to use the net proceeds from this offering for general corporate purposes, including working capital and operating expenses. We may also use a portion of such proceeds to acquire or invest in businesses, products, services or technologies.

Barclays Capital Inc. ("Barclays") is our sales agent under the EDA. The offering of our common stock under the EDA will terminate upon the earlier of (1) the sale of all common stock subject to the EDA or (2) the termination of the EDA by us or by Barclays as permitted therein. The EDA contains customary representations, covenants and indemnification provisions.

We sold no shares of newly issued common stock under the ATM program during the three months ended March 31, 2024, however, during the three months ended March 31, 2023, we sold 2,683,000 shares of newly issued common stock valued at $6.5 million for proceeds, net of commissions and fees, of approximately $6.3 million, including $0.8 million for shares sold but not yet settled as of March 31, 2023. As of March 31, 2024, approximately $64.9 million of capacity remained for future sales of our common stock under the ATM program.

 

 

14


 

5. Accounts receivable, net

Accounts receivable consisted of the following:

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Trade receivables

 

$

49,474

 

 

$

46,152

 

Related party receivables

 

 

1,672

 

 

 

868

 

Revenue recognized in excess of billings

 

 

24,456

 

 

 

26,813

 

Other receivables

 

 

4

 

 

 

3

 

Total

 

 

75,606

 

 

 

73,836

 

Allowance for credit losses

 

 

(9,227

)

 

 

(8,557

)

Accounts receivable, net

 

$

66,379

 

 

$

65,279

 

Information relating to related party receivables at March 31, 2024, may be found below in Note 16, "Related party transactions".

Included in total receivables above are amounts billed under retainage provisions totaling $0.6 million and $0.9 million as of March 31, 2024 and December 31, 2023, respectively, which are due within the next twelve months.

Activity in the allowance for credit losses during the three months ended March 31, 2024 and 2023 was as follows:

 

 

Three months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

Balance at beginning of period

 

$

8,557

 

 

$

1,184

 

Impact of adoption of ASU 2016-13, effective January 1, 2023

 

N/A

 

 

 

 

Additions charged to earnings during the period

 

 

670

 

 

 

 

Balance at end of period

 

$

9,227

 

 

$

1,184

 

 

 

 

 

 

 

 

 

6. Inventories, net

Inventories consisted of the following:

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Finished goods

 

$

4,362

 

 

$

4,246

 

Allowance for slow-moving and obsolete inventory

 

 

(518

)

 

 

(341

)

Total

 

$

3,844

 

 

$

3,905

 

 

7. Prepaid and other current assets

Prepaid and other current assets consisted of the following:

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Vendor deposits

 

$

5,894

 

 

$

5,667

 

Vendor deposits with related party

 

 

1,504

 

 

 

520

 

Prepaid expenses

 

 

710

 

 

 

1,251

 

Prepaid taxes

 

 

471

 

 

 

447

 

Deferred cost of revenue

 

 

611

 

 

 

666

 

Surety collateral

 

 

55

 

 

 

 

Other current assets

 

 

4,824

 

 

 

5,538

 

Total

 

$

14,069

 

 

$

14,089

 

At March 31, 2024, other current assets included $2.5 million of (i) a short-term, interest-bearing loan to a customer, as well as (ii) a non-interest-bearing customer advance, both of which are for pre-project construction financing activities. These amounts are secured by customer assets and, additionally in one case by a financial guarantee.

 

15


 

8. Leases

We lease office and warehouse space in various locations, including our corporate headquarters in Austin, Texas. Additionally, we lease space for an applications laboratory in Austin, Texas and a research and development facility in Seguin, Texas. All of our manufacturing is outsourced to contract manufacturing partners, and we currently do not own or lease any manufacturing facilities.

Our expense for our operating leases consisted of the following:

 

 

Three months ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

Operating lease cost

 

$

309

 

 

$

229

 

Short-term lease cost

 

 

93

 

 

 

92

 

Total lease cost

 

$

402

 

 

$

321

 

 

 

 

 

 

 

 

Reported in:

 

 

 

 

 

 

Cost of revenue

 

$

236

 

 

$

215

 

Research and development

 

 

14

 

 

 

15

 

Selling and marketing

 

 

48

 

 

 

15

 

General and administrative

 

 

104

 

 

 

76

 

Total lease cost

 

$

402

 

 

$

321

 

Future remaining operating lease payment obligations were as follows:

(in thousands)

 

March 31,
2024

 

Remainder of 2024

 

$

607

 

2025

 

 

755

 

2026

 

 

219

 

2027

 

 

192

 

2028

 

 

16

 

Total lease payments

 

 

1,789

 

Less: imputed interest

 

 

(113

)

Present value of operating lease liabilities

 

$

1,676

 

 

 

 

 

Current portion of operating lease liability

 

$

742

 

Operating lease liability, net of current portion

 

 

934

 

Present value of operating lease liabilities

 

$

1,676

 

 

9. Property and equipment, net

Property and equipment consisted of the following:

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Leasehold improvements

 

$

162

 

 

$

157

 

Field equipment

 

 

1,062

 

 

 

1,062

 

Information technology equipment

 

 

508

 

 

 

466

 

Tooling

 

 

1,381

 

 

 

1,014

 

Capitalized software

 

 

761

 

 

 

734

 

Total

 

 

3,874

 

 

 

3,433

 

Accumulated depreciation

 

 

(1,880

)

 

 

(1,610

)

Property and equipment, net

 

$

1,994

 

 

$

1,823

 

Depreciation expense recognized for the three months ended March 31, 2024 and 2023, totaled $0.3 million and $0.2 million, respectively.

 

 

16


 

10. Intangible assets, net and goodwill

Intangible assets consisted of the following:

(in thousands)

 

Estimated Useful Lives (Years)

 

March 31, 2024

 

 

December 31, 2023

 

Developed technology

 

2.5 3.0

 

$

2,529

 

 

$

2,555

 

Total

 

 

 

 

2,529

 

 

 

2,555

 

Accumulated amortization

 

 

 

 

(2,130

)

 

 

(2,013

)

Intangible assets, net

 

 

 

$

399

 

 

$

542

 

Amortization expense recognized for the three months ended March 31, 2024 and 2023, totaled $0.1 million and $0.1 million, respectively.

During the three months ended March 31, 2024 and 2023, activity in our goodwill balance was as follows:

 

 

 

 

Three months ended March 31,

 

(in thousands)

 

 

 

2024

 

 

2023

 

Balance at beginning of period

 

 

 

$

7,353

 

 

$

7,538

 

Translation

 

 

 

 

(140

)

 

 

(185

)

Balance at end of period

 

 

 

$

7,213

 

 

$

7,353

 

 

11. Debt

On April 30, 2021, we entered into our Credit Facility with various lenders, including Barclays Bank PLC, as issuing lender, the swingline lender and as administrative agent providing aggregate commitments of up to $100.0 million. We had not made any draws on our Credit Facility as of March 31, 2024. However, as of March 31, 2024, we had $1.9 million in letters of credit outstanding that reduced our unused borrowing capacity to approximately $98.1 million. At March 31, 2024, we have deposited $1.9 million in an escrow account with Barclays related to our outstanding letters of credit, which is reflected as restricted cash in our condensed consolidated balance sheets.

Under the Credit Facility, we were required to maintain a liquidity level (defined as unrestricted cash and cash equivalents plus the available borrowing capacity under the Credit Facility) of no less than $125.0 million at each quarter end in order to utilize the Credit Facility. As of March 31, 2024, we were under the required minimum liquidity level thus not allowing us to continue to access our Credit Facility up to the available borrowing capacity. The Credit Facility provided for payment of commitment fees of 0.50% per annum on our unused borrowing capacity and outstanding letter of credit fees of 3.25% per annum during its term. During the three months ended March 31, 2024 and 2023, we incurred interest expense of $0.3 million in each period, for commitment and letter of credit fees, as well as amortization of costs relating to the establishment of the Credit Facility.

Our Credit Facility expired unused on April 30, 2024.

 

12. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Accrued cost of revenue

 

$

22,423

 

 

$

26,773

 

Related party accrued cost of revenue

 

 

1,370

 

 

 

1,451

 

Accrued compensation

 

 

3,650

 

 

 

3,858

 

Other accrued expenses

 

 

2,247

 

 

 

2,766

 

Total accrued expenses