Attached files
file | filename |
---|---|
EX-31.2 - ENER1 INC | v183881_ex31-2.htm |
EX-32.1 - ENER1 INC | v183881_ex32-1.htm |
EX-10.6 - ENER1 INC | v183881_ex10-6.htm |
EX-32.2 - ENER1 INC | v183881_ex32-2.htm |
EX-31.1 - ENER1 INC | v183881_ex31-1.htm |
EX-10.5 - ENER1 INC | v183881_ex10-5.htm |
EX-10.7 - ENER1 INC | v183881_ex10-7.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended March 31, 2010
o
|
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 001-34050
Ener1,
Inc.
(Exact
name of registrant as specified in its charter)
FLORIDA
|
59-2479377
|
(State
or other jurisdiction
of
incorporation or organization)
|
(I.R.S.
Employer
Identification
No.)
|
1540
Broadway, Suite 25C
New
York, New York 10036
(Address of principal
executive offices) (Zip code)
(212)
920-3500
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities 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 R Noo
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o Noo
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ¨
|
Accelerated filer R
|
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
|
Smaller reporting company ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No R
APPLICABLE
ONLY TO CORPORATE ISSUERS:
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Class
|
Outstanding as of May 6,
2010
|
Common Stock, par value $0.01 per
share
|
125,680,653
|
ENER1, INC.
Form
10-Q for the Quarter Ended March 31, 2010
INDEX
Page
|
|
PART
I. FINANCIAL INFORMATION
|
|
Item
1. Consolidated Financial Statements
(Unaudited)
|
|
Consolidated
Balance Sheets as of March 31, 2010 and December 31, 2009
|
2
|
Consolidated
Statements of Operations for the three months ended March
31, 2010 and 2009
|
3
|
Consolidated
Statements of Stockholders’ Equity and Comprehensive Income
(Loss) for the three months ended March 31, 2010 and
2009
|
4
|
Consolidated
Statements of Cash Flows for the three months ended March
31, 2010 and 2009
|
5
|
Notes
to Unaudited Consolidated Financial Statements
|
6
|
Item
2. Management's Discussion and Analysis of
Financial Condition and Results
of
Operations
|
26
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
32
|
Item
4. Controls and Procedures
|
33
|
PART
II. OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
34
|
Item
1A. Risk Factors
|
34
|
Item
6. Exhibits
|
35
|
Signatures
|
38
|
PART
I. FINANCIAL INFORMATION
ITEM
1. Consolidated Financial Statements
ENER1,
INC.
CONSOLIDATED
BALANCE SHEETS
(unaudited,
in thousands, except share data)
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 7,646 | $ | 14,314 | ||||
Restricted
cash
|
4,547 | 3,668 | ||||||
Accounts
receivable, net of allowance of $875 and $865
|
8,306 | 6,350 | ||||||
Grant
receivable, including unbilled receivables of $2,832 and
$-0-
|
12,828 | - | ||||||
Inventories,
net of provision for obsolescence of $1,950 and $1,296
|
15,525 | 10,415 | ||||||
Deferred
financing costs, net of amortization of $323 and $177
|
2,384 | 268 | ||||||
Prepaid
expenses and other current assets
|
4,404 | 2,020 | ||||||
Total
current assets
|
55,640 | 37,035 | ||||||
Property
and equipment, net of accumulated depreciation of $9,911 and
$8,340
|
90,393 | 52,903 | ||||||
Intangible
assets, net of accumulated amortization of $3,290 and
$2,736
|
12,746 | 13,230 | ||||||
Investment
in unconsolidated entity
|
24,929 | 19,177 | ||||||
Goodwill
|
52,086 | 51,019 | ||||||
Other
|
1,247 | 1,043 | ||||||
Total
assets
|
$ | 237,041 | $ | 174,407 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 48,914 | $ | 14,268 | ||||
Income
taxes payable
|
340 | 329 | ||||||
Deferred
grant proceeds, current portion
|
100 | - | ||||||
Convertible
line of credit and accrued interest due to related party, net of discounts
of $1,212 and $1,965
|
16,560 | 10,516 | ||||||
Short
term borrowings
|
23,243 | 13,001 | ||||||
Capital
lease obligation, current portion
|
2,651 | 2,372 | ||||||
Total
current liabilities
|
91,808 | 40,486 | ||||||
Deferred
income tax liabilities
|
373 | 402 | ||||||
Derivative
liabilities
|
7,215 | 6,871 | ||||||
Deferred
grant proceeds, less current portion
|
18,863 | - | ||||||
Long
term borrowings
|
4,422 | 4,282 | ||||||
Other
long-term liabilities
|
4,239 | 4,367 | ||||||
Total
liabilities
|
126,920 | 56,408 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders'
Equity
|
||||||||
Common
stock, $0.01 par value, 175,714,286 shares authorized, 125,569,494 and
124,375,196 issued and outstanding
|
1,256 | 1,245 | ||||||
Paid
in capital
|
457,597 | 451,592 | ||||||
Accumulated
other comprehensive income
|
6,409 | 4,860 | ||||||
Accumulated
deficit
|
(356,842 | ) | (341,505 | ) | ||||
Total
Ener1, Inc. stockholders' equity
|
108,420 | 116,192 | ||||||
Noncontrolling
interests
|
1,701 | 1,807 | ||||||
Total
stockholders' equity
|
110,121 | 117,999 | ||||||
Total
liabilities and stockholders' equity
|
$ | 237,041 | $ | 174,407 |
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
- 2
-
ENER1,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited,
in thousands except per share data)
Three Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Net
sales
|
$ | 10,975 | $ | 8,192 | ||||
Cost
of sales
|
9,828 | 6,803 | ||||||
Gross
profit
|
1,147 | 1,389 | ||||||
Operating
expenses:
|
||||||||
General
and administrative
|
5,229 | 4,617 | ||||||
Research
and development, net
|
9,866 | 6,262 | ||||||
Grant
proceeds recognized
|
(28 | ) | - | |||||
Depreciation
and amortization
|
1,349 | 1,108 | ||||||
Total
operating expenses
|
16,416 | 11,987 | ||||||
Loss
from operations
|
(15,269 | ) | (10,598 | ) | ||||
Other
income (expense):
|
(178 | ) | 3,366 | |||||
Loss
before income taxes
|
(15,447 | ) | (7,232 | ) | ||||
Income
tax expense
|
16 | 37 | ||||||
Net
loss
|
(15,463 | ) | (7,269 | ) | ||||
Net
income (loss) attributable to noncontrolling interests
|
(126 | ) | 39 | |||||
Net
loss attributable to Ener1, Inc.
|
$ | (15,337 | ) | $ | (7,308 | ) | ||
Net
loss per share attributable to Ener1, Inc.:
|
||||||||
Basic
|
$ | (0.12 | ) | $ | (0.06 | ) | ||
Diluted
|
$ | (0.13 | ) | $ | (0.08 | ) | ||
Weighted
average shares outstanding
|
||||||||
Basic
|
124,904 | 113,470 | ||||||
Diluted
|
124,968 | 113,484 |
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
- 3
-
ENER1,
INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited,
in thousands)
Accumulated
|
||||||||||||||||||||||||
Other
|
Total
|
|||||||||||||||||||||||
Common
|
Paid
in
|
Comprehensive
|
Accumulated
|
Noncontrolling
|
Stockholders'
|
|||||||||||||||||||
Stock
|
Capital
|
Income
(Loss)
|
Deficit
|
Interests
|
Equity
|
|||||||||||||||||||
Balance
at December 31, 2008
|
$ | 1,132 | $ | 397,080 | $ | 1,510 | $ | (296,826 | ) | $ | 3,517 | $ | 106,413 | |||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||
Net
income (loss)
|
- | - | - | (7,308 | ) | 39 | (7,269 | ) | ||||||||||||||||
Translation
adjustment
|
- | - | (4,422 | ) | - | (232 | ) | (4,654 | ) | |||||||||||||||
Total
comprehensive loss
|
(193 | ) | (11,923 | ) | ||||||||||||||||||||
Stock
option exercises
|
- | 40 | - | - | - | 40 | ||||||||||||||||||
Shares
issued for additional noncontrolling interests
|
4 | 1,264 | 86 | - | (1,354 | ) | - | |||||||||||||||||
Cumulative
effect of change in accounting principle
|
- | (19,521 | ) | - | 6,325 | 5 | (13,191 | ) | ||||||||||||||||
Reduction
in derivative liability
|
- | 2,679 | - | - | - | 2,679 | ||||||||||||||||||
Warrants
issued to related party as borrowing fees under a line of credit
agreement
|
- | 489 | - | - | - | 489 | ||||||||||||||||||
Stock-based
compensation expense
|
- | 1,271 | - | - | - | 1,271 | ||||||||||||||||||
Balance
at March 31, 2009
|
$ | 1,136 | $ | 383,302 | $ | (2,826 | ) | $ | (297,809 | ) | $ | 1,975 | $ | 85,778 | ||||||||||
|
||||||||||||||||||||||||
Balance
at December 31, 2009
|
$ | 1,245 | $ | 451,592 | $ | 4,860 | $ | (341,505 | ) | $ | 1,807 | $ | 117,999 | |||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||
Net
loss
|
- | - | - | (15,337 | ) | (126 | ) | (15,463 | ) | |||||||||||||||
Translation
adjustment
|
- | - | 1,549 | - | 20 | 1,569 | ||||||||||||||||||
Total
comprehensive loss
|
(106 | ) | (13,894 | ) | ||||||||||||||||||||
Shares
sold for cash, net of costs
|
10 | 4,382 | - | - | - | 4,392 | ||||||||||||||||||
Stock
option and warrant exercises
|
1 | 38 | - | - | - | 39 | ||||||||||||||||||
Reduction
in derivative liability
|
- | 297 | - | - | - | 297 | ||||||||||||||||||
Warrants
issued to related party as borrowing fees under a line of credit
agreement
|
- | 275 | - | - | - | 275 | ||||||||||||||||||
Stock-based
compensation expense
|
- | 1,013 | - | - | - | 1,013 | ||||||||||||||||||
Balance
at March 31, 2010
|
$ | 1,256 | $ | 457,597 | $ | 6,409 | $ | (356,842 | ) | $ | 1,701 | $ | 110,121 |
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
- 4
-
ENER1,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited,
in thousands)
Three
Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Operating
activities:
|
||||||||
Net
loss
|
$ | (15,463 | ) | $ | (7,269 | ) | ||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||
Gain
on derivative liabilities
|
(1,525 | ) | (3,912 | ) | ||||
Non-cash
accretion of discounts on debentures and notes
|
850 | - | ||||||
Non-cash
interest expense related to financing costs
|
536 | 933 | ||||||
Depreciation
and amortization
|
2,167 | 1,771 | ||||||
Grant
proceeds recognized
|
(28 | ) | - | |||||
Stock-based
compensation expense
|
1,013 | 1,271 | ||||||
Other
non-cash changes
|
863 | (154 | ) | |||||
Changes
in certain operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(2,004 | ) | (336 | ) | ||||
Grant
receivable related to operating expenses
|
(306 | ) | - | |||||
Inventory
|
(5,401 | ) | (64 | ) | ||||
Accounts
payable and accrued expenses
|
11,608 | (3,119 | ) | |||||
Changes
in current assets, liabilities and other, net
|
(1,203 | ) | (870 | ) | ||||
Net
cash used in operating activities
|
(8,893 | ) | (11,749 | ) | ||||
Investing
activities:
|
||||||||
Capital
expenditures and equipment deposits
|
(16,155 | ) | (5,842 | ) | ||||
Grant
proceeds received related to capital expenditures
|
6,469 | - | ||||||
Investment
in unconsolidated entity
|
(5,752 | ) | - | |||||
Restricted
cash
|
(747 | ) | 743 | |||||
Other
|
36 | (2 | ) | |||||
Net
cash used in investing activities
|
(16,149 | ) | (5,101 | ) | ||||
Financing
activities:
|
||||||||
Proceeds
from sale of stock, net of costs
|
4,392 | - | ||||||
Proceeds
from borrowings, related party
|
5,000 | - | ||||||
Proceeds
from borrowings, net of costs
|
10,573 | 10,462 | ||||||
Proceeds
from exercise of options and warrants
|
39 | 40 | ||||||
Repayment
of borrowings and capital leases
|
(1,621 | ) | (494 | ) | ||||
Net
cash provided by financing activities
|
18,383 | 10,008 | ||||||
Effect
of exchange rates on cash and cash equivalents
|
(9 | ) | (120 | ) | ||||
Net
decrease in cash and cash equivalents
|
(6,668 | ) | (6,962 | ) | ||||
Cash
and cash equivalents - beginning balance
|
14,314 | 11,229 | ||||||
Cash
and cash equivalents - ending balance
|
$ | 7,646 | $ | 4,267 | ||||
Supplemental
Disclosure of Non-cash Investing and Financing Activities:
|
||||||||
Non-cash
investing and financing activities:
|
||||||||
Cumulative
effect of change in accounting principle on accumulated
deficit
|
$ | - | $ | 6,325 | ||||
Cumulative
effect of change in accounting principle on paid in
capital
|
- | 19,521 | ||||||
Reduction
in derivative liability
|
297 | 2,679 | ||||||
Warrants
issued in connection with advances of related party debt
|
275 | 489 | ||||||
Warrants
issued in connection with short term borrowings
|
2,166 | - | ||||||
Shares
issued for the purchase of noncontrolling interest
|
- | 2,597 | ||||||
Borrowings
pursuant to capital leases and equipment purchases
|
422 | 1,126 |
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
- 5
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
1 – Business Overview
Nature
of the Business
Ener1,
Inc.’s (Ener1, the Company, the Registrant, we, our or us) primary business is
designing, developing and manufacturing high-performance, rechargeable
lithium-ion batteries and battery systems for energy storage. The end
markets for our products include transportation, stationary power, military
applications and small cell markets. We are developing battery
systems to power the next generation of hybrid, plug-in hybrid and electric
vehicles (HEVs, PHEVs and EVs). We are also developing this
technology for other transportation markets including buses and
trucks. Our Enertech subsidiary specializes in small cell technology
and manufactures commercial battery packs, prismatic cells, lithium polymer
batteries, and large format cells for automotive applications; Enertech also
manufactures electrodes for other battery manufacturers. We also develop and
market fuel cells and fuel cell systems, and develop nanotechnology related
manufacturing processes and material.
Ener1’s
wholly-owned subsidiaries include; (i) EnerDel, Inc. (EnerDel), a Delaware
corporation; (ii) EnerFuel, Inc. (EnerFuel), a Delaware corporation; (iii)
NanoEner, Inc. (NanoEner), a Florida corporation; (iv) EnerDel Japan, Inc.
(EnerDel Japan), a Japanese corporation; (v) Ener1 Battery Company (Battery
Company), a Florida corporation; and (vi) Ener1 Europe, S.A.S. (Ener1 Europe), a
French corporation. As of March 31, 2010, Ener1 held an 89% interest
in Enertech International, Inc. (Enertech), a Korean
corporation. Enertech has a wholly owned subsidiary, Emerging Power,
Inc., a New Jersey corporation.
At March
31, 2010, the Company has negative working capital of $36.2 million primarily
due to the substantial increase in accounts payable related to the purchase of
production equipment, which is partially funded under a grant from the U.S.
Department of Energy (DOE). Under the grant, we receive one
incentive dollar for each dollar we spend of our own funds on qualifying capital
expenditures and other costs.
In March
2010 we secured a $15 million credit facility to provide a portion of the
initial funding of our share of the capital expenditures, and we intend to raise
additional capital, either through convertible debt, preferred stock, common
stock or other public or private financings available to us, to fund our share
of the capital expenditures under this grant program and provide additional
working capital to the Company. The pricing, dilution, terms and
conditions and availability of such funds are subject to market conditions, but
we believe sufficient funding will be available to the Company to fund our
capital expenditure program and operations during 2010.
Basis
of Presentation
In the
opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments, consisting only of normal recurring
accruals, necessary for a fair statement of financial position, results of
operations, and cash flows. The information included in this quarterly report on
Form 10-Q should be read in conjunction with these interim consolidated
financial statements and the accompanying notes included in our Annual Report on
Form 10-K for the year ended December 31, 2009. The year-end consolidated
balance sheet data presented for comparative purposes was derived from audited
financial statements, but does not include all disclosures required by
accounting principles generally accepted in the United States. The results of
operations for the three months ended March 31, 2010 are not necessarily
indicative of the operating results for the full year or for any other
subsequent interim period.
Principles
of Consolidation
Our
consolidated financial statements include the accounts of all wholly-owned and
majority-owned domestic and foreign subsidiaries. Amounts
attributable to the noncontrolling interests held by third parties in the
operating results and financial position of Enertech, our majority-owned
subsidiary are reported as a component of stockholders’ equity separate from
Ener1’s equity. Intercompany transactions and balances are eliminated
in consolidation.
We
account for our investment in Think Holdings, AS, a Norwegian limited liability
company (Think Holdings) over which we exercise significant influence but do not
exercise control using the cost method because the form of our investment is not
deemed to be equivalent to common stock for accounting purposes.
Certain
amounts for 2009 have been reclassified to conform to the 2010
presentation.
- 6
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Foreign
Currencies
Subsidiaries
located outside the United States of America use the local currency as the
functional currency. We translate assets and liabilities denominated in foreign
currencies using exchange rates in effect at the balance sheet date and equity
accounts at historical exchange rates. We translate revenues and
expenses using average exchange rates during the period. Translation
adjustments resulting from this process are shown as a separate component of
accumulated other comprehensive income within stockholders’
equity. Foreign currency transaction gains and losses are reported in
other income (expense) in the statements of operations.
Use
of Estimates
Preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America (US GAAP) requires management to make
estimates and assumptions that may affect reported amounts presented and
disclosed in our consolidated financial statements. Significant
estimates and assumptions used in the presentation of these consolidated
financial statements require the exercise of judgment and are used to account
for, among other things; revenue recognition and related allowances; derivative
liabilities; inventories; impairments of long-lived assets including intangible
assets; impairments of goodwill; income taxes including the valuation allowance
for deferred tax assets; valuation of long-lived assets; research and
development; contingencies and litigation; as well as stock-based payments;
warrants; valuation of beneficial conversion feature, if any, on convertible
securities; and other financing matters. Due to the inherent uncertainty
involved in making these estimates and assumptions, actual results reported in
future periods may be different from the results reported based on these
estimates.
Note
2 – New Accounting Pronouncements
Recently
Adopted Accounting Pronouncements
On
January 1, 2010, we adopted new accounting guidance for the consolidation of
variable interest entities which requires us to determine whether our variable
interest gives us a controlling financial interest in a variable interest
entity. This new standard has broad implications and may affect how
we account for the consolidation of equity method investments and other
agreements and purchase arrangements. Under this revised guidance,
more entities may meet the definition of a variable interest
entity. We have evaluated our investments in entities that may fall
within the scope of this amended guidance and determined that we are not
required to consolidate our investments in any additional
entities. As a result, the adoption of this standard did not have a
material impact on our financial statements.
In
January 2010, we adopted accounting guidance that amends the disclosure
requirements related to fair value measurements requiring new disclosures on the
transfers of assets and liabilities between Level 1 (assets and liabilities
measured based on quoted prices in active markets for identical assets or
liabilities) and Level 2 (assets and liabilities measured using significant
other observable inputs) of the fair value measurement hierarchy, including the
reasons for and the timing of the transfers. Effective January 1,
2011 we will adopt the guidance contained in this amendment, which requires a
rollforward of activities regarding purchases, sales, issuance, and settlements
of the assets and liabilities measured using significant unobservable inputs
(Level 3 fair value measurements). Other than requiring additional
disclosures, adoption of this new guidance did not and will not have a material
impact on our financial statements.
In
January 2010, we adopted new accounting guidance that clarifies the scope of the
noncontrolling interests standard to provide for consistency in the treatment of
partial sales and deconsolidation events. The Financial Accounting
Standards Board (FASB) broadened the scope of the new guidance to include groups
of assets that are businesses or nonprofit activities. Under this
amendment more disposal transactions will be subject to the full gain and loss
recognition requirements in the consolidation guidance. We have
retroactively applied this new guidance to January 1, 2009, evaluated all
transactions that fall within the scope of this amended guidance and determined
that the adoption of this standard did not have a material impact on our
financial statements.
- 7
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
3 – Supplemental Financial Information
Grant
Receivable and Deferred Grant Proceeds
In August
2009, we were awarded a grant of $118.5 million under the Automotive Battery
Manufacturing Initiative (ABMI), which is administered by the
DOE. The proceeds from the grant are being used primarily to purchase
production equipment in 2010 and subsequent periods, to maximize production
capacity at our existing facilities and to establish and equip an additional
manufacturing facility in Mt. Comfort, Indiana. Under the ABMI grant,
we receive one incentive dollar for each dollar we spend of our own
funds.
ABMI
grant proceeds related to the purchase of assets are recorded as deferred grant
proceeds and recognized as a reduction of operating expenses over the periods
during which depreciation on the assets is charged and in proportion to the
amount of the depreciation charge. We begin depreciating a purchased
asset on the date the asset is placed in service. ABMI grant proceeds
used to pay operating expenses are recorded as a reduction of research and
development expenses and totaled approximately $468,000 during the three months
ended March 31, 2010.
Inventories
The
following table presents the components of inventories (in
thousands):
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Raw
materials and supplies
|
$ | 9,073 | $ | 5,090 | ||||
Work
in process
|
1,551 | 1,164 | ||||||
Finished
goods
|
6,851 | 5,457 | ||||||
17,475 | 11,711 | |||||||
less:
provision for obsolescence
|
(1,950 | ) | (1,296 | ) | ||||
$ | 15,525 | $ | 10,415 |
The
Company establishes reserves for obsolete or slow-moving inventory based on
management’s analysis of inventory levels and future sales forecasts at the end
of each accounting period.
Deferred
Financing Costs
On March
23, 2010, Ener1 entered into a Credit Agreement with Credit Suisse AG, Cayman
Islands Branch (Credit Suisse), as lender, under which Ener1 is able to borrow
up to $15.0 million for general corporate purposes (the Credit
Facility). Amounts drawn under the Credit Facility become due and
payable in full on June 23, 2010 and bear interest, payable monthly, at the
London Interbank Offering Rate (LIBOR) plus 5% per annum. Commitment
fees and legal fees associated with closing the Credit Facility totaling
approximately $273,000 have been recorded as deferred financing
costs.
In
addition, in connection with the Credit Facility, Ener1 issued to Credit Suisse
warrants to purchase up to 1,046,511 shares of Ener1 common stock at an exercise
price of $4.30 per share. The warrants are immediately exercisable
and expire on March 23, 2012. Ener1 used a Black-Scholes pricing
model to value the warrants and the fair value of $2.2 million has been recorded
as deferred financing costs. See Note 6, Derivative Instruments and
Fair Value of Financial Instruments.
Total
financing costs incurred of approximately $2.4 million are being amortized to
interest expense over the term of the Credit Facility. Financing
costs of approximately $190,000 were expensed during the period ended March 31,
2010 and the remaining $2.2 million will be expensed during the quarter ending
June 30, 2010.
- 8
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Prepaid
Expenses
On March
23, 2010, Ener1 entered into an Engagement Letter with Credit Suisse for
advisory services that obligates Ener1 to offer Credit Suisse the lead role in
any future public offerings of Ener1 securities and entitles Credit Suisse to
receive minimum fees of $1.8 million prior to September 23,
2011. This minimum fee is payable whether or not Ener1 undertakes a
public offering.
Property
and Equipment
The
components of property and equipment were as follows (in thousands, except
useful life data):
Useful
life
|
March
31,
|
December
31,
|
|||||||||
(in years)
|
2010
|
2009
|
|||||||||
Land
|
$ | 2,147 | $ | 2,091 | |||||||
Building
and building improvements
|
30
- 39
|
5,852 | 5,704 | ||||||||
Machinery
and equipment
|
5 -
10
|
35,886 | 33,884 | ||||||||
Office
equipment, furniture and other
|
3 -
7
|
3,105 | 2,999 | ||||||||
Leasehold
improvements
|
1 -
10
|
9,925 | 9,929 | ||||||||
Construction
in progress
|
n/a
|
43,389 | 6,636 | ||||||||
100,304 | 61,243 | ||||||||||
less:
accumulated depreciation
|
(9,911 | ) | (8,340 | ) | |||||||
$ | 90,393 | $ | 52,903 |
Construction
in progress includes equipment not yet placed in service and deposits for
equipment being constructed by third parties specifically for our
use. Depreciation on these assets will commence when the assets are
placed in service.
Depreciation
expense for the periods ended March 31, 2010 and 2009 was approximately $1.6
million and $1.3 million, respectively. Assets recorded under capital
leases were approximately $8.1 million and $7.7 million at March 31, 2010 and
December 31, 2009, respectively.
Intangible
Assets
The
components of intangible assets were as follows (in thousands, except useful
life data):
Useful
|
As
of March 31, 2010
|
As
of December 31, 2009
|
||||||||||||||||||||||||||
life
|
Carrying
|
Accumulated
|
Carrying
|
Accumulated
|
||||||||||||||||||||||||
(in
yrs)
|
Amount
|
Amortization
|
Net
|
Amount
|
Amortization
|
Net
|
||||||||||||||||||||||
Patented
and unpatented technology
|
10 | $ | 13,908 | $ | (2,268 | ) | $ | 11,640 | $ | 13,905 | $ | (1,920 | ) | $ | 11,985 | |||||||||||||
Electric
vehicle battery technology
|
4.2 | 1,174 | (399 | ) | 775 | 1,137 | (318 | ) | 819 | |||||||||||||||||||
Customer
relationships
|
2.2 | 954 | (623 | ) | 331 | 924 | (498 | ) | 426 | |||||||||||||||||||
$ | 16,036 | $ | (3,290 | ) | $ | 12,746 | $ | 15,966 | $ | (2,736 | ) | $ | 13,230 |
Certain
intangible assets are subject to foreign currency translation and the
translation adjustment is recorded as a component of accumulated other
comprehensive income within stockholders’ equity in the consolidated balance
sheets. During the period ended March 31, 2010, the carrying amounts of
certain intangible assets were adjusted as a result of foreign currency
translations.
- 9
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Intangible
asset amortization expense was approximately $526,000 and $491,000 for the
periods ended March 31, 2010 and 2009, respectively. The following
table reflects the estimated future amortization expense related to intangible
assets as of March 31, 2010 (in thousands):
Year
Ended December 31,
|
||||
2010
|
$ | 1,538 | ||
2011
|
1,658 | |||
2012
|
1,637 | |||
2013
|
1,384 | |||
2014
|
1,363 | |||
Thereafter
|
5,166 | |||
$ | 12,746 |
Goodwill
Goodwill
represents the difference, if any, between the purchase price and the fair value
of the net assets acquired in a business combination. During the
three months ended March 31, 2010, goodwill was adjusted as a result of foreign
currency translations totaling approximately $1.1 million due to fluctuations in
the Korean Won, the local currency of Enertech, which the Company acquired in
October 2008.
Accounts
Payable and Accrued Expenses
The
components of accounts payable and accrued expenses were as follows (in
thousands):
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Accounts
payable
|
$ | 39,954 | $ | 9,847 | ||||
Customer
advances
|
3,719 | 1,130 | ||||||
Accrued
financing fee
|
1,800 | - | ||||||
Accrued
compensation and benefits
|
1,647 | 1,376 | ||||||
Accrued
other
|
1,794 | 1,915 | ||||||
$ | 48,914 | $ | 14,268 |
The
accounts payable balance at March 31, 2010 includes approximately $21.9 million
related to equipment purchases made under the ABMI grant. The accrued
financing fee represents minimum fees for advisory services payable by Ener1 to
Credit Suisse under an engagement letter obligating Ener1 to offer Credit Suisse
the lead role in any future public offerings of Ener1 securities and entitling
Credit Suisse to receive minimum fees of $1.8 million prior to September 23,
2011. This minimum fee is payable whether or not Ener1 undertakes a
public offering.
Other
Long-Term Liabilities
The
components of other long-term liabilities were as follows (in
thousands):
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Capital
lease obligations
|
$ | 2,276 | $ | 2,701 | ||||
Severance
benefits at foreign subsidiary
|
1,177 | 1,007 | ||||||
Convertible
bonds
|
397 | 385 | ||||||
Refundable
government grants
|
389 | 274 | ||||||
Other
long-term liabilities
|
$ | 4,239 | $ | 4,367 |
- 10
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Convertible
Bonds
On
January 25, 2008, Enertech issued convertible bonds with an aggregate principal
amount of $9.2 million maturing on January 25, 2013 (Enertech Convertible
Bonds). Interest accrues on the Enertech Convertible Bonds at 8.5%
per annum and is payable at maturity. Prior to December 2012,
principal due under the bonds may be converted by the holder into shares of
Enertech common stock at a fixed conversion price of 750 Korean Won per
share. Upon conversion, the principal amount to be converted is
translated from United States Dollars to Korean Won, using the exchange rate in
effect on the date of conversion.
Ener1
acquired 96% of the principal amount of the Enertech Convertible Bonds in
October 2008 in connection with Ener1’s acquisition of Enertech. In
December 2009, Ener1 converted $6.9 million of the outstanding principal of the
Enertech Convertible Bonds into shares of Enertech common stock. As
of March 31, 2010, approximately $2.3 million in principal and accrued interest
of the Enertech Convertible Bonds was outstanding and is convertible into up to
2,822,915 shares of Enertech common stock. We owned approximately 84%
of the outstanding principal balance of the Enertech Convertible Bonds at March
31, 2010 and have eliminated the principal and related accrued interest in
consolidation.
Note
4 – Earnings per Share
Net loss
per share - basic is calculated by dividing net loss by the weighted average
number of common shares outstanding during the period. Net loss per share -
diluted is calculated by reflecting the potential dilution that occurs if
options or warrants are exercised or convertible debt is converted into common
stock and the effect of the exercise or conversion on the net loss per
share. In addition, in calculating net loss per share-diluted we
assume in-the-money warrants containing dilution protection features are
exercised, which decreases the gain on derivative and, as a result, increases
the net loss per share-diluted. Following is a reconciliation of net
loss attributable to Ener1 and weighted average common shares outstanding for
purposes of calculating basic and diluted loss per share (in thousands, except
per share data):
Three
Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Net
loss for basic loss per share
|
$ | (15,337 | ) | $ | (7,308 | ) | ||
Adjustment
for derivative gain
|
(1,521 | ) | (2,325 | ) | ||||
Net
loss for diluted loss per share
|
$ | (16,858 | ) | $ | (9,633 | ) | ||
Weighted
average number of common shares outstanding:
|
||||||||
Basic
|
124,904 | 113,470 | ||||||
Effect
of dilutive securities:
|
||||||||
Certain
warrants
|
64 | 14 | ||||||
Diluted
|
124,968 | 113,484 | ||||||
Loss
per common share attributable to Ener1, Inc.:
|
||||||||
Basic
|
$ | (0.12 | ) | $ | (0.06 | ) | ||
Diluted
|
$ | (0.13 | ) | $ | (0.08 | ) |
- 11
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
5 – Other Income (Expenses)
The
components of other income (expense) were as follows (in
thousands):
Three
Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Other
income (expenses):
|
||||||||
Interest
expense
|
$ | (2,002 | ) | $ | (1,317 | ) | ||
Gain
on derivative liabilities
|
1,525 | 3,912 | ||||||
(Loss)
gain on foreign currency transactions
|
(50 | ) | 671 | |||||
Other
|
349 | 100 | ||||||
Total
other income (expenses)
|
$ | (178 | ) | $ | 3,366 |
Note
6 - Derivative Instruments and Fair Value of Financial Instruments
Derivative
Instruments
We issued
freestanding warrants in connection with capital raising activity during 2004
and 2005 that contained dilution protection features requiring exercise
price adjustments if we issued securities deemed to be dilutive to the warrants
(2004 Warrants and 2005 Warrants, respectively). Prior to January 1, 2009, these
warrants were classified in equity. After evaluating the application
of US GAAP, the 2004 Warrants and 2005 Warrants were no longer deemed to be
indexed to Ener1’s common stock and on January 1, 2009 were reclassified as a
derivative liability.
In March
2010, in connection with the Credit Facility, we issued warrants to Credit
Suisse (Credit Suisse Warrants) that contain dilution protection features
requiring increases in the number of shares issuable under the warrants if we
issue securities that are deemed to be dilutive to the warrants.
In
accordance with applicable accounting guidance, the conversion feature of the
Enertech Convertible Bonds was bifurcated and recorded as a derivative liability
on January 1, 2009. As foreign currency rates fluctuate, the
number of shares of Enertech stock to be issued upon conversion
fluctuates.
We record
the fair value of derivative instruments in our consolidated balance sheet and
reflect the changes in fair value as gain or loss on derivative
liabilities. Our derivative instruments are not designated as hedging
instruments.
Lattice Valuation
Model
Freestanding
Warrants
We valued
the 2004 Warrants and 2005 Warrants using a lattice valuation model, for which
management understands the methodologies, with the assistance of a valuation
consultant. This model incorporates factors such as the price of Ener1’s common
stock, contractual terms of the warrants, expiration date of the warrants, and
risk-free interest rates, as well as assumptions about future financings by
Ener1, volatility of Ener1 common stock, and warrant holder behavior on key
dates, including warrant exercise dates and period end reporting
dates. These assumptions are reviewed quarterly and are subject to
change. Changes to these assumptions could materially affect
management’s estimate of the fair value of the 2004 Warrants and 2005
Warrants.
- 12
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
During
the period ended March 31, 2010, certain 2005 Warrants were exercised and
certain 2005 Warrants expired. On the respective exercise or
expiration dates, these 2005 Warrants were no longer treated as derivative
liabilities. The fair value of the derivative liability associated
with the 2005 Warrants that were exercised was marked to market on the date of
exercise and a gain or loss on derivative liability was recorded, as
applicable. The balance of the derivative liability associated with
these 2005 Warrants that were exercised of $297,000 was recorded as a
contribution to paid in capital on the date of exercise.
Our
management estimates that the fair value of the derivative liability associated
with the 2004 Warrants and the 2005 Warrants that remain outstanding as of March
31, 2010 is approximately $4.8 million. Some of the key assumptions
on which this estimate is based include, but are not limited to, projected
annual volatility of Ener1 common stock of 65% and assumptions that
holders of the 2005 Warrants will exercise the warrants when Ener1’s common
stock price is 150% of the exercise price and holders of the 2004 Warrants will
exercise the warrants when Ener1’s common stock price is 200% of the exercise
price.
Black-Scholes Valuation
Model
Freestanding
Warrants
We use a
Black-Scholes pricing model to determine the fair value of the Credit Suisse
Warrants. This model uses market sourced inputs such as interest
rates, stock price and volatility, the selection of which requires management’s
judgment. The fair value of the warrants on key dates, including the
issuance date and period end reporting dates was estimated using the following
inputs:
Volatility
|
Interest
Rate
|
Stock
Price
|
Term
in
Years
|
|||||||||||||
March
23, 2010
|
84.9 | % | 1.0 | % | $ | 4.44 | 2.0 | |||||||||
March
31, 2010
|
85.0 | % | 1.0 | % | $ | 4.73 | 2.0 |
Based on
these inputs, the derivative liability associated with the Credit Suisse
warrants, as of March 31, 2010, was $2.4 million and the loss on derivative
liability for the period ended March 31, 2010 was approximately
$220,000.
Enertech
Convertible Bonds
We use a
Black-Scholes pricing model to determine the fair value of the Enertech
Convertible Bonds. This model uses market sourced inputs such as
interest rates, stock price and volatility, the selection of which requires
management’s judgment. Because the bonds are convertible into shares
of Enertech common stock, stock prices were estimated using the average stock
price of four comparable Korean companies which operate in the same industry and
are similar in size to Enertech, with a 30% liquidity
discount. Volatility was estimated using the average volatility of
the common stock of the same four comparable Korean
companies. Interest rates represent the Korean government bond rate
for securities with a maturity that approximates the estimated expected life of
the Enertech Convertible Bonds.
The fair
value of the Enertech Convertible Bonds on period end reporting dates was
estimated using the following inputs:
Volatility
|
Interest
Rate
|
Stock
Price
|
Term
in
Years
|
|||||||||||||
December
31, 2009
|
61.2 | % | 4.9 | % | $ | 0.43 | 3.1 | |||||||||
March
31, 2010
|
60.7 | % | 4.5 | % | $ | 0.42 | 2.8 |
We own a
percentage of the outstanding principal balance of the convertible bonds and as
a result have eliminated 90% of the related derivative liability and the gain on
derivative liability in consolidation. Based on these assumptions,
the remaining derivative liability as of March 31, 2010 is $25,000 and the gain
on derivative liability for the period ended March 31, 2010 was approximately
$4,000.
- 13
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Fair
Value of Financial Instruments
Fair
value is defined as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. A fair value hierarchy is used
which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. The three levels of
inputs that may be used to measure fair value are:
Level 1 – Quoted prices
in active markets for identical assets or liabilities.
Level 2 – Observable
inputs other than Level 1 prices, such as quoted prices for similar assets
or liabilities; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or
liabilities.
Level 3 – Unobservable
inputs that are supported by little or no market activity and that are financial
instruments whose values are determined using pricing models, discounted cash
flow methodologies, or similar techniques, as well as instruments for which the
determination of fair value requires significant judgment or estimation. Our
Level 3 liabilities as of March 31, 2010 consist of the 2004 Warrants, 2005
Warrants, Credit Suisse Warrants and Enertech Convertible Bonds.
Financial Assets and
Liabilities Measured at Fair Value on a Recurring Basis
The
following table summarizes the financial assets and liabilities measured at fair
value during the period ended March 31, 2010 (in thousands):
Carrying
|
Fair Value Measurements
Using
|
|||||||||||||||||||
Value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||||||
Warrant
derivative
|
$ | 7,190 | $ | - | $ | - | $ | 7,190 | $ | 7,190 | ||||||||||
Convertible
bond derivative
|
25 | - | - | 25 | 25 | |||||||||||||||
Total
Derivative Liabilities
|
$ | - | $ | - | $ | 7,215 | $ | 7,215 |
Level 3
Valuation Techniques
Financial
assets are considered Level 3 assets when their fair values are determined
using pricing models, discounted cash flow methodologies or similar techniques
and at least one significant model assumption or input is
unobservable.
The
following table provides a summary of the changes in fair value, including net
transfers in and/or out, of all financial instruments measured at fair value on
a recurring basis using significant unobservable inputs (in
thousands):
Total
|
||||||||||||
Convertible
|
Derivative
|
|||||||||||
Warrants
|
Bonds
|
Liabilities
|
||||||||||
Balance,
January 1, 2010
|
$ | 6,842 | $ | 29 | $ | 6,871 | ||||||
Total
realized/unrealized (gains) or losses:
|
||||||||||||
Included
in other income (expense)
|
(1,521 | ) | (4 | ) | (1,525 | ) | ||||||
Included
in stockholders' equity
|
(297 | ) | - | (297 | ) | |||||||
Purchases,
issuances and settlements
|
2,166 | - | 2,166 | |||||||||
Balance,
March 31, 2010
|
$ | 7,190 | $ | 25 | $ | 7,215 |
- 14
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Enertech
has derivative instruments for managing exposure to foreign currency primarily
to hedge against the foreign exchange risk arising from accounts receivable from
domestic subsidiaries. These derivative instruments are measured at
fair value as they are not designated as hedges based on the criteria
established under US GAAP, and gains or losses from changes in the fair value
are recognized in earnings.
Note
7 – Short-Term and Long-Term Borrowings
Short-term
borrowings
Short-term
borrowings consist of the following (in thousands):
March
31,
|
December
31,
|
||||||||
Interest rate
|
2010
|
2009
|
|||||||
Credit
facility
|
LIBOR
+ 5%
|
$ | 11,000 | $ | - | ||||
Trade
financing
|
6.24%
~ 6.98%
|
11,109 | 10,391 | ||||||
Letters
of credit
|
3.35%
~ 4.86%
|
634 | 881 | ||||||
Line
of credit
|
7.85%
|
500 | 700 | ||||||
Payment
plan
|
n/a
|
- | 1,029 | ||||||
$ | 23,243 | $ | 13,001 |
The
Credit Facility is denominated in United States Dollars and the total amount
available is $15.0 million, of which $11.0 million was outstanding at March 31,
2010 and $15.0 million was outstanding at April 14, 2010. The amount
outstanding of $15.0 million is payable in full on June 23, 2010. In
connection with the Credit Facility, Ener1 and certain of its subsidiaries
entered into a Guarantee and Collateral Agreement with Credit Suisse, pursuant
to which (i) certain collateral, including Ener1’s ownership interest in EnerDel
and Think Holdings AS, was pledged as security for repayment of amounts borrowed
and (ii) such subsidiaries guaranteed Ener1’s obligations under the Credit
Facility.
The trade
financing agreements and letters of credit are denominated in Korean Won and the
total amount available at March 31, 2010 was approximately $17.7 million of
which $11.7 million was outstanding, based on the period end exchange rate of
1,130.80 Korean Won per United States Dollar. The amounts are
scheduled for repayment at various times throughout 2010.
Emerging
Power, Inc., Enertech’s subsidiary, has a $1.0 million line of credit with a
commercial bank that is denominated in United States
Dollars. At March 31, 2010 $0.5 million was outstanding under
this line of credit. The loan is scheduled to mature on May 28,
2010.
Certain
bank deposits, land, buildings and equipment are pledged as collateral for the
trade financing agreements, letters of credit and line of credit.
Long-term
borrowings
Long-term
borrowings consist of an equipment loan denominated in Korean
Won. The total amount outstanding at March 31, 2010 was approximately
$4.4 million. The loan bears interest at 7.85% and matures in October
2011. Certain bank deposits, land and buildings are pledged as
collateral to guarantee payment.
- 15
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
8 – Sales of Common Stock
In
January 2010, we entered into an Open Market Sale Agreement (Open Market Sale
Agreement) with Jefferies & Company, Inc. (Jefferies), engaging Jefferies to
sell, on our behalf, shares of Ener1 common stock with an aggregate sales price
of up to $60.0 million. Sales of the shares are executed by means of ordinary
brokers’ transactions on the Nasdaq Global Market at market prices, privately
negotiated transactions, crosses or block transactions. Under the
terms of the Open Market Sale Agreement, we could also sell shares to Jefferies
as a principal for its own account at a price agreed upon at the time of
sale. The compensation to Jefferies for sales of common stock sold
pursuant to the Open Market Sale Agreement is 3.0% of the gross proceeds of the
sales price per share.
We began
selling shares under the Open Market Sale Agreement in February 2010 and through
March 31, 2010 we sold 1,036,555 shares for an aggregate of $4.6 million, at an
average price of $4.42 per share. After deducting fees and expense of
$193,000, we received net proceeds of $4.4 million from the sale of these
shares.
To date,
through May 6, 2010, we have sold a total of 1,147,457 shares for an aggregate
of $5.1 million, at an average price of $4.40 per share. After
deducting fees and expenses of approximately $207,000, we received net proceeds
of $4.8 million from the sale of these shares.
Note
9 – Stock-Based Compensation
At March
31, 2010, we had seven active stock-based compensation plans which provide for
the granting of incentive and non-incentive stock options, restricted stock and
bonuses to officers, directors, employees and consultants. The
Compensation Committee of the Board of Directors administers the plans and has
the authority to determine the recipients to whom awards will be made, the terms
of the vesting and forfeiture, the amounts of the awards and other
terms. Under the terms of the plans, the option exercise price
approved by the Compensation Committee shall not be less than the fair market
value of Ener1 common stock at the date of grant.
Performance
options are earned based on achievement of specifically identified performance
criteria and are subject to forfeiture if such performance criteria are not
met. These options usually vest one-third per year over a three year
period, but cannot be exercised unless the options are both earned and
vested. We also award incentive options from time to time which
generally vest over a three year period. Compensation expense is
recorded on a straight-line basis over the vesting periods and is based on the
amount of awards expected to be earned and vested.
We grant
restricted stock from time to time to certain employees. The
restrictions usually lapse over a period of one to three years provided the
recipient remains an employee of the Company. Compensation expense is
determined at the grant date, based on the closing price of our common stock,
and is recorded on a straight-line basis over the restriction
period.
Compensation
expense (net of estimated forfeitures) related to our stock-based compensation
plans for the periods ended March 31, 2010 and 2009 was approximately $1.0
million and $ 1.3 million, respectively. The total unrecognized
compensation expense (net of estimated forfeitures) related to non-vested awards
is approximately $2.9 million and is expected to be expensed in future years as
follows (in thousands):
2010
|
2011
|
2012
|
2013
|
Total
|
||||||||||||||||
Unrecognized
compensation expense
|
$ | 1,495 | $ | 1,114 | $ | 313 | $ | 1 | $ | 2,923 |
If there
are any modifications or cancellations of the underlying non-vested awards, we
may be required to accelerate, increase or cancel any remaining unearned
compensation expense. Future compensation expense and unrecognized compensation
expense may increase to the extent that additional equity awards are
granted.
- 16
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A summary
of the activity in our stock option plans is as follows:
Options
|
Weighted
average
exercise price
|
Weighted
average
remaining
contractual
life
|
Aggregate
intrinsic
value
|
|||||||||||||
Balance,
December 31, 2009
|
4,473,660 | $ | 3.80 | 4.0 | $ | 11,840,919 | ||||||||||
Granted
|
20,000 | $ | 3.80 | |||||||||||||
Exercised
|
(49,124 | ) | 2.83 | |||||||||||||
Forfeited
or expired
|
(159,500 | ) | 4.99 | |||||||||||||
Balance,
March 31, 2010
|
4,285,036 | $ | 3.77 | 3.7 | $ | 6,419,604 | ||||||||||
Exercisable,
March 31, 2010
|
3,408,593 | $ | 3.39 | 3.6 | $ | 5,739,361 |
The
intrinsic value of options exercised during the periods ended March 31, 2010 and
2009, was approximately $138,000 and $105,000, respectively.
The
weighted average fair value of non-vested options and restricted stock during
the period ended March 31, 2010 is as follows:
Weighted
|
||||||||
average
|
||||||||
Options
|
fair value
|
|||||||
Non-vested,
January 1, 2010
|
1,296,465 | $ | 3.71 | |||||
Granted
|
20,000 | 3.80 | ||||||
Vested
|
(280,522 | ) | 4.61 | |||||
Forfeited
|
(159,500 | ) | 4.99 | |||||
Non-vested,
March 31, 2010
|
876,443 | $ | 4.09 |
Weighted
|
||||||||
Restricted
|
average
|
|||||||
Stock
|
fair value
|
|||||||
Non-vested,
January 1, 2010
|
40,000 | $ | 6.19 | |||||
Granted
|
140,000 | 3.80 | ||||||
Vested
|
(10,000 | ) | 4.05 | |||||
Non-vested,
March 31, 2010
|
170,000 | $ | 4.35 |
- 17
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following key
assumptions:
2010
|
|
Expected
term
|
4
yrs
|
Risk
free interest rate
|
1.30%
|
Expected
volatility
|
91.20%
|
Expected
dividend yield
|
0%
|
Expected
term
The
expected term represents the period over which the stock options are expected to
be outstanding. It has been determined using the “simplified method” described
in Staff Accounting Bulletin No. 110, which is based on a calculation that
determines the midpoint between the vesting date and the end of the contractual
term.
Risk-free
interest rate
The
risk-free interest rate assumption is based on the implied yield currently
available on United States treasury bonds with a remaining term equivalent to
the expected term of the stock options.
Expected
volatility
The
expected volatility assumptions are based upon the weekly closing stock price of
Ener1’s common stock since January 2002, when Ener1 underwent a change in
control. We determined that share prices prior to January 2002 do not
reflect the ongoing business valuation of our current operations.
Dividend
yield
We do not
intend to pay dividends on our common stock in the foreseeable future.
Accordingly, we use a dividend yield of zero in our assumptions.
The
following table summarizes stock option information for options outstanding at
March 31, 2010:
Options Outstanding
|
||||||||||||||||
Exercise price
range
|
Number of
options
|
Weighted
average
remaining
contractual life
|
Weighted
average
exercise price
|
Aggregate
instrinsic value
|
||||||||||||
$0.49
- $1.61
|
832,631 | 1.8 | $ | 1.60 | $ | 2,685,836 | ||||||||||
$2.10
- $4.20
|
1,900,546 | 4.4 | 2.80 | 3,733,768 | ||||||||||||
$4.83
- $4.90
|
480,644 | 3.1 | 4.90 | - | ||||||||||||
$5.18
- $6.79
|
869,071 | 4.5 | 6.51 | - | ||||||||||||
$7.15
- $7.63
|
202,144 | 3.5 | 7.33 | - | ||||||||||||
Totals
|
4,285,036 | 3.7 | $ | 3.77 | $ | 6,419,604 |
- 18
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
following table summarizes stock option information for options exercisable at
March 31, 2010:
Options Exercisable
|
||||||||||||||||
Exercise
price range
|
Number of
options
|
Weighted
average
remaining
contractual
life
|
Weighted
average
exercise price
|
Aggregate
instrinsic value
|
||||||||||||
$0.49
- $1.61
|
789,696 | 1.8 | $ | 1.60 | $ | 2,551,888 | ||||||||||
$2.10
- $4.20
|
1,656,735 | 4.3 | 2.71 | 3,187,473 | ||||||||||||
$4.83
- $4.90
|
363,712 | 3.1 | 4.90 | - | ||||||||||||
$5.18
- $6.79
|
483,449 | 4.8 | 6.57 | - | ||||||||||||
$7.15
- $7.63
|
115,001 | 3.4 | 7.42 | - | ||||||||||||
Totals
|
3,408,593 | 3.6 | $ | 3.39 | $ | 5,739,361 |
Note
10 - Warrants
A summary
of the activity for warrants, all of which are currently exercisable, is as
follows:
Warrants
|
Weighted
average
exercise price
|
Weighted
average
remaining
contractual life
|
Aggregate
intrinsic value
|
|||||||||||||
Balance,
January 1, 2010
|
27,607,246 | $ | 4.23 | 2.2 | $ | 75,389,036 | ||||||||||
Granted
|
1,296,511 | 5.06 | ||||||||||||||
Exercised
|
(714,287 | ) | 5.39 | |||||||||||||
Expired
|
(98,826 | ) | 5.39 | |||||||||||||
Balance,
March 31, 2010
|
28,090,644 | 4.23 | 2.0 | $ | 44,492,911 |
The fair
value of each warrant granted during the first quarter of 2010 was estimated on
the date of the grant using the Black-Scholes option pricing model with the
following key assumptions:
2010
|
|
Expected
term (in years)
|
2
|
Risk
free interest rate
|
0.91%
- 1.02%
|
Expected
volatility
|
84%
- 89%
|
Dvidend
yield
|
0%
|
Expected
term
The
expected term represents the period over which the warrants are expected to be
outstanding.
Risk-free
interest rate
The
risk-free interest rate assumption is based on the implied yield currently
available on United States treasury bonds with a remaining term equivalent to
the expected term of the warrants.
- 19
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Expected
volatility
The
expected volatility assumptions are based upon the weekly closing stock price of
Ener1’s common stock since January 2002, when Ener1 underwent a change in
control. We determined that share prices prior to January 2002 do not
reflect the ongoing business valuation of our current operations.
Dividend
yield
We do not
intend to pay dividends on our common stock in the foreseeable future.
Accordingly, we use a dividend yield of zero in our assumptions.
The
following table summarizes warrant information for warrants outstanding, all of
which were exercisable at March 31, 2010:
Warrants Outstanding and Exercisable
|
||||||||||||||||
Exercise price range
|
Number of
warrants
|
Weighted
average
remaining
contractual life
|
Weighted
average
exercise price
|
Aggregate
instrinsic value
|
||||||||||||
$2.10
- $2.80
|
18,166,712 | 2.0 | $ | 2.31 | $ | 44,042,911 | ||||||||||
$4.83
- $5.95
|
2,250,327 | 1.8 | 4.80 | 450,000 | ||||||||||||
$7.50
- $8.88
|
7,058,217 | 1.8 | 8.08 | - | ||||||||||||
$10.50
- $17.57
|
615,388 | 4.1 | 14.62 | - | ||||||||||||
28,090,644 | 2.0 | $ | 4.23 | $ | 44,492,911 |
Note
11 – Noncontrolling Interests
The
following table reconciles equity attributable to the noncontrolling interests
related to Enertech, our majority-owned subsidiary (in thousands):
Three
Months Ended
|
||||||||
March
31,
|
||||||||
2010
|
2009
|
|||||||
Balance,
beginning of period
|
$ | 1,807 | $ | 3,517 | ||||
Net
income (loss) attributable to noncontrolling interests
|
(126 | ) | 39 | |||||
Translation
adjustments
|
20 | (232 | ) | |||||
Reduction
in noncontrolling interests
|
- | (1,354 | ) | |||||
Cumulative
effect of change in accounting principle
|
- | 5 | ||||||
Balance,
end of period
|
$ | 1,701 | $ | 1,975 |
In April
2010, we made a cash contribution to Enertech of approximately $7.3 million,
which increased our ownership interest to 93%. We have agreed to
invest an additional $5.0 million in July 2010, which will increase our
ownership interest to approximately 94%.
Enertech
has a share-based compensation plan in which stock options to purchase Enertech
common stock are granted to Enertech’s directors and employees who have
contributed to Enertech’s operations.
- 20
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
12 – Related Party Transactions
Investment
in Unconsolidated Entity
On August
24, 2009, we entered into a Securities Investment and Subscription Agreement
(SISA) with Think Holdings, the majority owner of Think Global, AS (Think
Global), a Norwegian electric car manufacturer and a customer of
EnerDel. As of March 31, 2010, Ener1 had fulfilled its obligations
under the SISA to purchase 10,826,640 shares of Series B Convertible Preferred
Stock (Series B Stock) for approximately $18.8 million.
As of
March 31, 2010, we owned approximately 32% of Think Holdings on a fully diluted
basis, which assumes the conversion and exercise of all outstanding dilutive
securities. In accordance with applicable accounting standards, we
have accounted for this investment under the cost method as the Series B Stock
is not considered to be equivalent to common stock for accounting
purposes.
On May 5,
2010, we agreed to purchase approximately 7,500,000 shares of Series B Stock
from Think Holdings for approximately $12.5 million pursuant to a second
Securities Investment and Subscription Agreement (Second SISA) offering
by Think Holdings of up to approximately 30,000,000 shares of Series B
Stock. It is anticipated that the purchase will occur in one or
more closings. We anticipate that the shares of Series B Stock will be
purchased during the quarter ending June 30, 2010. In April 2010, we
also made a $1.5 million short-term working capital loan to Think
Holdings.
Investors
who purchase shares of Series B Stock under the Second SISA may put their Series
B Stock to Ener1 in consideration for shares of Ener1 common
stock. The put price for one share of Series B Stock is
$1.67. The Ener1 common stock issued in consideration for a put will
be valued based on the preceding 15 day volume weighted average price of Ener1
common stock, with a floor of $4.00 per share. Investors will have
one year to exercise their put right and, upon exercise, would receive
unregistered shares of Ener1 common stock. Ener1 will use
commercially reasonable efforts to register the resale of the Ener1 shares, if
the investors are not able to resell such shares under Rule 144. Any
investor who exercises its put right must assign to Ener1 50% of the warrants to
purchase Series B Stock in Think Holdings that the investor received under the
Second SISA. The total amount of Ener1 common stock issuable upon
exercise of the put right is capped at $27.5 million. We are
currently evaluating the impact the put right may have on our financial
statements.
Convertible
Line of Credit
At March
31, 2010, Bzinfin, S.A., (Bzinfin) owned 68.5% of the common stock of Ener1
Group, Inc., which owned approximately 51% of our outstanding common stock as of
March 31, 2010. In February 2010, we borrowed an additional $5.0
million under an existing line of credit extended by Bzinfin and, in accordance
with the terms of the credit agreement, issued to Bzinfin warrants to purchase
up to 250,000 shares of Ener1 common stock at an exercise price of $8.25 per
share. These warrants are immediately exercisable and expire two
years from the date of grant. Using a Black-Scholes pricing model,
the estimated fair value of the warrants of $0.3 million was recorded as a
reduction in proceeds and will be accreted to interest expense over the
remaining five-month term of the agreement which matures on July 1,
2010.
The
components of the convertible line of credit balance as of March 31, 2010 are as
follows (in thousands, except warrants):
- 21
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Convertible
Line of Credit
|
||||
Proceeds
from advances
|
$ | 16,750 | ||
Beneficial
conversion feature, net
|
(979 | ) | ||
Fair
value of warrants, net
|
(233 | ) | ||
Accrued
interest payable at maturity
|
1,022 | |||
Balance,
March 31, 2010
|
$ | 16,560 | ||
Warrants
issued
|
325,000 | |||
Fair
value of warrants
|
$ | 502 |
The
following summarizes the accretion of debt discount to interest expense during
the period ended March 31, 2010 (in thousands):
Beneficial
|
Fair
|
|||||||
Conversion
|
Value
of
|
|||||||
Feature
|
Warrants
|
|||||||
Original
discount
|
$ | 2,816 | $ | 502 | ||||
Accreted
to interest expense
|
(1,837 | ) | (269 | ) | ||||
Balance,
March 31, 2010
|
$ | 979 | $ | 233 |
The
unamortized balance at March 31, 2010 will be accreted to interest expense
during the three months ending June 30, 2010.
Note
13 - Segments
Operating
segments are designed to allocate resources internally and provide a framework
for management responsibility. Operating segments are defined as components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision making
group, in deciding how to allocate resources and in assessing performance. Our
chief operating decision maker is our Chief Executive Officer.
We have
identified three reportable operating segments: battery, fuel cell and
nanotechnology. The battery business develops and manufactures
high-performance, rechargeable lithium-ion batteries and battery systems for
energy storage. The end markets for our products include transportation,
stationary power, military applications and small cell markets. We
are developing battery systems to power the next generation of HEVs, PHEVs and
EVs. We are also developing this technology for other transportation
markets including buses and trucks. The fuel cell business develops
and markets fuel cells and fuel cell systems. The nanotechnology business
develops nanotechnology related manufacturing processes and
materials.
Transactions
between segments, consisting principally of product sales and purchases, are
recorded at the consummated sales price. The accounting policies of
the segments are the same as those described in the Basis of
Presentation.
The
following table provides summarized financial information regarding our
reportable operating segments (in thousands):
- 22
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Three
Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Net
sales:
|
||||||||
Battery
|
$ | 10,879 | $ | 8,147 | ||||
Fuel
Cell
|
59 | (10 | ) | |||||
Nanotechnology
|
- | - | ||||||
Unallocated
|
37 | 55 | ||||||
Total
Net Sales
|
$ | 10,975 | $ | 8,192 | ||||
Corporate
allocations:
|
||||||||
Battery
|
$ | 2,931 | $ | 2,653 | ||||
Fuel
Cell
|
228 | 282 | ||||||
Nanotechnology
|
60 | 109 | ||||||
Corporate
|
(3,219 | ) | (3,044 | ) | ||||
$ | - | $ | - | |||||
Net
income (loss) attributable to Ener1, Inc.
|
||||||||
Battery
|
$ | (14,015 | ) | $ | (9,042 | ) | ||
Fuel
Cell
|
(927 | ) | (932 | ) | ||||
Nanotechnology
|
(276 | ) | (391 | ) | ||||
Reconciling
amounts
|
(119 | ) | 3,057 | |||||
Net
loss attributable to Ener1, Inc.
|
$ | (15,337 | ) | $ | (7,308 | ) | ||
March
31,
|
December
31,
|
|||||||
|
2010
|
2009
|
||||||
Assets: | ||||||||
Battery
|
$ | 200,455 | $ | 142,864 | ||||
Fuel
Cell
|
463 | 438 | ||||||
Nanotechnology
|
136 | 146 | ||||||
Unallocated
|
35,987 | 30,959 | ||||||
Total
assets
|
$ | 237,041 | $ | 174,407 |
Corporate
allocations represent corporate level activity including, but not limited to,
salary and benefits, stock-based compensation, and legal and professional fees
which are allocated to each segment on a pro-rata basis. Reconciling
amounts represent corporate level activity not specifically attributed to a
segment.
We record
proceeds from cost-sharing grants as a reduction of research and development
expenses. Proceeds from grants were $1.3 million and $1.2 million for
the periods ended March 31, 2010 and 2009, respectively.
- 23
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
following table provides certain segment information by geographic area (in
thousands). Net sales attributed to geographic areas are based on the
location where the sale originated.
Three
Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Net
sales:
|
||||||||
U.S.
|
$ | 7,763 | $ | 5,228 | ||||
South
Korea
|
8,150 | 7,624 | ||||||
Intersegment
transfers
|
(4,938 | ) | (4,660 | ) | ||||
Total
net sales
|
$ | 10,975 | $ | 8,192 | ||||
Net
income (loss) attributable to Ener1, Inc.
|
||||||||
U.S.
|
$ | (13,947 | ) | $ | (7,416 | ) | ||
South
Korea
|
(1,094 | ) | 286 | |||||
Intersegment
transfers
|
(296 | ) | (178 | ) | ||||
Net
loss attributable to Ener1, Inc.
|
$ | (15,337 | ) | $ | (7,308 | ) | ||
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Assets:
|
||||||||
U.S.
|
$ | 167,496 | $ | 111,702 | ||||
South
Korea
|
69,545 | 62,705 | ||||||
Total
assets
|
$ | 237,041 | $ | 174,407 |
We are
dependent on several large clients for a significant portion of net
sales. Sales from customers accounting for 10% or more of net sales
are as follows (in thousands):
Three
Months Ended
|
||||||||||||||||
March 31,
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Symbol
Technologies, Inc. (Motorola)
|
$ | 3,124 | 28 | % | $ | 1,106 | 14 | % | ||||||||
Bren-Tronics
|
1,445 | 13 | % | 975 | 12 | % | ||||||||||
Li-Tec
Battery
|
882 | 8 | % | 1,426 | 17 | % | ||||||||||
$ | 5,451 | $ | 3,507 |
- 24
-
ENER1,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
14 – Commitments and Contingencies
Litigation
Ener1
receives communications from time to time alleging various claims. These claims
may include, but are not limited to, employment matters, collections of accounts
payable, product liability claims, and allegations that certain of its
products infringe the patent rights of other third parties. Ener1
cannot predict when such claims may be made, the outcome of any such claims or
the effect of any such claims on its operating results, financial condition, or
cash flows. As of March 31, 2010, there were no material pending
legal proceedings.
Purchase
Commitments
Ener1 has
outstanding commitments with and submitted purchase order to various suppliers
to purchase machinery and equipment. These commitments are not
recorded in the accompanying consolidated balance sheets and totaled
approximately $36.3 million as of March 31, 2010.
- 25
-
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
Cautionary
Statement Concerning Forward Looking Information
Certain
statements in the following Management’s Discussion and Analysis, other than
purely historical information, including, without limitation, statements
concerning our financial outlook for 2010 and beyond, estimates and projections,
statements relating to our business plans, objectives and expected operating
results, and the assumptions upon which those statements are based, are all
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended..
These
forward-looking statements may be identified by words such as “believe,”
“project,” “expect,” “think,” “anticipate,” “strategy,” “intend,” “estimate,”
“future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,”
“will continue,” “will likely result,” or similar expressions. You should
understand that these forward-looking statements are based on current
expectations and assumptions that are subject to risks and uncertainties, which
may cause actual results to differ materially from those expressed or implied in
the forward-looking statements.
A
detailed discussion of risks and uncertainties that could cause actual results
and events to differ materially from such forward-looking statements is included
in the section entitled “Risk Factors” in Part II, Item 1A of this
Report. We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
Executive
Summary
The
following discussion should be read in conjunction with our Annual Report on
Form 10-K for the year ended December 31, 2009, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and other filings with the Securities and Exchange
Commission and our Consolidated Financial Statements and the accompanying notes
included in this Quarterly Report on Form 10-Q.
Our
primary business is designing, developing and manufacturing high-performance,
rechargeable lithium-ion batteries and battery systems for energy
storage. The end markets for our products include transportation,
stationary power (including energy storage for utilities and renewable energy
such as wind and solar power, in addition to battery backup systems for
residential use), military applications and small cell markets. We
are developing systems to power the next generation of hybrid, plug-in hybrid
and electric vehicles (HEVs, PHEVs and EVs). We are also developing
this technology for other transportation markets including buses and
trucks. Our Enertech subsidiary specializes in small cell technology
and manufactures commercial battery packs, prismatic cells and lithium polymer
batteries and large format cells for automotive applications. Enertech also
manufactures electrodes for other battery manufacturers. We develop
and market fuel cells and fuel cell systems, and develop nanotechnology related
manufacturing processes and materials.
Our goal
is to become the leading United States-based developer and manufacturer of
advanced, safe, high-performance lithium-ion battery systems for EVs, HEVs, and
PHEVs, and for non-automotive, stationary power and military
markets. Our intention is to supply our products to the
transportation and stationary power markets in North America, Europe and Asia
and the military markets in the United States. We initially plan to
manufacture and assemble our batteries in our United States-based Indianapolis
and Korea-based plants, and to increase our global production capacity of cells
as required. Ultimately, we envision a hub-and-spoke model for
manufacturing and distribution, basing cell manufacturing in our Indianapolis
and Korean facilities and locating pack assembly closer to our customers to
reduce transportation expense.
Under our
2010 capital expansion strategy, we intend to spend $63.0 million during the
year at our Indiana facility and $12.0 million at our Korea facility to increase
our cell and battery pack production capacity and reach capacity levels by
October 2010 that would enable us to produce the equivalent of 1,000 EV packs
per month. In January 2010, we began utilizing the funds available to
us under a $118.5 million federal grant awarded to us by the U.S. Department of
Energy (DOE) in August 2009 to execute our 2010 capital expansion
strategy. As of March 31, 2010, we have invested $38.9 million in
manufacturing equipment for our new production facility in Mt. Comfort, Indiana,
as well as additional equipment and capacity expansion at our existing
locations. Under the terms of the DOE grant, $19.5 million of these
costs were funded under the grant and we have received $6.6 million in cash
reimbursements as of March 31, 2010. During April 2010, we received
the remaining $12.9 million in cash reimbursements.
- 26
-
In late
2009, our Korean subsidiary Enertech began increasing production of large format
cells used in our lithium-ion battery systems while continuing to manufacture
small cell batteries, electrodes and other existing products. In April 2010, as
part of our 2010 capital expansion strategy, we invested $7.3 million in
additional manufacturing equipment and capacity expansion at our existing
Enertech facility and we plan to invest an additional $5.0 million in July
2010.
In the
beginning of 2010, our domestic subsidiary EnerDel began ramping up its
production of EV batteries in preparation for the pending production of the
Think City vehicle being manufactured by Think Global. The battery
packs will be assembled in our Indiana facilities and are expected to begin
shipping in the second quarter of this year.
We
anticipate commencing production of battery packs to be used in the Volvo C30 EV
when that vehicle goes into production, currently scheduled for the first
quarter of 2011.
We have a
pending application for a long-term, low-interest loan between $275 million and
$300 million in principal under the Advanced Technology Vehicle Manufacturing
Incentive Program (ATVM). Loan proceeds would be used to increase our
battery manufacturing capacity at our Indiana facilities. The ATVM
loan program requires us to match each eighty cents of loan funds with twenty
cents of our own investment. Funds received pursuant to the ATVM loan
program are restricted to the purchase of battery production equipment and are
subject to terms and conditions for equipment grants by the DOE.
Financial
Highlights
In
January 2010, we entered into an Open Market Sale Agreement with Jefferies,
engaging Jefferies to sell, on our behalf, shares of Ener1 common stock with an
aggregate sales price of up to $60.0 million. We began selling shares under the
Open Market Sale Agreement in February 2010. As of March 31, 2010, we
sold 1,036,555 shares at an average price of $4.42 per share for net proceeds of
$4.4 million, after deducting $193,000 of expenses. To date, through
May 6, 2010, we have sold a total of 1,147,457 shares for an aggregate of $5.1
million, at an average price of $4.40 per share. After deducting fees
and expenses of approximately $207,000, we received net proceeds of $4.8 million
from the sale of these shares.
In
February 2010, Ener1 participated in the third and final closing under the
Securities Investment and Subscription Agreement with Think Holdings, AS, a
Norwegian limited liability company (Think Holdings) and purchased 3,360,105
shares of Think Holdings Series B Convertible Preferred Stock (Series B Stock)
for approximately $5.8 million, bringing Ener1’s total investment in Series B
Stock to 10,826,640 shares for an aggregate purchase prices of approximately
$18.8 million. As of March 31, 2010, we owned approximately 32% of
Think Holdings on a fully diluted basis, which assumes the conversion and
exercise of all outstanding securities.
On May 5,
2010, Ener1 agreed to purchase approximately 7,500,000 shares of Series B Stock
from Think Holdings for approximately $12.5 million pursuant to a second
Securities Investment and Subscription Agreement (Second SISA) offering
by Think Holdings of up to approximately 30,000,000 shares of Series B
Stock. It is anticipated that the purchase will occur in one
or more closings. We anticipate that the shares of Series B Stock
will be purchased during the quarter ending June 30, 2010. In April
2010, we made a $1.5 million short-term working capital loan to Think
Holdings. Investors who purchase shares of Think Holdings Series B Stock
under the Second SISA may put their Series B Stock to Ener1 in consideration for
shares of Ener1 common stock. The put price for one share of Series B
Stock is $1.67. The Ener1 common stock issued in consideration for a
put will be valued based on the preceding 15 day volume weighted average price
of Ener1 common stock, with a floor of $4.00 per share. Investors
will have one year to exercise their put right and, upon exercise, would receive
unregistered shares of Ener1 common stock. Ener1 will use
commercially reasonable efforts to register the resale of the Ener1 shares, if
the investors are not able to resell such shares under Rule 144. Any
investor who exercise its put rights must assign to Ener1 50% of the warrants to
purchase Series B Stock from Think Holdings that the investor received under the
Second SISA. The total amount of Ener1 common stock issuable upon
exercise of the put rights is capped at $27.5 million.
- 27
-
In March
2010, Ener1 entered into a Credit Facility with Credit Suisse as lender, and as
of April 14, 2010 borrowed $15.0 million for general corporate
purposes. The funds borrowed are payable in full on June 23, 2010,
and bear interest, payable monthly, at the London Interbank Offering Rate
(LIBOR) plus 5% per annum. In addition, Ener1 issued to Credit Suisse
warrants to purchase up to 1,046,511 shares of Ener1 common stock at an exercise
price of $4.30 per share. The warrants are immediately exercisable
and expire on March 23, 2012. In connection with the Credit Facility,
Ener1 and certain of its subsidiaries entered into a Guarantee and Collateral
Agreement with Credit Suisse, pursuant to which (i) certain collateral,
including Ener1’s ownership interest in EnerDel and Think Holdings, was pledged
as security for repayment of amounts borrowed and (ii) such subsidiaries
guaranteed Ener1’s obligations under the Credit Facility. Commitment
fees and legal fees associated with closing the Credit Facility totaled
approximately $273,000.
Ener1
also entered into an Engagement Letter with Credit Suisse for advisory services
that obligates Ener1 to offer Credit Suisse the lead role in any future public
offerings of Ener1 securities and entitles Credit Suisse to receive minimum fees
of $1.8 million prior to September 23, 2011. This minimum fee is
payable whether or not Ener1 undertakes a public offering.
Results
of Operations
The
following information has been derived from the accompanying unaudited
consolidated financial statements for the three months ended March 31, 2010 and
2009 and is presented in thousands.
Three
Months Ended
|
||||||||||||||||
March
31,
|
Change
|
|||||||||||||||
2010
|
2009
|
$
|
%
|
|||||||||||||
Net
sales
|
$ | 10,975 | $ | 8,192 | $ | 2,783 | 34 | % | ||||||||
Cost
of sales
|
9,828 | 6,803 | 3,025 | 44 | % | |||||||||||
Gross
profit
|
1,147 | 1,389 | (242 | ) | -17 | % | ||||||||||
Operating
expenses:
|
||||||||||||||||
General
and administrative
|
5,229 | 4,617 | 612 | 13 | % | |||||||||||
Research
and development, net
|
9,866 | 6,262 | 3,604 | 58 | % | |||||||||||
Grant
proceeds recognized
|
(28 | ) | - | (28 | ) | n/a | ||||||||||
Depreciation
and amortization
|
1,349 | 1,108 | 241 | 22 | % | |||||||||||
Total
operating expenses
|
16,416 | 11,987 | 4,429 | 37 | % | |||||||||||
Loss
from operations
|
(15,269 | ) | (10,598 | ) | (4,671 | ) | 44 | % | ||||||||
Other
income (expenses):
|
||||||||||||||||
Interest
expense
|
(2,002 | ) | (1,317 | ) | (685 | ) | 52 | % | ||||||||
Gain
on derivative liabilities
|
1,525 | 3,912 | (2,387 | ) | -61 | % | ||||||||||
(Loss)
gain on foreign currency transactions
|
(50 | ) | 671 | (721 | ) | -107 | % | |||||||||
Other
|
349 | 100 | 249 | 249 | % | |||||||||||
Total
other income (expenses)
|
(178 | ) | 3,366 | (3,544 | ) | -105 | % | |||||||||
Loss
before income taxes
|
(15,447 | ) | (7,232 | ) | (8,215 | ) | 114 | % | ||||||||
Income
tax expense
|
16 | 37 | (21 | ) | -57 | % | ||||||||||
Net
loss
|
(15,463 | ) | (7,269 | ) | (8,194 | ) | 113 | % | ||||||||
Net
income (loss) attributable to noncontrolling interests
|
(126 | ) | 39 | (165 | ) | -423 | % | |||||||||
Net
loss attributable to Ener1, Inc.
|
$ | (15,337 | ) | $ | (7,308 | ) | $ | (8,029 | ) |
- 28
-
Net
sales, Cost of sales and Gross profit
The
increase in net sales is primarily due to an increase in EV battery pack
prototype sales to various customers of approximately $725,000 and an
increase in domestic sales of small cell battery packs to commercial
customers of approximately $2.0 million.
Cost of
sales increased at a faster rate than net sales increased as a result of
start-up costs for EV battery cell production, which totaled approximately
$463,000 during the three months ended March 31, 2010. Also included in
cost of sales is depreciation expense of approximately $818,000 for the three
months ended March 31, 2010, an increase of approximately $253,000 or 45%,
primarily due to battery manufacturing and production equipment placed in
service in late 2009.
General
and administrative expenses
General
and administrative expense increased primarily due to an increase in salary and
benefits of $625,000 which was partially offset by a decrease in stock-based
compensation of $390,000. Legal and professional fees increased
$230,000, of which $218,000 is for investor, government, media and public
relations professional services. Travel and facilities-related
expenses increased $114,000. These increases have been partially
offset by a decrease in bad debt expense of $55,000.
Research
and development expenses
Research
and development expenses increased primarily due to an increase in salaries and
benefits of $2.6 million as a result of the increase in our workforce and an
increase of $132,000 in stock-based compensation. Materials and
non-capitalized equipment increased $602,000 as production continued to ramp
up. Facilities-related expenses increased approximately $277,000
primarily due to rent and utilities for our Mt. Comfort, Indiana facility, which
we commenced leasing in February 2010. Professional fees increased $56,000
related to legal fees incurred for filing, maintaining and protecting our
patents and technology.
We
present proceeds from our cost-sharing arrangements with federal government
agencies as a reduction of research and development
expenses. Proceeds received under these cost-sharing arrangements
were $1.3 million and $1.2 million for the periods ended March 31, 2010 and
2009, respectively.
Grant
proceeds recognized
Proceeds
from government grants related to asset purchases are recorded as deferred grant
proceeds and recognized as a reduction of operating expense over the periods
during which depreciation on the assets is charged and in proportion to the
amount of the depreciation charge. We begin depreciating a purchased
asset on the date the assets are placed in service. During the three
months ended March 31, 2010 we recognized approximately $28,000 in grant
proceeds.
Depreciation
and amortization
Depreciation
expense, included in operating expenses, increased $207,000 as a direct result
of the increase in our property and equipment.
Interest
expense
Interest
expense represents a combination of cash and non-cash interest related to our
deferred financing costs, borrowings with banks, capital leases and other debt
instruments, as well as debt issuances costs. The cash and non-cash
components of interest expense are (in thousands):
Three
Months Ended
|
||||||||||||||||
March 31,
|
Change
|
|||||||||||||||
2010
|
2009
|
$
|
%
|
|||||||||||||
Cash
|
$ | 130 | $ | 276 | $ | (146 | ) | -53 | % | |||||||
Non-cash
|
1,872 | 1,041 | 831 | 80 | % | |||||||||||
Total
interest expense
|
$ | 2,002 | $ | 1,317 | $ | 685 | 52 | % |
The
increase in interest expense is due to the $15.6 million increase in short-term
borrowings. Of the total $1.9 million in non-cash interest expense
for the period ended March 31, 2010, $1.4 million or 74% represents the
amortization of deferred financing costs and debt issuance costs associated with
the fair value of warrants issued in connection with debt financing arrangements
and the beneficial conversion feature associated with our convertible line of
credit. The remaining estimated future straight-line amortization of
these deferred financing costs and debt issuance costs is estimated to be $3.6
million during 2010.
- 29
-
Gain
on derivative liabilities
The
decrease in gain on derivative liabilities during the three months ended March
31, 2010 is directly related to the expiration of the dilution protection
feature contained in certain free standing warrants which expired during the
period ended March 31, 2009 and resulted in a gain on derivative liabilities of
$2.7 million.
Liquidity
and Capital Resources
At March
31, 2010, the Company has negative working capital of $36.2 million primarily
due to the substantial increase in accounts payable related to the purchase of
production equipment, which is partially funded under a grant from the
DOE. Under the grant, we receive one incentive dollar for each dollar
we spend of our own funds on qualifying capital expenditures and other
costs.
In March
2010 we secured a $15 million credit facility to provide the initial funding of
our share of the capital expenditures, and we intend to raise additional
capital, either through convertible debt, preferred stock, common stock or other
public or private financings available to us, to fund our share of the capital
expenditures under this grant program and provide additional working capital to
the Company. The pricing, dilution, terms and conditions and availability
of such funds are subject to market conditions, but we believe sufficient
funding is available to the Company to fund our capital expenditure program and
operations during 2010.
Cash
Flow Summary
The
following information has been derived from the accompanying unaudited
consolidated financial statements for the three months ended March 31, 2010 and
2009 and is presented in thousands. Cash and cash equivalents
decreased by $6.7 million during the three months ended March 31, 2010. The
change in cash and cash equivalents is as follows (in thousands):
March 31,
|
||||||||
2010
|
2009
|
|||||||
Net
loss
|
$ | (15,463 | ) | $ | (7,269 | ) | ||
Non-cash
items
|
3,876 | (91 | ) | |||||
Increase
(decrease) in working capital items
|
2,694 | (4,389 | ) | |||||
Operating
activities
|
(8,893 | ) | (11,749 | ) | ||||
Investing
activities
|
(16,149 | ) | (5,101 | ) | ||||
Financing
activities
|
18,383 | 10,008 | ||||||
Effects
of exchange rates
|
(9 | ) | (120 | ) | ||||
Net
decrease in cash and cash equivalents
|
$ | (6,668 | ) | $ | (6,962 | ) | ||
Cash
and cash equivalents - beginning balance
|
14,314 | 11,229 | ||||||
Cash
and cash equivalents - ending balance
|
$ | 7,646 | $ | 4,267 |
Operating
Activities
Cash used
in operating activities is primarily driven by our net loss, adjusted for
non-cash items and changes in working capital. Non-cash items consist
primarily of depreciation and amortization, stock-based compensation and
interest expense, which are partially offset by the gain on derivative
liabilities.
Net cash
used in operating activities decreased $2.9 million during the period ended
March 31, 2010, as compared to the same period in 2009. Non-cash
items increased $4.0 million and working capital items increased $7.1
million. The increase in working capital items is primarily due to
the increase in accounts payable and accrued expenses and was partially offset
by the increase in inventories and accounts receivable.
Investing
activities
Net cash
used in investing activities for the period ended March 31, 2010 was $16.1
million, compared to $5.1 million for the period ended March 31,
2009. This increase is comprised primarily of $9.7 million in net
cash used for purchases of property, plant and equipment as we continue to
execute our capital expansion plan. In addition, our investment in
Think Holdings increased $5.8 million as a result of our purchase of additional
equity securities from Think Holdings during the period ended March 31,
2010.
- 30
-
Financing
activities
Net cash
provided by financing activities for the period ended March 31, 2010 was $18.4
million, compared to $10.0 million for the same period ended
2009. The increase is due to proceeds from sales of Ener1 common
stock of $4.4 million and an increase in proceeds from borrowings of $5.1
million during the period ended March 31, 2010. These increases have
been partially offset by the increase in repayments of borrowings and capital
leases of $1.1 million.
In
January 2010, we entered into an Open Market Sale Agreement under which we may
sell up to $60.0 million in shares of Ener1 common stock. These sales
will be effected by Jefferies & Company, Inc., acting as our
agent. Between February 3, 2010 and March 31, 2010, we sold 1,036,555
shares for net proceeds totaling $4.4 million.
In March
2010, we entered into the Credit Facility and through March 31, 2010 borrowed
$11.0 million, net of $273,000 of fees and costs.
Management’s
Assessment of Liquidity
In
addition to our available cash on hand, our sources of liquidity during the
three months ended March 31, 2010 included committed credit lines and credit
facilities for equipment purchases and operating expenses. During the
three months ended March 31, 2010, we borrowed an additional $5.0 million under
an existing credit line with Bzinfin and entered into a new $15 million credit
facility with Credit Suisse under which we borrowed $11.0
million. Subsequent to March 31, 2010, we borrowed the remaining $4.0
million available under the Credit Suisse credit facility. We have
historically financed, and expect to continue to finance, operations through
public and private offering of debt and equity securities. Our
ability to access the public debt and equity markets and the related cost of
these activities may be affected by market conditions. During the past year, the
market has experienced significant price and volume fluctuations. The
recent upheaval experienced by the debt and equity markets may adversely affect
our ability to procure future financing.
Under our
2010 capital expenditure plans, we intend to spend $63.0 million during the year
at our Indiana facility and $12.0 million at our Korea facility to increase our
cell and battery pack production capacity and reach capacity levels by October
2010 that would enable us to produce the equivalent of 1,000 EV packs per
months. In January 2010, we began utilizing the funds available to us
under a $118.5 million federal grant awarded to us by the DOE in August 2009 to
execute our 2010 capital expansion strategy. To date we have invested
$38.9 million in manufacturing equipment and capacity expansion for our
production facilities in Indiana. Under the terms of the DOE grant,
$19.5 million of these costs have been funded under the grant through April 30,
2010. We also invested $7.3 million in additional manufacturing
equipment and capacity expansion at our existing Enertech facility in April
2010, and we plan to invest an additional $5.0 million in July
2010.
We expect
to receive $6.9 million from our active cost-sharing arrangements with the DOE
and the United States Advanced Battery Consortium through September 2012, which
will reduce our future research and development expense.
We have
applied for a loan between $275 million and $300 million under the DOE ATVM loan
program to increase our battery manufacturing capacity in
Indiana. The ATVM loan program requires us to match each eighty cents
of loan money with twenty cents of our own investment. Funds received
pursuant to the ATVM loan program are restricted to the purchase of equipment
and are subject to terms and conditions for equipment grants by the
DOE. We continue to provide information and due diligence requests to
the DOE in accordance with the application process.
We
believe we have access to sufficient capital to continue our planned operations
for the 12 months following the balance sheet date of March 31,
2010. We plan to utilize the proceeds from sales of common stock
pursuant to the Open Market Sale Agreement and other possible sources to fund
operations and the planned purchase of production equipment and manufacturing
plant assets.
- 31
-
Contractual
Obligations
Ener1 has
outstanding commitments with, and submitted purchase orders to, various
suppliers to purchase machinery and equipment. These commitments are
not recorded in the accompanying consolidated balance sheets and totaled
approximately $36.3 million as of March 31, 2010.
During
the three months ended March 31, 2010, Ener1 entered into capital lease
obligations for certain battery production and equipment totaling approximately
$422,000, payable over the next two to ten years. In addition, in
February 2010, EnerDel entered into a two-year lease for approximately 211,500
square feet of industrial space located in Mt Comfort, Indiana. The annual base
rent under the initial two-year term of the lease is approximately
$780,000.
New
Accounting Standards
Refer to
Note 2, New Accounting
Pronouncements, in “Notes to Consolidated Financial Statements,” for a
discussion regarding new accounting standards.
Application
of Critical Accounting Policies
Our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (US
GAAP). Preparing financial statements requires management to make
estimates, judgments and assumptions regarding uncertainties that may affect the
reported amounts of assets, liabilities, revenue and expenses. These
estimates, judgments and assumptions are affected by management’s application of
accounting policies. We base our estimates, judgments and assumptions
on historical experience and other relevant factors that are believed to be
reasonable under the circumstances. In any given reporting period,
our actual results may differ from the estimates, judgments and assumptions used
in preparing our consolidated financial statements.
Refer to
Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our Annual Report on Form 10-K for the year ended
December 31, 2009 for a discussion of our critical accounting
estimates.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
We have
international operations that expose us to foreign currency exchange
risks.
We
conduct a portion of our business in foreign countries and are subject to
transactional currency exposures that arise when our foreign subsidiaries enter
into transactions denominated in currencies other than their own local currency.
We do not have any long term supply agreements with suppliers as of March 31,
2010 but we are exposed to currency exchange risk when purchases are denominated
in a foreign currency. Currently, the majority of our principal
suppliers are based in China, Japan and Korea and we may not be able to
negotiate payment terms that are denominated in United States
Dollars. As a result, any future decline in the United States Dollar
against the Chinese Yuan, the Japanese Yen or the Korean Won will increase the
amount we may have to pay to our suppliers and could have material impact on our
financial condition, results of operations and cash flows.
In
addition, we are exposed to fluctuations in foreign exchange rates from
translating the results of our Korean and Japanese operations to United States
Dollars. At March 31, 2010 and December 31, 2009, the translation
adjustment recognized in accumulated comprehensive income was $6.4 million and
$4.9 million, respectively.
To date,
we have not entered into any derivative financial instruments for purposes of
reducing our exposure to adverse fluctuations in foreign currency exchange
rates.
We are
not exposed to market risk from changes in interest rates due to the fixed
nature of interest rates associated with our debt instruments and the short-term
nature of our debt instruments that have variable interest
rates.
- 32
-
Item
4. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the reports the Company
files or submits under the Securities Exchange Act of 1934, as amended (Exchange
Act), is recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms and that
such information is accumulated and communicated to the Company's management
including the Chief Executive Officer and the Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure.
As of
March 31, 2010, we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e). This evaluation was done under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer. Based on this evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded
that as of March 31, 2010, such disclosure controls and procedures were
effective.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting during the
quarter ended March 31, 2010 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
- 33
-
PART
II - OTHER INFORMATION
Item 1.
Legal Proceedings.
We
receive communications from time to time alleging various claims. These claims
may include, but are not limited to, employment matters, collection of accounts
payable, and allegations that certain of our products infringe the patent rights
of other third parties. We cannot predict the outcome of any such claims or the
effect of any such claims on our operating results, financial condition, or cash
flows. As of March 31, 2010, there are no material pending legal
proceedings.
Item
1A. Risk Factors.
Refer to
Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year
ended December 31, 2009 for a discussion of our risk factors.
- 34
-
Item
6. Exhibits.
Exhibit
Number
|
Description
|
|
3.1
|
Amended
and Restated Articles of Incorporation of the Registrant, dated February
12, 1993, incorporated by reference to Exhibit 3(i) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000,
SEC File No. 000-21138.
|
|
3.2
|
Articles
of Amendment to Amended and Restated Articles of Incorporation, dated
March 11, 2002, incorporated by reference to Exhibit 3.2 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
2001, SEC File No. 000-21138.
|
|
3.3
|
Articles
of Amendment to Amended and Restated Articles of Incorporation, dated
October 21, 2002, incorporated by reference to Exhibit 3.1 of the
Registrant's Current Report on Form 8-K dated October 28, 2002, SEC File
No. 000-21138.
|
|
3.4
|
Articles
of Amendment to Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit A of the Registrant's Schedule 14C
filed on December 6, 2004, SEC File No. 000-21138.
|
|
3.5
|
By-laws
of the Registrant, incorporated by reference to Exhibit 3.4 of the
Registrant's Registration Statement on Form SB-2 (Registration No.
333-112837), filed February 13, 2004.
|
|
3.6
|
Certificate
of Designations of Series B Convertible Preferred Stock, dated October 15,
2004, incorporated by reference to Exhibit 3.6 of the Registrant’s Annual
Report on Form 10-KSB for the year ended December 31, 2004, SEC File No.
000-21138.
|
|
3.7
|
Amendment
to By-laws of the Registrant, dated January 5, 2005, incorporated by
reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K
dated January 12, 2005, SEC File No. 000-21138.
|
|
3.8
|
Articles
of Amendment to Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit B of the Registrant's Schedule 14C
filed December 10, 2007.
|
|
3.9
|
Articles
of Amendment to Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit 3.8 of the Registrant’s Current
Report on Form 8-K filed April 24, 2008.
|
|
3.10
|
Articles
of Amendment to Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit B of the Registrant’s Schedule 14C
filed July 22, 2008.
|
|
3.11
|
Articles
of Amendment to Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit B of the Registrant’s Schedule 14C
filed December 11, 2008.
|
|
4.1
|
Form
of Warrant to Purchase Common Stock issued pursuant to Securities Purchase
Agreement, dated January 16, 2004, incorporated by reference to Exhibit
4.2 to the Registrant's Current Report on Form 8-K dated January 21, 2004,
SEC File No. 000-21138.
|
|
4.2
|
Warrant
issued to Cofis Compagnie Fiduciaire S.A. dated October 15, 2004 to
purchase from Ener1, Inc., 4,166,666 shares of Common Stock of the Company
at a price per share of $1.25, incorporated by reference to Exhibit 4.4 of
the Registrant’s Annual Report on Form 10-KSB for the year ended December
31, 2004, SEC File No. 000-21138.
|
|
4.3
|
Warrant
issued to Cofis Compagnie Fiduciaire S.A. dated October 15, 2004 to
purchase from Ener1, Inc., 4,166,666 shares of Common Stock of the Company
at a price per share of $1.50, incorporated by reference to Exhibit 4.5 of
the Registrant’s Annual Report on Form 10-KSB for the year ended December
31, 2004, SEC File No.
000-21138.
|
- 35
-
4.4
|
Warrant
to Purchase Common Stock issued October 20, 2004 to Delphi Automotive
Systems, LLC, to purchase up to 7,000,000 shares of Common Stock,
incorporated by reference to Exhibit 4.6 of the Registrant’s Annual Report
on Form 10-KSB for the year ended December 31, 2004, SEC File No.
000-21138.
|
|
4.5
|
Form
of Warrant to Purchase Common Stock of Ener1, dated December 9, 2004
issued to Merriman Curhan Ford & Co., incorporated by reference to
Exhibit 4.10 to the Registrant’s Registration Statement on Form SB-2
(Registration No. 333-124745), filed May 9, 2005.
|
|
4.6
|
Warrant
issued to Ener1 Group, Inc. dated June 30, 2006 to purchase 9,000,000
shares of Common Stock of the Registrant incorporated by reference to
Exhibit 4.17 of Registrant's Quarterly Report on Form 10-QSB, filed August
21, 2006.
|
|
4.7
|
Warrant
issued to Ener1 Group, Inc. dated June 30, 2006 to purchase 20,000,000
shares of Common Stock of the Registrant incorporated by reference to
Exhibit 4.18 of Registrant's Quarterly Report on Form 10-QSB, filed August
21, 2006.
|
|
4.8
|
Form
of Warrant to Purchase Common Stock of Ener1, Inc. issued to Ener1 Group
on August 29, 2006, incorporated by reference to Exhibit 4.17 of
Registrant's Form SB-2/A filed September 3, 2006.
|
|
4.9
|
Warrant
issued to Ener1 Group, Inc. dated September 30, 2006 to purchase 9,000,000
shares of Common Stock of the Registrant, incorporated by reference to
Exhibit 4.20 of Registrant's Quarterly Report on Form 10-QSB for the
period ending September 30, 2006.
|
|
4.10
|
Warrant
issued to Ener1 Group, Inc. dated September 30, 2006 to purchase 9,000,000
shares of Common Stock of the Registrant, incorporated by reference to
Exhibit 4.21 of Registrant's Quarterly Report on Form 10-QSB for the
period ending September 30, 2006.
|
|
4.11
|
Warrant
issued to Credit Suisse Securities (USA), LLC, dated January 5, 2007, to
purchase 5,000,000 shares of Common Stock of the Registrant at a
price per share of $0.30, incorporated by reference to Exhibit 10.03 to
the Registrant’s Current Report on Form 8-K dated January 8,
2007.
|
|
4.12
|
Form
of Warrant to purchase 9,000,000 and 18,000,000 shares of Common Stock of
the Registrant, issued to Ener1 Group, Inc. dated February 13, 2007,
incorporated by reference to Exhibit 4.27 to the Registrant’s Registration
Statement on Form SB-2 filed on February 13, 2007.
|
|
4.13
|
Warrant
issued to Charles Gassenheimer dated January 5, 2007 to purchase 500,000
shares of common stock of the Registrant, incorporated by reference to
Exhibit 4.28 to the Registrant’s Registration Statement on Form SB-2 filed
on February 13, 2007.
|
|
4.14
|
Form
of Warrant to purchase 57,600,000 shares of Common Stock of the
Registrant, issued to certain investors named therein, dated November 19,
2007, incorporated by reference to Exhibit 10.3 to the Registrant’s
Current Report on Form 8-K dated November 20, 2007.
|
|
4.15
|
Form
of Warrant to Purchase Common Stock of the Registrant issued pursuant to
Series B Stock Amendment Agreement between Ener1, Inc., Ener1 Group, Inc.
and Cofis Compagnie Fiduciaire S.A., incorporated by reference to Exhibit
4.32 of the Registrant’s Annual Report on Form 10-KSB for the period ended
December 31, 2007 filed on March 12, 2008.
|
|
4.16
|
Warrant
issued to Alpha Class Investments, Ltd., dated October 24, 2008, to
purchase 2,560,000 shares of Common Stock of the Registrant at a price per
share of $7.50, incorporated by reference to Exhibit 4.1 to the
Registrant’s Current Report on Form 8-K dated October 30,
2008.
|
|
4.17
|
Warrant
to Purchase Common Stock of Ener1, Inc. under Line of Credit Agreement
dated December 29, 2008, incorporated by reference to Exhibit 4.1 to the
Registrant’s Current Report on Form 8-K dated December 30,
2008.
|
- 36
-
4.18
|
Warrant
Agreement with Credit Suisse AG, Cayman Islands Branch, dated as of March
23, 2010, incorporated by reference to Exhibit 10.3 to the Registrant’s
Current Report on Form 8-K dated March 23, 2010.
|
||
10.1
|
Open
Market Sales Agreement with Jefferies & Company, Inc., dated January
25, 2010, incorporated by reference to Exhibit 1.1 to the Registrant’s
Current Report on Form 8-K dated January 25, 2010.
|
||
10.2
|
Lease
Agreement with Park 70 Partners, L.P., dated February 9, 2010,
incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K dated February 16, 2010.
|
||
10.3
|
Credit
Agreement with Credit Suisse AG, Cayman Islands Branch, dated March 23,
2010, incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K dated March 29, 2010.
|
||
10.4
|
Guarantee
and Collateral Agreement with Credit Suisse AG, Cayman Islands Branch,
dated March 23, 2010, incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K dated March 29,
2010.
|
||
10.5
|
*
|
Engagement
Letter with Credit Suisse AG, Cayman Islands Branch, dated March 23,
2010.
|
|
10.6
|
*
|
Securities
and Investment Subscription Agreement with Think Holdings, AS, dated May
5, 2010.
|
|
10.7
|
*
|
Amended
and Restated Shareholders Agreement with Think Holdings, AS, dated May 5,
2010.
|
|
31.1
|
*
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.
|
|
31.2
|
*
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer.
|
|
32.1
|
‡
|
Section
1350 Certification of Chief Executive Officer.
|
|
32.2
|
‡
|
Section
1350 Certification of Chief Financial
Officer.
|
* Filed herewith.
‡
Furnished herewith.
- 37
-
ENER1,
INC. AND SUBSIDIARIES
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
ENER1,
INC.
|
||
Dated:
May 10, 2010
|
by:
|
/s/ Charles Gassenheimer
|
Charles
Gassenheimer
|
||
Chief
Executive Officer, Chairman
|
||
(Principal
Executive Officer)
|
||
Dated:
May 10, 2010
|
by:
|
/s/ Gerard A. Herlihy
|
Gerard
A. Herlihy
|
||
Chief
Financial Officer
|
||
(Principal
Financial Officer and
|
||
Principal
Accounting Officer)
|
- 38
-
EXHIBIT
INDEX
Exhibit
Number
|
Description
|
||
10.5
|
*
|
Engagement
Letter with Credit Suisse AG, Cayman Islands Branch, dated March 23,
2010.
|
|
10.6
|
*
|
Securities
and Investment Subscription Agreement with Think Holdings, AS, dated May
5, 2010.
|
|
10.7
|
*
|
Amended
and Restated Shareholders Agreement with Think Holdings, AS, dated May 5,
2010.
|
|
31.1
|
*
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.
|
|
31.2
|
*
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer.
|
|
32.1
|
‡
|
Section
1350 Certification of Chief Executive Officer.
|
|
32.2
|
‡
|
Section
1350 Certification of Chief Financial Officer.
|
|
* Filed
herewith.
‡
Furnished herewith.
- 39
-