Notes to Condensed Consolidated Financial Statements
(unaudited)
1.
Organization
CDTi Advanced Materials, Inc. ("CDTi" or the "Company") is a provider of technology and solutions to the automotive emissions control markets. The Company possesses expertise in emissions catalyst design and engineering for automotive and off-road applications
The Company has a proven ability to develop proprietary materials incorporating various base metals that replace costly platinum group metals ("PGMs") in coatings on vehicle catalytic converters. Recently, the Company has expanded its materials platform to include new synergized-PGM diesel oxidation catalysts (SPGM
™
DOC), Base-Metal Activated Rhodium Support (BMARS
™
), and Spinel™ technologies, and it is in the process of introducing these new catalyst technologies to OEMs and other vehicle catalyst manufacturers in a proprietary powder form. The Company believes that this powder-to-coat business model will allow it to achieve greater scale and higher return on its technology investment than in the past.
The Company's business is driven by increasingly stringent global emission standards for internal combustion engines, which are major sources of a variety of harmful pollutants. It has operations in the United States ("U.S."), the United Kingdom and Sweden.
2.
Liquidity and Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. Therefore, the condensed consolidated financial statements contemplate the realization of assets and liquidation of liabilities in the ordinary course of business. The Company has suffered recurring losses and negative cash flows from operations since inception, resulting in an accumulated deficit of
$232.0 million
at
September 30, 2018
. The Company has funded its operations through asset sales, credit facilities and other borrowings and equity sales. At
September 30, 2018
, the Company had
$3.3 million
in cash.
The Company’s continuation as a going concern is dependent upon its ability to obtain adequate financing, which the Company has successfully secured since inception, including financing from equity sales and asset divestitures. However, there is no assurance that the Company will be able to achieve projected levels of revenue and maintain access to sufficient working capital, and accordingly, there is substantial doubt as to whether the Company’s existing cash resources and working capital are sufficient to enable it to continue its operations within one year from the financial statement issuance date. If the Company is unable to obtain the necessary capital, it will be forced to license or liquidate its assets, significantly curtail or cease its operations and/or seek reorganization under the U.S. Bankruptcy Code. The condensed consolidated financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
On May 19, 2015, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on November 17, 2015. The Form S-3 permits the Company to sell in one or more registered transactions up to an aggregate of
$50.0 million
of various securities not to exceed one-third of the Company’s public float in any
12
-month period. In July 2018, the Company sold approximately
$2.2 million
of common stock in a rights offering to existing shareholders utilizing the Form S-3. As of
September 30, 2018
, the Company had sold an aggregate of
$3.1 million
using the Form S-3.
3.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for interim financial reporting. In the opinion of management, all normal recurring accruals and adjustments that are necessary for a fair presentation have been reflected. Intercompany transactions and balances have been eliminated in consolidation. The results reported in these unaudited condensed consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), but is not required for interim reporting purposes, has been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on April 2, 2018.
On September 21, 2018, the Company effected a one-for-five reverse stock split. All share and per share information presented in these unaudited condensed consolidated financial statements has been retroactively adjusted to reflect the reverse stock split.
Discontinued Operations
Upon divesture of a business, the Company classifies such business as a discontinued operation, if the divested business represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.
For disposals other than by sale such as abandonment, the results of operations of a business would not be recorded as a discontinued operation until the period in which the business is actually abandoned. We have completed manufacturing commitments to Honda for production catalysts. In line with our strategy to provide our catalyst technology to other catalyst manufacturers in the form of functional powders or material systems, we will no longer sell coated catalysts and have exited our Coated Catalyst business.
Our exit of the Coated Catalyst business qualifies as discontinued operations and therefore has been presented as such for all reporting periods. Results of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead is not allocated to discontinued operations. The Company also presents cash flows from discontinued operations separately from cash flows of continuing operations.
All discussions and amounts in the consolidated financial statements and related notes for all periods presented relate to continuing operations only, unless otherwise noted.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. These estimates and assumptions are based on management's best estimates and judgment. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to impairment of long-lived assets, stock-based compensation, the fair value of financial instruments including warrants, allowance for doubtful accounts, inventory valuation, taxes and contingent and accrued liabilities. The Company bases its estimates on historical experience and various other factors, including the current economic environment, which it believes to be reasonable under the circumstances. Estimates and assumptions are adjusted when facts and circumstances dictate. Actual results may differ from these estimates under different assumptions and conditions. Management believes that the estimates are reasonable.
Revenue
Adoption of Recent Accounting Pronouncement
Effective January 1, 2018, the Company adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2014-09,
Revenue from Contracts with Customers (Topic 606).
ASU 2014-09 supersedes the revenue recognition requirements in FASB Accounting Standards Codification ("ASC") 605,
Revenue Recognition
, and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The adoption of ASU 2014-09, using the modified retrospective approach, had no significant impact on the Company's results of operations, cash flows or financial position.
Revenue Recognition
Net sales include products and shipping and handling charges, net of estimates for product returns as well as royalties earned under licensing agreements. Revenue for products and shipping and handling charges are measured as the amount of consideration the Company expects to receive in exchange for transferring products. All revenue is recognized when the Company satisfies its performance obligations under the contract. The Company recognizes revenue by transferring the promised products to the customer, with revenue recognized at the point in time the customer obtains control of the products. The Company recognizes revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. The Company estimates product returns based on historical return rates. The majority of the Company's
contracts have a single performance obligation and are short term in nature. The Company recognizes revenue for its usage based royalties when the usage has occurred.
Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore excluded from the transaction price and net sales.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-2,
Leases (Topic 842)
. ASU 2016-2 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. generally accepted accounting principles. It is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is evaluating the impact of adoption of ASU 2016-2 on its consolidated financial statements.
In July 2017, the FASB issued ASU 2017-11,
Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815).
The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact that ASU 2017-11 will have on its consolidated financial statements.
Reclassifications
Certain amounts reported in the prior years in the financial statements have been reclassified to conform to current year's presentation.
4.
Sale of DuraFit Business
On September 8, 2017, the Company entered into an Asset Purchase Agreement with AP Emissions Technologies, LLC (“AP") wherein the Company sold substantially all of the assets of its DuraFit and private label OEM replacement diesel particulate filter ("DPF") and diesel oxidation catalysts ("DOC") business for approximately
$3.3 million
in cash. The assets sold included all tangible and intangible assets of that business, including brands, intellectual property, equipment, customer agreements, private label programs and inventory. As a result of the transaction, for the
three and nine
months ended
September 30, 2017
, the Company recorded a gain on sale of DuraFit of approximately
$0.8 million
. The Company will continue to serve this market through coating arrangements and its powder-to-coat technology.
Concurrently with the sale of the DuraFit business, the Company repaid in full all indebtedness owed to FGI Worldwide LLC, successor to Faunus Group International, Inc. ("FGI"), and terminated the Company's loan agreements with FGI and all commitments thereunder. In connection with termination of the loan agreements, FGI terminated and released all of its security interests in and liens on all of the assets of the Company and its subsidiaries. Of the proceeds received by the Company from the sale of the DuraFit business, the Company applied approximately
$315,000
in repayment of the outstanding indebtedness to FGI. The Company did not incur any prepayment or early termination penalties in connection with termination of the FGI loan agreements.
5.
Inventories
Inventories consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
Raw materials
|
$
|
921
|
|
|
$
|
721
|
|
Work in process
|
220
|
|
|
322
|
|
Finished goods
|
242
|
|
|
312
|
|
Total inventories
|
$
|
1,383
|
|
|
$
|
1,355
|
|
6.
Intangible Assets
Intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Useful Life
in Years
|
|
September 30, 2018
|
|
December 31, 2017
|
Trade name
|
15 - 20
|
|
$
|
1,208
|
|
|
$
|
1,208
|
|
Patents and know-how
|
5 - 12
|
|
4,113
|
|
|
4,113
|
|
Customer relationships
|
4 - 8
|
|
731
|
|
|
750
|
|
|
|
|
6,052
|
|
|
6,071
|
|
Less accumulated amortization
|
|
|
(5,123
|
)
|
|
(5,020
|
)
|
|
|
|
$
|
929
|
|
|
$
|
1,051
|
|
The Company recorded amortization expense related to amortizable intangible assets of less than
$0.1 million
and
$0.1 million
during the three months ended
September 30, 2018
and
2017
, respectively and approximately
$0.1 million
and
$0.3 million
for the
nine
months ended
September 30, 2018
and
2017
, respectively
Estimated amortization expense for each of the next five years is as follows (in thousands):
|
|
|
|
|
Years ending December 31:
|
|
|
Remainder of 2018
|
$
|
40
|
|
2019
|
162
|
|
2020
|
162
|
|
2021
|
162
|
|
2022
|
143
|
|
Thereafter
|
260
|
|
|
$
|
929
|
|
7.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
Accrued salaries and benefits
|
$
|
437
|
|
|
$
|
506
|
|
Accrued severance and other charges (1)
|
—
|
|
|
28
|
|
Accrued warranty (2)
|
76
|
|
|
125
|
|
Warrant liability (3)
|
78
|
|
|
669
|
|
Other
|
349
|
|
|
211
|
|
|
$
|
940
|
|
|
$
|
1,539
|
|
|
|
(1)
|
For additional information, refer to Note 8, “Severance and Other Charges”.
|
|
|
(2)
|
For additional information, refer to Note 9, “Accrued Warranty”.
|
|
|
(3)
|
For additional information, refer to Note 10, “Warrants” and Note 11, “Fair Value Measurements”.
|
8.
Severance and Other Charges
Severance and other charges consist of employee severance expense and lease exit costs, and the following summarizes the activity (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
Lease Exit
Costs
|
|
Total
|
December 31, 2017
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
28
|
|
Provision
|
—
|
|
|
—
|
|
|
—
|
|
Payments
|
(28
|
)
|
|
—
|
|
|
(28
|
)
|
September 30, 2018
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
Lease Exit
Costs
|
|
Total
|
December 31, 2016
|
$
|
718
|
|
|
$
|
1,020
|
|
|
$
|
1,738
|
|
Provision
|
235
|
|
|
(619
|
)
|
|
(384
|
)
|
Payments
|
(576
|
)
|
|
(386
|
)
|
|
(962
|
)
|
September 30, 2017
|
$
|
377
|
|
|
$
|
15
|
|
|
$
|
392
|
|
During 2016, the Company accrued severance and lease exit costs associated with its manufacturing facility in Canada and other North American locations. During 2017, the Company incurred severance charges related to the sale of its DuraFit business as well as the contraction in its operations team in response to the permanent decrease in sales to Honda.
9.
Accrued Warranty
The Company establishes reserves for future product warranty costs that are expected to be incurred pursuant to specific warranty provisions with its customers. The Company generally warrants its products against defects between
one
and
five years
from date of shipment, depending on the product. The warranty reserves are established at the time of sale and updated throughout the warranty period based upon numerous factors including historical warranty return rates and expenses over various warranty periods. Historically, warranty returns have not been material.
The following summarizes the activity in the Company’s accrual for product warranty (in thousands):
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
Balance at beginning of period
|
$
|
125
|
|
|
$
|
338
|
|
Accrued warranty expense/(benefit)
|
(13
|
)
|
|
(16
|
)
|
Transfer in sale of DuraFit business
|
—
|
|
|
(110
|
)
|
Warranty claims paid
|
(35
|
)
|
|
(152
|
)
|
Translation adjustment
|
(1
|
)
|
|
5
|
|
Balance at end of period
|
$
|
76
|
|
|
$
|
65
|
|
At
September 30, 2018
and
December 31, 2017
, the balance of accrued warranty was recorded in accrued expenses and other liabilities in the condensed consolidated balance sheet.
10.
Warrants
Warrants outstanding and exercisable are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares(1)
|
|
Weighted
Average
Exercise
Price
|
|
Range of
Exercise Prices
|
Outstanding at December 31, 2017
|
180,894
|
|
|
$
|
24.96
|
|
|
$2.50-$105.00
|
Exercised
|
—
|
|
|
—
|
|
|
—
|
Expired
|
(3,988
|
)
|
|
31.25
|
|
|
—
|
Outstanding at September 30, 2018
|
176,906
|
|
|
$
|
24.87
|
|
|
$2.50-$105.00
|
Exercisable at September 30, 2018
|
176,906
|
|
|
$
|
24.87
|
|
|
$2.50-$105.00
|
(1) Outstanding and exercisable information includes
3,000
equity-classified warrants.
Warrant Liability
The Company's warrant liability is carried at fair value and is classified as Level 3 in the fair value hierarchy because the warrants are valued based on unobservable inputs.
The Company determines the fair value of its warrant liability using the Black-Scholes option-pricing model unless the awards are subject to market conditions, in which case it uses a Monte Carlo simulation model, which utilizes multiple input variables to estimate the probability that market conditions will be achieved. These models are dependent on several variables such as the instrument's expected term, expected strike price, expected risk-free interest rate over the expected term of the instrument, expected dividend yield rate over the expected term and the expected volatility. The expected strike price for warrants with full-ratchet down-round price protection is based on a weighted average probability analysis of the strike price changes expected during the term as a result of the full-ratchet down-round price protection.
The assumptions used in the Black-Scholes option-pricing model to estimate the fair value of the warrant liability as of
September 30, 2018
were as follows:
|
|
|
|
|
Expected volatility
|
95.0%-122.5%
|
Risk-free interest rate
|
2.6%-2.9%
|
Dividend yield
|
—
|
Expected life in years
|
1.0-3.2
|
The assumptions used in the Monte Carlo simulation model to estimate the fair value of the warrant liability as of
September 30, 2018
were as follows:
|
|
|
|
|
Expected volatility
|
114.3%
|
Risk-free interest rate
|
2.6%
|
Dividend yield
|
—
|
Expected life in years
|
1.1
|
The warrant liability, included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets, is re-measured at the end of each reporting period with changes in fair value recognized in other income (expense), net in the consolidated statements of comprehensive loss. Upon the exercise of a warrant that is classified as a liability, the fair value of the warrant exercised is re-measured on the exercise date and reclassified from warrant liability to additional paid-in capital.
11.
Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value in accordance with a hierarchy which requires an entity to maximize the use of observable inputs which reflect market data obtained from independent sources and minimize the use of unobservable inputs. There are three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable including quoted prices for similar instruments in active markets and quoted prices for identical or similar instruments in markets that are not active; and
Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
Assets and liabilities measured at fair value on the Company’s balance sheet on a recurring basis include the following at
September 30, 2018
and
December 31, 2017
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability
|
Level 1
|
|
Level 2
|
|
Level 3
|
September 30, 2018
|
—
|
|
|
—
|
|
|
$
|
78
|
|
December 31, 2017
|
—
|
|
|
—
|
|
|
$
|
669
|
|
There were
no
transfers in or out of Level 1, Level 2 or Level 3 fair value measurements during the
nine
months ended
September 30, 2018
.
The following is a reconciliation of the warrant liability, included in accrued expenses and other current liabilities in the accompanying unaudited condensed consolidated balance sheets, measured at fair value using Level 3 inputs (in thousands):
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
Balance at beginning of period
|
$
|
669
|
|
|
$
|
1,226
|
|
Exercise of common stock warrants
|
—
|
|
|
(34
|
)
|
Remeasurement of common stock warrants
|
(591
|
)
|
|
(404
|
)
|
Balance at end of period
|
$
|
78
|
|
|
$
|
788
|
|
The fair values of the Company’s cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities approximate carrying values due to the short maturity of these instruments.
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy.
12. Stockholders' Equity
On August 24, 2018 at the Company’s Annual Meeting of Stockholders, the stockholders voted to approve the amendment of the Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock. On September 21. 2018, the Company filed a Certificate of Amendment to its Restated Certificate of Incorporation, as amended, with the Secretary of State of Delaware to effect a one-for-five reverse stock split of the Company’s common stock, (the “
Reverse Stock Split
”). The amendment became effective on September 21, 2018. As a result of the Reverse Stock Split, every five (5) shares of the Company’s issued and outstanding common stock were combined and reclassified into one (1) share of the Company’s common stock, which began trading on a split-adjusted basis on the NASDAQ Capital Market on September 24, 2018 with a new CUSIP number of 12514V2014. The Reverse Stock Split did not change the par value of the Company’s common stock. All share and per share information disclosed as of September 20, 2018 and for all other comparative periods provided, have been retroactively adjusted to reflect the Reverse Stock Split.
13. Loss per Share
Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of common shares plus potentially dilutive common shares. Potentially dilutive common shares include employee stock options and restricted share units and warrants and debt that are convertible into the Company’s common stock.
Because the Company incurred net losses from continuing operations in the
three and nine
months ended
September 30, 2018
and 2017, the effect of potentially dilutive securities has been excluded in the computation of diluted loss per share as their
impact would be anti-dilutive. Potentially dilutive common stock equivalents excluded were
0.4 million
shares during the
three and nine
months ended
September 30, 2018
and 2017, respectively.
14.
Commitments and Contingencies
The Company leases facilities under non-cancellable operating leases. The leases expire at various dates through fiscal 2018 and frequently include renewal provisions for varying periods of time, provisions which require us to pay taxes, insurance and maintenance costs, and provisions for minimum rent increases. Minimum lease payments, including scheduled rent increases are recognized as rent expense on a straight-line basis over the term of the lease.
Litigation
The Company is involved in legal proceedings from time to time in the ordinary course of its business. Management does not believe that any of these claims and proceedings against it is likely to have, individually or in the aggregate, a material adverse effect on the Company’s condensed consolidated financial condition, results of operations or cash flows. Accordingly, the Company cannot determine the final amount, if any, of its liability beyond the amount accrued in the unaudited condensed consolidated financial statements as of
September 30, 2018
, nor is it possible to estimate what litigation-related costs will be in the future.
Applied Utility Systems, Inc.
The Company is undergoing a sales and use tax audit by the State of California (the "State") with respect to Applied Utility Systems, Inc., a former subsidiary of the Company that was sold in 2009, for the period of 2007 through 2009. The audit has identified a project performed by the Company during that time period for which sales tax was not collected and remitted and for which the State asserts that proper documentation of resale may not have been obtained and that the Company owes sales tax of
$1.5 million
, inclusive of interest. The Company contends and believes that it received sufficient and proper documentation from its customer to support not collecting and remitting sales tax from that customer and is actively disputing the audit report with the State. On August 12, 2013, the Company appeared at an appeals conference with the State Board of Equalization ("BOE"). On July 21, 2014, the Company received a Decision and Recommendation ("D&R") from the BOE. The D&R's conclusion was that the basis for the calculation of the aforementioned
$1.5 million
tax due should be reduced from
$12.2 million
to
$9.0 million
with a commensurate reduction in the tax owed to the State. Regardless of this finding, the Company continues to believe that it will prevail in this matter, as it believes that the State did not adequately address the legal arguments related to the Company's acceptance of the valid resale certificate from its customer. The Company has not agreed to these findings, and therefore, it will be appealing at a higher level at the BOE. Based on a re-audit, the BOE lowered the tax due to
$0.9 million
, inclusive of interest. The Company continues to disagree with these findings based on the aforementioned reasons. However, in October 2015, the Company offered to settle this case for
$0.1 million
, which is based on the expected cost of continuing to contest this audit. Accordingly, an accrual was charged to discontinued operations during the year ended December 31, 2015 to reflect the offer to settle this case. Should the Company not prevail with the offer to settle this case, it plans to continue with the appeals process. Further, should the Company not prevail in this case, it will pursue reimbursement from the customer for all assessments from the State.
15.
Geographic Information
Net sales by geographic region based on the location of the customer is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
United States
|
$
|
762
|
|
|
$
|
1,755
|
|
|
$
|
2,424
|
|
|
$
|
6,341
|
|
International:
|
|
|
|
|
|
|
|
Canada
|
261
|
|
|
322
|
|
|
863
|
|
|
1,061
|
|
Europe
|
864
|
|
|
1,300
|
|
|
3,153
|
|
|
3,247
|
|
Asia
|
138
|
|
|
99
|
|
|
214
|
|
|
232
|
|
Total international
|
1,263
|
|
|
1,721
|
|
|
4,230
|
|
|
4,540
|
|
Total revenues
|
$
|
2,025
|
|
|
$
|
3,476
|
|
|
$
|
6,654
|
|
|
$
|
10,881
|
|
16. Concentrations
For the three months ended September 30, 2018, one customer accounted for approximately
11%
of the Company's revenues. For the three months ended September 30, 2017, one customer accounted for approximately
12%
of the Company's revenues. For all other period presented, no customer accounted for more than
10%
of the Company's revenues.
At September 30, 2018, one customer accounted for approximately
14%
of the Company's accounts receivable. At September 30, 2017, one customer accounted for approximately
16%
of the Company's accounts receivable.
For the three months ended September 30, 2018, the Company had two suppliers that accounted for approximately
43%
and
17%
of the Company's material purchases. For the three months ended September 30, 2017, the Company had three suppliers that accounted for approximately
21%
,
18%
and
16%
of the Company's material purchases.
For the nine months ended September 30, 2018, the Company had two suppliers that accounted for approximately
37%
, and
10%
of the Company's material purchases. For the nine months ended September 30, 2017, the Company had three suppliers that accounted for approximately
26%
,
15%
and
14%
of the Company's material purchases.
17. Discontinued Operations
The Coated Catalyst operations are presented below as discontinued operations. The following table presents the major classes of assets and liabilities of discontinued operations in the consolidated balance sheets as of September 30, 2018 and December 31, 2017 (in thousands).
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
Assets
|
|
|
|
Accounts receivable, net
|
$
|
140
|
|
|
$
|
220
|
|
Inventories
|
45
|
|
|
1,292
|
|
Prepaid expenses and other current assets
|
31
|
|
|
12
|
|
Current assets of discontinued operations
|
216
|
|
|
1,524
|
|
|
|
|
|
Property and equipment, net
|
—
|
|
|
300
|
|
Other assets
|
105
|
|
|
124
|
|
Assets of discontinued operations
|
105
|
|
|
424
|
|
|
|
|
|
Total assets of discontinued operations
|
321
|
|
|
1,948
|
|
|
|
|
|
Liabilities
|
|
|
|
Accounts payable
|
45
|
|
|
375
|
|
Accrued expenses and other current liabilities
|
843
|
|
|
2,046
|
|
Current liabilities of discontinued operations
|
888
|
|
|
2,421
|
|
|
|
|
|
Other liabilities
|
674
|
|
|
—
|
|
|
|
|
|
Net liabilities of discontinued operations
|
$
|
1,241
|
|
|
$
|
473
|
|
|
|
|
|
The following table presents revenue and expense information for discontinued operations for the three and nine months ended September 30, 2018 and 2017 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues
|
$
|
132
|
|
|
$
|
3,348
|
|
|
$
|
3,422
|
|
|
$
|
12,556
|
|
Pre-tax (loss) income
|
(645
|
)
|
|
730
|
|
|
(486
|
)
|
|
2,149
|
|
Income tax expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net (loss) income from discontinued operations
|
$
|
(645
|
)
|
|
$
|
730
|
|
|
$
|
(486
|
)
|
|
$
|
2,149
|
|
18. Subsequent Event
On November 14, 2018, the company announced that it will voluntarily delist its common stock from The Nasdaq Stock Market and, based upon ownership of its shares by fewer than 300 holders of record, deregister its common stock under the Securities Exchange Act of 1934 and suspend its public reporting obligations. Our Board of Directors concluded that the costs of maintaining the Nasdaq listing and remaining a public reporting company, including costs of compliance, the demands on management time and the Company resources required to maintain its listed and registered status, outweigh the benefits to the Company and its stockholders of continued Nasdaq listing and SEC reporting.
The Company will file a Form 25 with the Securities and Exchange Commission on or about November 26, 2018, and the Nasdaq delisting is expected to become effective on or about December 6, 2018, at which time trading on Nasdaq will cease. The common stock may thereafter be eligible for quotation on the Pink tier of OTC Markets Group if market makers commit to making a market in the Company’s shares. The Company can provide no assurance that trading in its common stock will continue on the OTC Markets Group or otherwise.
After the Nasdaq delisting becomes effective, the Company will file a Form 15 with the Securities and Exchange Commission on or about December 10, 2018, at which time the Company anticipates that its obligation to file periodic reports under the Exchange Act, including annual, quarterly and current reports on Form 10-K, Form 10-Q and Form 8-K, respectively, will be suspended, and that all requirements associated with being an Exchange Act-registered company, including the requirement to file current and periodic reports, will terminate permanently 90 days thereafter.