Energy Focus, Inc. (“Energy Focus” or the “Company”) (NASDAQ:EFOI),
a leader in sustainable LED lighting technologies, today announced
financial results for its second quarter ended June 30, 2020.
Second Quarter 2020 and Subsequent Business
Highlights:
- Net sales of $3.3 million, up 8.2%
compared to the second quarter of 2019 and down 11.8% sequentially
from the first quarter of 2020 reflecting the shift in the timing
of the shipment of a portion of a certain military contract order
from the second quarter to the third quarter of 2020.
- Loss from operations improved by
$1.2 million year-over-year, and by $0.3 million compared
sequentially to the first quarter of 2020.
- Net loss of $4.3 million, or
$(1.36) per share, inclusive of a $3.3 million non-cash adjustment
in the fair value of outstanding warrants, compared to a net loss
of $2.3 million, or $(0.91) per share in the second quarter of
2019.
- Management expects third quarter
revenues of $6 million to $7 million, inclusive of the sales shift
from the second quarter, representing year-over-year growth of
106%-140% from the third quarter of 2019, and sequential growth of
80%-110% compared with the second quarter of 2020.
- Cash of $2.7 million as of June 30,
2020 compared to $0.4 million as of December 31, 2019.
- Launched EnFocus™, the Company’s
breakthrough lighting control platform, which received strong and
positive feedback from customers and prospects, and won “Top
Product of the Year” award from Energy & Environment
Leaders.
- Secured two new working capital
financing facilities that significantly expand the credit capacity
at a lower blended borrowing cost than the previous facility.
“Energy Focus continues to deliver solid growth,
margin expansion and improved operating results, reflecting the
steps we have taken to deliver innovative products, on top of our
heightened focus on expense and inventory management,” stated James
Tu, Executive Chairman and CEO of Energy Focus. “The second quarter
was impacted, as anticipated, by the delay of a portion of a large
military order, shifting approximately $1.7 million in revenue out
of the second quarter and into the third quarter. We expect to
recognize a significant portion of this revenue in the third
quarter, resulting in third quarter revenue guidance of $6 to $7
million, representing 106% to 140% growth over the third quarter of
2019. Year-to-date as of June 30, 2020, our revenues are up over
the prior year more than 13%, even with the $1.7 million in delayed
revenue, reflecting our expanded leadership and increased
penetration in the military market that offset the temporary
slowdown of our commercial business due to the impact from COVID-19
pandemic since late March.”
“Longer-term, we are increasingly encouraged
with the market response to our patent-pending EnFocus™ lighting
platform, which enables both existing and new buildings to provide
quality, accessible and affordable dimmable and color tunable
circadian lighting like never before,” added Mr. Tu. “Our immediate
focus is on expanding our U.S. distribution of this groundbreaking
product line, and we have had interests and inquiries from multiple
countries since our release in June as well, suggesting clear
global demand potential for the EnFocus™ products. We have
already received initial orders and expect to start shipping the
EnFocus™ products during the third quarter, with the
expectation that the products will start contributing more
significant sales in the fourth quarter particularly if facility
management budgets and retrofit project activities start to
solidify and recover.”
“Subsequent to quarter end, we closed two new
credit facilities with new lenders, important financing events that
increase our current borrowing capacity and access to additional
working capital as we continue to grow our business,” stated Tod
Nestor, President and CFO of Energy Focus. “With substantially
improved terms, our blended all-in borrowing costs will be much
lower and previous borrowing limitations have been eased as our
lenders recognize the high quality of the assets that back these
facilities. Total credit availability under the new facilities has
therefore been expanded from $1.9 million to $4.8 million with
additional room to expand as we build new, higher-turnover
inventory such as EnFocus™, RedCap® and our forthcoming UV
disinfection products. These facilities address our expected need
for additional funding for the foreseeable future.”
“We are also excited to report that our engineering team
continued to make technical breakthroughs and achieved development
milestones for our coming UV germicidal irradiation (UVGI)
products, first with EnFocus™ controlled UVGI troffers that
provide both flicker-free, dimmable and color tunable lighting as
well as UV-C disinfection capability. With simple replacement of
existing wall switches and fluorescent or LED fixtures, buildings
of all kinds—particularly those with pressing demand for safety in
the age of COVID-19 such as healthcare, senior living, educational,
correctional, retail and public assembly facilities— could
affordably and rapidly adopt high quality, sustainable LED lighting
while providing effective air disinfection while occupants are in
the spaces. Barring unexpected supply or logistics delays that
COVID-19 might cause, we plan to launch this impactful and timely
product line in the fourth quarter and expect sales from the UVGI
product series to commence in the first quarter of 2021,” concluded
Mr. Tu.
Second Quarter 2020 Financial Results:
Net sales were $3.3 million for the second quarter of 2020,
compared to $3.1 million in the second quarter of 2019, an increase
of 8.2%. Net sales from commercial products were $1.1 million, or
31.7% of total net sales, for the second quarter of 2020, down from
$2.1 million or 69.1% of total net sales, in the second quarter of
2019 reflecting the impact of the COVID-19 pandemic and related
customer interruptions. Net sales from military and maritime
products (“MMM”) were $2.3 million, or 68.3% of total net sales,
for the second quarter of 2020, up from $1.0 million, or 30.9% of
total net sales, in the second quarter of 2019. Sequentially, net
sales were down 11.8% compared to $3.8 million in the first quarter
of 2020, reflecting a shift in the timing of the shipment of a
portion of a $3.4 million U.S. Navy order for the Company’s new
generation of military Intellitubes. The shipment, which was
originally expected to contribute approximately $1.7 million to the
Company’s revenues during the second quarter, was shifted into the
third quarter as disclosed in a press release issued on July 16,
2020.
Gross profit was $1.3 million, or 40.3% of net sales, for
the second quarter of 2020. This compares with gross loss of $109
thousand, inclusive of $500,000 of unfavorable inventory reserves,
in the second quarter of 2019. Sequentially, this compares with
gross profit of $1.0 million, or 27.3% of net sales, in the
first quarter of 2020. The sequential increase in gross profit and
gross profit margin was primarily driven by an increase in MMM.
Adjusting gross profit margins for “excess and obsolete inventory,
and related reserves,” and warranty reserves, gross profit margin
was 33.0% for the second quarter of 2020 compared to 23.4% in the
second quarter of 2019 and 25.2% in the first quarter of 2020. The
higher reported gross margin was due to a sales mix more weighted
to higher margin military sales in the period.
Operating loss was $0.9 million for the second quarter of 2020
compared to an operating loss of $2.1 million in the second quarter
of 2019. Sequentially, this compares to an operating loss of $1.3
million in the first quarter of 2020. Net loss was $4.3 million,
inclusive of $3.3 million pre-tax adjustment which was the result
of the revaluation of the warrant liability using the market price
of the Company’s stock at June 30, 2020 versus the market price of
the Company’s stock at March 31, 2020. On a per share basis, the
net loss was $(1.36) per basic and diluted share for the second
quarter of 2020, compared with a net loss of $2.3 million, or
$(0.91) in the second quarter of 2019. Sequentially, this compares
with a net loss of $0.5 million, or $(0.19) per basic and diluted
share, in the first quarter of 2020.
Adjusted EBITDA, as defined under “Non-GAAP
Measures” below, was a loss of $0.7 million for the second quarter
of 2020, compared with a loss of $2.0 million in the second quarter
of 2019 and a loss of $1.1 million in the first quarter of
2020.
Cash was $2.7 million as of June 30, 2020. This compares
with $0.4 million as of December 31, 2019. As of June 30,
2020, the Company had total availability of $3.9 million, which
consisted of $2.7 million of cash and $1.2 million of additional
borrowing availability under its credit facility. This compares to
total availability of $1.9 million as of December 31, 2019 and
total availability of $4.1 million as of March 31, 2020.
Financings:
On August 11, 2020, Energy Focus entered into two debt financing
arrangements, which substantially increase the Company’s borrowing
capacity and reduce its blended interest expense:
- A two-year inventory financing facility (“Inventory Facility”)
with Crossroads Financial Group, LLC, which includes maximum
borrowings of the lower of $3 million and a borrowing base
determined from time to time based on the value of the Company’s
eligible inventory, valued at 75% of inventory cost or 85% of the
inventory net orderly liquidation value, less availability
reserves. As of August 11, 2020, the borrowing base was less than
the $3 million maximum amount at approximately $2.4 million. The
outstanding indebtedness under the Inventory Facility currently
accrues at an annual rate equal to the greater of (i) 5.75% and
(ii) 4.00% plus the three-month LIBOR rate and is also subject to a
service fee of 1.00% per month; provided that the combined amount
is subject to a minimum monthly fee of $18,490.
- A two-year receivables financing facility (“Receivables
Facility”) with Factors Southwest L.L.C. (d/b/a FSW Funding).
Borrowings under the Receivables Facility are permitted up to the
lower of (i) $2.5 million and (ii) a borrowing base determined from
time to time based on the value of the Company’s eligible accounts
receivable, valued at 90% of the face value of such accounts
receivable, less availability reserves, if any. As of August 11,
2020, the borrowing base was less than the $2.5 million maximum
amount at approximately $1.6 million. Interest on outstanding
indebtedness under the Receivables Facility currently accrues at an
annual rate equal to (i) the prime rate announced from time to time
by the Wall Street Journal plus (ii) 2.00%.
- These facilities immediately increased the Company’s borrowing
capacity the day it was refinanced by 2.392 times its prior debt
capacity.
On April 17, 2020, the Company was granted a loan from
KeyBank National Association in the amount of approximately
$795 thousand, pursuant to the PPP under Division A of the
Coronavirus Aid, Relief and Economic Securities Act (the "CARES
Act"), which was enacted on March 27, 2020. The funds were received
on April 20, 2020. At June 30, 2020, $263 thousand is
classified as short-term debt and $532 thousand is classified
as long-term debt on the Company’s balance sheet. The loan accrues
interest at a rate of 1.0% per annum and matures on April 17,
2022. Under the terms of the PPP, certain amounts of the loan may
be forgiven if they are used for qualifying expenses as described
in the CARES Act. The Company intends to use the loan for
qualifying expenses, however there is no assurance that the Company
will obtain forgiveness for any portion of the loan.
Third Quarter 2020 Outlook:
We continue to actively monitor and evaluate the
impact of the COVID-19 pandemic on our customers, suppliers and
logistics providers as well as governmental actions being taken to
curtail the spread of the virus. While the significance of the
various potential impacts on us is still uncertain, particularly
for our commercial business, we stand ready to adjust our
organizational structure, strategies, plans and processes to
respond to the impacts from the pandemic as timely as possible.
The Company reaffirms its third quarter 2020 outlook for sales
in the range of $6 million to $7 million, inclusive of the sales
shift from the second quarter, representing year-over-year growth
of 106%-140% from the third quarter of 2019, and sequential growth
of 80%-110% compared with the second quarter of 2020.
Earnings Conference Call:
The Company will host a conference call and webcast tomorrow,
August 14, 2020 at 11:00a.m. ET to discuss the second quarter 2020
results, followed by a Q & A session.
You can access the live conference call by dialing the following
phone numbers:
- Toll free 1-877-451-6152 or
- International 1-201-389-0879
- Conference ID# 13707772
The conference call will be simultaneously webcast. To listen to
the webcast, log onto it at:
http://public.viavid.com/index.php?id=141043. The webcast will be
available at this link through August 28, 2020. Financial
information presented on the call, including the earnings press
release, will be available on the investors section of Energy
Focus’ website, investors.energyfocus.com.
About Energy Focus:
Energy Focus is an industry-leading innovator of
sustainable LED lighting and lighting control technologies and
solutions. As the creator of the first flicker-free LED lamps,
Energy Focus develops high quality LED lighting products that
provide extensive energy and maintenance savings, as well as
aesthetics, safety, health and sustainability benefits over
conventional lighting. Our EnFocus™ lighting control platform
enables existing and new buildings to provide quality, convenient
and affordable dimmable and color tunable circadian and
human-centric lighting capabilities. Energy Focus customers include
U.S. and foreign navies, U.S. federal, state and local governments,
healthcare and educational institutions, as well as Fortune 500
companies. Since 2007, Energy Focus has installed approximately
900,000 lighting products across the U.S. Navy fleet, including
TLEDs, waterline security lights, explosion-proof globes and berth
lights, saving more than five million gallons of fuel and 300,000
man-hours in lighting maintenance annually. Energy Focus is
headquartered in Solon, Ohio. For more information, visit our
website at www.energyfocus.com.
Forward Looking Statements:
Forward-looking statements in this release are
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Generally, these
statements can be identified by the use of words such as
“believes,” “estimates,” “anticipates,” “expects,” “seeks,”
“projects,” “intends,” “plans,” “may,” “will,” “should,” “could,”
“would” and similar expressions intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words. These forward-looking
statements include all matters that are not historical facts and
include statements regarding our current expectations concerning,
among other things, our results of operations, financial condition,
liquidity, prospects, growth, strategies, capital expenditures and
the industry in which we operate. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. Although we base these forward-looking statements on
assumptions that we believe are reasonable when made, we caution
you that forward-looking statements are not guarantees of future
performance and that our actual results of operations, financial
condition and liquidity, and industry developments may differ
materially from statements made in or suggested by the
forward-looking statements contained in this release. We believe
that important factors that could cause our actual results to
differ materially from forward-looking statements include, but are
not limited to: (i) disruptions in the U.S. and global economy and
business interruptions resulting from the recent coronavirus
(“COVID-19”) health pandemic outbreak and related stay-at-home
orders, quarantine policies and restrictions on travel, trade and
business operations; (ii) our need for additional financing in the
near term to continue our operations; (iii) our ability to obtain
refinancing or extend maturing debt; (iv) our ability to continue
as a going concern for a reasonable period of time; (v) our ability
to implement plans to increase sales and control expenses; (vi) our
reliance on a limited number of customers for a significant portion
of our revenue, and our ability to maintain or grow such sales
levels; (vii) our ability to increase sales by adding new customers
to reduce the reliance of our sales on a smaller group of
customers, and the long sales-cycle that our product requires;
(viii) our ability to increase demand in our targeted markets and
to manage sales cycles that are difficult to predict and may span
several quarters; (ix) the timing of large customer orders,
significant expenses and fluctuations between demand and capacity
as we invest in growth opportunities; (x) our ability to compete
effectively against companies with lower cost structures or greater
resources, or more rapid development efforts, and new competitors
in our target markets; (xi) our ability to successfully scale our
network of sales representatives, agents, and distributors to match
the sales reach of larger, established competitors; (xii) market
acceptance of LED lighting and control technologies and products;
(xiii) our ability to attract and retain qualified personnel, and
to do so in a timely manner; (xiv) the impact of any type of legal
inquiry, claim, or dispute; (xv) general economic conditions in the
United States and in other markets in which we operate or secure
products; (xvi) our dependence on military maritime customers and
on the levels and timing of government funding available to such
customers, as well as the funding resources of our other customers
in the public sector and commercial markets; (xvii) the possible
impact on our military maritime customers and their ability to
honor the timing for existing orders or place future orders due to
COVID-19 breakouts amongst personnel that might impact the use of
ships in service; (xviii) business interruptions resulting from
geopolitical actions, including war and terrorism, natural
disasters, including earthquakes, typhoons, floods and fires or
from health epidemics or pandemics or other contagious outbreaks;
(xix) our reliance on a limited number of third-party suppliers,
our ability to obtain critical components and finished products
from such suppliers on acceptable terms, and the impact of our
fluctuating demand on the stability of such suppliers; (xx) our
ability to timely and efficiently transport products from our
third-party suppliers to our facility by ocean marine channels;
(xxi) our ability to respond to new lighting technologies and
market trends, and fulfill our warranty obligations with safe and
reliable products; (xxii) any delays we may encounter in making new
products available or fulfilling customer specifications; (xxiii)
any flaws or defects in our products or in the manner in which they
are used or installed; (xxiv) our ability to protect our
intellectual property rights and other confidential information,
and manage infringement claims by others; (xxv) our compliance with
government contracting laws and regulations, through both direct
and indirect sale channels, as well as other laws, such as those
relating to the environment and health and safety; (xxvi) risks
inherent in international markets, such as economic and political
uncertainty, changing regulatory and tax requirements and currency
fluctuations, including tariffs and other potential barriers to
international trade; and (xxvii) maintain effective internal
controls and otherwise comply with our obligations as a public
company and under Nasdaq listing standards.
Investor Contact:Cameron Donahue(651)
653-1854ir@energyfocus.com
Condensed Consolidated
Balance Sheets(in thousands) |
June 30, 2020 |
|
December 31, 2019 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash |
$ |
2,727 |
|
|
$ |
350 |
|
Trade accounts receivable, less allowances of $7 and $28,
respectively |
2,518 |
|
|
2,337 |
|
Inventories, net |
5,900 |
|
|
6,168 |
|
Prepaid and other current assets |
677 |
|
|
479 |
|
Total current assets |
11,822 |
|
|
9,334 |
|
Property and equipment,
net |
415 |
|
|
389 |
|
Operating lease, right-of-use
asset |
1,051 |
|
|
1,289 |
|
Restructured lease,
right-of-use asset |
214 |
|
|
322 |
|
Other assets |
405 |
|
|
405 |
|
Total assets |
$ |
13,907 |
|
|
$ |
11,739 |
|
|
|
|
|
LIABILITIES |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
2,617 |
|
|
1,340 |
|
Accrued liabilities |
57 |
|
|
186 |
|
Accrued legal and professional fees |
307 |
|
|
215 |
|
Accrued payroll and related benefits |
585 |
|
|
360 |
|
Accrued sales commissions |
50 |
|
|
32 |
|
Accrued restructuring |
25 |
|
|
24 |
|
Accrued warranty reserve |
215 |
|
|
195 |
|
Deferred revenue |
61 |
|
|
18 |
|
Operating lease liabilities |
577 |
|
|
550 |
|
Restructured lease liabilities |
331 |
|
|
319 |
|
Finance lease liabilities |
3 |
|
|
3 |
|
Warrant liability |
4,011 |
|
|
— |
|
Convertible notes |
— |
|
|
1,700 |
|
Iliad note, net of discount and loan origination fees |
603 |
|
|
885 |
|
PPP loan |
263 |
|
|
— |
|
Credit line borrowings, net of loan origination fees |
1,331 |
|
|
715 |
|
Total current liabilities |
11,036 |
|
|
6,542 |
|
|
|
|
|
Other liabilities |
— |
|
|
14 |
|
Operating lease liabilities,
net of current portion |
623 |
|
|
906 |
|
Restructured lease
liabilities, net of current portion |
— |
|
|
168 |
|
Finance lease liabilities, net
of current portion |
2 |
|
|
4 |
|
PPP loan, net of current
maturities |
532 |
|
|
— |
|
Iliad note, net of current
maturities |
— |
|
|
109 |
|
Total liabilities |
12,193 |
|
|
7,743 |
|
|
|
|
|
STOCKHOLDERS'
EQUITY |
|
|
|
Preferred stock, par
value $0.0001 per share: |
|
|
|
Authorized: 5,000,000 shares (3,300,000 shares designated as Series
A Convertible Preferred Stock) in 2020 and 2,000,000 shares (no
shares designated as Series A Convertible Preferred Stock) in
2019 |
|
|
|
Issued and outstanding: 2,597,470 at June 30, 2020 and no shares
outstanding at December 31, 2019 |
— |
|
|
— |
|
Common stock, par
value $0.0001 per share: |
|
|
|
Authorized: 50,000,000 shares in 2020 and 30,000,000 shares in
2019 |
|
|
|
Issued and outstanding: 3,216,345 at June 30, 2020 and 2,485,684 at
December 31, 2019 |
— |
|
|
— |
|
Additional paid-in
capital |
131,472 |
|
|
128,873 |
|
Accumulated other comprehensive loss |
(3 |
) |
|
(3 |
) |
Accumulated deficit |
(129,755 |
) |
|
(124,874 |
) |
Total stockholders' equity |
1,714 |
|
|
3,996 |
|
Total liabilities and stockholders'
equity |
$ |
13,907 |
|
|
$ |
11,739 |
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of
Operations(In thousands, except per share
data)(Unaudited)
|
Three months ended June 30, |
|
Six months ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net sales |
$ |
3,335 |
|
|
$ |
3,082 |
|
|
$ |
7,118 |
|
|
$ |
6,259 |
|
Cost of sales |
1,992 |
|
|
3,191 |
|
|
4,743 |
|
|
6,270 |
|
Gross profit (loss) |
1,343 |
|
|
(109 |
) |
|
2,375 |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Product development |
313 |
|
|
318 |
|
|
595 |
|
|
844 |
|
Selling, general, and administrative |
1,973 |
|
|
1,594 |
|
|
4,000 |
|
|
3,835 |
|
Restructuring |
(14 |
) |
|
128 |
|
|
(28 |
) |
|
262 |
|
Total operating expenses |
2,272 |
|
|
2,040 |
|
|
4,567 |
|
|
4,941 |
|
Loss from operations |
(929 |
) |
|
(2,149 |
) |
|
(2,192 |
) |
|
(4,952 |
) |
|
|
|
|
|
|
|
|
Other expenses
(income): |
|
|
|
|
|
|
|
Interest expense |
87 |
|
|
26 |
|
|
220 |
|
|
69 |
|
Loss from change in fair value of warrants |
3,300 |
|
|
— |
|
|
2,427 |
|
|
— |
|
Other expenses |
24 |
|
|
79 |
|
|
42 |
|
|
98 |
|
Net loss |
$ |
(4,340 |
) |
|
$ |
(2,254 |
) |
|
$ |
(4,881 |
) |
|
$ |
(5,119 |
) |
|
|
|
|
|
|
|
|
Net loss per share -
basic and diluted |
|
|
|
|
|
|
|
Net loss |
$ |
(1.36 |
) |
|
$ |
(0.91 |
) |
|
$ |
(1.55 |
) |
|
$ |
(2.09 |
) |
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding: |
|
|
|
|
|
|
|
Basic and diluted |
3,192 |
|
|
2,467 |
|
|
3,139 |
|
|
2,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Cash
Flows
(In
thousands)(Unaudited) |
Six months ended June 30, |
|
2020 |
|
2019 |
Cash flows from
operating activities: |
|
|
|
Net loss |
$ |
(4,881 |
) |
|
$ |
(5,119 |
) |
Adjustments to reconcile net loss to net cash used in
operating activities: |
|
|
|
Depreciation |
92 |
|
|
200 |
|
Stock-based compensation |
61 |
|
|
523 |
|
Change in fair value of warrant liabilities |
2,427 |
|
|
— |
|
Provision for doubtful accounts receivable |
(12 |
) |
|
38 |
|
Provision for slow-moving and obsolete inventories |
(319 |
) |
|
(303 |
) |
Provision for warranties |
20 |
|
|
106 |
|
Amortization of loan discounts and origination fees |
76 |
|
|
45 |
|
Loss on dispositions of property and equipment |
— |
|
|
15 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
(169 |
) |
|
358 |
|
Inventories |
587 |
|
|
693 |
|
Prepaid and other assets |
(198 |
) |
|
447 |
|
Accounts payable |
1,277 |
|
|
(1,526 |
) |
Accrued and other liabilities |
293 |
|
|
(580 |
) |
Deferred revenue |
43 |
|
|
(17 |
) |
Total adjustments |
4,178 |
|
|
(1 |
) |
Net cash used in operating activities |
(703 |
) |
|
(5,120 |
) |
Cash flows from
investing activities: |
|
|
|
Acquisitions of property and equipment |
(118 |
) |
|
(28 |
) |
Net cash used in investing activities |
(118 |
) |
|
(28 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds from the issuance of common stock and warrants |
2,750 |
|
|
— |
|
Proceeds from the exercise of warrants |
51 |
|
|
— |
|
Offering costs paid on the issuance of common stock and
warrants |
(474 |
) |
|
— |
|
Proceeds from PPP loan |
795 |
|
|
— |
|
Principal payments under finance lease obligations |
(2 |
) |
|
(1 |
) |
Proceeds from exercise of stock options and employee stock purchase
plan purchases |
30 |
|
|
— |
|
Common stock withheld in lieu of income tax withholding on vesting
of restricted stock units |
(3 |
) |
|
(116 |
) |
Payments on the Iliad Note |
(526 |
) |
|
— |
|
Proceeds from convertible notes |
— |
|
|
1,700 |
|
Net proceeds from (payment on) credit line borrowings |
577 |
|
|
(568 |
) |
Net cash provided by financing activities |
3,198 |
|
|
1,015 |
|
Effect of exchange rate changes on cash |
— |
|
|
5 |
|
Net increase (decrease) in cash and restricted cash |
2,377 |
|
|
(4,128 |
) |
Cash and restricted cash, beginning of period |
692 |
|
|
6,335 |
|
Cash and restricted cash, end of period |
$ |
3,069 |
|
|
$ |
2,207 |
|
|
|
|
|
Classification of cash
and restricted cash: |
|
|
|
Cash |
$ |
2,727 |
|
|
$ |
1,865 |
|
Restricted cash held in other
assets |
342 |
|
|
342 |
|
Cash and restricted cash |
$ |
3,069 |
|
|
$ |
2,207 |
|
|
|
|
|
|
|
|
|
Sales by Product(In
thousands)
|
Three months ended June 30, |
|
Six months ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net
sales: |
|
|
|
|
|
|
|
Commercial |
$ |
1,058 |
|
|
$ |
2,131 |
|
|
$ |
2,794 |
|
|
$ |
4,114 |
|
MMM products |
2,277 |
|
|
951 |
|
|
4,324 |
|
|
2,145 |
|
Total net sales |
$ |
3,335 |
|
|
$ |
3,082 |
|
|
$ |
7,118 |
|
|
$ |
6,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
In addition to the results provided in
accordance with U.S. GAAP, we may provide certain non-GAAP
measures, which present operating results on an adjusted basis.
These are supplemental measures of performance that are not
required by or presented in accordance with U.S. GAAP and, for the
three and six months ended June 30, 2020 and 2019, and the
three months ended March 31, 2020 include adjustments for:
- Table 1 – our ability on the period
ending date to access additional cash if necessary under our
short-term credit facility, plus the amount of cash on hand on that
same date which demonstrates our ‘access to cash’ at any point in
time;
- Table 2 - our restructuring
expenses, financing charges, income taxes, and non-cash
depreciation and amortization, stock compensation, incentive
compensation, and change in fair value of warrant liability that do
not have a current period impact on cash flow demonstrates a
measurement of cash generating capability from our the operations
of our business, and;
- Table 3 – our reported margins
during the period without the impact from reserve movements that do
not reflect current period inventory decisions as reflected by
“adjusted gross margins”.
We believe that our use of non-GAAP financial
measures permits investors to assess the operating performance of
our business relative to our performance based on U.S. GAAP results
and relative to other companies within the industry by isolating
the effects of items that may vary from period to period without
correlation to core operating performance or that vary widely among
similar companies, and to assess liquidity, cash flow performance
of the operations, and the product margins of our business relative
to our U.S. GAAP results and relative to other companies in the
industry by isolating the effects of certain items which do not
have a current period impact. However, our inclusion of these
adjusted measures should not be construed as an indication that our
future results will be unaffected by unusual or infrequent items or
that the items for which we have made adjustments are unusual or
infrequent or will not recur. We believe that the disclosure of
these non-GAAP measures is useful to investors as they form part of
the basis for how our management team and Board of Directors
evaluate our operating performance.
These non-GAAP financial measures are not
intended to replace U.S. GAAP financial measures, and they are not
necessarily standardized or comparable to similarly titled measures
used by other companies.
Table 1 |
As of |
(in
thousands) |
June 30, |
|
March 31, |
|
June 30, |
|
2020 |
|
2020 |
|
2019 |
Total borrowing capacity under credit facility |
$ |
2,566 |
|
|
$ |
2,025 |
|
|
$ |
2,006 |
|
Less: Line of credit
borrowings, gross* |
(1,397 |
) |
|
(875 |
) |
|
(1,652 |
) |
Excess availability under
credit facility** |
1,169 |
|
|
1,150 |
|
|
354 |
|
Cash |
2,727 |
|
|
2,911 |
|
|
2,207 |
|
Total availability*** |
$ |
3,896 |
|
|
$ |
4,061 |
|
|
$ |
2,561 |
|
*Forms
10Q’s and 10K Balance Sheet reflect the Line of credit net of debt
financing costs of $66, $85 and $0, respectively. |
**Excess
availability under credit facility - represents difference between
maximum borrowing capacity of credit facility and actual
borrowings |
*** Total
availability- represents Company’s ‘access’ to cash if needed at
point in time |
|
Table 2 |
Three Months Ended |
(in
thousands) |
June 30, |
|
March 31, |
|
June 30, |
|
2020 |
|
2020 |
|
2019 |
Net loss |
$ |
(4,340 |
) |
|
$ |
(541 |
) |
|
$ |
(2,254 |
) |
Restructuring (recovery)
expense |
(14 |
) |
|
(14 |
) |
|
128 |
|
Net loss, excluding restructuring |
(4,354 |
) |
|
(555 |
) |
|
(2,126 |
) |
Interest |
87 |
|
|
133 |
|
|
26 |
|
Depreciation |
46 |
|
|
46 |
|
|
95 |
|
Stock-based compensation |
41 |
|
|
20 |
|
|
(20 |
) |
Change in fair value of
warrant liability |
3,300 |
|
|
(873 |
) |
|
— |
|
Other incentive
compensation |
134 |
|
|
139 |
|
|
— |
|
Adjusted EBITDA |
$ |
(746 |
) |
|
$ |
(1,090 |
) |
|
$ |
(2,025 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Table 3 |
Three Months Ended |
(in
thousands) |
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
($) |
(%) |
|
($) |
(%) |
|
($) |
(%) |
Net sales |
$ |
3,335 |
|
|
|
$ |
3,783 |
|
|
|
$ |
3,082 |
|
|
Reported gross profit |
$ |
1,343 |
|
40.3 |
% |
|
$ |
1,032 |
|
27.3 |
% |
|
$ |
(109 |
) |
(3.5 |
)% |
Warranty, E&O, in-transit
and net realizable value inventory reserve changes |
$ |
(241 |
) |
(7.2 |
)% |
|
$ |
(78 |
) |
(2.1 |
)% |
|
$ |
831 |
|
27.0 |
% |
Adjusted gross margin |
$ |
1,102 |
|
33.0 |
% |
|
$ |
954 |
|
25.2 |
% |
|
$ |
722 |
|
23.4 |
% |
|
|
|
|
|
|
|
|
|
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